State Farm Mutual Automobile Insurance v. Crisfulli

DEBORAH S. EYLER, Judge. State Farm Mutual Automobile Insurance Company (“State Farm”), the appellant, challenges what we shall treat as a summary judgment ruling on liability, by the Circuit Court for Talbot County, on a contract claim for uninsured motorist insurance policy benefits brought by Nancy Trempe, the ap-pellee. The parties stipulated to damages, and judgment was entered on that basis. ⁵¹⁷ State Farm has raised three questions, 1 which we have consolidated into one: Was the circuit court legally incorrect in concluding that Trempe was entitled to recover uninsured motorist benefits under State Farm’s policy? For the following reasons, we shall reverse the judgment of the circuit court.

FACTS AND PROCEEDINGS This case stems from a three car accident that happened on July 30, 1995, on Route 50, in Talbot County. A Toyota driven by Ok Cheon Ha and owned by Yoon Ko Myung (“the Myung vehicle”) drove into the back of a BMW driven by Trempe and owned by Diana Crisfulli (“the Crisfulli vehicle”), propelling it into a car being driven by James Hurst. At the time of the accident, Crisfulli and her son Nicholas were riding as passengers in the Crisfulli vehicle. Trempe, Crisfulli, Nicholas, and Hurst all suffered bodily injuries in the accident.

The Myung vehicle was insured by Progressive Insurance Co., under a $50,000 single limit liability policy (“the Progressive Policy”). Trempe, Crisfulli, Nicholas, and Hurst all made claims against the Progressive Policy. They received payments under that policy that exhausted the $50,000 limit: $28,451 to Trempe; $17,071 to Crisfulli; $750 to Nicholas; and $3,278 to Hurst. ⁵¹⁸ The Crisfulli vehicle was insured under “State Farm Car Policy” No. 7038-689-20E (“the State Farm Policy”). The State Farm Policy included uninsured motorist (“UM”) coverage, with limits of $25,000 per person and $50,000 per accident.

Trempe was an insured under the UM coverage provision of the State Farm Policy. Trempe made a claim for UM benefits against State Farm. State Farm declined to pay, on the ground that the $28,451 payment Trempe had received from the Progressive Policy exceeded the $25,000 per person limit for the UM coverage in the State Farm Policy. State Farm paid Crisfulli $7,929 in uninsured motorist benefits, so that the payments to her, from Progressive and State Farm combined, totaled $25,000.

On February 28, 2001, in the Circuit Court for Talbot County, Trempe and Crisfulli, individually and on behalf of Nicholas, filed suit against Ha, Myung, and State Farm. The first three counts of the complaint were by Trempe, Crisfulli, and Nicholas, respectively, against Ha and Myung, and alleged negligence. Count IV was a breach of contract claim by Crisfulli against State Farm. Count V was a breach of contract claim by Trempe against State Farm.

The breach of contract claims alleged that State Farm was obligated under the terms of the State Farm Policy to pay Trempe UM benefits, and to pay Crisfulli additional UM benefits. Ha and Myung failed to answer, and on June 29, 2001, an order of default was entered against them. Thereafter, State Farm filed cross-claims against Ha and Myung. On March 25, 2002, Trempe filed what she termed a “motion for declaratory judgment,” asking the court to construe the UM coverage provision of the State Farm Policy to mean that, assuming she had proof of damages, she was entitled to recover the difference between the $50,000 per accident UM limit and the $28,451 she had received from the Progressive Policy (i&, $21,549). ⁵¹⁹ State Farm failed to file a response to the “motion for declaratory judgment.” On April 17, 2002, the court issued a brief order granting Trempe’s “motion for declaratory judgment.” On April 29, 2002, State Farm filed a motion to alter or amend, arguing that Trempe was not entitled to any payment under the UM coverage of its policy on the Crisfulli vehicle because the $28,451 she had received from the Progressive Policy exceeded the $25,000 per person UM coverage limit in the State Farm Policy.

Before the court ruled on the motion to alter or amend, State Farm filed a notice of appeal. In this Court, Trempe moved to dismiss the appeal on the ground that it was not taken from a final judgment. The motion was granted on October 17, 2002. On remand, the court scheduled a trial date for May 12, 2003.

Before then, Crisfulli voluntarily dismissed with prejudice all her claims, and those of Nicholas, and Trempe voluntarily dismissed with prejudice all her claims, except her breach of contract claim against State Farm. State Farm voluntarily dismissed with prejudice its cross-claims. Thereafter, the remaining parties—Trempe and State Farm—entered into a stipulation about damages with respect to Count V (the only remaining count). On that basis, they jointly asked the court to enter judgment in favor of Trempe and against State Farm for $21,549.

