Stickley v. State Farm Fire & Casualty Co.

JAMES R., J. Joan J. Stickley, appellant, appeals from the grant of a motion for summary judgment in favor of State Farm Fire & Casualty Company, appellee, in the Circuit Court for Montgomery County. At issue is the applicability of Maryland Code (2005 Supp.), § 19-504.1 of the Insurance Article (“Ins.”), which requires an insurer to offer “under a policy ... of private passenger motor vehicle liability insurance liability coverage for claims made by a family member in the same amount as the liability coverage for claims made by a nonfamily member under the policy ...,” to a personal liability ⁶⁸² umbrella policy. In granting summary judgment in favor of appellee, the circuit court concluded that, pursuant to the unambiguous language of the statute, an umbrella policy is not a policy of “private passenger motor vehicle liability insurance”; thus, it does not fall within the purview of Ins. § 19-504.1. The question of what constitutes “private passenger motor vehicle liability insurance” and, more specifically, whether that phrase refers only to primary insurance policies, or whether it extends to umbrella policies, is an issue of first impression in Maryland.

For the reasons that follow, we shall affirm. Factual & Procedural Background On March 19, 2008, at approximately 2:05 p.m., appellant was the passenger in a motor vehicle operated by her husband, Vernon Stickley, which motor vehicle was proceeding west on Old Frederick Road near the intersection with Maryland Route 15 in Frederick, Maryland. At the same time, Joel Lindblom was operating a motor vehicle traveling north on Maryland Route 15. According to appellant, after stopping at a stop sign at the intersection of Old Frederick Road and Maryland Route 15, Mr. Stickley negligently proceeded into the Maryland Route 15 roadway where the vehicle he was operating was struck by the vehicle Mr. Lindblom was operating.

Mr. Stickley was killed as a result of the accident, and appellant suffered significant injuries. At the time of the accident, appellant and her husband owned several insurance policies issued by State Farm insurance companies, including a motor vehicle liability policy (the “motor vehicle policy”) with limits for bodily injury of $100,000 per person/$300,000 per accident, and for property damage of $25,000 per accident issued by State Farm Mutual Automobile Insurance Company (“State Farm Mutual”), and a Personal Liability Umbrella Policy (the “umbrella policy”) with limits of $2,000,000 for personal liability and $2,000,000 for uninsured and underinsured motor vehicle coverage, issued by appellee. The umbrella policy provided coverage for bodily injury, per ⁶⁸³ sonal injury, 1 and property damage, as defined in the policy. The declarations page noted that coverage included uninsured and underinsured motor vehicle coverage.

Appellant’s claim was for bodily injury, defined as physical injury. The umbrella policy mandated that the insured maintain specific underlying insurance, as shown on the declarations page, including automobile liability insurance. Automobile liability insurance is defined as “a policy which provides coverage for the insured for that insured’s liability arising out of the ownership, operation, maintenance or use of any automobile. That [underlying] policy must include Uninsured and/or Underinsured Motor Vehicle coverage if Uninsured and/or Underinsured Motor Vehicle coverage is shown on the declarations page of this policy.” Further, the umbrella policy mandated that ‘“[Required underlying insurance must be maintained at all times in an amount at least equivalent to the Minimum Underlying Limits shown on the declarations page.” Appellant and her husband maintained the required underlying coverages.

The umbrella policy is not, strictly speaking, an excess policy, in that its coverage does not expressly track and provide the same coverage as the underlying policies. Rather, the umbrella policy requires the insured to pay the amount of the required primary coverage to the extent the required underlying coverage does not exist. While this distinction seems to have played a role in a few cases from other jurisdictions, as explained below, our decision does not turn on that distinction. According to appellant, she and Mr. Stickley had always insured their homes and motor vehicles with State Farm, they had used the same State Farm agent for 45 or 50 years, and the umbrella policy was issued in the early-1980’s.

Following ⁶⁸⁴ the accident, appellant made liability claims under both policies. State Farm Mutual agreed that the motor vehicle liability policy provided coverage and extended the full policy limits of $100,000 to appellant. Appellee, however/denied appellant’s claim under the umbrella policy based on a policy exclusion commonly referred to as the “household exclusion.” The terms of the exclusion provide: EXCLUSIONS There is no coverage under this policy for any: 13. bodily injury or personal injury to any insured as defined in part a. or b. of the definition of insured, including any claim made or suit brought against any insured to share damages with or repay someone else who may be obligated to pay damages because of such bodily injury or personal injury; DEFINITIONS 6. “insured” means: a. you and your relatives whose primary residence is your household; b. Any other human being under the age of 21 whose primary residence is your household and who is in the care of a person described in 6.a.[.] There is no such exclusion in the motor vehicle policy.

