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 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.
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
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 "`[r]equired 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 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:
There is no coverage under this policy for any:
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 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 appellee 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 appellee's motion for summary judgment. This appeal followed.
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 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
It is well-settled that
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 Repl.Vol.),
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
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, supra. 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 was changed with the advent of "compulsory" automobile liability insurance with required coverages:
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' stepson, Mr. Jennings brought a declaratory judgment action against GEICO, the insurer, seeking a declaration that GEICO 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]ecause 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,
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 by him, 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
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 required." Id. at 637, 516 A.2d 586. In other words, a household exclusion was held to violate public policy only to the extent it operated to prevent the mandatory minimum coverage of $20, 000/$40,000. Id. at 637, 516 A.2d 586. The Court reasoned that,
Id. at 643, 516 A.2d 586 (citations omitted). Thus, State Farm "invalidated household exclusions that attempted to exclude coverage below the statutory minimums, but also validated household exclusions that provided coverage above the statutory minimum." Stearman v. State Farm Mut. Auto. Ins. Co., 381 Md. 436, 440, 849 A.2d 539 (2004) (emphasis in original). As the Court in Wilson pointed out, "Jennings and State Farm stand for the principle that, although not explicitly mentioned by the General Assembly, an exclusion can be a valid and enforceable contractual provision as to coverage above the minimum statutory automobile liability insurance amount." 395 Md. at 534, 910 A.2d 1122.
In 2004, in Stearman, the Court of Appeals again considered the validity of a household exclusion beyond the statutory minimum and reaffirmed State Farm. In that case, the automobile insurance policy provided for liability coverage in excess of the $20,000/$40,000 statutory minimum limits. Id. at 438, 849 A.2d 539. The issue before the Court was the validity of a household exclusion that reduced the limit
Mrs. Stearman suffered injuries as a result of an accident that occurred while she was a passenger in a vehicle driven by her husband, and sued State Farm and her husband, seeking a declaration that the household exclusion in State Farm's automobile liability insurance policy was invalid. Id. The trial court declared the exclusion valid, and accordingly reduced liability coverage from the stated policy amount of $100,000 per person to the statutory limit of $20,000 per person. Id. at 440, 849 A.2d 539. On appeal, the Stearmans argued that Jennings and State Farm should be overruled, asserting that the abrogation of interspousal immunity changed public policy. Id. at 450, 849 A.2d 539. The Court concluded, however, that in the absence of statutory authority, there was no basis to strike down the household exclusion. The Court observed that the "public policy that the Stearmans urge us to change now is not a policy that has been developed by the courts through common law. Rather, it was an act of the Legislature that created the policy, and ordinarily only an act of the Legislature can change that policy." Id. at 454, 849 A.2d 539. "We will not invade the province of the General Assembly and rewrite the law for them, no matter how just or fair we may think such a new law or public policy will be." Id. "The refusal of the Legislature to act to change a legislatively enacted public policy (as opposed to a common law one) provides even greater support for the Court to exercise restraint and refuse to step in and make the change, unless constitutional violations." Id. at 455, 849 A.2d 539. Thus, in the absence of a legislatively enacted public policy to the contrary, the Court concluded that household exclusion clauses extending beyond mandatory minimums were valid:
Stearman, 381 Md. at 455, n. 14, 849 A.2d 539 (quoting Allstate Ins. v. Hart, 327 Md. 526, 532-33, 611 A.2d 100 (1992)).
The Stearman Court recognized, however, that the General Assembly had made attempts "in the recent past to make the change the Stearmans urge us to make now," observing:
Stearman, 381 Md. at 455-56, 849 A.2d 539 (footnote omitted). The Court noted that Stearman was not affected by Ins. § 19-504.1, as the law only applied to policies
To reiterate succinctly, the evolution of public policy changes with regard to household exclusions was as follows. Initially, based on general contract principles, household exclusion provisions were generally accepted and aimed at protecting the insurer against collusive claims. After Jennings and State Farm, household members were allowed recovery up to the compulsory minimum mandated by the Legislature. By mandating compulsory minimums, the Legislature intended that innocent victims of motor vehicle accidents be permitted to recover for their injuries, with very few exclusions, and regardless of their household status. Stearman expressly held that household exclusions reducing the amount of liability to the statutory minimum, where the policy otherwise provided coverage in excess of the minimum, were valid, in the absence of the Legislature acting to change the public policy. Contemporaneously with the Court's decision in Stearman, however, and as Stearman recognized, the Legislature did enact Ins. § 19-504.1, the lynchpin of the present case, which requires an insurer to offer a policy of "motor vehicle liability insurance coverage" for claims made by family members in the same amount as for claims made by non-family members. We now turn to the statute at issue on this appeal.
Section 19-504.1 falls under Article 19, Subtitle 5 is, which is entitled "Motor Vehicle Insurance—Primary Coverage." (Emphasis added). Section 19-504.1 provides:
(Emphasis added). As pointed out previously, the minimum requirements under
As noted above, based on public policy, case law declared invalid a household exclusion that would prevent liability coverage for less than the mandatory minimum proscribed by the Legislature. Following the decisions in the foregoing cases, the Legislature enacted Ins. § 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. The question remains, however, whether the right to obtain a policy without the exclusion extends beyond a primary motor vehicle liability policy to encompass an umbrella policy.
