Maddox v. Shanks

³⁵⁰ Horney, J., delivered the opinion of the Court. This is an appeal by the Unsatisfied Claim and Judgment Fund (the Fund) from a lower court order directing payment from the Fund of a judgment obtained by Vera Shanks (judgment creditor), the injured party, against William H. Maddox (judgment debtor and nominal appellant), an alleged insured. The appeal turns on the question as to whether the lower court erred in ordering payment of the judgment from the Fund even though there was a possibility that the judgment debtor was an insured under an automobile liability policy issued to Elsie Mae Farrow (named insured) by the Maryland Indemnity Insurance Company (insurance company or insurer) . At the time, of the accident, the judgment debtor was operating a truck owned by the named insured, which, with her permission, he was using to tow a merry-go-round mounted on a trailer she had previously sold, but had not delivered, to a third party.

While the merry-go-round was being towed from one location to another, the trailer broke loose from the truck and struck the automobile in which the judgment creditor was riding and seriously injured her. When the insurance company was notified of the accident, it denied coverage and the injured party filed notice of an intention to make a claim against the Fund and subsequently filed suit against both the owner and the operator of the truck. At the trial of the case, the jury found in favor of the injured party against the operator but not the owner of the truck and judgment was entered in accordance with the verdict. And when the judgment creditor was unable to obtain satisfaction of her judgment from the judgment debtor, she applied to the lower court for an order directing payment from the Fund.

The application was opposed and at the hearing thereon it was stipulated that the sole issue was whether or not there was a possibility that the judgment debtor was “an insured” under the policy issued to the named insured. At the hearing on the application, a representative of the insurance company, testifying on behalf of the judgment creditor, stated that the truck was insured but that the trailer was ³⁵¹ not covered, that the use of the trailer was not within the terms of the policy, that the parties had been so advised, and that the Fund had not indicated that it disagreed with the position taken by the company following the notice of disclaimer. On the contrary, a representative of the Fund, claiming that it had not seen a copy of the insurance policy until after the filing of the application for payment of judgment, disputed the insurance company’s interpretation of the coverage afforded by the policy, and further testified, among other things, that the trailer exclusion clause was not applicable to the facts of this case because the operator of the truck was an insured by virtue of using the truck with the permission of the owner. The lower court concluded that the judgment debtor was not covered by an automobile liability insurance policy which would be liable for the payment of the judgment against him.

Since, as a prerequisite to the passage of an order requiring the Fund to pay a judgment, Code (1957), Art. 66%, § 159(e) requires an application for payment to show that “the judgment debtor at the time of the accident was not insured under a policy of