Stickley v. State Farm Fire & Casualty Co.

GREENE, J. Joan Stickley (“Petitioner”) was a passenger in a motor vehicle accident, in which the driver of the vehicle, her husband, was killed, and in which she suffered serious injuries. At the time of the accident, Petitioner and her husband had a motor vehicle liability insurance policy with State Farm Mutual Automobile Insurance Company (“State Farm Auto”), and an umbrella policy with State Farm Fire and Casualty Company (“Respondent”) (collectively, “State Farm”). The umbrella policy contained a household exclusion, 1 which formed the ³⁵¹ basis for State Farm’s denial of Petitioner’s claim under the umbrella policy. Petitioner challenges the household exclusion’s validity in light of Maryland Code (1997, 2002 Repl.Vol., 2005 Cum.Supp.), § 19-504.1 of the Insurance Article (“ § 19-504.1”), 2 which requires an insurer to offer liability coverage for claims of family members in the same amount of liability coverage for claims of nonfamily members under a “policy or binder of private passenger motor vehicle liability insurance.” Petitioner claims that she and her husband were never offered equal coverage for family members under their umbrella policy, which contained motor vehicle coverage.

Therefore, according to Petitioner, the household exclusion in their umbrella policy is void. The issue before this Court is the proper interpretation of the phrase “private passenger motor vehicle liability insurance” as contained in § 19-504.1. Specifically, we are asked whether an umbrella policy fits within that definition such that an insurer must offer an insured liability coverage for family members in the same amount as the liability coverage for nonfamily members. We shall hold that the umbrella policy does not fit within the definition of “private passenger motor vehicle liability insurance” as contained in § 19-504.1.

FACTUAL AND PROCEDURAL BACKGROUND On March 19, 2008, Petitioner was riding as a passenger in a vehicle driven by her husband when, according to Petitioner, her husband negligently drove into an intersection and was struck by another vehicle. As a result of the accident, Peti ³⁵² tioner’s husband was killed and Petitioner suffered serious injuries. At the time of the accident, Petitioner and her husband had several policies of insurance issued by State Farm. They had a motor vehicle liability policy with coverage of $100,000 per person and $800,000 per accident with State Farm Auto.

Mrs. Stickley and her husband also had a Personal Liability Umbrella Policy with personal liability and uninsured motorist coverage of $2,000,000 with Respondent, a subsidiary of State Farm Auto. According to Petitioner, the Stickleys purchased both policies from the same State Farm agent. The umbrella policy was originally purchased in the 1980’s and issued by State Farm. It provided coverage for bodily injury, personal injury, 3 and property damage.

On the “Declarations Page,” the umbrella policy required the insured to maintain specific underlying insurance, including automobile liability insurance. The umbrella policy also included the following language under the “Exclusions” and “Definitions” sections, respectively: 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; ³⁵³ 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[.] 12. “relative” means any person related to you by blood, adoption, or marriage. (Emphasis in original). After the accident, Petitioner filed a claim under their automobile liability policy for injuries and losses she sustained as a result of the March 2008 accident.

State Farm offered Petitioner the full $100,000 in liability coverage provided under the policy. Petitioner also made a claim for bodily injury under the umbrella policy. State Farm denied the claim, however, due to the household exclusion included in the policy which denied payment of damages for bodily injury or personal injury resulting from the negligence of another insured household member. On February 1, 2010, Petitioner filed a Complaint for Declaratory Judgment in the Circuit Court for Montgomery County.

Petitioner sought to have the household exclusion in the umbrella policy declared void. To support her claim, Petitioner cited § 19-504.1, enacted in 2004, that requires an insurer to offer its insured, under a policy or binder of private passenger motor vehicle liability insurance, liability coverage for claims made by family members in the same amount as liability coverage for claims made by nonfamily members. The statute only applies when the liability coverage in the private passenger motor vehicle liability insurance policy exceeds the State-mandated minimum amount of coverage. 4 Petitioner argued that their Personal Liability Umbrella Policy is private passenger motor vehicle liability insurance, and “the exclusion, which was included in the policy prior to 2004 and ³⁵⁴ never signed off [ ] by the insureds, [is therefore] void” in light of the statute. Subsequently, both Petitioner and Respondent filed Cross-Motions for Summary Judgment.

