Duckett-Murray v. Encompass Ins. Co. of Am.

HEADNOTE: Lashawn Duckett-Murray v. Encompass Insurance Company of
America, No. 1812, September Term, 2016
PRIVATE PASSENGER MOTOR VEHICLE INSURANCE — UNINSURED
MOTORIST (UM) COVERAGE — STATUTORY REQUIREMENT OF
EQUALITY OF LIABILITY AND UM COVERAGE — INSURANCE ARTICLE
SECTIONS 19-509(e)(2) AND 19-510(b)(1) — MATERIAL CHANGES IN
POLICY UPON RENEWAL THAT ARE TANTAMOUNT TO NEW POLICY
In 2014, insured under private passenger automobile policy (“policy”) was injured
in an accident caused by an uninsured motorist. The policy originally was issued in 1987
to her grandfather, grandmother, and aunt.
In 1992, the General Assembly amended the Insurance Article to require that, for
private passenger automobiles, UM limits must equal liability limits, unless the named
insured waives equality of coverage in writing. Uncodified section 2 of the 1992 equality
of coverage law provided that it “shall apply only to motor vehicle insurance policies
issued or delivered on or after” October 1, 1992.
In the more than twenty years after the policy first was issued, it was renewed
annually with many changes, including that insureds were removed, as they died, and
others insureds, including the insured in this case and her mother, were added. The
named insured changed over the years, and insured vehicles were added and removed.
After the insured’s insurance company (“company”) declined her demand for
payment of damages in excess of her $75,000 stated UM limits, up to her $300,000
liability limits, she sued the uninsured driver for negligence and the company for breach
of contract. Partial summary judgment was granted in favor of the company, on the
ground that because the policy merely was renewed from year to year, it was not a policy
“issued or delivered” after October 1, 1992, within the meaning of uncodified section 2,
and therefore was not controlled by the 1992 equality of coverage law. The negligence
case against the uninsured motorist resulted in a jury verdict in favor of the insured in an
amount above the stated UM limits and below the liability limits in the policy.
Insured appealed the grant of partial summary judgment in favor of the company,
arguing that the changes in the policy over time made it effectively new and therefore a
policy “issued or delivered” after October 1, 1992, and subject to the equality of coverage
law. The company responded that the trial court ruled correctly that the policy simply
was renewed over a long period of time and was not new.
Held: Judgment reversed. As the parties acknowledge, uncodified section 2
cannot mean that all policies issued or delivered after October 1, 1992, including standard
renewal policies, are within the equality of coverage law, because the legislature would
not have included “only” as a word of limitation if that were the case. The meaning of
uncodified section 2 otherwise is not clear. It must be ascertained in light of the purpose
of the 1992 equality of coverage law, which was to maximize the number of auto
insurance customers who would have UM coverage equal to liability coverage by making
that the default coverage situation, unless affirmatively waived. Looking to other
jurisdictions that have addressed the question of when a policy is “new” for purposes of
similar equality of coverage laws, Court holds that when there has been a material change
in the risk relationship between the insurer and the insured under the policy, considering
the totality of the circumstances, the policy effectively is new and an equal coverage
provision will be read into it.
Because there is no dispute over the underlying facts, whether the policy was
issued or delivered after October 1, 1992, i.e., was effectively new after that date, can be
answered as a matter of law. In the 1998 to 2000 renewal periods, there were three major
changes in the policy that were material: the original named insured died; the new named
insured was added to the policy as the named insured and for the first time as a driver;
and the number of vehicles covered was reduced from three to two. These changes were
material in that they altered significant terms, introduced a new decision-maker for
waiver purposes, and affected the premium charged. Accordingly, the policy effectively
was “issued and delivered” within the meaning of uncodified section 2 at that time, and
the equality of coverage law applied. Because there was no waiver of equal coverage,
equal coverage must be implied in the terms of the policy.
Circuit Court for Prince George’s County
Case No. CAL15-15643
REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 1812
September Term, 2016
______________________________________
LASHAWN DUCKETT-MURRAY
v.
ENCOMPASS INSURANCE COMPANY OF
AMERICA, ET AL.
______________________________________
Eyler, Deborah S.,
Friedman,
Wilner, Alan M.
(Senior Judge, Specially Assigned),
JJ.
______________________________________
Opinion by Eyler, Deborah S., J.
______________________________________
Filed: January 31, 2018
In this appeal, we must examine the reach of Maryland’s statutory policy in favor
of equality of liability and uninsured motorist (“UM”) coverage limits in private
passenger automobile insurance policies.1
In January 2013, Michael David Haynesworth, an appellee, struck a vehicle owned
and operated by Lashawn Duckett-Murray, the appellant, causing her to suffer personal
injuries. Haynesworth had no motor vehicle liability insurance coverage. In the Circuit
Court for Prince George’s County, Duckett-Murray filed suit for damages against
Haynesworth and Encompass Insurance Company of America (“Encompass”), also an
appellee, her own motor vehicle liability and UM insurance carrier.
Duckett-Murray and Encompass filed cross-motions for partial summary judgment
on the issue of the applicable UM limits. Duckett-Murray argued that by statute her
policy’s UM limits necessarily were equal to her policy’s $300,000 liability limits.
Encompass argued that the UM limits were $75,000, as stated on the policy declarations
page. The circuit court issued a memorandum opinion and order ruling that the
applicable UM limits were $75,000 and granting partial summary judgment in favor of
Encompass.
