McCauley v. Suls

SONNER, Judge. This case calls upon us to decide whether an insured can sue his insurance company for bad faith based on its dealings with him during a case he filed against it in an uninsured and underinsurance action. This case also calls upon us to decide whether the insurance company and the attorney representing that insurance company can be sued under theories of invasion of privacy and abuse of process for improperly issuing an ex parte subpoena that produces private and embarrassing hospital records about the insured. The court below, in two separate hearings, held that appellant could not maintain his action against his insurance company and its attorney and granted their motions to dismiss.

We will affirm the trial court. FACTS On November 1, 1994, a car operated by Russell Tasker collided with the vehicle of appellant, Joseph Andrew McCauley, and severely injured him. McCauley alleged that he suffered extensive permanent injuries, including sprains and strains of the cervical and lumbar spine, contusions on the arms and legs, contusions on the abdomen, lacerations on the ¹⁸² left thumb, and nasal septal deviation requiring surgery. McCauley filed suit against his insurance company, Erie Insurance Exchange (Erie), appellee, and the driver, Tasker, on two theories: first, that a second “phantom vehicle” may have caused Tasker to lose control, and, second, that the $100,000 limit on Tasker’s policy was insufficient to cover his injuries.

After McCauley filed his initial complaint against appellee Erie, Robert A. Suls entered his appearance as the attorney for Erie and began to conduct discovery. McCauley informed Suls, in interrogatories, that Carroll County General Hospital (CCGH) had hospitalized him in November 1992 for a bacterial skin infection. Although Suls had requested all documents referred to in his interrogatories, McCauley did not produce the hospital records. Suls questioned McCauley about his medical history during depositions and McCauley told him that CCGH hospitalized him for a “staph infection.” Subsequent to the deposition, Suls issued several subpoenas 1 on July 16, 1996, including one to CCGH for McCauley’s ¹⁸³ medical records and one to McCauley’s employer for its records.

The return date for the subpoenas was August 19, 1996. On or about July 22, 1996, McCauley learned about one of the subpoenas through his employer and informed his attorney, Mr. Shapiro, that his employer had received a subpoena from Suls for his personnel records. On July 26, 1996, Shapiro telephoned Suls to inquire about the subpoenas. Suls indicated that it was then that he realized that he had failed to send notices of deposition relating to the subpoenaed records and informed Mr. Shapiro about the other outstanding subpoenas, in particular the one to CCGH.

Suls also informed Shapiro that he had received records from McCauley’s employer, but he had not yet received the records from CCGH. Suls told Shapiro that he was leaving for vacation, but that he would instruct his staff to send out copies of the subpoenas, and his office did so on July 31, 1996. While Suls was on vacation, his office received the subpoenaed records from CCGH which bore a certification date of July 31, 1996. On August 6, Suls returned, confirmed the source of the records, and, without reviewing them substantively, placed them in sealed envelopes.

On August 7, 1996, Suls wrote to Shapiro and indicated that he wanted “to restore the parties to status quo.” He asked Shapiro to advise him, within fifteen days, about the records resulting from the subpoenas sent without notices. If Shapiro advised, Suls would reissue the subpoenas and notices so that counsel could take any appropriate action. If counsel filed a motion to quash, Suls offered to “return, destroy, or place with the court under seal any document which should not have been produced.” Suls wrote that if counsel did not contact him within fifteen days, he would “presume there is no dispute regarding the documents produced,” and that he would then review the documents and make them available to counsel. Shapiro next contacted Suls by letter dated August 21, 1996, ¹⁸⁴ asking that Suls forward the records “that have been spawned as a result of the Subpoenas which you filed without sending notices.” Suls complied and sent Shapiro a copy of the records.

McCauley never sought any relief from the court for any discovery violation and did not file a motion to quash or for protective order. Nevertheless, because Suls failed to notify McCauley’s attorney about the subpoenas, McCauley filed a second complaint against Suls and Erie, alleging invasion of privacy, fraud, civil conspiracy, and bad faith. 2 PROCEEDINGS BELOW After McCauley filed his complaint, Erie and Suls filed motions for dismissal or for summary judgment and McCauley filed his opposition and an amended complaint, adding a claim for abuse of process. Erie and Suls again filed motions for dismissal or for summary judgment. Judge William Hinkel of the Circuit Court for Baltimore County granted the motions with prejudice as to the claims for invasion of privacy, fraud, civil conspiracy, and bad faith, but allowed McCauley leave to amend his abuse of process claim.

After McCauley amended his complaint, Erie and Suls again filed motions for dismissal or for summary judgment, and Judge Lawrence R. Daniels granted the motions on October 27, 1997. McCauley appeals from those decisions and asks: I. Did the trial court err in granting the motions as to appellant’s claim of first party bad faith?

II

Did the court err in granting the motions on appellant’s invasion of privacy claim?

III

Did the court err in granting the motions as to the claim of abuse of process? We answer “no” to all three questions and, accordingly, affirm. 3 ¹⁸⁵ ANALYSIS Before we can resolve any of the issues raised by McCauley, we must first determine how the trial judges disposed of the instant case, and then apply the appropriate standard to the courts’ decisions. McCauley argues that both trial judges who heard the motions for dismissal or for summary judgment considered them as motions to dismiss and therefore we should apply that standard. Erie and Suls assert that, although both judges suggested that they were granting motions to dismiss, they have not confined us to that standard on appellate review.

