West American Insurance v. Popa

⁷⁶ BISHOP, Judge. Appellees, John and Tommie Sue Popa, filed suit in the Circuit Court for Baltimore County to collect money allegedly owed to them under the terms of an uninsured/underinsured automobile policy issued by appellant, West American Insurance Company. Both sides moved for summary judgment. After a hearing, the court granted the Popas’ motion and denied summary judgment to West American.

West American noted a timely appeal. ISSUES West American presents five issues, which we reorder and rephrase: I. Does an issue of fact exist regarding whether the Popas adequately notified West American of their intention to seek uninsured motorist benefits?

II

Did the trial court err when it concluded that the Popas were “legally entitled to recover” more than $50,000 in damages even though they filed an order of satisfaction acknowledging receipt of that amount from the State of Maryland?

III

Did the trial court err when it concluded that the Popas were “legally entitled to recover” more than $50,000 in damages even though the State of Maryland has sovereign immunity for damages above $50,000?

IV

Did the trial court err when it concluded that the self-insured and government-owned vehicle exclusions in the Popas’ policy are void as against public policy? V. If the self-insured and government-owned vehicle exclusions in the Popas’ policy are void, did the trial court err by holding that they are void above the $20,000/$40,000 minimum for uninsured motorist insurance? FACTS On July 1, 1991, Jonathan David Popa, son of John and Tommie Sue Popa, was killed when his vehicle was struck by a ⁷⁷ speeding Maryland State Police cruiser, driven by Trooper Rodney Manuel. One year later, the Popas filed a wrongful death suit against Trooper Manuel, the Maryland State Police, and the State of Maryland in the Circuit Court for Cecil County.

A jury found Trooper Manuel negligent and assessed $867,000 in damages against the State of Maryland, and, in accordance with Md.Rule 2-601(a), the Clerk of the Circuit Court entered judgment against the State in that amount. On February 4, 1994, one week after the end of the trial, the Popas asked West American for payment of uninsured motorist benefits in the amount of $250,000 allegedly due under their insurance policy issued by West American. The Popas’ claim was denied. The State filed a motion to reduce the judgment to $50,000, arguing that the Maryland Tort Claims Act waives sovereign immunity for tortious conduct to the extent of insurance coverage under Title 9 of the State Finance and Procurement Article, and that the extent of such coverage at the time of the accident was $50,000.

The circuit court denied the State’s motion to reduce the damage amount, but prohibited the Popas “from executing on their existing judgment against [the State] for amounts in excess of $50,000.” On March 7, 1994, West American filed a motion to intervene and a motion to reduce the judgment to $50,000. The court denied those motions. In the meantime, the Popas accepted a settlement check from the State for $50,000. The Popas filed an order of satisfaction acknowledging the payment and removing “judgment against the [State] ... in accordance with prior Orders of the Court and Maryland law....” In April 1994, the Popas filed suit in the Circuit Court for Baltimore County to force West American to pay them uninsured motorist benefits.

After conducting a limited amount of discovery, both sides moved for summary judgment. In support of its motion, West American presented four arguments. First, it asserted that the Popas’ claim was ⁷⁸ barred by certain policy exclusions. The uninsured motorist coverage provides, in relevant part: We will pay damages which a covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of: 1.

Bodily injury sustained by a covered person and caused by an accident; and 2. Property damage caused by an accident. ****** “[U]ninsured motor vehicle” does not include any vehicle or equipment: ****** 2. Owned or operated by any self-insurer under any applicable motor vehicle law. 3. Owned by any governmental unit or agency.

Second, West American argued that, even if the exclusions were void as against public policy, they were only void up to the minimum amount of coverage required by law. Third, West American asserted that, even if the exclusions were held completely void, it was not liable to the Popas because the State’s sovereign immunity prevented them from being “legally entitled to recover” more than $50,000 in damages. Fourth, West American argued that, even if the exclusions were completely void and the State’s sovereign immunity did not preclude the Popas from recovering more than $50,000, the order of satisfaction prevented the Popas from being “legally entitled to recover” more than $50,000. In support of their motion, the Popas asserted that the exclusions in their policy were void as against public policy and that, notwithstanding the State’s sovereign immunity and the order of satisfaction, they were “legally entitled to recover” more than $50,000 in damages.

At the hearing on those motions, West American asserted, in addition to its other claims, that the Popas had failed to generate an issue of material fact over whether West American received proper notice of the Popas’ underlying suit ⁷⁹ against the State. The trial court subsequently granted summary judgment for the Popas and denied West American’s motion. DISCUSSION A. Standard of Review In determining whether a party is entitled to summary judgment, the court must view the facts, including all inferences, in the light most favorable to the opposing party. The trial court will not determine any disputed facts, but rather makes a ruling as a matter of law.

The standard of review, therefore, is whether the trial court was legally correct. Baltimore Gas & Elec. Co. v. Lane, 338 Md. 34, 42-43 , 656 A.2d 307 (1995) (citations omitted). B. Notice Uninsured motorist coverage is unique because it predicates indemnification of the insured on a showing of fault by a third-party uninsured tortfeasor.

The insurer does not pay benefits to the insured unless the uninsured tortfeasor’s liability has been established. See Andrew Janquitto, Uninsured Motorist Coverage in Maryland, 21 U.Balt.L.Rev. 171, 181 (1992). Because an insurance company’s liability on an uninsured motorist claim hinges on the outcome of the insured’s suit against a third party, due process requires that the company be given advance notice of the suit. If the insurer is not notified, the insured party may not collect uninsured motorist benefits.