1
At the times relevant to this case, UM coverage included “coverage for accidents
involving under-insured, as well as uninsured, motorists.” Swartzbaugh v. Encompass
Ins. of Am., 425 Md. 614, 617 (2012) (citing GEICO v. Comer, 419 Md. 89, 91 n. 1
(2011)). As we shall discuss, a new law recently took effect allowing for enhanced
underinsured motorist coverage in place of uninsured motorist coverage. See 2017 Md.
Laws, ch. 20, § 2; ch. 815, § 2 (effective Oct. 1, 2017).
In a jury trial, Haynesworth was found liable to Duckett-Murray for $192,148.15
in damages. The court entered judgment against Haynesworth in the full amount of the
verdict and against Encompass for $75,000.
On appeal, Duckett-Murray presents one question, which we have rephrased:
Did the circuit court err by ruling that the UM limits on her automobile
insurance policy were not equal to the policy’s liability limits?
We answer that question in the affirmative. We shall vacate the judgment against
Encompass for $75,000 and remand the case for the court to enter judgment in favor of
Duckett-Murray and against Encompass for $192,148.15.
FACTS AND PROCEEDINGS
By 1992, Md. Laws, Chap. 641 (“the 1992 Law”), the General Assembly amended
Maryland’s motor vehicle insurance laws to state that “[u]nless waived . . . the amount of
[UM] coverage provided under a private passenger motor vehicle liability insurance
policy shall equal the amount of liability coverage provided under the policy.” Md. Code
(1997, 2011 Repl. Vol., 2013 Supp.), § 19-509(e)(2) of the Insurance Article (“Ins.”). To
be effective, a waiver of equality of coverage must be in writing and made by the “first
named insured” under the policy. Ins. § 19-510(b)(1).2 The 1992 Law included two
sections that were not codified. Section 2 stated that “[t]his Act shall apply only to motor
2
The “Named insured” is “the person denominated in the declarations in a motor
vehicle liability insurance policy.” Ins. § 19-501(d).
The Maryland Insurance Administration (“MIA”) provides a waiver form that
complies with the statutory standards. Ins. § 19–510(d).
-2-
vehicle insurance policies issued or delivered on or after the effective date of this Act[,]”
and section 3 established an effective date of October 1, 1992.
The accident that gave rise to the lawsuit in this case happened on January 3,
2014. At that time, Duckett-Murray was insured under a “USP Deluxe” policy from
Encompass, for the policy period November 4, 2013, through November 4, 2014.
Barbara Duckett (“Barbara”), Duckett-Murray’s mother, was identified on the
declarations page as the “Policyholder.”3 The policy covered two vehicles: a 2003
Chrysler Town & Country driven by Barbara and a 2008 Dodge Charger driven by
Duckett-Murray. Barbara, Duckett-Murray, and Barbara’s sister, Bertha Duckett
(“Bertha”), were listed as drivers on the policy. The declarations page showed liability
limits of $300,000 and UM limits of $75,000. It is undisputed that neither Barbara nor
any prior policyholder ever executed a written waiver of UM coverage equal to liability
coverage consistent with Ins. sections 19-509 and 19-510.
On cross-motions for summary judgment, the parties presented evidence pertinent
to when the policy was “issued or delivered.” That evidence showed that on October 30,
1987, Edison Duckett (“Edison”), Barbara and Bertha’s father and Duckett-Murray’s
grandfather, applied to CNA Insurance Companies (“CNA”) for a combined policy of
homeowners and automobile insurance. At that time, Edison; his wife, Mary Duckett
(“Mary”); Barbara, then age 33; Bertha, then age 30; and Duckett-Murray, then age 10,
3
As the policy history we shall recount makes clear, the insurer at one time used
the term “named insured” but later substituted the term “policyholder” in its place.
-3-
all were living at 12809 Heatherwich Court, in Brandywine. Barbara and Duckett-
Murray continue to live at the Heatherwich Court residence.4
On November 4, 1987, “Universal Security Deluxe Policy” No. US6021509 was
issued to “Named Insured[s]” “Edison and Mary and Barbara Duckett.” The “New
Business Coverage Summary” pages identified CNA as the insurer and Continental
Casualty Company (“CCC”) as the insurance underwriter. The liability limit was
$300,000 and the UM limit was $50,000. Three vehicles were covered: a 1987 Chevrolet
Celebrity, a 1986 Ford Escort, and a 1980 Ford Pinto. Edison, Mary, and Bertha were
listed as drivers, but Barbara was not. In fact, Barbara had her own automobile insurance
policy with Allstate. The only reason Barbara was included as a “Named Insured” on the
policy was because it covered the Heatherwich Court residence and she was a mortgagor
on the house, along with her parents.5
The next year, for the policy period November 4, 1988, through November 4,
1989, only Edison was listed as a “Named Insured.” The policy was renewed for the
policy years beginning November 4, 1988, through November 4, 1994, with Edison as
4
Bertha may still live there, but the record does not address that.
5
In the application, Edison asked that the CNA policy list “Edison, Mary, &
Barbara” as the “named insured[s]” in order to “satisfy mortgagee.” We take judicial
notice of the State Department of Assessments and Taxation online records, which show
that Barbara owned the Heatherwich Court residence jointly with her parents.
