Universal Underwriters Insurance v. Lowe

ROBERT F. FISCHER, Judge (Retired, Specially Assigned). The appeal before us stems from a motor vehicle accident that occurred on May 10, 1996, in which a car driven by Melody Lowe (“Ms. Lowe”) collided with a car driven by Nicole Parsons. We are asked, in essence, to determine which of two insurers, if either, must provide coverage to Ms. Lowe. FACTS Nicole Parsons and her husband, Michael Parsons, filed suit in the Circuit Court for Anne Arundel County against: Ms. Lowe; Ms. Lowe’s father, Hubert Lowe; 1 and the Parsons’ own insurer, State Farm Mutual Automobile Insurance Company 2 (“State Farm”).

Hubert Lowe sold an automobile dealership to Bob Bell Automotive Group, Inc. (“Bell”) in August of 1995. Pursuant to the sale agreement, Bell provided two cars to Hubert Lowe and his wife, Rebecca Lowe (“Mrs. Lowe”), for their personal ¹²⁷ use. The cars were still owned by Bell. Ms. Lowe was driving one of those vehicles when the accident occurred.

Bell’s vehicles were insured by Universal Underwriters Insurance Company (“Universal”). In the declarations sheets to Bell’s policy with Universal, Hubert and Rebecca Lowe were listed as “Other Insureds” for the following parts of the policy: —“Auto Inventory Unicover Coverage Part 300,” which, in pertinent part, provided coverage for any loss of or to any covered auto unless the auto was furnished or available for the regular use of an individual named in the declarations sheets as an insured or a family member of that individual. See Universal Policy, Part 300 at 9-14 and Endorsement No. 11 at 79-80. —“Garage Unicover Coverage Part 500,” which provided coverage for injuries that resulted from garage operations or auto hazard, and which extended, in certain circumstances to be discussed in more detail, infra, to autos “furnished [by BellJ for the use of any person or organization.” See Universal Policy, Part 500 at 32-41. Hubert and Rebecca Lowe were listed as “Named Insureds” under: “Property Unicover Coverage Part 330,” which provided coverage for loss to property located at various Bell locations.

See Universal Policy, Part 330 at 15-25. The Lowes were not listed as “Named Insureds” or “Other Insureds” under “Basic Auto Unicover Coverage Part 900.” The only entity listed as insured under that part was Bob Bell Leasing, Inc. (“Bell Leasing”), which was identified as a “Named Insured.” In pertinent part, Part 900 provided coverage for any injury resulting from an occurrence arising out of the ownership, maintenance, use, loading, or unloading of a vehicle owned or leased by Bell Leasing. See Universal Policy, Part 99 at 47. Part 900 specifically provided, however, that any person using such a vehicle within the scope of Bell ¹²⁸ Leasing’s permission was insured under the policy. 3 See id. at 49.

At the time of the accident, Melody Lowe resided in the household of her parents. Hubert and Rebecca Lowe owned several vehicles other than those provided by Bell, and those other vehicles were insured by Brethren Mutual Insurance Company (“Brethren”). Although Brethren began providing a defense to Ms. Lowe, it eventually denied coverage. Ms. Lowe then claimed coverage under the Universal policy.

Universal, in response, filed a declaratory judgment action in the Circuit Court for Anne Arundel County against Melody Lowe, Nicole and Michael Parsons, Brethren, and State Farm 4 . Universal averred that the Brethren policy “may have provided coverage to Melody Lowe for the claims of Nicole and Michael Parsons,” and that, in any event, “at the time of the collision there was also in effect an insurance policy issued by State Farm to Nicole and Michael Parsons providing uninsured and underinsured motorist coverage to them for injuries arising out of the collision.” Universal asked that the court declare that it “has no duty under its policy ... to provide a defense to Melody Lowe ... or to indemnify her for, or pay, any judgment which may be entered against her.... ” Ms. Lowe moved for summary judgment. In her written motion, she asserted, in essence, that there was no dispute that she had her parents’ permission to use the car on the day the accident occurred. She concluded that she was therefore insured under Part 900 of the Universal policy, and asked the court to declare that, as a matter of law, Universal was ¹²⁹ required to defend and indemnify her.

