Larimore v. American Insurance

ROSALYN B. BELL, Judge. Douglas E. Larimore brought suit against his employer’s automobile liability carrier, American Insurance Company, 1 seeking a declaratory judgment that a provision in his employer’s insurance policy which excluded him from coverage is contrary to the express public policy of the State of Maryland. The Circuit Court for Prince George’s County ⁶³³ entered judgment for American Insurance. Larimore presents two questions on appeal: -Whether the fellow employee exclusion contained in the policy of automobile liability insurance issued by American Insurance Company is contrary to the provisions of Md.Transp.

Code Ann. § 17 (1977, 1984 Repl. Vol.), and thus is contrary to the general public policy of the State of Maryland and therefore void. -If the fellow employee exclusion is void, whether American Insurance Company is liable for payment up to the stated policy limits or only to the extent of the statutorily required mínimums. American Insurance Company is licensed to issue insurance policies which comply with the compulsory automobile insurance laws of the State of Maryland. Moving Masters, Incorporated is a corporation licensed to do business in the State of Maryland.

In April of 1983, American Insurance issued a business automobile policy to Moving Masters effective April 15, 1983 through August 15, 1984. The policy covered motor vehicles used in the course of Moving Masters’s business operations. While the combined bodily injury and property damage limit of the policy was $500,-000, the policy contained a provision excluding from liability coverage any employee who injured a co-worker while operating a covered vehicle. This fellow employee exclusion, 2 located within the liability insurance provisions of Moving Masters’s policy, provided: “C. WE WILL NOT COVER—EXCLUSIONS.

This insurance does not apply to: ****** ⁶³⁴ 4. Bodily injury to any fellow employee of the insured arising out of and in the course of his or her employment.” Section D of the policy’s liability insurance provision described who qualified as an insured under Exclusion 4. That section provided in pertinent part: “D. WHO IS INSURED. 1. You are an insured for any covered auto. * # * * * * 3.

Anyone else is an insured while using with your permission a covered auto you own, hire or borrow----” On May 31, 1983, Douglas E. Larimore and Joseph Benjamin Williams, both employees of Moving Masters, were involved in an accident while in the course of their common employment. Williams was operating a 1970 GMC Model DS Tractor owned by Moving Masters and covered under its business automobile policy. Williams seriously injured Larimore when he backed the tractor over Larimore’s legs. Larimore filed a worker’s compensation claim for which he received $25,781.44 in benefits.

Larimore also filed suit in the Circuit Court for Prince George’s County against Williams on the ground of negligence. Because Williams qualified as an insured under Section D of the liability provision in Moving Masters’s policy, a copy of Larimore’s Declaration was sent to a claims adjuster for American Insurance advising that Williams was being sued. American Insurance denied coverage based on Exclusion 4 and three other separate exclusions also enumerated under Section C of Moving Masters’s policy. Accordingly, it refused to defend Williams.

Larimore obtained a default judgment against Williams in the amount of $200,000. Larimore then brought an action against American Insurance seeking a declaratory judgment that American Insurance was required to provide coverage for Williams, and further that the insurer was liable for payment of the judgment to the extent of its policy limits. American Insurance moved for summary judgment on the grounds that ⁶³⁵ there was no dispute of any material fact and that under Section C of the liability provision of the policy in question, Exclusion 4 exempted the insurer from liability for “[b]odily injury to any fellow employee [Larimore] of the insured [Williams] arising out of and in the course of his [Larimore’s] ... employment.” In response, Larimore filed a motion for summary judgment contending that the fellow employee exclusion on which American Insurance relied was contrary to Maryland’s policy of requiring minimum liability coverage for automobile accidents. The court entered judgment in favor of American Insurance.

Larimore filed this appeal. Since we agree with the circuit court that Exclusion 4, even though not expressly authorized by Maryland’s compulsory insurance law, is valid, and that it applies to Larimore, we do not decide whether any of the remaining policy exclusions in Moving Masters’s policy apply to Larimore. Nor need we reach Larimore’s second question concerning the extent of American Insurance’s liability. 3 In 1972 the Legislature mandated that all owners of automobiles registered in Maryland insure their vehicles. 1972 Md.Laws Ch. 73, § 2. “This legislative policy has the overall remedial purpose of protecting the public by assuring that operators and owners of motor vehicles are financially able to pay compensation for damages resulting from motor vehicle accidents.” Pennsylvania Nat’l Mut. Casualty Ins.

Co. v. Gartelman, 288 Md. 151, 154 , 416 A.2d 734 (1980). A policy must contain personal injury protection (PIP) up to $2,500, liability coverage up to $20,000 for one injured person and up to $40,000 for two or more injured persons, and uninsured motorist (UM) coverage to the same extent as the minimum liability insurance. Md.Code Ann. ⁶³⁶ Art. 48A, § 539(a) (1957, 1986 Repl.Vol.) (PIP); Md.Code Ann. Art. 48A, § 541(c)(2) (1957, 1986 Repl.Vol.) (UM); Md. Transp.Code Ann. § 17-103(b) (1977, 1984 Repl.Vol.) (liability insurance). Certain exclusions from the required coverages are specified in the statute.

The case sub judice concerns an exclusion from liability coverage not expressly authorized by Maryland’s mandatory insurance law. Thus, to resolve whether that exclusion is permissible, we will review the treatment by the Court of Appeals of other exclusions which similarly do not appear in the statute. In Gartelman , the Court considered the validity of exclusions from the coverage required for PIP and UM insurance, where those exclusions were not expressly authorized in the Maryland Code. The PIP requirement provides that an automobile insurance policy must afford minimum medical, hospital and disability benefits to certain persons injured in an accident involving the insured’s vehicle and to persons insured under the policy who are injured in an accident involving any other vehicle.