-4-
the “Named Insured” and the coverage limits, number of vehicles covered, and drivers
unchanged. In policy years 1990 through 1993, various automobiles were substituted.6
Beginning November 4, 1995, the policy name changed from “Universal Security
Deluxe Policy” to “USP Deluxe.” The policy number, limits, vehicles, and drivers were
unchanged. Edison remained the sole “Named Insured.” Beginning November 4, 1996,
the name of the policy underwriter was changed from CCC to Continental Insurance
Company (“Continental”).7 The policy was renewed with no changes on November 4,
1997. On November 4, 1998, the policy was renewed but the Nissan Maxima assigned to
Edison was removed and not replaced, so only two vehicles were covered, not three.
On July 30, 1999, an endorsement added Barbara as a “Policyholder” and as a
driver.8 Edison, Mary, and Bertha continued to be listed as drivers. Two vehicles were
covered: one assigned to Mary and one to Bertha.
On November 4, 1999, the policy was renewed with liability limits remaining at
$300,000, but with UM limits increased to $55,000, consistent with a change in the
statutory minimum. Edison and Barbara remained the “Policyholders.”
6
In 1990, a 1990 Ford Ranger pick-up truck was substituted in place of the 1986
Ford Escort. In 1992, a 1984 Ford Escort was substituted in place of the 1980 Ford Pinto.
In 1993, a 1985 Nissan Maxima was substituted in place of the 1984 Ford Escort.
7
A 1995 Ford Windstar was added in place of the 1987 Chevrolet Celebrity. The
policy number and limits remained unchanged.
8
As noted, CNA stopped using the term “named insured” and instead used the
term “policyholder.”
-5-
Edison died in August of 2000. The policy was renewed on November 4, 2000,
with no changes. On November 4, 2001, the policy was again renewed, still listing
Edison and Barbara as “Policyholders,” but not listing Edison as a driver. The policy
number, liability limits, and UM limits remained unchanged, although the policy stated
that it now was being issued by Glens Falls Insurance Company (“Glens Falls”). The
policy was renewed on November 4, 2002, still with “Edison & Barbara Duckett” listed
as the “Policyholders.”
On December 23, 2002, the policy was amended by endorsement to delete Edison
as a “Policyholder” and add Mary. Thus, “Barbara & Mary Duckett” were now the
“Policyholders.”
On November 4, 2003, Duckett-Murray, then age 26, was added as a driver, and a
third vehicle, a 1993 Jeep Grand Cherokee, was added. “Barbara and Mary Duckett”
remained the “Policyholders.”9 Bertha and Mary also were listed as drivers.
The “USP Deluxe Renewal Policy” for the November 4, 2004, through November
4, 2005 policy period bore a new policy number, No. #261526627, and stated that it was
being issued by Encompass, “Formerly known as CNA Personal Insurance.” The
“Coverage Summary” page stated “Policyholder Since: 11/1987.”10 The “Policyholders”
and coverage limits remained unchanged.
9
A 2003 Chrysler Town & Country was added to the policy, in place of the 1995
Ford Windstar.
10
This language also appeared on prior iterations of the policy, beginning in 1998.
-6-
The USP Deluxe Renewal policy was renewed on November 4, 2005. The
“Renewal Policy Coverage Summary” states: “Policy Number: 261526627. This is a
replacement of policy 006021509.” It further states that the issuer is “Encompass
Insurance Formerly known as CNA Personal Insurance” and includes the “Policyholder
Since: 11/1987” language. The policy was renewed again on November 4, 2006, with no
changes. The policy was renewed on November 4, 2007, with two vehicles covered
instead of three.11
In December 2007, Mary died.
On November 4, 2008, the policy was renewed with “Barbara Duckett” as the sole
“Policyholder.” Barbara renewed the policy in 2009 and again in 2010. Beginning
November 4, 2011, the UM coverage was increased to $75,000, consistent with changes
to the statutory minimum, while the liability coverage remained unchanged. A third
covered vehicle, a 2008 Dodge Charger, was added.
The policy was renewed on November 4, 2012, with the 1998 Dodge Stratus
removed, so the policy only covered two vehicles. On November 4, 2013, the policy was
renewed with no changes.
As mentioned, the accident giving rise to this lawsuit occurred on January 3, 2014,
during the 2013 policy period. Duckett-Murray made a claim against Encompass for UM
benefits up to the $300,000 liability limits under the policy. Encompass took the position
11
A 1998 Dodge Stratus, assigned to Duckett-Murray, was added, and the 1990
Ford truck and the 1993 Jeep were removed.
-7-
that the stated $75,000 UM limits applied. Duckett-Murray filed suit against
Haynesworth and Encompass on May 21, 2015.
On July 1, 2016, Duckett-Murray moved for partial summary judgment, arguing
that because Ins. section 19-509(e)(2) requires UM limits to equal liability limits for a
private passenger automobile insurance policy, absent an affirmative written waiver, and
because neither Barbara nor any other Policyholder made such a waiver, the UM benefits
recoverable under the policy automatically were up to the $300,000 liability limits.
Encompass filed a timely opposition to Duckett-Murray’s motion and a cross-motion for
partial summary judgment. It maintained that Ins. section 19-509(e)(2) did not apply to
the policy covering Duckett-Murray because that policy was not “issued or delivered” on
or after October 1, 1992, having been continuously renewed since 1987.