Ms. Lowe attached to her motion copies of the Universal policy and Universal’s response to her request for admissions of fact. In the response, Universal admitted, inter alia, that Ms. Lowe had her parents’ permission to use the car at the relevant time. Universal opposed Ms. Lowe’s motion for summary judgment and filed a cross-motion for summary judgment. 5 In its motion, Universal contended that Hubert and Rebecca Lowe were not insured under Part 900 of the policy and that the relevant coverage part was Part 500. It asserted that Bell had expressly forbidden Hubert and Rebecca Lowe to permit anyone else to use the automobile, and that Melody was therefore not covered under Part 500.

Universal attached to its motion the affidavit of Bell general manager Michael Fitzpatrick, affirming that he had met with Hubert Lowe in August of 1995 and again in March of 1996 and had both times informed Mr. Lowe that “only he and his wife had permission to drive the automobiles being furnished to them pursuant to the sale of his automobile agency to Mr. Bell.” A hearing was held, and the parties reiterated the positions set forth in their memoranda. Counsel for Ms. Lowe contended that, on the face of the Universal policy, Hubert and Rebecca Lowe had authority, under both Part 900 and Part 500, to permit Melody Lowe to use the automobile. Ms. Lowe’s counsel posited that the Fitzpatrick affidavit was inadmissible in that, in counsel’s view, it was “extrinsic evidence ... beyond the four corners of the insurance policy.” In the event that the court believed such “extrinsic” evidence was admissible, counsel submitted to the court a letter dated August 26, 1995, which was apparently prepared for Hubert Lowe’s signature but was never signed. If signed, the letter would have reflected Mr. Lowe’s agreement that only he and Rebecca Lowe were to use the Bell vehicles.

Counsel did not ¹³⁰ explain who prepared the unsigned letter or how it controverted the Fitzpatrick affidavit. The court subsequently issued an order by which it resolved, in Ms. Lowe’s favor, that portion of the declaratory judgment action regarding whether Universal was required to defend and indemnify Ms. Lowe. The order stated: This matter came before this Honorable Court on February 8, 1999, for a hearing on the Plaintiffs [(Universal’s)] Motion for Summary Judgment and the Defendant’s [(Ms. Lowe’s)] Motion for Summary Judgment. Having considered the arguments of both parties, it is this 9th day of February, 1999, by the authority of the Circuit Court for Anne Arundel County, State of Maryland.

ORDERED that the Plaintiffs Motion for Summary Judgment is DENIED; and it is further, ORDERED that the Defendant’s Motion for Summary Judgment [is] GRANTED; and it is further ' ORDERED that judgment be entered in favor of the Defendant. (Footnote omitted.) The only explanation for the court’s decision was contained in a footnote, which provided: Maryland Rule 2-501(c) states that “[t]he court shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law.” In the present case there is no dispute as to the facts. Therefore, the only issue is whether either party is entitled to judgment as a matter of law. The primary consideration in this case is whether the Defendant, Melody Lowe, was insured by the Plaintiff at the time of her accident.

Having reviewed the terms of the policy, this Court finds that the Defendant, Melody Lowe, was an insured and entitled to indemnification to the extent provided for in the policy. Consequently, summary judgment in favor of the Defendant is appropriate. 6 ¹³¹ Brethren also moved for summary judgment in the declaratory judgment action. Brethren pointed out that Hubert and Rebecca Lowe were the named insureds under its policy, and that the automobile in question was neither owned by Hubert and Rebecca Lowe nor listed in the declarations to the Brethren policy as a covered auto. Brethren further pointed out that the policy specifically excluded coverage for any automobile that was not a covered auto but was “furnished or available” for the “regular use” of the named insureds, Hubert and Rebecca Lowe.

