Schuler v. Erie Insurance Exchange

WENNER, Judge. The issue we are called upon to decide in this appeal is whether the Circuit Court for Montgomery County erred in holding that the appellant, Thomas Schuler, was not entitled to uninsured motorist and personal injury protection coverage under the terms of a commercial liability insurance policy issued by Erie Insurance Exchange. Erie’s policy covered a 1980 BMW owned by Lena Schuler, appellant’s wife. Mrs. Schuler’s employer, Rainbow Hair Designers, is the named insured in the policy.

The subscriber is Sylvan Nahamani, the owner of Rainbow Hair Designers, who paid the premiums for the policy. The facts giving rise to appellant’s claim may be briefly stated. They are not in dispute. On August 8, 1986, appellant was standing beside his 1983 Camaro when he ⁵⁰¹ was struck and was seriously injured by an automobile driven by an uninsured motorist. 1 At the time he was injured, appellant’s car was insured by Maryland Automobile Insurance Fund (MAIF).

The limits of the MAIF policy were $20,000 per person, $40,000 per accident. Appellant’s wife is currently the general manager for all of the stores operated by Rainbow Hair Designers. Mrs. Schuler’s BMW was insured under the policy issued by Erie to Rainbow, as a benefit of her employment. 2 The uninsured motorist limits of the Erie policy are $100,000 per person, $300,000 per accident. Appellant made his claim against Erie rather than against MAIF, because of the higher limits available under the Erie policy.

That he may make this election between the two carriers is supported by the holding in Rafferty v. Allstate Ins. Co., 303 Md. 63 , 492 A.2d 290 (1985). By statute, a recovery from one carrier precludes a recovery against the other. Erie contends, and the trial court agreed, that appellant’s claim is not covered by the Erie policy, because the definitions section of the Erie policy identifies the subscriber as the one who signs the policy and the terms in the policy referring to “you,” “your,” and “named insured,” refer to the subscriber, Nahamani, and cannot be interpreted to include either the appellant or his wife.

The uninsured motorist coverage provided in the policy, Erie contends, applies to Nahamani, his resident spouse and other relatives resident in his household, but does not extend to the appellant, who is the spouse of the owner of one of the covered cars. ⁵⁰² Erie concedes that the BMW is a covered vehicle and, as such, is covered by its policy as are individuals occupying the BMW or struck by it. Erie contends that, inasmuch as the appellant was injured while standing outside of his own car, in an occurrence not involving the BMW, no payments are due appellant from either the PIP or uninsured motorist coverages provided by the Erie policy. Citing Pennsylvania National Mutual Casualty Co. v. Gartelman, 288 Md. 151 , 416 A.2d 734 (1980), and Parsons v. Erie Insurance Group, 569 F.Supp. 572 (D.Md.) (1983), appellant contends that because of the remedial nature of the uninsured motorist statute, Md.Code Art. 48A, §§ 539, 540 and 541, a liberal construction is required in order that innocent victims of motor vehicle accidents may be compensated. In appellant’s view, a proper construction of the Erie policy would afford coverage to the spouse of an owner of a vehicle covered by a policy of general liability insurance.

As appellant sees it, the owners of each of the five cars listed in the Erie policy have both PIP and UM coverage that includes their spouses and any relatives residing in their household. In Gartelman, supra, the claimant was an insured motorist under a policy issued to her husband. While operating a motor scooter not covered under the policy, she was forced off the road and injured by an unidentified vehicle. Her PIP and UM claims were denied because of an exclusion in the policy providing that coverage was not available to a named insured, or to a relative injured while occupying an uninsured vehicle owned by the named insured.

The husband owned the motor scooter. The Court of Appeals held that the wife was covered. The Court reasoned that where the Maryland Legislature specifically enumerated the circumstances where PIP coverage could be excluded, 3 additional exclusions may not be validly inserted in a policy. The same result was reached ⁵⁰³ by the Court with respect to UM benefits.

Article 48A, § 243H permits the exclusion of coverage where the claimant is operating an uninsured motor vehicle owned by him. Since the claimant in Gartelman was not the named insured, but was his spouse, the Court held that the policy exclusion as to the spouse was invalid and that UM benefits were available to her. In Parsons, supra, Curtis Parsons was killed in a collision with an uninsured driver who was at fault. Parsons was driving his 1980 Pontiac and was accompanied by his wife and children, all of whom were injured.

Two insurance policies were in effect at the time of the accident. Progressive Casualty Insurance Company had issued a policy to Parsons, who was the named insured, covering a 1981 Ford; the Pontiac was not listed as an insured vehicle under that policy. The second policy was issued to Parsons by Erie Insurance Group. It covered the Pontiac, but an endorsement to the policy provided that Erie was not liable for any claims arising out of the operation of the car by Parsons, who had numerous speeding violations.

Progressive conceded that it was liable to Parsons for PIP benefits, in light of the holding in Gartelman that all policies must provide such coverage irrespective of fault. All parties conceded, however, that Progressive was not liable to Parsons for UM benefits, because the Pontiac was not an insured vehicle under the Progressive policy. UM coverage was available to the other injured parties, however. Erie contended that it could determine the risks it would cover and that the endorsement excluding Parsons was valid.

Accordingly, it denied any claims for PIP or UM benefits made on behalf of Parsons or on behalf of any other members of his family. The district court held that the endorsement to the Erie policy denied to the insured the PIP protection required by Art. 48A, § 539(a), which expressly covered the named insured and members of his family residing in the house ⁵⁰⁴ hold. 4 Citing § 541(c), which requires that every automobile liability policy issued in Maryland provide UM coverage, the district court held that the subscriber, his or her spouse, and any relative was an insured under the policy. The court concluded that the endorsement to the policy relied upon by Erie did not exclude Parsons as an insured because there was no exclusion in the statute that would permit Erie to deny the claims of Parsons and his family. Erie, therefore, was required to provide PIP and UM benefits to Parsons and his family.

In the case sub judice, Erie contends that its policy comports with the requirements of Maryland law and that the PIP and UM provisions are applicable only to the subscriber, Nahamani, and to the members of Nahamani’s family residing in his household. According to Erie, the appellant or his spouse would only be covered if either or both of them were injured while occupants of the BMW. Thus, as we said earlier, since the appellant was not a named insured and the BMW was not involved in the accident Erie contends that no coverage is available to him. We observe that Gartelman and Parsons , involve named insureds, whereas the question before us is whether appellant’s spouse, the owner of the BMW, should be considered as an insured despite the fact that she was neither the subscriber nor named in the policy declarations.

Unquestionably, the Gartelman and Parsons cases reveal a legislative policy designed to insure fiscal responsibility by those persons owning and operating motor vehicles in Maryland. ⁵⁰⁵ Md.Ann.Code, Art. 48A, §§ 243A-243N, 538-47; Transportation Article, § 17-101, et seq. Therefore, while Erie’s contention that it may select those whom it chooses to cover has a certain facial appeal, it is not necessarily correct. In Gartelman, supra, the Court, referring to § 541(c), said: That section is concerned with the protection of innocent victims of motor vehicle accidents rather than with the protection of insurance companies from allegedly unascertainable risks____ The exclusion of such other insured persons from UM coverage is contrary to the purpose of 541(c) which is to assure financial compensation to innocent victims of motor vehicle accidents who are unable to recover from financially irresponsible motorists. 288 Md. at 160 , 416 A.2d