The court heard argument on September 1, 2016, and, on September 14, 2016,
entered a memorandum opinion and order. It ruled that the policy covering Duckett-
Murray had been issued and delivered in 1987 and renewed continuously thereafter,
opining:
While there have been numerous changes to the policy, they are
those of the routine variety. Individuals frequently change the covered
drivers when necessary and change the covered vehicle when they purchase
a new car. They then proceed to renew their coverage at the expiration of
each term. This Court finds that is what the Duckett family did here. They
renewed their motor vehicle insurance policy every November since the
policy was issued in 1987. The best evidence is the most recent renewal
itself that indicates “Policyholder Since: 11/1987.
The court concluded that because the policy merely was renewed yearly after it was first
purchased in 1987, it was not “issued or delivered” after October 1, 1992, and, therefore,
-8-
a waiver of enhanced UM coverage limits was not required. It relied upon World
Insurance Co. v. Perry, 210 Md. 449, 454 (1956), which holds that “a renewal of an
insurance policy by the payment of a new premium and the issuance of a receipt therefor,
where the renewal is in pursuance of a provision to that effect, is not a new contract but
an extension of the old.”
A jury trial went forward on October 3-4, 2016, and, as mentioned, the jury found
in favor of Duckett-Murray, and against Haynesworth, awarding damages of
$192,148.15. On October 18, 2016, the court entered judgment against Haynesworth for
$192,148.15 and Encompass for $75,000. Duckett-Murray noted a timely appeal.12
DISCUSSION
Duckett-Murray contends the circuit court’s interpretation and application of
uncodified section 2 of the 1992 Law is “inconsistent with the text and purpose of the
remedial statute creating a default of matching limits of liability coverage and uninsured
motorist benefits.” In her view, the legislature adopted a policy that favors equality of
liability and UM coverage limits, by making that the default coverage circumstance
absent an affirmative written waiver; and it intended for that policy to apply to motor
vehicle insurance policies such as the one here, which, although labeled as a “renewal”
policy, “was not issued to the same person to whom it was issued on the effective date
of” the 1992 Law and “was not issued by the same company, or an affiliated company,
12
Haynesworth is an appellee, but he did not file a brief or otherwise participate in
the appeal.
-9-
that issued” the policy in 1992. She maintains that because, under Ins. section 19-
510(a)(1), the “first named insured” has the power to execute a waiver of enhanced UM
coverage on behalf of the other insureds, any time the first named insured under the
policy changes, as happened here in 2002 and again in 2008, there is a new contract, not a
policy renewal. In that circumstance, equality of coverage as mandated by Ins. section
19-509(e)(2) applies, and the new first named insured must be given the opportunity to
execute a waiver.13
Encompass responds that the circuit court correctly ruled that, for purposes of
uncodified section 2, only a new policy, not a renewal policy, is a policy “issued or
delivered” on or after October 1, 1992. In its view, the renewal of a policy first issued
and delivered before October 1, 1992, never will trigger the equality of coverage
requirement, even if the policy has been renewed multiple times and the renewals have
significantly changed the policy over time. Encompass asserts that, after the policy at
issue here first was issued in 1987, it became a renewal policy, to which the 1992 Law
did not apply. That is so, it maintains, regardless of which named insured actually
renewed the policy each year. Encompass argues that Swartzbaugh v. Encompass Ins. of
America, 425 Md. 614 (2012), supports this position.
No Maryland case has interpreted uncodified section 2, and the UM statute does
not define the phrase “issued or delivered.” The words “issued,” “sold,” or “delivered,”
13
Effective October 1, 2017, Ins. sections 19-510(a)(1) and (2) were moved to
(b)(1) and (b)(2). We shall cite to the statutory sections in effect during the prior relevant
time.
-10-
usually in full or partial combination, appear throughout the motor vehicle insurance title
of the Code (Title 19), however. As the author of the leading treatise on Maryland motor
vehicle insurance law has commented, “[t]he phrase ‘issue, sell, or deliver’ and its
derivatives have not been given any special judicial interpretation by Maryland courts.”
Andrew Janquitto, Maryland Motor Vehicle Insurance, § 5.5 at 140 (3d ed. 2011)
(footnote omitted) (hereinafter “Janquitto”). But the way in which these words are used
in Title 19, subtitle 5 “suggests that ‘issued’ and ‘sold’ are synonymous,” while
“delivery” stands on its own. Id. at 140–41 (footnote omitted).
The meaning of “issued or delivered” in uncodified section 2 is not entirely clear.
From 1975, when UM coverage first was mandated, those words were used broadly:
“[E]ach motor vehicle liability insurance policy issued, sold, or delivered in the State
after July 1, 1975, shall contain” UM coverage as further described. Ins. § 19-509(c).
Likewise, they have been used broadly from 1972 on, in mandating minimum liability
coverage amounts: “Each motor vehicle liability insurance policy issued, sold, or
delivered in the State shall provide the minimum liability coverage specified in Title 17
of the Transportation Article.” Ins. § 19-504. As the Janquitto treatise points out,
because insurance contracts are said to come into existence when sold and delivered,
these words may have been used to make clear, for conflict of laws purposes, that any
insurance policy formed in the State of Maryland after the effective date of those
statutory mandates would need to provide the minimum liability and UM coverages.
Janquitto, at 141. There is no case law or history to suggest a distinction between new
and renewal policies in that context.
-11-
The words “issued or delivered” in uncodified section 2 are not as broadly phrased
as in Ins. sections 19-509(c) and 19-504, however, given the use of the word “only” in
that section. Rather, they seem to have been meant as a limitation upon the insurance
policies to which the 1992 Law would apply. “This Act shall apply only to . . . policies
issued or delivered on or after” October 1, 1992, implies that there are policies to which
the Act will not apply, i.e., those not issued or delivered on or after that date. (Emphasis
added.)