Brethren argued that, because there was no dispute that the car Melody Lowe was driving was furnished for the regular use of Hubert and Rebecca Lowe, Brethren was not required to provide coverage as a matter of law. Universal opposed Brethren’s motion, arguing, in essence, that because Melody Lowe was a family member of a named insured rather than a named insured herself, she was not subject to the exclusion for automobiles furnished or available for the regular use of named insureds. 7 A hearing was held ¹³² on November 18, 1999, and the court granted summary judgment in Brethren’s favor. In the resulting order, the court explained: There is no dispute that the vehicle being driven by Melody Lowe was not an insured vehicle under the Brethren policy, nor is there any dispute that the vehicle was furnished by Bob Bell Automotive for the regular use of Herbert [sic] and Rebecca Lowe. Under these undisputed facts and as a matter of law, and under the unambiguous language of the Brethren policy, coverage is excluded for Melody Lowe’s accident.

Although the Parsons’ insurer, State Farm, filed an answer to Universal’s declaratory judgment action, it did not move for summary judgment. In its answer, State Farm denied that “at the time of the collision there was ... in effect an insurance policy issued by State Farm to Nicole and Michael Parsons providing uninsured and underinsured motorist coverage to them for injuries arising out of the collision.” It asserted that Universal and Brethren were required to provide coverage to Melody Lowe. The trial court has yet to rule on whether State Farm is required to provide any coverage. ISSUES Universal is the appellant in this appeal.

The appellees are Melody Lowe, Nicole and Michael Parsons, Brethren, and State Farm, although only Ms. Lowe and Brethren have filed briefs and appeared at oral argument. Universal challenges the two summary judgments entered by the trial court. It argues, in essence, that: I. The trial court erred in granting Melody Lowe’s motion for summary judgment and thereby declaring that she was insured under the Universal policy, and II. The trial court erred in granting Brethren’s motion for summary judgment and thereby declaring that coverage under the Brethren policy was excluded.

Because we find merit in Universal’s first argument, we shall reverse the declaratory judgment to the effect that Melody ¹³³ Lowe was insured under the Universal policy. We find no merit in the second argument and affirm the declaratory judgment as to Brethren. DISCUSSION Finality of Judgment In its declaratory judgment action, Universal expressly sought a declaration that it “ha[d] no duty under its policy ... to provide a defense to Melody Lowe ... or to indemnify her for, or pay, any judgment which may be entered against her....” By naming Nicole and Michael Parsons, Brethren, and State Farm as defendants in the action, in addition to Melody Lowe, Universal implicitly asked the trial court to declare which insurer was to provide primary coverage and which, if any, was to provide secondary coverage. 8 As we have indicated, the court declared the rights of Universal and Melody Lowe as to the Universal policy when it ruled on their motions for summary judgment. It declared the rights of Brethren and Melody Lowe as to the Brethren policy when it ruled on Brethren’s motion for summary judgment.

The court has yet to rule on the rights of State Farm and the Parsons as to the Parsons’ uninsured and underinsured motorist policy, however. Because the rights and liabil ¹³⁴ ities of all parties to the declaratory judgment action have not yet been adjudicated, the summary judgments are not final. Maryland Rule 2-602 provides: (a) Generally. Except as provided in section (b) of this Rule, an order or other form of decision, however designated, that adjudicates fewer than all of the claims in an action (whether raised by original claim, counterclaim, cross-claim, or third-party claim), or that adjudicates less than an entire claim, or that adjudicates the rights and liabilities of fewer than all the parties to the action: (1) is not a final judgment; (2) does not terminate the action as to any of the claims or any of the parties; and (3) is subject to revision at any time before the entry of a judgment that adjudicates all of the claims by and against all of the parties.

