Pappano v. Chevy Chase Bank

SHARER, Judge. In this appeal, Martha K. Pappano, plaintiff below and appellant here, challenges the entry of summary judgment by the Circuit Court for Montgomery County in favor of appellees, Chevy Chase, F.N.B. and Chevy Chase Financial Services, Inc. (collectively, “the Bank”); American General Assurance Company, Security of America Life Insurance Company, United States Life Insurance Company, USLIFE Indemnity Company, USLIFE Credit Life Insurance Company (collectively, “American General”); and Union Security Life Insurance Company. 1 ⁶⁷⁴ The basis for summary judgment was the trial court’s finding that appellant’s complaint was barred by the statute of - limitations. Hence, we are presented with a single issue, which we rephrase for simplicity, as follows: Did the trial court err in ruling that appellant’s suit was barred by the statute of limitations? We shall answer the question in the positive and reverse.

FACTUAL AND PROCEDURAL BACKGROUND In 1990, appellant, Martha K. Pappano, and her husband, Leonard Anthony Pappano, applied to Chevy Chase Bank for a home equity credit line to be secured by their Gaithersburg, Maryland residence. At the closing on October 9, 1990, Mr. and Mrs. Pappano expressed, by filling in certain sections of the printed settlement sheet, their desire for credit life insurance on both their lives. At that time the Bank had a group policy of credit life insurance issued by Security of America Life Insurance Company. As pimvided by the group policy, the Bank could offer up to $50,000 in credit life insurance to eligible borrowers.

Credit life insurance is procured for the purpose of paying off all or part of an outstanding loan balance upon the death of an insured debtor of the lender. Any payment under the credit life policy would have been made directly to the Bank, to be applied to the then outstanding balance of the mortgage or home equity loan. The Bank was responsible for processing and transmitting its customer’s insurance applications to Security of America. Security of America issued a policy of credit life insurance on appellant’s life, not on both as requested, effective October 9, 1990, for the maximum amount.

Neither the Bank nor Security of America issued a policy or certificate, or other documentation of coverage, to the Pappanos subsequent to the 1990 closing. Their monthly statement from the Bank did contain a charge for insurance, which they regularly paid. The monthly charge, unbeknownst to the Pappanos, was for single insurance coverage on the life of appellant, not on their joint lives as she recalls that they requested. ⁶⁷⁵ On July 15, 1994, the Bank terminated its group policy with Security of America and thereafter offered its customers credit life insurance through Union Security Life. No notice of the change in the group policy was provided to the Pappanos.

In July 1994, the Pappanos applied to the Bank for an increase of their home equity line of credit. A closing was held on July 18, 1994 at which, according to appellant, she and her husband again elected credit life insurance on both of their lives. That request, however, is not conclusive because the settlement sheet does not indicate whether the Pappanos clearly expressed a desire for insurance. The form provided a space for a check-off of whether the borrowers desire credit life insurance.

An “x” was placed on the form, but partially on the line for “yes” and partially on the line for “no.” Also, where the settlement sheet states premium amounts for either single or joint coverage, respectively, no amounts were entered. As before, the monthly statement contained an amount for insurance, which was timely paid. As before, the Pappanos were not provided with a policy or certificates by either the Bank or Union Security Life. On August 19. 1996, Leonard Pappano died.

According to Mrs. Pappano, she thereafter became responsible for handling numerous personal and family affairs, which previously had been seen to by her late husband, including the education of their children. In January 1997 she underwent major surgery. Sometime in the spring of 1997, appellant inquired at a branch of the Bank as to whether life insurance benefits were payable as a result of her husband’s death. The branch manager replied in the negative, but left appellant “with a sense that something was not right.” She made at least two subsequent inquiries at the branch, and was told each time that no insurance existed.

In 1999 appellant decided to sell her residence. In connection with the sale and closing, the Bank, on July 21, 1999, addressed a letter to “Leonard Anthony Pappano” certifying ⁶⁷⁶ the payoff amount for the line of credit. Included in that statement was a line item reading: “Insurance (Credit Life): $54.47.” After seeing this, on August 2, 1999, appellant contacted the Bank’s benefits department to inquire if there was insurance on her husband’s life. A bank employee responded that there was such coverage, but later recanted, saying that she had been mistaken, that the insurance coverage was on appellant’s life only, and that there was no coverage on the life of Mr. Pappano.