Following appellee’s denial of appellant’s claim under the umbrella policy, appellant sought a declaratory judgment in the circuit court relying on Ins. § 19-504.1, which became effective October 1, 2004, and which applied to binders or policies of “private passenger motor vehicle liability insurance” issued, delivered or renewed in the State on or after January 1, 2005. Section 19-504.1 requires, inter alia, that when liability coverage under a policy of “private passenger motor ⁶⁸⁵ vehicle liability insurance” exceeds the requirements of Trans. § 17-103, an insurer must offer as part of that policy liability coverage for claims made by a family member in the same amount as the liability coverage for claims made by a non-family member under the policy. According to appellant, the “plain meaning” of a policy of “ ‘private passenger motor vehicle liability insurance’ includes a personal liability umbrella polic[y]”; thus, the umbrella policy is subject to the requirements of Ins. § 19-504.1. As a result, according to appellant, appellee had to offer coverage under the umbrella policy for claims made by a family member in the same amount as coverage for claims made by a non-family member, and appel-lee failed to offer such coverage.

In appellant’s complaint seeking declaratory relief, appellant did not expressly allege the purported effect of a failure to “offer” coverage, assuming a statutory violation. On appeal, appellant contends that the effect is to “void” the household exclusion. Subsequently, both parties filed motions for summary judgment, and a hearing was held on March 30, 2011. At the conclusion of the hearing, the court ruled that the requirements of Ins. § 19-504.1 were met when appellee tendered to appellant, a family member, the limit of coverage under the motor vehicle liability policy, the same amount of coverage provided for a non-family member.

The court ruled that an umbrella policy is not a private passenger motor vehicle liability insurance policy; thus, is not a policy that is included under Ins. § 19-504.1, and ruled that there is no prohibition on a household exclusion in an umbrella policy. Following the court’s oral ruling, it issued an order denying appellant’s motion for summary judgment, and granting appel-lee’s motion for summary judgment. This appeal followed. Discussion The umbrella policy was renewed after January 1, 2005 and, thus, is subject to § 19-504.1 if it comes within its substantive terms.

The sole issue before us is whether a personal liability umbrella policy is a policy of “private passenger motor vehicle liability insurance,” thereby requiring an ⁶⁸⁶ insurer to offer coverage under the umbrella policy for a claim made by a family member in the same amount as the coverage made by a non-family member, pursuant to Ins. § 19-504.1. As an initial matter, we observe that both appellant and appellee cite to foreign jurisdictions in support of their respective baseline arguments that the umbrella policy is or is not a policy within the meaning of the statute. We find the case law from other jurisdictions to be of limited use because of differences in legal requirements and differences in statutory language. We conclude it is unnecessary to parse those cases, however, because we are able to resolve the question before us by reference to the statute at issue and other Maryland law.

We conclude that an umbrella policy is not a policy of private passenger motor vehicle liability insurance and that a household exclusion in an umbrella policy is a valid, contractual term not subject to the requirements of Ins. § 19-504.1. It is well-settled that [i]n statutory interpretation, our primary goal is always "to discern the legislative purpose, the ends to be accomplished, or the evils to be remedied by a particular provision, be it statutory, constitutional or part of the Rules.” Barbre v. Pope, 402 Md. 157, 172 [ 935 A.2d 699 ] (2007); Gen. Motors Corp. v. Seay, 388 Md. 341, 352 [ 879 A.2d 1049 ] (2005). See also Dep’t of Health & Mental Hygiene v. Kelly, 397 Md. 399, 419-20 [ 918 A.2d 470 ] (2007).

We begin our analysis by first looking to the normal, plain meaning of the language of the statute, reading the statute as a whole to ensure that “ ‘no word, clause, sentence or phrase is rendered surplus-age, superfluous, meaningless or nugatory.’ ” Barbre, 402 Md. at 172 [ 935 A.2d 699 ]; Kelly, 397 Md. at 420 [ 918 A.2d 470 ]. See also Kane v. Bd. of Appeals of Prince George’s County, 390 Md. 145, 167 [ 887 A.2d 1060 ] (2005). If the language of the statute is clear and unambiguous, we need not look beyond the statute’s provisions and our analysis ends. Barbre, 402 Md. at 173 [ 935 A.2d 699 ]; Kelly, 397 Md. at 419 [ 918 A.2d 470 ]; City of Frederick v. Pickett, 392 Md. 411, 427 [ 897 A.2d 228 ] (2006); Davis v. Slater, 383 Md. ⁶⁸⁷ 599, 604-05 [ 861 A.2d 78 ] (2004).