Art. 48A, § 539(a). The purpose of requiring PIP is to guarantee some compensation to motor vehicle accident victims without regard to their fault. Gartelman, 288 Md. at 154 , 416 A.2d 734 . Section 545 of Article 48A permits a policy to exclude from PIP any person insured under the policy who, among other things, intentionally caused the accident, was injured while operating or riding in a stolen vehicle, or was injured while committing a felony.

Art. 48A, § 545 (1957, 1986 Repl.VoL). The Legislature also mandated minimum UM coverage but specified permissible exclusions to it. An automobile insurance policy must provide coverage “for damages which the insured is entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injuries sustained in an accident arising out of the ownership, maintenance, or use of such uninsured motor vehicle.” Art. 48A, § 541(c)(2). The purpose of UM coverage is to provide compensation for “innocent victims of motor vehicle ⁶³⁷ accidents who are unable to recover from financially irresponsible uninsured motorists.” Gartelman, 288 Md. at 157 , 416 A.2d 734 .

The policy may exclude from UM coverage the named insured and family members residing in his or her household when one of them operates an uninsured motor vehicle he or she owns, and in addition to these parties any other person injured when the vehicle insured is operated by a named excluded driver. Art. 48A, § 541(c)(2)(i), (ii). The policy at issue in Gartelman excluded from PIP an insured injured while occupying an uninsured motor vehicle owned by a named insured, and excluded from UM coverage an insured injured while occupying an uninsured motor vehicle owned by another insured. Neither of these exclusions were among those expressly authorized in the Maryland Code.

In holding these exclusions invalid, the Court applied the rule of statutory construction that “[wjhere a statute expressly provides for certain exclusions, other [sic] should not be inserted.” Gartelman, 288 Md. at 156 , 416 A.2d 734 . The Court refused to validate exclusions from PIP and UM coverage in addition to those listed in the statute “which would be contrary to the remedial legislative purpose of assuring compensation for damages to victims of motor vehicle accidents without regard to fault.” Gartelman, 288 Md. at 156 , 416 A.2d 734 . In Jennings v. Government Employees Insurance Company, 302 Md. 352 , 488 A.2d 166 (1985), the Court invalidated a household exclusion from the required liability coverage. The household exclusion involved in Jennings excluded liability coverage to an insured operating a covered vehicle where that person’s negligent operation caused injury to a member of his or her family residing in the same household.

The Court noted that under Maryland’s mandatory insurance scheme, there was no household exclusion from mandatory liability coverage although one was authorized under the required UM insurance. Jennings, 302 Md. at 358-60 , 488 A.2d 166 . In declining to allow an exclusion ⁶³⁸ that would deprive benefits to a large class of persons injured in automobile accidents, the Court explained: “Recently in DeJarnette v. Federal Kemper Ins. Co., supra, 299 Md. [708] at 725, 475 A.2d 454 , Judge Couch for the Court, after quoting from Gartelman that ‘ “[wjhere a statute expressly provides for certain exclusions, others shall not be inserted,” ’ stated that 'we are still in accord with the sound reasoning of Gartelman in light of the remedial purpose of Article 48A, §§ 538-547.’ In our view, [the insurer] has offered no sound reason why this principle should not be applied to invalidate the household exclusion____” Jennings, 302 Md. at 359 , 488 A.2d 166 .

Appellant would have us apply the reasoning of Gartelman and Jennings to invalidate the fellow employee exclusion at issue in the instant case. Appellant argues that the Legislature did not authorize the insurer to exclude from liability coverage an employee, driving a covered vehicle with permission, where that employee injures a co-worker. Thus, this Court should not insert a fellow employee exclusion into the statute. Unlike in Gartelman and Jennings , however, there is a compelling reason to permit the fellow employee exclusion in this case.

Moving Masters’s policy provides coverage to all non-employees injured by an employee’s negligent operation of the employer’s automobile in the course of employment. An employee engaged in an activity outside of his or her employment who is injured by a co-worker’s negligent operation of the employer’s vehicle is also covered under the language of the policy. The only class of persons not protected under the automobile liability provision is that comprised of employees whose injuries arise “out of and in the course of [their] employment” due to a co-worker’s negligent operation of a covered vehicle. This latter class of injured employees, however, is guaranteed, without litigating any issue of fault, worker’s compensation benefits that may exceed the statutorily required $20,000 minimum ⁶³⁹ motor vehicle liability coverage. 4 Thus, Exclusion 4 is in harmony with the legislative purpose behind mandatory insurance of assuring at least a minimum recovery for damages incurred by victims of automobile accidents.

It is one of those “many exclusions in automobile insurance policies [that] do not conflict with legislative policy and are therefore valid.” Jennings, 302 Md. at 362 , 488 A.2d 166 . In 1914 Maryland enacted its Workmen’s Compensation Act as a scheme of protection both to provide employees injured while in the course of their employment with a definite and expedient method for payment of compensation and to protect employers from large monetary awards in civil suits brought against them by their employees. See 1914 Md.Laws 1429; Liggett & Meyers Tobacco Co. v. Goslin, 163 Md. 74, 80 , 160 A. 804 (1932); Pressman, Workmen’s Compensation in Maryland § 1-1 (1970). All employers with one or more employees subject to the Act are required to provide some form of worker’s compensation.

Md.Code Ann. Art. 101, § 16 (mandatory clause and permissible methods of insurance), § 19(f) (penalty for employer’s failure to secure compensation), § 21(a) (employers subject to the Act), § 31 (certificate of compliance requirement) (1957, 1985 Repl.Vol., 1986 Supp.). Generally, under Maryland’s