Oarr v. Government Employees Insurance

Wilner, J., delivered the opinion of the Court. Effective February 5, 1973, Government Employees Insurance Company (GEICO), appellee, renewed for a one-year period a Standard Family Automobile Policy insuring two automobiles owned by James E. Daugherty — a 1970 Ford Torino and a 1966 Chevrolet Corvair. The Ford was normally driven by Mr. Daugherty; the Chevrolet was generally used by his wife Charlene. The policy limits, with respect to liability coverage, were stated to be $20,000 per person and $40,000 per occurrence as to each of the two automobiles.

On September 3,1973, Charlene was driving the Ford when she was involved in an accident with an automobile driven by appellant, Judith Jean Oarr. Ms. Oarr sued Mr. and Mrs. Daugherty for the injuries sustained by her as a result of that accident. The litigation was terminated by a consent judgment against Charlene for $40,000 and dismissal of the claim against James. In pursuance of that judgment, and its obligations under the insurance policy, GEICO paid $20,000 to Ms. Oarr.

This case arises from a dispute over the other $20,000. Ms. Oarr brought an action for declaratory judgment against GEICO alleging that, because of an ambiguity in the policy language, the policy limit of GEICO’s liability to her ¹²⁴ was $40,000, not $20,000, and that GEICO should be required to pay the balance of the judgment debt. GEICO, of course, believes otherwise, and was able to convince the Circuit Court for Prince George’s County that its position was the correct one. From the granting of summary judgment in GEICO’s favor, Ms. Oarr has appealed.

She raises two issues: (1) Whether the language of the policy was so ambiguous as to create a jury question and to cause the contract to be construed against GEICO and in favor of the insured; and (2) Whether “stacking” of policy benefits should be allowed where the policy insures two automobiles and the insurer collects separate premiums for each. Both issues are aimed at the same result — the “stacking” or “pyramiding” of coverage based on the fact that the policy insures two vehicles. The second issue, as framed, may be disposed of rather quickly. We are aware of no provision of Maryland law, nor any regulation of the Insurance Commissioner, that would require a policy insuring more than one vehicle to provide for the “stacking” of liability coverage.

In the absence of such a supervening requirement, therefore, the terms of the policy will control. 1 Thus, if there is to be “stacking”, it will be because the policy provides for it, not because the law requires it. GEICO’s obligations are derived from the policy, which is a contract to be read and construed in the same manner as other contracts. 2 To determine whether Ms. Oarr is entitled to recover the other $20,000 from GEICO, we must therefore look solely to the insurance policy to see what limit of liability has been expressed therein. Consequently, the second issue will be treated as part of the first. The basic coverages afforded by the policy (and the limits ¹²⁵ thereto) are shown on the Declaration sheet which, in relevant part, provides as follows: 3 [[Image here]] [[Image here]] In Part I of the policy, entitled “Liability”, the company obligates itself “[t]o pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of ... bodily injury, sickness or disease, including death resulting therefrom, hereinafter called ‘bodily injury’, sustained by any person ... arising out of the ownership, maintenance or use of the owned automobile or any non-owned automobile____” The policy includes as “persons insured” under Part I, with respect to the “owned automobile”, the named insured and any resident of the same household.” A “named insured” is defined as “the individual named in the declarations and also includes his spouse, if a resident of the same household.” With respect to these provisions, it is conceded that the Ford Torino is an “owned automobile” and both James and Charlene Daugherty are “persons insured”. ¹²⁶ The alleged ambiguity arises from the next two provisions.

