Liberty Mutual Insurance v. Maryland Automobile Insurance Fund

KRAUSER, J. We are asked to decide whether a Maryland Automobile Fund (MAIF) policy covers an individual who has been granted permission to drive the insured’s car by the person to whom the insured originally loaned it. In other words, was the second permittee, in this chain of possession, covered by the MAIF policy? To answer that question, we begin by identifying the parties and the roles they played in this matter. We start with the insured, Dennis Ray Drewery.

He lent his car to his son and namesake, Dennis Ray, Jr., who in turn allowed his friend, Leo J. Stevenson, to drive the automobile to the home of a mutual acquaintance. That proved to be a mistake with tortious consequences. Shortly after Stevenson took over the wheel of the car, it collided with a parked car, causing that vehicle to strike a pedestrian, appellant Donald Andrew. As a result of that collision, Andrew incurred medical expenses and suffered a loss of wages, for which he was compensated by appellant, Liberty Mutual Insurance Company (Liberty Mutual).

That led Liberty Mutual and Andrew to file a declaratory judgment action in the Circuit Court for Prince George’s County, requesting a determination that Stevenson, as second permittee, was covered by Drewery, Sr.’s MAIF policy and that MAIF ⁶⁰⁷ should therefore indemnify them for all costs and expenses they incurred as a result of the accident. Although Andrew, Stevenson, and both Drewerys were named as parties to this suit, at bottom, it was, and remains, essentially a coverage dispute between appellant Liberty Mutual and appellee MAIF. Consequently, we will cast our discussion in terms of those two entities, which are in fact the principal parties in interest here. To the chagrin of Liberty Mutual, the circuit court, after a bench trial, declared that Stevenson was not covered under the MAIF policy and denied its request for indemnification.

Liberty Mutual then noted this appeal presenting two issues that can be stated as one: “Did the trial court err in concluding that Stevenson was not covered under the MAIF policy?” For the reasons that follow, we shall hold that it did not and affirm the judgment of the circuit court. Background At trial, the parties agreed to submit the depositions of both Drewerys in lieu of live testimony. In fact, the only witness to testify at trial was a MAIF adjuster, who testified as to the insurance policy Drewery had with MAIF. Consequently, the facts presented below are culled from the Drewerys’ depositions.

On March 27, 1997, Dennis Ray Drewery, Sr.’s former wife telephoned him to ask if their son, Dennis Ray Drewery, Jr., could use Drewery, Sr.’s car to take her to work. Her place of employment was in Washington, D.C. Drewery, Sr. agreed to this request, and Drewery, Jr. arrived at his house to pick up the car. At that time, Drewery, Sr. instructed his son that he was to use the car to take his mother to work and then to bring the car back. Although Drewery, Sr., did not, on that occasion, instruct his son not to let anyone else drive the car, he had, in the past, “always told him” that only he could drive the car.

After leaving his father’s house, Drewery, Jr. picked up a friend, Leo Stevenson, before driving to his mother’s resi ⁶⁰⁸ dence. With Stevenson, he picked up his mother and dropped her off at work. After leaving his mother’s place of employment, the pair decided to visit Stevenson’s cousin Rashad in Washington, D.C. Because Drewery, Jr. did not “know [his] way around there,” he let Stevenson drive. After picking up Rashad, the three men left Rashad’s residence, with Stevenson still driving.

On the way back to the residence of Drewery’s mother, Stevenson struck a parked truck. The parked truck was propelled forward by the impact, striking and injuring Donald Leroy Andrew, an employee of the Flippo Construction Company. After the accident, Liberty Mutual, the worker’s compensation insurance carrier for Flippo, paid Andrew worker’s compensation benefits. Liberty Mutual subsequently filed a complaint for declaratory relief in the Circuit Court for Prince George’s County, requesting a declaration that Stevenson was covered under Drewery, Sr.’s automobile insurance policy with MAIF and that MAIF was therefore required to indemnify Liberty Mutual for compensation payments made to Andrew.

The omnibus clause of the MAIF policy provided, in part, “[i]nsured means: 1. you and any person while using the covered automobile with your permission; 2. any person or organization legally responsible for the use of the covered automobile provided its actual use is by you or with your permission.” Relying on that clause, MAIF denied coverage on the grounds that, at the time of the accident, Stevenson did not have Drewery, Sr.’s permission to operate the car. A bench trial was held to determine whether Stevenson was covered under the MAIF policy. At the conclusion of that proceeding, the circuit court declared that Stevenson was not, because he “did not have the express permission of the insured, Dennis Ray Drewery, Sr.” to drive his car and because “both father and son ... had a mutual understanding that the driving would be restricted to the son when the car was lent to him.” After the court issued a written order declaring the rights and obligations of the parties consistent with its ruling, Liberty Mutual noted this appeal. ⁶⁰⁹ Standard of Review Because the trial below was a non-jury trial, our standard of review is governed by Maryland Rule 8-131. Boyd v. State, 22 Md.App. 539 , 323 A.2d 684 , cert. denied, 272 Md. 738 (1974).