On March 30, 2011, a hearing was held in the Circuit Court for Montgomery County. The trial judge ruled in favor of State Farm and granted its Motion for Summary Judgment. Finding “absolutely no ambiguity in Section 19-504.1[,]” the judge stated “that the umbrella policy in this case is not a part of, referred to, connected to, or the same as, a private passenger motor vehicle liability insurance [policy].” The trial judge reasoned: The Court interprets and reads 19-504.1 literally, and it indicates that a policy ... it doesn’t say where there is other coverage. It says, a policy of private passenger motor vehicle liability insurance, liability coverage for claims made by family members, in the same amount as liability coverage for claims made by non-family members under the policy.

That is, the insurer shall offer. And in this case, the [$4100,000 pertains to her the same as it would anyone else. In the particular case of the umbrella, that’s a separate animal. It has a lot of coverage.

It covers the entire waterfront, but it doesn’t make it a private passenger motor vehicle liability insurance coverage policy. That’s so specific that the Court doesn’t even have to strain to guess. It defies credulity to say that it’s ambiguous. It’s about as clear as it can be.

The judge further indicated that the General Assembly could have linked umbrella policies and motor vehicle policies together by specifically referencing “any type of policy which affords coverage in any motor vehicle accident” in the statute. As the judge noted, however, the statute was not written that way, and “[o]ur job is to look at what the law says.” Petitioner appealed the trial court’s ruling to the Court of Special Appeals. The intermediate appellate court issued its reported opinion affirming the Circuit Court’s ruling. Stickley v. State Farm, Fire & Cas.

Co., 204 Md.App. 679, 682 , 42 A.3d 696, 697 (2012). According to the intermediate appellate court, the General Assembly enacted the statute at issue, ³⁵⁵ § 19-504.1, “to ensure that, when obtaining a policy of private passenger motor vehicle liability insurance with limits in excess of the statutory minimum, the insured would have a right to obtain that policy without a household exclusion.” 204 Md.App. at 696 , 42 A.3d at 706 . In applying the “public policy considerations leading up to the enactment of the statute” the court reasoned that interpreting the phrase “private passenger motor vehicle liability insurance” as applying to any policy that contains, even in part, some motor vehicle liability insurance, “would be a colossal leap[.]” 204 Md.App. at 696-98 , 42 A.3d at 706-07 . Further, the court noted the title given to Article 19, Subtitle 5, “Motor Vehicle Insurance — Primary Coverage ” (emphasis added), and analyzed the text of other sections in the Subtitle to support the conclusion that § 19-504.1 must have referred to primary policies alone, and not umbrella policies. 204 Md.App. at 695, 698-700 , 42 A.3d at 705, 707-08 .

Finally, in the court’s view, “[t]he coverage under a policy of ‘private passenger motor vehicle liability insurance’ focuses on the scheduled motor vehicles, which is also the focus of the mandatory insurance requirements^] [whereas] [t]he coverage under an umbrella policy focuses on the insured.” 204 Md.App. at 700 , 42 A.3d at 708 . Subsequently, Petitioner asked that we review the case. We granted certiorari, in Stickley v. State Farm Fire & Cas. Co., 427 Md. 606 , 50 A.3d 606 (2012), to answer the following questions: 1.

Whether the Court of Special Appeals erred in concluding that Insurance Code § 19-504.1 does not apply to excess of umbrella policies. 2. Whether a personal liability umbrella policy that includes motor vehicle liability insurance constitutes “private passenger motor vehicle liability insurance” as contemplated by Insurance Code § 19-504.1. DISCUSSION I. The issue in the present case is the correct interpretation of § 19-504.1, which provides: ³⁵⁶ § 19-504.1. Coverage for claims of family members.