The parties to this appeal are in agreement that the limitation envisioned by the
General Assembly in uncodified section 2 applies to ordinary renewal policies. That is, a
routine renewal policy is not a policy “issued or delivered” within the meaning of section
2. Maryland law is well-established that when an insured renews a policy that permits
renewal, and the insurer accepts the renewal, the resulting policy merely is a continuation
of the already existing policy. World Insurance Co. v. Perry, supra. We agree with the
parties that it is unlikely that the legislature generally intended renewal policies to be
included among the policies “issued or delivered” on or after October 1, 1992, as that
would have eliminated any distinction, for purposes of UM limits, between policies sold
or delivered before October 1, 1992, and policies sold or delivered on or after that date.
The question is whether there can be circumstances in which a renewal policy that is
issued or delivered has changed so much from the policy as originally sold that it is, in
effect, a new policy. Duckett-Murray urges a broad reading of uncodified section 2 to
that effect, while Encompass urges a narrow reading, so that only a new contractual
-12-
relationship with a new customer is a policy “issued or delivered” under uncodified
section 2.
In determining the meaning of uncodified section 2, we must “ascertain and
effectuate the intent of the General Assembly.” Bottini v. Dep’t of Fin., 450 Md. 177,
187 (2016). In so doing,
we look first to the language of the statute [or here, the uncodified
provision of the law], giving it its natural and ordinary meaning. We do so
on the tacit theory that the General Assembly is presumed to have meant
what it said and said what it meant. When the statutory language is clear,
we need not look beyond the statutory language to determine the General
Assembly’s intent. If the words of the statute, construed according to their
common and everyday meaning, are clear and unambiguous and express a
plain meaning, we will give effect to the statute as it is written. In addition,
we neither add nor delete words to a clear and unambiguous statute to give
it a meaning not reflected by the words that the General Assembly used or
engage in forced or subtle interpretation in an attempt to extend or limit the
statute’s meaning. If there is no ambiguity in the language, either inherently
or by reference to other relevant laws or circumstances, the inquiry as to
legislative intent ends.
If the language of the statute is ambiguous, however, then courts
consider not only the literal or usual meaning of the words, but their
meaning and effect in light of the setting, the objectives, and the purpose of
the enactment under consideration. We have said that there is an ambiguity
within a statute when there exist two or more reasonable alternative
interpretations of the statute. When a statute can be interpreted in more than
one way, the job of this Court is to resolve that ambiguity in light of the
legislative intent, using all the resources and tools of statutory construction
at our disposal.
Id. at 187–88 (citation omitted).
It is evident from the history of the Maryland UM law from its inception until
enactment of the 1992 Law that the General Assembly’s objective has been to maximize
the number of consumers who purchase UM coverage in excess of the statutory minimum
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amount. As noted, since 1975, private passenger automobile insurance policies issued in
Maryland have been required to provide minimum levels of UM coverage. See 1975 Md.
Laws, Chap. 562; see also Swartzbaugh v. Encompass Ins. of Am., 201 Md. App. 133,
143–46 (2011) (discussing the legislative history of mandatory UM coverage in
Maryland). In 1981, the General Assembly went a step further, requiring insurers to
“make available” to insureds UM coverage above the minimum levels, so long as that
coverage did not exceed the amount of liability coverage under their policies. 1981 Md.
Laws, Chap. 510. (It also expanded UM coverage to include certain underinsured motor
vehicles.)
In 1989, the General Assembly tried to put teeth in that law, changing it to
“require insurance companies to offer in writing the opportunity to contract for higher
amounts of [UM] coverage.” Swartzbaugh, 201 Md. App. at 145 (emphasis in original).
And finally, when it became evident that a law that placed the burden on consumers to
act to increase their UM limits could not be made strong enough to be effective, the
General Assembly enacted the 1992 Law, shifting the burden to insurers to provide UM
coverage equal to liability coverage unless equal UM coverage was affirmatively waived
in writing.14 As this Court explained in Swartzbaugh,
14
While the instant litigation was pending, the General Assembly enacted a new
law requiring insurers to offer their insureds enhanced underinsured motorist coverage
(“EUIM”) in lieu of traditional UM coverage. See 2017 Laws of Md., ch. 20, § 2, ch.
815, § 2. That law, which took effect on October 1, 2017, and is now codified at Ins.
section 19-509.1, amended the affirmative waiver requirement of Ins. section 19-510 to
make it inapplicable to any policy that includes EUIM coverage in lieu of UM coverage.
(Continued…)
-14-
the impetus behind the 1992 amendment was the lack of awareness
regarding the importance of carrying uninsured motorist coverage in an
amount equal to the policy’s liability coverage. By requiring the insured to
affirmatively waive higher uninsured motorist coverage, an “insured’s
inaction [wa]s more protection,” and the “‘default setting’ recognize[d] the
realities of life and dovetail[ed] with the legislative aim of [uninsured
motorist] coverage—a full recovery.”
201 Md. App. at 146 (quoting Janquitto, § 8.7 at 334). See also Staab v. Am. Motorists
Ins. Co., 345 Md. 428, 435–36 (1997) (observing that the General Assembly “has
determined, as a general policy, that insureds should have the same amount of [UM]
coverage as they have automobile liability coverage, unless they affirmatively waive the
equivalent level over and above the mandatory minimum[.]”)