On December 17, 1999, Mrs. Pappano filed a six count complaint against the Bank, sounding in both contract and tort. As the names of the various credit life insurance providers became known to her in the course of discovery, she twice amended her complaint. Chevy Chase and American General filed motions for summary judgment pursuant to Md. Rule 2-501 asserting that appellant’s claim was barred by the statute of limitations. The circuit court conducted a hearing on the motions at which all parties were represented.

Union Security Life, having been served only days before the hearing, was likewise represented and its counsel moved orally for summary judgment. After taking limited, and incomplete, testimony from appellant, the circuit court heard full argument from counsel for all parties. At the close of arguments, the court announced from the bench: The issue that is before me is whether or not her claim is barred by the applicable statute of limitations. I have to say that has been submitted, and the difficulty that I have is that the commencement of the statute of limitations is when the elements are present and the knowledge of the facts and circumstances are sufficient to put the plaintiff on appropriate notice to make inquiry, and there is no dispute that the plaintiffs husband died on August 19,1996.

The cause of action that is being asserted here today is negligent failure to obtain insurance, breach of a contract to procure insurance, and claims arising from that. ⁶⁷⁷ The plaintiff was on notice to make inquiry as of August 19, 1996. At that time she had a duty to seek out the facts supporting her cause of action. The statute of limitations began to run as of that time. The lawsuit was not filed until after the three-year limitation ran.

Accordingly, I will grant the defendants’ motion for summary judgment. Immediately thereafter, counsel for Union Security orally moved to join the motions, which the court granted. The court then extended the summary judgment to Union Security Life as well as to all other defendants. The circuit court later entered orders dated May 24, 2001 and June 8, 2001, from which this appeal has been taken.

STANDARD OF REVIEW As in any appeal from a grant of summary judgment, our review is to determine whether the trial court was legally correct. In assessing the rulings of the trial court, we recognize that “ordinary principles governing summary judgment ... continue to apply when the issue on summary judgment is [the statute of] limitations!.]” Murphy v. Merzbacher, 346 Md. 525, 531 , 697 A.2d 861 (1997) (quoting O’Hara v. Kovens, 305 Md. 280, 304 , 503 A.2d 1313 (1986)). A summary judgment motion is not a substitute for trial. Rather it is used to dispose of cases when there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law.

The standard for appellate review of a trial court’s grant of summary judgment is whether the trial judge was legally correct in his or her rulings. In granting a motion for summary judgment, the trial judge may not resolve factual disputes, but instead is limited to ruling on matters of law.... If any inferences may be drawn from the well-plead facts, the trial court must construe those inferences in the light most favorable to the non-moving party. The existence of a dispute as to some non-material fact will not defeat an otherwise properly ⁶⁷⁸ supported motion for summary judgment, but if there is evidence upon which the jury could reasonably find for the non-moving party or material facts in dispute, the grant of summary judgment is improper.

Okwa v. Harper, 360 Md. 161, 178 , 757 A.2d 118 (2000) (citations omitted). DISCUSSION Did the trial court err in granting appellees’ motion for summary judgment on the basis of the statute of limitations? Maryland’s statute of limitations, codified in Md. Code, Cts. & Jud. Proc., § 5-101, provides that “[a] civil action shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced.” Statutes of limitations are to be strictly construed.

Murphy, supra, 346 Md. at 532 , 697 A.2d 861 . “[Absent a legislative creation of an exception, we ‘will not allow any implied or equitable exception to be engrafted upon it.’ ” Id. at 532-33 , 697 A.2d 861 (quoting Garay v. Overholtzer, 332 Md. 339, 359 , 631 A.2d 429 (1993)). None of the exceptions referred to in § 5-101 is applicable to the present case. The elemental inquiry then becomes when did appellant know, or when should she have known, of the alleged failure of the Bank and the insurers to provide her and her late husband with the coverage for which they had bargained. Section 5-101 provides guidance as to when a civil action is foreclosed, but does not define the word “accrue.” “Absent such statutory definition, the question of when a cause of action accrues is left to judicial determination.” Harig v. Johns-Manville Products Corp., 284 Md. 70, 75 , 394 A.2d 299 (1978).

That judicial determination, adopted incrementally over decades, has become known as the “discovery