Richmond v. Hartford Underwriters Insurance

DAVIS, Judge. Appellant Doris Richmond and her husband, Joel Richmond, are the named insureds on a motor vehicle insurance policy (the policy) issued by appellee Hartford Underwriters Insurance Company. The policy insures a vehicle owned jointly by ¹⁶⁸ appellant and her husband. On May 31,1996, while appellant was riding as a passenger and her husband was driving, the car was involved in an accident and appellant allegedly sustained extensive injuries.

Appellant filed a tort claim against her husband, alleging that he was negligent and, therefore, liable for her injuries. Appellant also brought a declaratory judgment action against appellee, seeking a determination of whether she was entitled to benefits under the liability and uninsured motor vehicle provisions of the policy. Appellee filed a motion for summary judgment, asserting that appellant lacked standing to seek a declaratory judgment and, if she did have standing, her benefits were limited to $20,000 under the policy’s liability provision. Appellee also sought summary judgment on the issue of uninsured motor vehicle coverage, stating that appellant was not entitled to uninsured motor vehicle benefits.

Appellant filed a cross-motion for summary judgment and the coverage issues were joined. On June 29, 1998, the Circuit Court for Baltimore County (Levitz, J.), held a hearing on the scope of the policy’s liability and uninsured motor vehicle coverage. The court determined that the policy permitted no uninsured motor vehicle benefits and restricted appellant’s recovery to $20,000 in liability insurance. Accordingly, summary judgment was entered in favor of appellee.

Appellant timely noted her appeal on July 9, 1998, and raises one question for our review that we restate as follows: Is a household exclusion clause in an automobile insurance policy void as against public policy when the Maryland Insurance Statute requires insurers to provide uninsured motor vehicle coverage to its insureds in an amount equal to the amount of liability insurance the insureds purchase? In addition, appellee presents one question for our review, reframed below: Does appellant lack standing to seek a declaration of her entitlement to insurance benefits? ¹⁶⁹ For the reasons stated herein, we answer appellant’s question in the negative, appellee’s affirmatively and, consequently, affirm the judgment of the circuit court. FACTS On September 4, 1996, appellee issued an automobile insurance policy to appellant and her husband. Both individuals were named on the policy, which provided for liability insurance up to $250,000 and uninsured motor vehicle insurance up to $250,000.

The policy also contained the standard household exclusion for liability insurance as well as the owned-but-uninsured and named-driver exclusions for uninsured motor vehicle insurance. On May 31, 1996, appellant allegedly was injured when their car was involved in an accident. At the moment of impact, appellant’s husband was driving and appellant was riding in the passenger seat. Appellant filed a complaint against her husband, alleging the accident occurred as a result of his negligence.

In addition, appellant filed a separate action in the Circuit Court for Baltimore County, seeking a declaratory judgment regarding the amount of benefits to which she was entitled under the provisions of the policy. Appellee responded to appellant’s complaint, asserting that appellant did not have standing to seek a declaratory judgment and, therefore, appellee was entitled to summary judgment. Appellee also urged that, even if appellant had standing, she was not entitled to uninsured motor vehicle benefits and was limited to only $20,000 in benefits under the liability provision due to the household exclusion contained in the policy. Following a hearing on June 28, 1998, the court entered judgment in favor of appellee, based on its determination that recovery was limited to $20,000, pursuant to the liability portion of the policy.

On July 9, 1998, appellant timely noted this appeal. 1 ¹⁷⁰ DISCUSSION I Prior to analyzing the merits of appellant’s appeal, we must address appellee’s contention that appellant did not have standing to seek a declaratory judgment. According to appel-lee, Maryland law forbids an injured tort claimant from bringing a direct action against the insurer of the alleged tort-feasor until after the alleged tort-feasor’s liability has been judicially determined. Thus, appellee concludes, until a determination of her husband’s liability has been made, appellant may not seek a declaratory judgment regarding her entitlement to insurance benefits. We disagree.

Maryland law instructs that an individual may seek a declaratory judgment against an insurer before the insured tort-feasor’s underlying liability has been determined when the two issues are independent and separable. See Harford Mut. Ins. Co. v. Woodfin Equities Corp., 344 Md. 399, 413 , 687 A.2d 652 (1997); Washington Metro.

Area Transit Auth. v. Queen, 324 Md. 326 , 333 n. 6, 597 A.2d 423 (1991) (citing Allstate Ins. Co. v. Atwood, 319 Md. 247, 252, 256-57 , 572 A.2d 154 (1990)). For example, in Valliere v. Allstate Ins. Co., 324 Md. 139, 141 , 596 A.2d 636 (1991), the representative of a decedent brought a declaratory judgment action concerning the terms of an alleged tort-feasor’s liability insurance policy while the underlying tort lawsuit was pending.