We find that, in this case, the judges in the trial courts stated that they were deciding motions to dismiss, and neither court considered matters outside the pleadings when making their decisions. As we cautioned trial courts in Hrehorovich v. Harbor Hospital Ctr., Inc., 93 Md.App. 772, 784-85 , 614 A.2d 1021 (1992), the failure to articulate clearly the nature of its ruling in these circumstances is risky business.... Rule 2-322(c) gives the trial court discretion to convert a motion to dismiss to a motion for summary judgment by considering matters outside the pleading. When a judge exercises that discretion, however, best management practice indicates he should either (1) issue an oral or written opinion indicating that he has considered extraneous information and is deciding the motion on a summary judgment basis, or (2) put appropriate language in the order granting or denying relief that indicates that he has transmuted the motion to one for summary judgment....

The importance to appellate ¹⁸⁶ courts of a trial court clearly articulating what action it is taking cannot be over-emphasized. After reviewing Judge Hinkel’s written decision, we find that he not only specifically stated that his decision granted “Defendants’ Motion to Dismiss on Counts I-IV,” but the language of his decision clearly demonstrated that he had excluded facts that were not part of the pleadings. As to Judge Daniels’s oral decision on the motions for dismissal or for summary judgment on the issue of abuse of process, we note that, although it appears that the judge looked at the records submitted with the motion and stated that Suls had a right to subpoena them, he stated specifically that the court was ruling on the motion “strictly as a motion to dismiss.” Further, in dismissing the action, the court did not base its decision on whether Erie and Suls legally and appropriately used the process to subpoena those records, but, rather, the court examined the allegations in McCauley’s complaint and found that the complaint advanced only bald allegations. The court dismissed the action on the basis that McCauley had not sufficiently pled any ulterior motive in his complaint, a required element of the claim.

Therefore, we find that neither judge considered matters outside of the initial or amended complaint, but decided these motions as motions to dismiss. In reviewing a trial court’s decision on a motion to dismiss, under Md. Rule 2-322(b), “we must assume the truth of all relevant and material facts that are well pleaded and all inferences which can be reasonably drawn from those pleadings.” Sharrow v. State Farm Mut. Auto. Ins.

Co., 306 Md. 754, 768 , 511 A.2d 492 (1986) (citations omitted); Hrehorovich, 93 Md.App. at 781 , 614 A.2d 1021 . We must take care to determine whether the trial court was legally correct, that is, whether “the complaint does not disclose, on its face, a legally sufficient cause of action.” Hrehorovich, supra at 785 , 614 A.2d 1021 ( citing Bramble v. Thompson, 264 Md. 518, 520 , 287 A.2d 265 (1972)). Having determined the appropriate standard to apply in this case, we now consider the issues raised by McCauley. ¹⁸⁷ I. McCauley first protests the dismissal by Judge Hinkel of his claim of bad faith. McCauley contends that the court did not dismiss this claim by deciding whether Maryland recognizes the tort of bad faith in these circumstances, but, rather, it based its decision on the adversarial nature of his complaint against Erie for uninsured and underinsured coverage.

McCauley argues that the court’s reasoning is flawed because, in spite of the adversarial position of the parties, an insured pays premiums for insurance coverage and therefore has a legitimate expectation that his insurer will deal with him in a fair manner. McCauley acknowledges that Maryland recognizes a cause of action for bad faith in a third-party context when an insurer fails to settle a claim within the policy limits of its insured, Fireman’s Fund v. Continental Ins. Co., 308 Md. 315 , 519 A.2d 202 (1987), but has not recognized a bad faith claim against an insurer in the first-party context, that is, holding an insurer liable in tort for failing to pay an underinsurance claim. See Johnson v. Federal Kemper Ins.

Co., 74 Md.App. 243, 248 , 536 A.2d 1211 (1988); Stephens v. Liberty Mutual Fire Ins. Co., 821 F.Supp. 1119, 1120-23 (D.Md.1993); Yuen v. American Republic Ins. Co., 786 F.Supp. 531, 533 (D.Md. 1992); Caruso v. Republic Ins. Co., 558 F.Supp. 430, 434 (D.Md.1983).

McCauley points out that these cases all involve the failure by an insurer to honor or pay a claim, whereas his case is readily distinguishable because his claim is based on the insurer’s counsel using court processes illegally by issuing ex parte subpoenas. Although the facts of this case are distinguishable from prior cases in which courts have found that Maryland did not recognize a bad faith cause of action against an insurer for failure to pay first-party benefits, the reasons why Maryland has not recognized this tort are equally applicable to this case. As we stated in Johnson, 74 Md.App. at 247 , 536 A.2d 1211 , the difference between a third-party claim against the insured and a first-party claim is that ¹⁸⁸ the standard liability policy gives the insurer exclusive control over the investigation, litigation, and settlement of claims against the insured ... The insurer therefore owes a duty to the insured to attempt to settle the claim within the limits of the policy since the insured has surrendered the right to do so itself.

However, in a first-party claim, the insured “retains all rights to control any litigation necessary to enforce the claim ... [therefore] there is no conflict of interest situation requiring the law to impose any fiduciary duties on the insurer. Instead, the situation is a traditional dispute between the parties to a contract.” 4 Id. We see no need to recognize a bad faith claim and impose a tort duty on the insurance carrier under these facts. As we stated in Johnson , an insurance company owes no