Appellant asserts that Popham v. State Farm Mut. Ins. Co., 333 Md. 136, 634 A.2d 28 (1993) is dispositive, and answers that question in the affirmative. Appellant also asserts, in essence, that any policy providing, even in part, motor vehicle liability insurance falls under the statute. We disagree with appellant with respect to both assertions and, observing that it would be a colossal leap to consider the Legislature's expansion of the right to obtain insurance above the mandatory minimum without a household exclusion as encompassing any insurance policy, conclude that a policy of "private passenger motor vehicle liability insurance" does not include umbrella policies.
It is worth noting that the Legislature has never stated a public policy that would compel insurers to provide coverage in excess of the mandatory minimums. The Legislature also has not prohibited it. Pursuant to Ins. § 19-502(b), subtitle 5 does not "prevent[ ] an insurer from issuing, selling, or delivering motor vehicle liability insurance policies that provide liability coverage in excess of the requirements of the Maryland Vehicle Law."
The public policy considerations leading up to the enactment of the statute, as well as the text of other sections in the subtitle, support our conclusion that the Legislature intended Ins. § 19-504.1 to apply only to primary policies.
In Popham, a passenger was injured in a vehicle involved in a one car accident. 333 Md. at 138, 634 A.2d 28. The driver of the vehicle had coverage through MAIF with liability limits of $20,000/$40,000. Id. at 139, 634 A.2d 28. The passenger was additionally insured with State Farm under two policies: one provided uninsured motorist coverage in the same amount as its liability coverage, i.e., $100,000/$300, 000, and the other, an "excess" personal liability insurance policy, provided liability coverage of $1,000,000, but no uninsured motorist coverage. Id. The passenger sued State Farm, seeking a declaration that, pursuant to Art. 48A, § 541(c) (now Ins. § 19-509), State Farm had to offer, in its excess policy, uninsured motorist coverage in the same amount as the liability coverage it provided. Id. At that time, the statute provided that an insurer, when issuing a policy of motor vehicle liability insurance, had to offer in writing the opportunity to contract for a limit of uninsured motor vehicle coverage equal to the liability limit under the policy, if higher than the statutory minimum limits. Id. at 145, 634 A.2d 28; Art. 48A, § 541(c)(2). The statute also provided that excess policies "may include uninsured motorist coverage as provided in subsection (c) of this section." Id. at 146, 634 A.2d 28; Art. 48A, § 541(f). The circuit court found that, with respect to an excess policy providing motor vehicle liability coverage, the Legislature, by enacting section Art. 48A, § 541(f) (now Ins. § 19-509(h)(1)), either intended that the excess policy was not a motor vehicle liability insurance policy or that it was excluded or exempted from the requirements of Art. 48A, § 541(c)(2) (now Ins. § 19-509).
The Court of Appeals granted certiorari, and held that Art. 48A, § 541(f), the current Ins. § 19-509(h)(1), "permits, but does not require, the excess insurer to offer uninsured motorist coverage." Id. at 152, 634 A.2d 28. The Court recognized that the appellants contended that umbrella policies providing motor vehicle liability coverage fell within the definition of a motor vehicle liability insurance policy, and that the appellees did not accept that an umbrella policy is a motor vehicle liability insurance policy, id. at 147, 634 A.2d 28, but "left for another day," the resolution of that issue. Id. at 152, 634 A.2d 28. The Court stated that, regardless of the reach of Art. 48A. § 541(c)(2), by virtue of Art. 48A, § 541(f), the Legislature clearly intended that the statutory requirement to offer higher limits did not apply to excess policies. Id. at 152, 634 A.2d 28. As Popham did not decide the issue before us either way, concerned uninsured motorist coverage as opposed to the liability coverage at issue here, and did not involve the applicability of a household exclusion, it is not dispositive of the present case.
Consistent with her reliance on Popham, however, appellant directs us to a portion of the uninsured motorist statute, Ins. § 19-509(e)(2), to support her position that a private passenger motor vehicle liability policy encompasses an umbrella policy. Subsection (e)(1) provides that a motor vehicle liability insurance policy contain uninsured motor vehicle coverage at least equal to the statutory minimum, and (e)(2) provides that, unless waived, the limit of uninsured motor vehicle coverage must
As noted above, section 19-509(h)(1), "[c]overage under other policies . . ." provides, however, that a "policy that, as its primary purpose, provides coverage in excess of other valid and collectible insurance. . . may include the uninsured motorist coverage provided for in this section." (Emphasis added). Thus, in an umbrella policy, an insurer is permitted, but not required, to offer uninsured motorist coverage. That appellee offered appellant uninsured motorist coverage in the same amount as liability coverage in the umbrella policy is coincidental. Appellee was not required to do so, and contrary to appellant's observation, the fact that the Legislature expressly addressed umbrella policies in the uninsured motorist statute, and not in Ins. § 19-504.1, does not lead to the conclusion that the household "exclusion must be read to include all motor vehicle policies, including umbrella polices." Indeed, the language in subsection § 19-509(h)(1) would have been inconsistent with § 19-509(e)(2) if the Legislature had intended that § 19-509(e)(2) covered excess or umbrella policies. The language in (h)(1) simply recognized that parties were free to contract for greater coverage in an umbrella policy beyond that which is required in a primary policy. Section 19-504.1 simply provides for the mandatory offering of higher uninsured motor vehicle limits under a primary policy in the event the limits of liability have been increased beyond what Trans. § 17-103 requires.
The above analysis is consistent with the nature of the policies in question. The 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. The coverage under an umbrella policy focuses on the insured. Based upon the foregoing, we conclude that Ins. § 19-504.1 does not apply to excess or umbrella policies.