The parties also submitted a proposed “Declaratory Judgment Order,” setting forth the basic undisputed facts as we have recited them, and declaring: that [Trempe] is entitled to recover underinsured motorist benefits under [the State Farm policy] up to the amount of $21,549.00, equaling the difference between the per occurrence limit of $50,000.00 and the Progressive Insurance Company payment of $28,451.00.... The court signed the proposed “Declaratory Judgment Order,” and entered judgment in favor of Trempe and against State Farm for $21,549. State Farm noted a timely appeal. ⁵²⁰ DISCUSSION Before addressing the parties’ contentions, we shall comment briefly on the procedural path this case took in the circuit court. The two breach of contract claims against State Farm, by Crisfulli and Trempe, accused State Farm of breaching the UM coverage provision of its policy on the Crisfulli vehicle by not paying what they contended was the amount of damages for bodily injuries they sustained on account of negligence by Ha and Myung.

They sought to recover specific sums in damages against State Farm, for the alleged breach. Ultimately, whether and to what extent State Farm would be liable to Trempe and Crisfulli, if at all, would depend, in part, on whether, on the negligence claims against them, Ha and Myung were found legally liable for the damages the plaintiffs were claiming they had sustained, and on the amount of damages proven by them. In fact, orders of default were entered against Ha and Myung and it ultimately was stipulated by Trempe and State Farm that Ha and Myung were the tortfeasors responsible for the accident. The “motion for declaratory judgment” filed by Trempe was not a separate declaratory judgment action; rather, it was a motion for partial summary judgment on the issue of liability in her contract claim against State Farm.

Indeed, it was in part for that reason that the first appeal in this case was not from a final judgment. Not only had outstanding claims by Trempe and other plaintiffs against other defendants not been resolved, the issue of damages on Trempe’s breach of contract claim remained undecided. The circuit court’s decision on that motion amounted to a ruling that, on the undisputed facts, ultimately stipulated to by the parties, State Farm had breached its contractual obligation to Trempe, as an insured, to pay UM benefits, i.e., the grant of a partial summary judgment in favor of Trempe on the contract claim against State Farm. Thereafter, when the claims of all parties except Trempe’s contract claim were disposed of, Trempe and State Farm remained as the only parties, and they entered into a stipulation about damages that resulted in the court’s entering judgment on its liability finding. ⁵²¹ Accordingly, the issue that is before us on appeal is whether the court erred in granting summary judgment on liability.

As the parties have stipulated, and is clear from the record, there is no dispute of material fact. The only issue is whether the court’s decision that State Farm breached the terms of the contract was legally correct. Beyer v. Morgan State Univ., 369 Md. 335, 360 , 800 A.2d 707 (2002); Maryland Dept. of the Environment v. Underwood, 368 Md. 160, 171 , 792 A.2d 1130 (2002); Okwa v. Harper, 360 Md. 161, 178 , 757 A.2d 118 (2000). State Farm contends the circuit court wrongly interpreted the UM coverage language of its policy on the Crisfulli vehicle; and that, under a legally correct interpretation of that language, Trempe was not entitled to any UM benefits under the policy.

Its argument is two-fold. First, it maintains that the Myung vehicle was not an “uninsured motor vehicle,” either within the language of the State Farm Policy UM provision, or Md.Code (1996, 2002 Repl.Vol.), section 19-509(a) of the Insurance Article (“Ins.”), which it maintains are the same. Alternatively, it argues that, even if the Myung vehicle is an “uninsured motor vehicle,” Trempe is not entitled to benefits, based on certain language of the State Farm Policy and Ins. section 19-509(g), which it also maintains are the same. Trempe responds that the court correctly interpreted the controlling policy and statutory language to conclude that the Myung vehicle indeed was an “uninsured motor vehicle”; and that State Farm’s interpretation of the policy language it contends excludes the payments sought, even if correct, could not be upheld, because it would be contrary to Ins. section 19-509(g), and therefore would be void.

We are persuaded that the circuit court’s ruling in Trempe’s favor on the issue of her entitlement to UM benefits under the State Farm Policy was legally incorrect, because the Myung vehicle was not an “uninsured motor vehicle,” within the meaning of Ins. section 19-509(a), and therefore the UM coverage under the State Farm Policy did not apply to it; moreover, the language of the State Farm Policy does not ⁵²² define the term “uninsured motor vehicle” more broadly than it is defined by statute. This issue is one of statutory interpretation. Section 19-509 provides, in pertinent part: Uninsured motorist coverage—In general. (a) In this section, “uninsured motor vehicle” means a motor vehicle: (1) the ownership, maintenance, or use of which has resulted in the bodily injury or death of an insured; and (2) for which the sum of the limits of liability under all valid and collectible liability insurance policies, bonds, and securities applicable to bodily injury or death: (i) is less than the amount of coverage provided under this section; or (ii) has been reduced by payment to other persons of claims arising from the same occurrence to an amount less than the amount of the coverage provided under this section.

As the Court of Appeals and this Court have explained, the statutory