That rule provides that this Court “will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses.” Md. Rule 8-131(c). “A finding of a trial court is not clearly erroneous if there is competent or material evidence in the record to support the court’s conclusion.” Lemley v. Lemley, 109 Md.App. 620, 628 , 675 A.2d 596 (1996). Moreover, “[ujnder the clearly erroneous standard, this Court does not sit as a second trial court, reviewing all the facts to determine whether an appellant has proven his case.” Id. Nor is it our function to weigh conflicting evidence. Bausch & Lomb, Inc. v. Utica Mut.

Ins. Co., 355 Md. 566, 586-87 , 735 A.2d 1081 (1999); Weisman v. Connors, 76 Md.App. 488 , 547 A.2d 636 (1988), cert. denied, 314 Md. 497 , 551 A.2d 868 (1989). Our task is limited to deciding whether the circuit court’s factual findings were supported by “substantial evidence” in the record. GMC v. Schmitz, 362 Md. 229, 234 , 764 A.2d 838 (2001)(quoting Ryan v. Thurston, 276 Md. 390, 392 , 347 A.2d 834, 835-36 (1975)).

And, in doing so, we must view all the evidence “in a light most favorable to the prevailing party.” Id. Although the factual determinations of the circuit court are afforded significant deference on review, its legal determinations are not. “ ‘[T]he clearly erroneous standard for appellate review in [Maryland Rule 8-131] section (c) ... does not apply to a trial court’s determinations of legal questions or conclusions of law based on findings of fact.’ ” Ins. Co. of N. Am. v. Miller, 362 Md. 361, 372 , 765 A.2d 587 (2001)(quoting Heat & Power Corp. v. Air Prods. & Chem. Inc., 320 Md. 584, 591 , 578 A.2d 1202, 1205 (1990)).

Indeed, the appropriate inquiry for such determinations is whether the circuit court ⁶¹⁰ was “legally correct.” Maryland Envtl. Trust v. Gaynor, 140 Md.App. 433, 440 , 780 A.2d 1193 (2001). Discussion Liberty Mutual contends that the circuit court erred in holding that Stevenson was not covered under the MAIF policy when the accident occurred. We disagree.

The MAIF policy states: We agree to pay, on behalf of the insured, all sums which the insured becomes legally obligated to pay for bodily injury and property damage caused by an accident and arising out of the ownership, patent or use of a covered automobile. It then defines an “insured” as follows: 1. You and any person while using a covered automobile with your permission; 2. Any person or organization legally responsible for the use of a covered automobile provided its actual use is by you or with your permission.

To qualify as an insured under that policy, Stevenson must fall within either of these two definitions. He does not. At the time of the accident, he was not operating the covered automobile with the permission of the owner and insured, Drewery, Sr., as the Circuit Court concluded, and therefore does not fall within either definition. Appellant contends, however, that Stevenson was covered by the policy because his operation of the vehicle had not been expressly forbidden by Drewery, Sr.; because he was operating the car on behalf of the person, who was given permission to use the vehicle, Drewery, Jr.; and because no restrictions had been imposed on the use of the vehicle.

Appellant further claims that the circuit court applied the wrong case in arriving at what appellant describes as an “erroneous” conclusion. Instead of Bond v. Pennsylvania Nat’l Mut. Cas. Ins.

Co., 289 Md. 379 , 424 A.2d 765 (1981), the circuit court should have followed, according to appellant, the reasoning of this Court in ⁶¹¹ Maryland Indem. Ins. Co. v. Kornke, 21 Md.App. 178, 319 A.2d 603 (1974). Had it done so, appellant contends, the circuit court would have found that Stevenson was operating the covered automobile within the permission granted to Drewery, Jr. to use the vehicle.

There was, however, ample evidence presented that, at the time that Stevenson was operating the covered vehicle, there was, as the circuit court put it, a “mutual understanding” between father and son “that the driving would be restricted to the son when the car was lent to him.” In support of that conclusion, the court first quotes the following testimony of Drewery, Sr.: Q. Okay. Now, do you recall saying anything to your son about anyone else driving the vehicle? A. Not that day, but always like I have let my son drive the vehicle, you know, through the past, and I have always told him, you know, that only, you know, him can drive the vehicle. It then cites the testimony of Drewery, Jr.: A. I was told not to let anyone drive.

Q. You have no recollection of your father saying anything that morning that would alter that understanding? A. No, sir. But that was not the only evidence of the understanding between the father and son as to the son’s restricted