(a) Applicability. — This section applies only when the liability coverage under a policy or binder of private passenger motor vehicle liability insurance exceeds the amount required under § 17-103 of the Transportation Article. (b) In general. — An insurer shall offer to the first named insured under a policy or binder 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 or binder. (c) Form. — (1) An offer made under this section shall be made on the form that the Commissioner requires. (2) The form may be part of the insurance application, policy, contract, or binder.

(3) The form shall clearly and concisely explain in 10 point boldface type: (1) the nature, extent, benefit, and cost of the amount of liability coverage for claims made by family members that is available to the first named insured; and (ii) that an insurer may not refuse to underwrite a first named insured because the first named insured requests or elects the liability coverage for claims made by family members in an amount equal to the coverage provided for claims made by nonfamily members. (d) Prohibitions against insurers. — (1) An insurer may not refuse to underwrite a first named insured because the first named insured requests or elects the liability coverage for claims made by family members in an amount equal to the coverage provided for claims made by nonfamily members. (2) An insurer that violates this subsection is subject to the penalties provided in §§ 4-113 and 4-114 of this article. / [Emphasis added]. As noted by the intermediate appellate court, the Stickleys’ umbrella policy was renewed after the effective date of the ³⁵⁷ statute and, “thus, is subject to § 19-504.1 if it comes within its substantive terms.” Stickley, 204 Md.App. at 685 , 42 A.3d at 699 .

We must assess, therefore, whether an umbrella policy is a policy of “private passenger motor vehicle liability insurance,” thereby requiring the insurer to offer liability coverage for family members in the same amount as coverage for nonfamily members. Petitioner argues that the General Assembly’s “interest in protecting an insured’s ability to recover damages in excess of the statutory mínimums evidences an intent for [§ 19-504.1] to include excess liability policies.” By only affording Petitioner the benefit of her primary motor vehicle coverage, Petitioner argues, she is being denied the extra protection she sought in the umbrella policy, which contradicts the purpose and language of the statute. With regard to the plain meaning of the statute, Petitioner’s central argument is that because the umbrella policy contained motor vehicle liability insurance coverage, it is considered private passenger motor vehicle liability insurance as contemplated by § 19-504.1. Petitioner also argues that because the umbrella policy in the instant case required Petitioner to carry underlying motor vehicle insurance, “this requirement, [ ] intrinsically linked the two policies together making the motor vehicle coverage of the [u]mbrella [p]olicy an extension of the underlying policy, and, thus, the [u]mbrella [p]olicy would constitute private passenger motor vehicle liability insurance.” Positing several textual arguments with reference to the uninsured motor vehicle statutes, Md.Code (1997, 2002 Repl.

Vol.), §§ 19-509, 19-510 of the Insurance Article, Petitioner contends that although the General Assembly distinguished between underlying policies and umbrella policies in the uninsured motorist statutes, it did not do so in § 19-504.1 because the General Assembly intended both underlying motor vehicle policies and umbrella policies to be incorporated into § 19-504.1. Finally, Petitioner reviews Maryland legislative history and precedent to argue, in the alternative, that household exclusions in umbrella policies are against Maryland public policy. ³⁵⁸ To the contrary, Respondent maintains that the umbrella policy in question is not a policy of “private passenger motor vehicle liability insurance” within the meaning of the statute, and “[f]or this reason, State Farm was not obliged to provide coverage where neither the policy nor [§ 19-504.1] required it to do so.” Looking at the plain meaning of the statute, Respondent claims that umbrella policies are broad-based, general, personal liability policies that follow the insured, which is separate and distinct from a policy of private passenger motor vehicle liability insurance that covers the motor vehicle and anyone with permission to operate it. Along these lines, Respondent argues that the fact that certain policy coverages overlap “does not transform one type of policy into another for purposes of statutory interpretation.” Rather, Respondent contends, the General Assembly’s objective in providing automobile liability coverage for claims of family members equal to others above the statutory minimum can be accomplished through the purchase of higher limits of automobile liability insurance. According to Respondent, “[s]uch additional coverage should not be created by way of a strained interpretation of the nature of an umbrella policy to fit it within the definition of [] ‘private passenger motor vehicle liability insurance []’____” Finally, Respondent asserts that by enacting § 19-504.1, the General Assembly “chose not to abrogate the household exclusion altogether above statutory minimum coverage, but, [elected,] instead to offer the insured the opportunity, for an additional premium, to purchase liability limits for family members equal to that of nonfamily members.” The legal issue in this case is one of statutory interpretation.