(b) When allowed. If the court expressly determines in a written order that there is no just reason for delay, it may direct in the order the entry of a final judgment: (1) as to one or more but fewer than all of the claims or parties.... * * Hi As this Court has explained, “Rule 2-602(b) permits a circuit court to finalize for appeal an order or decision that adjudicates fewer than all of the claims in an action or the rights and liabilities of all the parties.” Tyrone W. v. Danielle R., 129 Md.App. 260, 270 , 741 A.2d 553 (1999), aff'd sub nom. Langston v. Riffe, 359 Md. 396 , 754 A.2d 389 (2000). “A prerequisite for the entry of such a judgment is an order that, absent the existence of multiple parties or multiple claims, would be final in the traditional sense.” Jenkins v. Jenkins, 112 Md.App. 390, 424 , 685 A.2d 817 (1996), cert. denied, 344 Md. 718 , 690 A.2d 524 (1997). The discretionary authority granted by Rule 2-602(b) “is to be used sparingly in order to minimize ‘piecemeal appeals and duplication of efforts and costs in cases involving multiple cases or multiple parties.’ ” Tyrone W., 129 Md.App. at 271 , 741 A.2d 553 (citation omit ¹³⁵ ted). “Rule 2-602(b) may not be used to certify as final only part of a claim.” G-C Partnership v. Schaefer, 358 Md. 485, 488 , 749 A.2d 823 (2000).

The trial court’s summary judgments as to Universal and Brethren established that Universal was required to defend and indemnify Melody Lowe and Brethren was not. They resolved all the claims raised in the declaratory judgment action as to Universal and Brethren. The summary judgment in Ms. Lowe’s favor against Universal indicated that State Farm would not be required to provide coverage to the Parsons unless the Universal policy was inadequate to cover the damages proven. It is logical that Universal be permitted to appeal at this point, rather than be forced to litigate the Parsons’ tort suit on Ms. Lowe’s behalf and appeal later whether Ms. Lowe was actually an insured.

Indeed, because, as we shall hold, Ms. Lowe was not insured by Universal, such a course of action would force the wrong insurer to defend. Quite possibly, the one insurer that might be required to provide coverage in the Parsons’ tort action—State Farm— would not even participate in the defense of that action. Under the circumstances, the trial court should have “expressly determine[d] in a written oi’der that there [was] no just reason for delay,” and should have “direct[ed] in the [summary judgment] order[s] the entry of final judgments]” as to Universal and Brethren. Md. Rule 2-602(b).

See generally Porter Hayden Co. v. Commercial Union Ins. Co., 339 Md. 150, 160-65 , 661 A.2d 691 (1995) (discussing when summary judgment granted in declaratory judgment action against insurer can be certified as final). That the court did not do so is of little consequence here. Under Md. Rule 8-602(e): (1) If the appellate court determines that the order from which the appeal is taken was not a final judgment when the notice of appeal was filed but that the lower court had discretion to direct the entry of a final judgment pursuant to Rule 2-602(b), the appellate court may, as it finds appropriate, (A) dismiss the appeal, (B) remand the case for the ¹³⁶ lower court to decide whether to direct the entry of judgment, (C) enter a final judgment on its own initiative, or (D) if a final judgment was entered by the lower court after notice of appeal was filed, treat the notice of appeal as if filed on the same day as, but after, the entry of judgment. * * * (3) If the appellate court enters a final judgment on its own initiative, it shall treat the notice of appeal as if filed on the date of the entry of the judgment and proceed with the appeal.

(Emphasis added.) In the interest of expediency, we therefore enter as final the summary judgments entered by the trial court and proceed with the appeal. Standard of Review A trial court may grant summary judgment if “there is no genuine dispute as to any material fact and ... the party in whose favor judgment is entered is entitled to judgment as a matter of law.” Md. Rule 2-501(e). In ruling on a motion for summary judgment, the trial court determines issues of law, “resolving no disputed issues of fact.” Beatty v. Trailmaster Products, Inc., 330 Md. 726, 737 , 625 A.2d 1005 (1993). “Ordinarily, an appellate court should review a grant of summary judgment only on the grounds relied upon by the trial court.” Blades v. Woods, 338 Md. 475, 478 , 659 A.2d 872 (1995) (per curiam). “[T]he standard for appellate review of a trial court’s grant of a motion for summary judgment is simply whether the trial court was legally correct.” Beatty, 330 Md. at 737 , 625 A.2d 1005 . “[A]n appellate court resolves all differences against the party making the motion.” Southland Corp. v. Griffith, 332 Md. 704, 712 , 633 A.2d 84 (1993). In the case sub judice, the parties agree that there are no genuine disputes as to material fact, and no such disputes are apparent from the record.