Under the heading “Limits of Liability”, this language appears: “Regardless of the number of automobiles or trailers to which this policy applies, the limit of bodily injury liability stated in the declarations as applicable to ‘each person’ is the limit of the company’s liability for all damages, including damages for care and loss of services, arising out of bodily injury sustained by one person as the result of any one occurrence____” (Emphasis supplied.) This would seemingly make clear that the limit of liability stated in the declarations with respect to the Ford — $20,000 each person — is the total extent of GEICO’s obligation. Later in the policy, however, are stated a number of “CONDITIONS”, one of which, Condition 4, provides, in relevant part, that, “When two or more automobiles are insured hereunder, the terms of this policy shall apply separately to each.” The point sought to be made by appellant is essentially as follows: (1) Condition 4 states that “the terms of this policy shall apply separately to each” of the two automobiles insured under the policy; (2) Thus, the limits of liability expressed in the declarations ($20,000 each person) apply separately to each of the two automobiles, to the same effect as if the vehicles were insured under separate policies; (3) Mrs. Daugherty is an insured person with respect to both automobiles; (4) Therefore, by virtue of Condition 4, appellant is entitled to collect $20,000 under Charlene’s insurance with respect to the Ford and $20,000 under Charlene’s insurance with respect to the Chevrolet. Without pausing at this point to comment upon the substance of this proffered syllogism, we note that it rests entirely upon an assumed effect of Condition 4, without recognizing in any way the language contained in the “Limits ¹²⁷ of Liability” section of the policy. It is well-settled, however, that courts are not at liberty to ignore a clear provision in an insurance policy in order to avoid what is professed or may appear to be a hardship; 4 indeed, the intention of the parties must be garnered from all of the terms of the policy considered as a whole, and not from the various clauses considered separately. 5 We therefore must assess appellant’s argument, not solely upon the basis of Condition 4, but in the light of what is said in the “Limits of Liability” section.

Appellant recognizes this, but seeks to protect her position by asserting that, to the extent the language found under “Limits of Liability” would produce a contrary result, an ambiguity is created which should be construed against the insurer and in her favor. To the extent (but only to the extent) that the policy is ambiguous, that would be the required construction; 6 and so the threshold issue is whether the two provisions, read together, in fact make the policy ambiguous. This appears to be a case of first impression in the Maryland courts. There are, however, dozens of decisions of the Federal courts and the courts of other States from which a rather well established pattern has emerged.

It is a pattern decidedly antagonistic to appellant’s contention. The development of the decisional law in this area arose initially and primarily in the context of “medical payments” coverage, involving an undertaking by the insurance company to reimburse its insured for the cost of medical services incurred as the result of bodily injuries sustained by the insured or certain members of his family. The earliest case appears to be Sullivan v. Royal Exchange Assurance, 181 C.A.2d 644, 5 Cal. Rptr. 878 (1960), in which the California District Court of Appeal interpreted a policy insuring two vehicles to preclude the “stacking” of medical payments coverage.

In essence, the court concluded that Condition 4 and the “limit of liability” clause were complementary rather ¹²⁸ than contradictory, that there was therefore no ambiguity, and that the “specific limitation provision” governed. The approach taken by the California court in Sullivan, with respect to medical payment coverage, has not been followed in subsequent cases throughout the country. 7 Rather, the nearly universal rule is that, in a single Family Automobile Policy of the type issued in this case, in which more than one vehicle is insured, the inclusion of the “limit of liability” clause and Condition 4 suffices to create an ambiguity with respect to medical payment coverage, and that, as a result, the policy will be construed to permit a “stacking” of benefits under that coverage. Not all of the courts adopting this approach have explained the rationale behind their decision in exactly the same way; but, in most instances, the result seems to have been reached upon the theory that: (1) Medical payment coverage extends to bodily injuries sustained from the operation or involvement of any automobile, and is therefore not dependent upon or related to the involvement of an automobile insured under the policy; (2) Thus, neither the coverage, nor the premiums collected for it, are really attributable to either, any, or all of the vehicles insured under a multi-vehicle policy; (3) This type of coverage is therefore more like a personal accident policy than automobile insurance; (4) If the insured had separate policies on his vehicles, each containing this type of coverage, he would be able to collect up to the policy limit of liability under each policy [i.e., the coverage would be “stacked”); (5) Condition 4, applying the terms of the policy separately to each insured vehicle, when coupled with the charging of separate and cumulative premiums for this coverage, is ¹²⁹ consistent with an intent to treat this coverage in the same manner as if it had been afforded under separate policies; and (6) To the extent the “limit of liability” clause is inconsistent with this approach, there is an ambiguity in the policy, which should and would be construed against the company and in favor of the insured. 8 This type of reasoning has been applied and extended by some courts to permit the “stacking” of benefits under uninsured motorist coverage, also a “first party” coverage; 9 and it is upon this general line of cases, pertaining to first party coverages, that appellant relies in espousing her position that coverage should be “stacked” in this instance. It is not necessary for us to determine whether we would follow this line of reasoning with respect to the “stacking” of medical payment and uninsured motorist coverages, and we expressly decline to make such a