Declaratory judgment actions on separate and independent issues regarding policy coverage have also been permitted by the courts when the underlying tort action was filed near or after the date that the declaratory judgment suit was filed. See Van Horn v. Atlantic Mut. Ins. Co., 334 Md. 669 , 641 A.2d 195 (1994) (entertaining the merits of a declaratory judgment regarding the enforceability of a policy held by an alleged tortfeasor before the underlying lawsuit was filed); Bankers and Shippers Ins.

Co. v. Electro Enters., Inc., 287 Md. 641 , 415 A.2d 278 (1980) (addressing a declaratory judgment ruling on policy coverage disputes brought soon after the underlying tort claim was filed). ¹⁷¹ In the case sub judice, the court properly concluded that appellant had standing to bring the declaratory judgment action. 2 The issues in the underlying tort claim, which is pending, will be the negligence of appellant’s husband and the extent of appellant’s injuries. By contrast, the issue in the declaratory judgment action was appellant’s entitlement to coverage under the liability and uninsured motor vehicle provisions of the policy. The issues raised in appellant’s declaratory judgment action were independent and separable from the pending tort lawsuit. Appellant had standing, therefore, to bring a declaratory judgment action.

II Appellant asserts that the trial court erroneously concluded that she was not entitled to benefits under the uninsured motor vehicle portion of the policy. Specifically, she contends that there is no Maryland case law supporting the trial court’s determination that appellant was not entitled to additional benefits pursuant to the uninsured motorist portion of the insurance policy. Furthermore, avers appellant, application of the household exclusion is violative of the policy’s terms, the Maryland Insurance Code, and public policy, which require that insurers provide uninsured motorist coverage in an amount equal to the amount of liability coverage the insured purchases. Appellee counters that appellant is not entitled to uninsured motor vehicle benefits because an exclusion in its policy states that an uninsured motor vehicle does not include a vehicle owned by the named insured.

Appellee urges that this exclusion is expressly permitted by Maryland’s insurance statute and has been affirmed by this Court in two recent decisions. See Md.Code (1997, 1998 Supp.), Insurance II (Ins. II), § 19-509(f)(1); see also Matta v. Government Employees Ins. Co., ¹⁷² 119 Md.App. 334 , 705 A.2d 29 (1998); Provident General Ins.

Co. v. McBride, 69 Md.App. 497 , 518 A.2d 468 (1986). In conclusion, states appellee, the trial court correctly determined that appellant was not entitled to additional benefits under the uninsured portion of the policy. Owners of vehicles registered in Maryland are required to maintain liability and uninsured motorist insurance of at least $20,000 for any one person and $40,000 for any two or more persons. Md.Code (1998 RepLVol.), Transportation II, § 17-103.

Liability insurance is intended to insure that motor vehicle owners are “financially able to pay compensation for damages resulting from motor vehicle accidents.” Matta, 119 Md.App. at 340 , 705 A.2d 29 (citing Enterprise Leasing Co. v. Allstate Ins. Co., 341 Md. 541 , 671 A.2d 509 (1996)). Uninsured motorist coverage, on the other hand, is required “to assure financial compensation to the innocent victims of motor vehicle accidents who are unable to recover from financially irresponsible uninsured motorists.” Id. at 341, 705 A.2d 29 (citing Pennsylvania Nat’l Mut. Cas.

Ins. Co. v. Gartelman, 288 Md. 151 , 416 A.2d 734 (1980)). Uninsured motorist insurance also provides coverage against “underinsured” vehicles when the liability coverage on the vehicle causing the insured’s injuries is less than the uninsured motor vehicle coverage in the insured party’s policy. See Ins.

II § 19-509(a)(2)(i); see also Matta, 119 Md.App. at 342 , 705 A.2d 29 . Although they are required to provide the minimum amounts of insurance, insurers may “limit their liability and [ ] impose whatever condition they please in the policy so long as neither the limitation on liability nor the condition contravenes a statutory inhibition or the State’s public policy.” Walther v. Allstate Ins. Co., 83 Md.App. 405, 411 , 575 A.2d 339 , cert. denied, 320 Md. 801 , 580 A.2d 219 (1990). One exclusion, the “household exclusion,” allows insurers to limit the amount of liability insurance coverage when the injured party is a member of the named insured’s household. 3 This exclusion, which ¹⁷³ is actually a limitation, is permissible by statute, so long as the statutory minimum is still available to the household member.

There are also three exclusions from uninsured motorist coverage. The “owned-but-uninsured” exclusion allows insurers to exclude the following from uninsured motorist coverage: [T]he named insured or a family member of the named insured who resides in the named insured’s household for an injury that occurs when the named insured or family member is occupying or is struck as a pedestrian by an uninsured motor vehicle that is owned by the named insured or