If, however, the language is subject to more than one interpretation, or when the terms are ambiguous when it is part of a larger statutory scheme, it is ambiguous, and we endeavor to resolve that ambiguity by looking to the statute’s legislative history, case law, statutory purpose, as well as the structure of the statute. Barbre, 402 Md. at 173 [ 935 A.2d 699 ]; Kelly, 397 Md. at 419-20 [ 918 A.2d 470 ]; Smack v. Dep’t of Health & Mental Hygiene, 378 Md. 298, 305 [ 835 A.2d 1175 ] (2003). When the statute is part of a larger statutory scheme, it is axiomatic that the language of a provision is not interpreted in isolation; rather, we analyze the statutory scheme as a whole considering the “purpose, aim, or policy of the enacting body,” Serio v. Baltimore County, 384 Md. 373, 390 [ 863 A.2d 952 ] (2004); Drew v. First Guar. Mortgage Corp., 379 Md. 318, 327 [ 842 A.2d 1 ] (2003), and attempt to harmonize provisions dealing with the same subject so that each may be given effect.

Bowen v. City of Annapolis, 402 Md. 587, 613-14 [ 937 A.2d 242 ] (2007); Magnetti v. Univ. of Md., 402 Md. 548, 565 [ 937 A.2d 219 ] (2007); Clipper Windpower, Inc. v. Sprenger, 399 Md. 539, 554 [ 924 A.2d 1160 ] (2007). State of Maryland Central Collection Unit v. Jordan, 405 Md. 420, 425-26 , 952 A.2d 266 (2008) (parallel citations omitted). At the heart of the issue before us is the interpretation of Ins. § 19-504.1, but before we turn specifically to that section, we will first review the framework relating to compulsory insurance law, household exclusions in automobile liability insurance policies, and public policy considerations. Preliminarily, we note that during the relevant time period, Maryland Code (2006 RepLVol.), 2 § 17-103 of the Transportation Article (“Trans.”), provided that all motor vehicle liability insurance policies must provide minimum liability coverage of $20,000 for individual personal injuries, up to a total of $40,000 per accident, 3 and $15,000 for property damage. ⁶⁸⁸ As a general rule, parties are free to contract as they wish.

See, e.g., Gardiner v. Gardiner, 200 Md. 233, 240 , 88 A.2d 481 (1952). Insurance companies have a right to limit their liability and to impose whatever condition they please in a policy as long as neither the limitation on liability nor the condition contravenes a State public policy. See, e.g., Matta v. GEICO, 119 Md.App. 334 , 705 A.2d 29 (1998). Historically, insurers included “household exclusion” clauses in insurance contracts, the purpose of which was so obviously to protect the insurer against collusive or cozy claims, to exempt him from liability stemming from one whose natural ties and pulls are likely to favor a claimant who lives in the same household, that the courts have unhesitatingly recognized that purpose and excluded from policy coverage claimants who live in the same household as the named insured.

State Farm Mut. Auto. Ins. Co. v. Briscoe, 245 Md. 147, 151 , 225 A.2d 270 (1967).

Prior to 1972, household exclusions in automobile insurance policies were considered in a number of cases. See, e.g., Hicks v. Hatem, 265 Md. 260 , 289 A.2d 325 (1972); Parker v. State Farm Mut. Auto. Ins.

Co., 263 Md. 206 , 282 A.2d 503 (1971); Briscoe, swpra. Most of the cases considering the household exclusion “dealt with construction and application of the exclusion; its validity was not questioned,” because “[a]bsent a statute to the contrary, Maryland followed the general rule, which was to uphold the validity of the exclusion.” State Farm Mut. Auto Ins. Co. v. Nationwide Mut.

Ins. Co., 307 Md. 631 , 516 A.2d 586 (1986) (hereinafter “State Farm ”). “Beginning in 1972, however, the General Assembly ... changed the public policy of this State.... ” Jennings v. GEICO, 302 Md. 352, 357 , 488 A.2d 166 (1985). In Wilson v. Nationwide Mutual Insurance Co., 395 Md. 524 , 910 A.2d 1122 (2006), the Court of Appeals explained that the landscape ⁶⁸⁹ was changed with the advent of “compulsory” automobile liability insurance with required coverages: Prior to the enactment of § 19-504[ 4 ] of the Insurance Article and Title 17 of the Transportation Article, this Court, in a number of cases, had considered exclusions contained within auto insurance policies. The enactment of § 19-504 of the Insurance Article and Title 17 of the Transportation Article, however, “substantially changed the public policy of this state with regard to motor vehicle insurance and reparations for damages caused by motor vehicle accidents.” Section 19-504 of the Insurance Article and Title 17 of the Transportation Article and related statutes effectively mandated compulsory automobile insurance with required minimum coverages.