As we stated in Bowen v. City of Annapolis, 402 Md. 587, 613 , 937 A.2d 242, 257-58 (2007) (citations and quotations omitted): The cardinal rule of statutory interpretation is to ascertain and effectuate the intent of the Legislature. Statutory construction begins with the plain language of the statute, and ordinary, popular understanding of the English language dictates interpretation of its terminology. ³⁵⁹ In construing the plain language, a court may neither add nor delete language so as to reflect an intent not evidenced in the plain and unambiguous language of the statute; nor may it construe the statute with forced or subtle interpretations that limit or extend its application. Statutory text should be read so that no word, clause, sentence or phrase is rendered superfluous or nugatory.... “It is also clear that we avoid a construction of the statute that is unreasonable, illogical, or inconsistent with common sense.” Centre Ins. Co. v. J.T.W., 397 Md. 71, 81 , 916 A.2d 235, 240-41 (2007) (citations and quotations omitted).

Additionally, we have stated: We analyze the contested provisions of Maryland’s Insurance Article in the context of the statutory scheme and construe the plain language so that the various sections of the article do not conflict with one another.... In addition, the meaning of the plainest language is controlled by the context in which it appears. As this Court has stated, because it is part of the context, related statutes or a statutory scheme that fairly bears on the fundamental issue of legislative purpose or goal must also be considered. Thus, not only are we required to interpret the statute as a whole, but, if appropriate, in the context of the entire statutory scheme of which it is a part.

Id. (citations and quotations omitted). We begin by looking at the plain meaning of the phrase “policy or binder of private passenger motor vehicle liability insurance.” (emphasis added). By its terms, a private passenger motor vehicle liability insurance policy refers to a specific type of motor vehicle liability insurance policy.

These insurance policies have been held by this Court to “attach[] to automobiles and not to individuals.” Neale v. Wright, 322 Md. 8, 16 , 585 A.2d 196, 199-200 (1991). By contrast, a personal liability umbrella policy includes coverage for a myriad of losses suffered by the insured. This might include coverage for losses resulting in “personal injury,” such as false arrest, wrongful eviction, libel, and defamation of character. The ³⁶⁰ personal liability umbrella policy might also include protection against excess judgments of third parties with regard to the operation of a motor vehicle.

Therefore, umbrella policies attach generally to the insured, whereas private passenger motor vehicle liability insurance policies attach to the motor vehicle and protect against injuries and/or damages resulting from the operation of the motor vehicle. Additionally, a motor vehicle liability insurance policy is a type of primary policy that is required in the State. For example, as explained by one scholar, “an individual’s automobile liability and homeowner’s policies are [types of] primary insurance policies.” Michael M. Marick, Excess Insurance: An Overview of General Principles and Current Issues, 24 Tort & Ins. L.J. 715 , 716 (1989).

Primary policies of motor vehicle liability insurance “attach[ ] immediately upon the happening of the occurrence ... giv[ing] rise to liability[,]” and have been required with a mandated minimum amount of coverage since the General Assembly revised the State’s automobile insurance laws in 1972. See State Farm Mut. Auto. Ins.

Co. v. Nationwide Mut. Ins. Co., 307 Md. 631, 635-36 , 516 A.2d 586, 588 (1986)(discussing the General Assembly’s mandated compulsory motor vehicle liability insurance law); Empire Fire & Marine Ins. Co. v. Liberty Mut.

Ins. Co., 117 Md.App. 72, 117 , 699 A.2d 482, 504 (1997) (citations and quotations omitted) (defining “primary insurance”); see also Md.Code (1977, 2002 Repl.Vol.), § 17-103 of the Transportation Article (noting that “the form of security required ... is a vehicle liability insurance policy”