Generally, because the UM statute is “remedial” legislation, we must construe it
liberally “‘in order to effectuate its purpose of assuring recovery for innocent victims of
motor vehicle accidents.’” Nationwide Mut. Ins. Co. v. Webb, 291 Md. 721, 737 (1981)
(quoting State Farm v. Md. Auto. Ins. Fund, 277 Md. 602, 605 (1976)). More
specifically, we must construe the meaning of “issued or delivered” in uncodified section
2 in light of the public policy underlying UM coverage, which has evolved to afford
greater protection, through the private sector, to those injured by uninsured motorists:
Before 1981, the public policy was to place the insured in the same position
he or she would have occupied had the uninsured motorist maintained
liability limits in the amount mandated by Title 17 of the Transportation
(…continued)
Traditional UM coverage will only pay up to the UM limits, minus any liability coverage
under the at-fault driver’s policy. EUIM coverage, in contrast, pays “in addition to the
limits of liability” under any valid and collectible liability coverage, and up to the full
damages sustained. H.B. 5 (2017), Fiscal Note at 6.
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Code. The public policy behind today’s UM statute is to place the insured
in the same position he or she would have occupied had the tortfeasor
maintained liability limits equal to the claimant’s own UM coverage . . . .
Today’s UM statute is designed to provide the insured the opportunity to
secure a full recovery for his or her injuries. The General Assembly
enables the insured to purchase UM insurance greatly in excess of the
minimum limits mandated by Title 17 . . . , and, once purchased, that
coverage is inviolable (unless the UM statute expressly permits such a
violation). In this sense, the insured has the opportunity to secure a full
recovery if he or she purchases higher UM limits.
Janquitto, § 8.1 at 310 (emphasis in original).
As noted, Encompass relies upon Swartzbaugh to support its position that,
contrary to what Duckett-Murray argues, significant changes in the “named insured” do
not create a new policy so long as the policy has been continuously renewed. In
Swartzbaugh, the Court of Appeals held that “first named insured” under Ins. section 19-
510 means any of the named insureds on the policy declarations page. There, a husband
and wife both were listed as “Policyholders” on the declarations page, with the husband’s
name first. The wife signed a UM coverage limits waiver as the “first named insured,”
consistent with Ins. section 19-510, electing UM coverage limits less than liability limits
(and therefore a lower annual premium). When the couple’s daughter, who was insured
under the policy, was injured in an accident caused by an underinsured driver, she
brought a declaratory judgment action seeking a ruling that her mother’s waiver of UM
coverage equal to liability coverage was ineffective because her mother was not the “first
named insured” on the policy. The circuit court and this Court rejected that argument.
In affirming, the Court of Appeals noted that “first named insured” is not defined
in the Insurance Article, but “named insured” is defined and means “the person
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denominated in the declarations in a motor vehicle liability insurance policy.” Ins. § 19-
501(d). The Court concluded that “in the context of a motor vehicle insurance policy, the
phrase ‘first named insured’ refers to a person insured under the policy and specifically
named in the policy, who acts on behalf of the other insured parties and is designated as
such in the policy documents.” Swartzbaugh. 425 Md. at 616. The Court reasoned that
it would make little sense if who could waive equal UM coverage limits turned on the
order in which the named insureds were listed. Because the wife was a “named insured”
under the policy, she could act on behalf of the other insureds by signing the UM waiver,
and therefore the waiver was effective.
Swartzbaugh is pertinent but not on point. It clarifies that when more than one
person is listed as a named insured on a policy declarations page, any one of them may
execute a written waiver of equality of liability and UM limits on behalf of the other
insureds. One could conclude from the Court’s holding that, because more than one
named insured has authority to waive equal limits, the elimination of one named insured
from the policy is not a significant change. Swartzbaugh does not give guidance on the
question whether a complete turnover of named insureds, and other changes to a policy
over time, can effectively result in the creation of a new policy so as to trigger the
statutory requirement of equality of coverage. Other states have considered this issue and
we look to some of those cases for guidance.
In Iverson v. State Farm Mutual Insurance Company, 256 P.3d 222, 223 (Utah
2011), the Supreme Court of Utah answered a certified question from the United States
District Court for the District of Utah about Utah’s equality of coverage law, which is
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similar to Maryland’s law. The Utah law states that “new policies written on or after
January 1, 2001,” “shall” provide equal UM and liability coverage unless equal UM
coverage is affirmatively waived in writing. Id. at 225 (quoting Utah Code Ann., § 31A–
22–305(9)(g)). For policies that are not “new,” insurers only are required to send their
insureds an insert with renewal notices explaining the purpose of UM coverage and the
costs associated with increasing that coverage.
Mr. and Mrs. Iverson purchased motor vehicle insurance from State Farm
beginning in 1981 and renewed their policy continuously thereafter through the 2004-
2005 policy year. Beginning in February 2001 and for the following four renewal terms,
State Farm sent the Iversons an insert about UM coverage along with their renewal
notices. In August 2001, State Farm changed the Iversons’ policy number consistent
with a change in its standard policy booklet. In April 2003, the Iversons added a new
vehicle to their policy, and “State Farm issued a new policy number to reflect this final
change[.]” Id. at 223. At all relevant times, the Iversons had liability coverage limits of
$50,000 for one person and $100,000 for two or more persons and UM coverage limits of
$20,000. “At no point during its twenty-four year insurance relationship with the
Iversons did State Farm obtain a written waiver . . . affirmatively authorizing [it] to issue
[them UM] coverage in an amount less than their liability coverage.” Id. at 223–24.