Our task is thus to determine whether the trial court correctly resolved the issues of law. This Court has explained that “ ‘summary judgment in a declaratory judgment action is “the exception rather than the ¹³⁷ rule”....’” Utica Mutual Ins. Co. v. Miller, 130 Md.App. 373, 380 , 746 A.2d 935 (citations omitted), cert. denied, 359 Md. 31 , 753 A.2d 3 (2000). “Summary judgment may be warranted,” however, “where there is no dispute as to the terms of an insurance contract but only as to their meaning.” Id. Here, the parties do not dispute the terms of either the Universal policy or the Brethren policy.

Rather, they disagree as to whether the terms should be construed to provide coverage to Melody Lowe. “[Bjecause [any] duty to defend [on the part of the two insurers] rests on the construction and interpretation of the contract, resolution by summary judgment [was] appropriate.” Id. “Under Maryland law, when deciding the issue of coverage under an insurance policy, the primary principle of construction is to apply the terms of the insurance contract itself.” Bausch & Lomb v. Utica Mutual Ins. Co., 330 Md. 758, 779 , 625 A.2d 1021 (1993). “Initially, we analyze the plain language of the contract according to words and phrases their ordinary and accepted meanings as defined by what a reasonably prudent lay person would understand them to mean.” Kendall v. Nationwide Ins. Co., 348 Md. 157, 166 , 702 A.2d 767 (1997). Maryland does not follow the rule, adopted in many jurisdictions, that an insurance policy is to be construed most strongly against the insurer.

Rather, following the rule applicable to the construction of contracts generally, we hold that the intention of the parties is to be ascertained if reasonably possible from the policy as a whole. In the event of an ambiguity, however, extrinsic and parol evidence may be considered. If no extrinsic or parol evidence is introduced, or if the ambiguity remains after consideration of extrinsic or parol evidence that is introduced, it will be construed against the insurer as the drafter of the instrument. Cheney v. Bell National Life, 315 Md. 761, 766-67 , 556 A.2d 1135 (1989). ¹³⁸ The Universal Policy Universal contends that the trial court erred by granting summary judgment against it and in favor of Melody Lowe on the ground that it was required to provide coverage to Melody Lowe.

Ms. Lowe counters that summary judgment was proper, in that she was insured under both Part 500 and Part 900 of the Universal policy. 9 For reasons that follow, we agree 1 that the policy did not insure Ms. Lowe. The Universal policy consisted of three distinct portions. The first portion consisted of the declaration sheets which established, in essence, who was insured under the particular coverage parts and the amounts of potential insurance. As we have explained, Hubert and Rebecca Lowe were listed in the declarations sheets as “Other Insureds” for purposes of Part 500 of the Universal policy.

Various Bob Bell entities, including Bob Bell Automotive Group, Inc., were listed as “Named Insureds” under Part 500. Mr. and Mrs. Lowe were not listed as insureds of any type for purposes of Part 900. Bell Leasing was the sole “Named Insured” under Part 900, and no “Other Insureds” were listed. The second portion of the policy consisted of the “General Conditions” and the conditions under the various coverage parts.

Significantly, the words “You” and “Your,” as used throughout the policy, were defined in the “General Conditions” to mean “the person or organization shown in the declarations as the Named Insured.” Universal Policy, General Conditions at 5. Finally, the third portion of the policy consisted of endorsements-or amendments-to the various coverage parts. Part 500 As we have explained, Part 500 provided coverage for garage operations or auto hazard. There is no dispute that the car driven by Ms. Lowe was not used for the purposes of ¹³⁹ garage operations.

Thus, any coverage would have been by virtue of the auto hazard provision, which provided coverage, under certain circumstances, for any automobile owned by Bell which was in Bell’s care, custody, or control and was “furnished for the use of any person or organization.” Universal Policy, Part 500 at 32. In defining “WHO IS AN INSURED,” the policy provided: With respect to the AUTO HAZARD: (1) YOU; (2) Any of YOUR partners, paid employees, directors, stockholders, executive officers, a member of their household or a member of YOUR household, while using an AUTO covered by this Coverage Part, or when legally responsible for its use. The actual use of the AUTO must be by YOU or within the scope of YOUR permission; (3) any CONTRACT DRIVER; (4) Any other person or organization required by law to be an INSURED while using an AUTO covered by this Coverage Part within the scope of YOUR permission. Id. at 35.