The Maryland General Assembly enacted the compulsory insurance statutes in an attempt to provide some “recovery for innocent victims of motor vehicle accidents.” As the Court of Special Appeals noted ..., “[ajfter the enactment of the compulsory liability insurance law, certain exclusions commonly found in automobile insurance policies that effectively excluded all liability coverage were held to violate public policy and declared invalid.” Wilson, 395 Md. at 529-30 , 910 A.2d 1122 (omitting citations and footnotes). In Jennings , following the enactment of the compulsory automobile insurance statutes, the Court of Appeals considered the validity of the household exclusion clause in an automobile liability insurance policy. In that case, Mr. Jennings was a passenger in an automobile owned by him and operated by his stepson, who resided in the same household. Id. at 353 , 488 A.2d 166 .

After the vehicle was involved in an accident, and a judgment entered against Mr. Jennings’ step ⁶⁹⁰ son, Mr. Jennings brought a declaratory judgment action against GEICO, the insurer, seeking a declaration that GEI-CO was obligated, by virtue of the insurance policy issued to him, to pay the judgment obtained against his stepson. Id. at 354 , 488 A.2d 166 . Mr. Jennings asserted that the household exclusion contained in the policy, excluding all liability coverage for injury to the insured and members of his household, was invalid because it was contrary to the Trans. § 17-103 and Ins. § 19-504. Id. at 356, 488 A.2d 166 .

The Court of Appeals agreed, holding that the household exclusion clause was inconsistent with the public policy adopted by the Legislature in those statutes, which provided for compulsory automobile insurance for all Maryland automobiles with specified required coverages for the “payment of claims for bodily injury or death arising from an accident of up to $20,000 for any one person and up to $40,000 for any two or more persons.... ” Id. at 357-58 , 488 A.2d 166 . The Court reasoned that the exclusion was contrary to public policy “[b]e-cause the stated purpose of [Maryland’s compulsory insurance law] is to assure that a driver be insured to a minimum level, [and] such an exclusion provision contravenes the purpose and policy of the ... act.” Id. at 362 , 488 A.2d 166 (citation omitted). Moreover, [t]he exclusion of a large category of claimants, suffering bodily injury arising from accidents, is not consistent with [the language of Trans. § 17-103(b)]____ [I]f any and all exclusions from this required liability coverage are valid as long as they are not expressly prohibited by statute, the purpose of compulsory automobile liability insurance could be frustrated to a significant extent. Id. at 360, 488 A.2d 166 .

Shortly thereafter, in State Farm, the Court of Appeals was asked to decide whether the household exclusion, found invalid in Jennings , was “wholly invalid, or whether its invalidity extends only to the amount of the minimum liability coverage required by the compulsory insurance law.” State Farm, 307 Md. at 633 , 516 A.2d 586 . In that case, Mr. Carroll, who was insured by State Farm, was the passenger in a vehicle owned ⁶⁹¹ by bim, but driven by a friend of his, Ms. Glass. Id. Ms. Glass drove the vehicle off the road and it overturned, killing Ms. Glass and another passenger, and injuring Mr. Carroll.

Id. Mr. Carroll sued Ms. Glass’s estate. Id. at 634 , 516 A.2d 586 . Ms. Glass had been insured by Nationwide Mutual Insurance Company, and her policy insured her against liability for any accident involving her use of a motor vehicle belonging to someone who, like Mr. Carroll, was not a member of her household.

Id. at 633-34 , 516 A.2d 586 . Mr. Carroll’s policy included liability coverage of $100,000 per person and $300,000 per accident, and also excluded coverage for injury to “any insured or any member of an insured’s family residing in the insured’s household.” Id. The “any insured” portion of that clause was at issue. Nationwide brought an action against State Farm and Mr. Carroll seeking a declaration that the “household exclusion” in State Farm’s policy was void as against public policy.

Id. at 634 , 516 A.2d 586 . State Farm argued that the exclusion was valid, and that Nationwide should be declared the primary insurer. Id. While the declaratory action was pending, Jennings was decided, where the Court determined that a household exclusion that eliminated all liability coverage was invalid.

Id. The question remained, however, whether the exclusion was valid above the statutory minimum requirements. Id. Noting, again, that the purpose of Maryland compulsory insurance statutes is to “ ‘[assure] recovery for innocent victims of motor vehicle accidents,’ ” id. at 639, 516 A.2d 586 (quoting State Farm Mut.

Auto. Ins. Co. v. MAIF, 277 Md. 602, 604 , 356 A.2d 560 (1976)), the Court ultimately concluded that “what the legislature has prohibited,” in requiring compulsory insurance, “is liability coverage of less than the minimum amounts