Maryland Indemnity & Fire Insurance Exchange v. Steers

Brunb, C. J., delivered the opinion of the Court. This case involves two questions arising under an automobile insurance policy issued under an assigned risk plan. The first is one of misrepresentation, the second is one of coverage under the liability insurance provisions of the policy. Maryland Indemnity & Fire Insurance Exchange (Indemnity), the appellant, filed a bill of complaint in equity in the Circuit Court of Baltimore County, (i) seeking a declaratory decree that Indemnity was not obligated under an automobile liability insurance policy issued by it to Kenneth S. Steers (Steers), one of the appellees, to pay damages suffered by the other appellees, Romaine W. and Orville Jacobs, her husband, (the Jacobs) in an automobile accident in which Mrs. Jacobs and Steers were involved, and (ii) also seeking to enjoin the appellees from proceeding with a suit at law brought by the Jacobs against Steers for damages arising out of the accident, until the bill for declaratory relief should have been adjudicated.

The Circuit Court sustained a demurrer to the bill insofar as it sought an injunction^ but deferred ruling upon the issue of coverage under the insurance policy until after the suit between Steers and the Jacobs had been concluded. That suit resulted in judgments for the Jacobs, and this suit for the construction of the policy and determination of coverage was then heard. 1 After considering an agreed statement of facts and the testimony of two witnesses the lower court dismissed the bill with prejudice. The trial court found that the .automobile involved in the accident was in fact a replacement of the insured automobile and therefore held that it was covered by the policy. Indemnity appeals from the decree dismissing its bill.

Indemnity challenges the decision of the trial court on two ³⁸³ grounds. It first says that the policy was void at the time of the accident because there had been a material misrepresentation as to the automobile covered when the renewal policy which was in force at the time of the accident was issued in December, 1956. Secondly, it argues that, even assuming that the policy was not void, the automobile owned and driven by Steers which was involved in the accident was not a replacement vehicle for the automobile described in the policy and therefore was not insured under the policy. The Jacobs contend that there was no material misrepresentation (if there was any misrepresentation at all), and that the car involved in the accident was a replacement of the automobile originally insured.

Steers takes no part in the appeal. The accident in which Mrs. Jacobs was injured occurred on November 1, 1957, while Steers was driving a 1955 Ford. At the time of the accident Steers had an automobile liability insurance policy which the appellant, Indemnity, had issued to him in December, 1956, is a renewal of a one-year policy issued in December, 1955. Both were issued as a result of Indemnity’s participating in the Maryland Assigned Risk Plan. 2 When this insurance was issued Steers owned and operated a 1946 Oldsmobile which was the automobile named in the policy.

The policy had a provision as to newly acquired automobiles which made the insurance applicable to such automobiles and waived the requirement of notice of the acquisition thereof (under the liability coverage applicable here) “if the newly acquired automobile replaces an owned automobile covered by this policy.” Sometime prior to April, 1956, according to Steers’ testimony, the Oldsmobile became inoperative. However, the license for it was renewed on April 1, 1956, because Steers expected to get it running again. After using public transportation for several weeks, Steers purchased, on May 15, 1956, a 1946 Dodge which he regis ³⁸⁴ tered in his name and for which he obtained license plates. Thereafter he used the Dodge, and the Oldsmobile was left standing in the street.

In December, 1956, Steers accepted the renewal policy issued by Indemnity. This policy repeated the designation of the Oldsmobile as the insured automobile, just as it had been in the original, and Steers did nothing to correct this. In March, 1957, Steers renewed the license plates on the Dodge but did not do so on the Oldsmobile. By this time, as Steers testified, and as the trial judge found, the Oldsmobile was physically inoperable.

After its registration expired on March 31, 1957, it also became illegal to operate it. On March 20, 1957, Steers sold the Dodge and shortly thereafter bought a 1955 Ford. The current license plates which had been obtained for the Dodge were then transferred to the Ford. This transaction was not brought to the attention of Indemnity.

In October, 1957, Steers bought a 1946 Pontiac for $30 which he never registered, and according to his testimony he bought it simply with the intention of removing and selling the salable parts of the car. Steers was a garage attendant at a service station. There is nothing to show that he ever used the Pontiac as a car or that he ever intended to do so. One week after the accident occurred, on November 7, 1957, Steers requested Indemnity to designate the Ford as the insured automobile in place of the Oldsmobile.

This was done without any demand for the payment of an additional premium, although notice of the accident appears to have been given previously. Indemnity’s first argument is that the renewal policy of December, 1956, was void ab initio, because at the time of the renewal he represented to Indemnity that the automobile to be insured was the Oldsmobile, while actually the car he was driving at that time was the Dodge. The Oldsmobile was described as the vehicle insured in the original policy and this was then true. This description was carried over into the renewal policy when Indemnity prepared the latter, and Indemnity had no knowledge of any change at that time.

The policy had a provision by which the insured agreed that “the statements in the declarations are his agreements and representations”. Since the designation of the car insured was by ³⁸⁵ a declaration, Indemnity contends that the listing of the Oldsmobile as the automobile covered was a misrepresentation by Steers. We shall assume (without deciding) that this contention is correct. Indemnity argues that this constituted a material misrepresentation.

The usual test of whether or not a representation is material is whether it concerns a fact that would affect the insurer’s decision in entering into the contract and in estimating the degree or character of the risk (which, of course, affect the premium). Monumental Life Ins. Co. v. Taylor, 212 Md. 202, 213 , 129 A. 2d 103 ; John Hancock Mutual Life Ins. Co. of Boston, Mass. v. Adams, 205 Md. 213, 221 , 107 A. 2d 111 ; 12 Appleman, Insurance Law & Practice, § 7294 (1943).

We think it is clear from the insurance contract itself and from other evidence in the case that the failure to identify correctly the insured car at the time of the renewal of the policy was not a material misrepresentation. Most important of all, we think, is the fact that the insurance policy itself contained a provision which made it applicable to any newly acquired vehicle which replaced an insured automobile, and provided that the liability insurance thereby afforded and here involved should become effective as to the newly acquired automobile without notice of the replacement. Looking at its provisions in some detail we note that the policy listed a number of coverages which were available, but that it afforded protection as to only those for which a premium was charged. The only coverages which Steers thus obtained were for bodily injury liability, referred to as “coverage A”, and for property damage liability, referred to as “coverage B”.

Another form of liability insurance—designated as “Automobile Medical Payments”, referred to as “coverage C”, was available, but Steers did not have this. Other available coverages not afforded by Steers’ policy included ñre, theft and collision, as to which the value of the insured vehicle would obviously be pertinent to the risk and the premium therefor. The policy here in suit applied to a “Newly Acquired Automobile” which it defined (so far as here material) as “an automobile, ownership of which is acquired by the named in ³⁸⁶ sured or his spouse * * * if (i) it replaces an automobile owned by either and covered by this policy, or the company