Part (4) of the definition was an omnibus clause 10 , and provided coverage where Bell granted permission to use the automobile. Because there is no dispute that Bell gave Hubert and Rebecca Lowe permission to use the automobile in question, it is apparent that they were insured under Part (4) of the definition. In order for Melody Lowe to have been insured under Part (4), her use would have to have been within the scope of Bell’s permission. Ms. Lowe points to two endorsements to Part 500, both of which were expressly made applicable in the declaration sheets to Hubert and Rebecca Lowe, which she contends ¹⁴⁰ extended coverage to her even without Bell’s permission.

Endorsement No. 81 states: ADDITIONAL INSURED—FURNISHED AUTO The WHO IS AN INSURED condition of this Coverage Part is changed by adding the following to “With respect to the AUTO HAZARD”: (5) The person or organization named in the declarations as subject to this endorsement, but only with respect to an AUTO furnished by YOU to such person or organization. Id., Endorsements at 90. The plain language of Endorsement No. 31 does indeed indicate that Hubert and Rebecca Lowe were insured under the endorsement as persons to whom Bell furnished cars. Nothing in the language, however, suggests that Melody Lowe was an insured, or that Mr. and Mrs. Lowe were authorized to permit Melody Lowe or anyone else to use the automobile. ' The other endorsement to which Ms. Lowe directs us, Endorsement No. 34, changed the definition of auto hazard for purposes of that endorsement alone.

It stated: “AUTO HAZARD” means the use of any AUTO (1) not owned by the individual or FAMILY MEMBERS, and (2) not used by any of them while working in the business of selling, servicing, repairing or parking AUTOS. Id. at 91. Family member was defined, for purposes of Endorsement No. 34, to mean any person related to the individual named in the declarations as insured under this endorsement, by marriage, blood, or adoption, who is a resident of his or her household. FAMILY MEMBERS includes a ward or foster child.

Id. Endorsement No. 34 provided: DRIVE OTHER AUTOS The WHO IS AN INSURED condition of this Coverage Part is changed by adding the following to “With respect to the AUTO HAZARD”: (5) The individual (and their FAMILY MEMBERS) named in the declarations as subject to this endorsement, ¹⁴¹ but only with respect to any AUTO not owned by them or any member of their household. Id. Endorsement No. 34 then excluded from coverage, apparently under that endorsement alone, “any AUTO furnished or available for the regular use of the individual or FAMILY MEMBERS.” Id.

It appears that, in the event that Bell or someone else provided a vehicle to Mr. and Mrs. Lowe or their family members, including Melody Lowe, for temporary use, Mr. and Mrs. Lowe and their family members would have been insured under Endorsement No. 34. Endorsement No. 34 did not provide coverage, however, where, as here, the vehicle was “furnished or available for ... regular use....” Id. Part 900 Part 900, like all of the coverage parts in the Universal policy, “applie[d] only when it is shown in the declarations.” Universal Policy, Part 900 at 47. The coverage part defined an insured, in pertinent part, as (1) YOU, including YOUR spouse, if a resident of the same household; (2) under INSURING AGREEMENTS A and B [11] * ❖ sit (b) any other person using an OWNED AUTO or TEMPORARY SUBSTITUTE AUTO within the scope of YOUR permission, unless it is being loaded or unloaded....

Universal Policy, Part 900 at 49. Like part (4) of the definition of an insured under Part 500, part (2)(b) of the above-quoted definition was an omnibus clause. As we have observed, the policy defined the words “You” and “Your” to mean “the person or organization shown in the declarations as the Named Insured.” Universal Policy, General Conditions at 5. ¹⁴² The plain language of the policy makes clear that only those listed in the declarations as insured by Part 900 (in this case, only Bell Leasing) and