See Aetna Cas. & Sur. Co. v. Souras, 78 Md.App. 71, 77 , 552 A.2d 908 (1989) (noting that “considerations of due process require notice in order for an insurer to be bound by the outcome of the tort action.”). In the case sub judice, West American knew about the Popas’ lawsuit against Trooper Manuel, the Maryland State Police, and the State of Maryland. The record includes the hearing transcript of the motion to intervene filed by West ⁸⁰ American in the Popas’ initial suit.

At that hearing, West American’s counsel made the following statement: [West American] knew all about the case. They have defended ... the young fellow that died in the accident in the case brought by the police officer. But that case was resolved before trial. So they knew about the case.

Because that evidence is uncontradicted, no issue of fact exists regarding West American’s knowledge of the Popas’ initial suit against the State. West American, however, argues that, regardless of whether it knew about the underlying suit, it did not know that the Popas would be filing an uninsured motorist claim based on that suit. West American contends that it had a right to rely on the government-owned and self-insured vehicle exclusions in the policy and to expect that the Popas would not file an uninsured motorist claim. West American therefore asserts that the Popas have the burden of proving that, during the course of the underlying suit, they gave notice of their intent to file an uninsured motorist claim.

Because the Popas introduced no proof on this issue, West American asks that the case be remanded for further proceedings. West American’s knowledge of the underlying suit and of the limited liability of the defendants in that suit sufficiently put it on notice that an uninsured motorist claim might later be made. Even if West American honestly did not know that a claim would be made against it, it should have known of the possibility; given the hostility of courts in Maryland to exclusions like the ones in the case sub judice (see, infra, § E), its reliance on those exclusions was misplaced. Therefore, we hold that, as a matter of law, West American’s due process rights were not violated, and the Popas are entitled to summary judgment on the notice issue.

C. Order of Satisfaction Under its policy, West American is obligated to pay the Popas for damages that they are “legally entitled to recover” from an uninsured third-party tortfeasor. This language mir ⁸¹ rors the uninsured motorist statute, which mandates that the insurer pay, under its uninsured motorist policies, damages the insured is “entitled to recover” from an uninsured motorist. West American argues that, because the Popas filed an order of satisfaction acknowledging payment by the State of $50,000 and directing that judgment against the State be “removed,” they are not “legally entitled to recover” more than that amount. Because the Popas have already received $50,000 from the State, West American asserts that it owes nothing under its policy.

To adopt West American’s interpretation of “legally entitled to recover” would frustrate the remedial goals of the uninsured motorist statute. Under our reading of the law, an insured is “legally entitled to recover” damages as long as he has proven: 1) that he was damaged by the fault of an uninsured motorist, and 2) the extent of his damages. In Reese v. State Farm Mutual Automobile Insurance Co., 285 Md. 548 , 403 A.2d 1229 (1979), the insurance company required, in its uninsured motorist policy, that the insured party first win a judgment against the third-party uninsured tortfeasor before he could collect on the policy. Whether such a provision was void as against public policy turned on the definition of the statutory language “entitled to recover.” Holding that the disputed provision was void, the Court of Appeals stated that the language “entitled to recover” is to be given a liberal interpretation.

Particularly important, for our purposes, was its approval of the following language in Winner v. Ratzlaff, 211 Kan. 59 , 505 P.2d 606, 610 (1973): “[T]he words ‘legally entitled to recover as damages’ ... mean[s] simply that the insured must be able to establish fault on the part of the uninsured motorist which gives rise to the damages and to prove the extent of those damages.” Reese, 285 Md. at 555-56 , 403 A.2d 1229 (quoting Winner, 211 Kan. 59 , 505 P.2d at 610 ). We also hold that the filing of the order of satisfaction had no effect on the Popas’ entitlement to damages above ⁸² $50,000. Generally, the intent of the parties governs the scope of an order of satisfaction. Franzen v. Dubinok, 290 Md. 65, 75 , 427 A.2d 1002 (1981).

The Popas never intended that the order of satisfaction foreclose completely all of their claims above $50,000. Rather, the order simply represented the Popas’ acknowledgment that they received $50,000 and that further action against the State would be futile. D. Sovereign Immunity West American also argues that the State’s sovereign immunity for damages above $50,000 precludes the Popas from being “legally entitled to recover” more than that amount. Because the Popas have already received $50,000 from the State, West American claims that it owes the Popas nothing.

As an initial matter we note that, pursuant to Md.State Gov’t Code Ann., § 12-104(c) (1993 Repl.), the Treasurer, after approval by the Board of Public Works, may pay damage claims which exceed $50,000. Therefore, it is possible for a claimant to receive more than $50,000 from the State. Even if the State’s immunity were absolute, to adopt the narrow interpretation of “legally entitled to recover” advocated by West American would frustrate the remedial goals of the legislature. Nothing in the uninsured motorist statute indicates that the legislature intended for an insurer’s uninsured motorist coverage not to apply in cases where the tortfeasor enjoys sovereign immunity.

We recognize that, in Frye v. Frye, 305 Md. 542 , 505 A.2d 826 (1986), the Court of Appeals stated that a child injured by an uninsured parent could not collect uninsured motorist benefits because the parent-child immunity prevents him from being “legally entitled to recover” from the parent. Frye , however,