In July 2005, the Iversons were killed in a collision with an uninsured motorist.
The personal representative of their estate demanded payment of $100,000 in UM
benefits from State Farm. State Farm declined and paid only the UM policy limits of
$20,000. The personal representative sued State Farm in federal district court, and that
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court certified to the Utah Supreme Court the question whether the State Farm policy
complied with Utah law. To answer, it was necessary to determine when a “new policy
exists.” Id. at 223. The term “new policy” was not defined in the statute, and its meaning
was “far from apparent.” Id. at 225–26. The court noted that the term could be read
narrowly, to refer to “new contractual relationships” only, or broadly, to include policies
that existed before January 1, 2001, but that had been “change[d] in such a material way
that the relationship of risk between the insurer and the insured has little resemblance to
the original policy.” Id. at 226.
Looking to the legislative history and the policy goals of the UM statute to
ascertain legislative intent, the court adopted the broader definition. It emphasized the
remedial purposes of the change in the UM law effected by the statute. The enactment
was the legislature’s response to an “urgent concern that citizens of the state did not
understand the consequences of not carrying [UM coverage].” Id. at 226. The court
expressed concern that, were it to read “new policy” narrowly, “few current insurance
policyholders w[ould] have the opportunity to sign a waiver.” Id. at 227. “Indeed, the
opportunity to sign a waiver would arise only if a current insurance policyholder’s
contract lapses or if the insured switches insurance providers; the majority of
policyholders will not fall into these categories.” Id.
The court reasoned further that “the changing nature of insurance policies over
time” militated in favor of a broad construction of “new policy.” Id. It gave as an
example a policy with $100,000 in liability limits purchased by a single driver in his
twenties. Under a narrow construction of “new policy,” if, over twenty-five years, the
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driver married, had children, and insured his spouse and his teenage children under the
policy, paying a much higher premium and raising his liability limits, he still would not
have a “new policy.” In the court’s view, that result would defy common sense.
The court next considered “what changes to an existing contractual relationship
are sufficiently material to create a ‘new policy.’” Id. It declined to decide whether the
specific changes to the Iversons’ policy were “material,” concluding that that issue was
for the district court to decide. It also declined to adopt a categorical approach to the
materiality standard, holding instead that courts must consider the “totality of
circumstances” in assessing the materiality of a policy change. Id. at 228. It advised that
in making that assessment, the “primary focus should be on whether the change to the
policy would meaningfully alter the risk relationship between the insurer and the
insured.” Id. “Relevant, but not determinative, considerations may include”: 1) whether
the policy change was requested by the insured or simply was a ministerial change; 2)
whether in light of the policy change the “average insured would want to reevaluate the
amount of risk she would be willing to bear”; and 3) whether the average insured would
understand the policy change as creating a new policy. Id.
Allstate Ins. Co. v. Kaneshiro, 998 P.2d 490 (Haw. 2000), also is instructive. In
1974, Clyde Kaneshiro (Clyde), who was unmarried, purchased an automobile insurance
policy from Allstate. Four years later, he married and his wife (Kaneshiro) was added to
the policy as a driver. Twelve years later, in 1990, Allstate offered him UM coverage,
which he rejected in writing. Effective January 1, 1993, Hawaii state law changed so that
in some situations insurers were required to give their insureds the “option to select [UM
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coverage] . . . up to but not greater than the bodily injury liability coverage limits in the
insured’s policy.” Id. at 212 (quoting Hawaii’s Revised Statutes § 431:10C-301(d)
(1993)). One such situation was when a policy was “first applied for or issued.” Id.
However, for “existing policies, an insurer [was required to] offer such coverage at the
first renewal after January 1, 1993[,]” and thereafter, “no further offer [was] required to
be included with any renewal or replacement policy issued to the insured.” Id. (emphasis
omitted).
In compliance with the new law, Allstate made another offer of UM coverage to
Clyde on March 1, 1993, his first renewal date after January 1, 1993. Clyde signed a
written waiver rejecting that coverage. Allstate issued a renewal policy to Clyde in
February 1994. On March 3, 1994, he requested several amendments to the renewal
policy. Most significantly, he advised his insurance agent that he and Kaneshiro were
separated and were in the process of getting a divorce and asked that his name be
removed from the policy and that Kaneshiro be substituted in his place as the named
insured. After he signed a release, a renewal policy was issued in Kaneshiro’s name
only, with that change made retroactive to March 1, 1994.
Kaneshiro renewed the policy on September 1, 1994, adding another vehicle. On
September 10, 1994, she was injured in a car accident. Allstate denied her claim for UM
benefits and then filed a declaratory judgment action in federal district court. Kaneshiro
counterclaimed. The federal district court certified to the Supreme Court of Hawaii the
question whether an insurer that already had made an offer of enhanced UM coverage to
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its insured after January 1, 1993, must reoffer enhanced UM coverage if the named
insured is removed and replaced with a new named insured.
The Hawaii Supreme Court answered the certified question in the affirmative. It
explained that the central dispute was whether the policy issued to Kaneshiro on March 1,
1994, was a new policy or merely a “renewal or replacement policy.” After reviewing
cases from around the country, the court held that “when a material change is made to an
existing policy, the resulting policy is not a ‘renewal or replacement policy’ and a new
offer of [UM] coverage is required.” Id. at 217. The materiality determination is “fact
specific” based upon the “totality of the circumstances.” Id.
Applying that test to the facts before it, the court determined that the substitution
of Kaneshiro for Clyde as the insured on the policy, coupled with the addition of a new
vehicle, was a material change to the policy that triggered the statutory requirement of a
new offer of UM coverage. In so deciding, the court emphasized the remedial purpose of
the UM statute, explaining that, under the circumstances, requiring a new notice would
advance the legislative goals of informing consumers of their UM coverage rights and
ensuring that consumers will make choices with adequate knowledge. The requirement
would not cause insurers to incur additional costs when merely issuing renewal or
replacement policies that have not changed in any material respect. The court stressed
that Kaneshiro’s substitution for Clyde altered the relationship between Clyde and
Allstate, in that he was no longer insured; and altered the relationship between Allstate
and Kaneshiro, in that she became a named insured. The addition of a new vehicle also
was a material change because it caused the premium to increase by more than $200.
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The court concluded that Allstate had been required to make a new offer of enhanced UM
coverage to Kaneshiro and, because it had failed to do so, UM coverage in an amount
equal to the liability coverage would be implied in the policy as a matter of law.
Other courts likewise have adopted a “materiality” standard to assess whether a
renewal policy is tantamount to a new policy for purposes of applying UM equality of
coverage laws. See Matheny v. Glen Falls Ins. Co., 152 F.3d 348 (5th Cir. 1998)
(applying Louisiana’s “materiality standard” to hold that the addition of a married
couple’s teenage son to an existing policy resulted in a “new policy,” not a mere
“substitute policy”); Johnson v. Farmers Ins. Co., 817 P.2d 841 (Wash. 1991) (en banc)
(applying a materiality standard and holding that the substitution of one spouse for the
other after the parties separated was not a material change absent a change in coverage
levels); State Farm Mutual Ins. Co. v. Arms, 477 A.2d 1060 (Del. 1984) (applying a
materiality standard and holding that the addition of a newly purchased vehicle to a
policy, coupled with a change in coverage limits, was a material change that made the
policy a “new policy” within the meaning of the UM statute). But see Atlanta Casualty
Co. v. Evans, 668 So.2d 287 (Fla. Dist. Ct. App. 1996) (holding that a Florida statute
made clear that an offer of UM coverage did not need to be made based upon a material
intervening change in an existing policy); Allstate Ins. Co. v. Parfrey, 830 P.2d 905, 913
(Colo. 1992) (en banc) (holding that Colorado’s UM statute did not impose a duty on
insurers of “notification and offer . . . [whenever] an insured makes a ‘material change’ in
coverage—whether by modifying liability limits or by adding or substituting vehicles”).
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For many of the same reasons expressed by the courts in Iverson and Kaneshiro,
we conclude that a narrow interpretation of uncodified section 2 to limit equality of
coverage to policies of new business “issued or delivered” on or after October 1, 1992,
will undermine the General Assembly’s purpose in enacting Ins. section 19-509(e)(2).
The change in the law to make equality of liability and UM coverage the rule, and
inequality of coverage the exception, was major and was aimed at providing full recovery
to the highest number of victims of uninsured and underinsured motorists, with the
financial risk and burden being borne by the private sector.
Uncodified section 2 must be read to further the legislative goal to expand the
number of victims eligible for full recovery by means of equal UM benefits. Therefore,
for purposes of the equality of coverage statute, changes to a policy that alter the level of
risk insured, or introduce new decision-makers, so as to remove the policy from being a
mere continuation of coverage, should not be treated differently from “new business”
policies. Accordingly, a policy “issued or delivered” on or after October 1, 1992, as that
phrase is used in uncodified section 2, either is a policy of new business or an existing
policy that through renewals has materially changed so as to “meaningfully alter the risk
relationship between the insurer and the insured.” Iverson, 256 P.3d at 228.
The “materiality” inquiry necessarily will depend upon the unique facts of each
case considered in light of the totality of the circumstances. In some cases, the facts
pertinent to whether changes to a policy are material, so as to effectively create a new
policy for purposes of equality of UM coverage, will be in dispute, requiring a decision
by the trier-of-fact. Here, the facts are not in dispute, and therefore we shall consider
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whether they constitute a material change as a matter of law. We conclude that a
multitude of significant changes in the policy after October 1, 1992, resulted in a
materially altered policy issued and delivered—and not simply renewed—after that date,
requiring Encompass to make Barbara an offer of UM coverage equal to liability
coverage, which it did not do.
The policy of insurance was renewed 22 times after October 1, 1992, and before
the accident. Before October 1, 1992, Edison was the Policyholder, he and Mary and
Bertha were the drivers, and the policy covered three vehicles, one for each driver. From
November 1998, through November 2000, there were three major coverage changes.
Edison’s vehicle was removed (November 1998), so that only two vehicles were covered;
Barbara was added as a Policyholder and a driver (July 1999); and Edison died and
therefore no longer was a driver or Policyholder (August 2000). From the time of
Edison’s death in 2000 until Mary was added as a Policyholder in 2002, Barbara, who
had not had any involvement with the policy before the 1992 Law went into effect, was
the sole Policyholder in a position to make any decisions about the policy. (Edison was
listed as a Policyholder after his death, but obviously could not make decisions).
Moreover, in that same time period, the risks covered changed, as Edison no longer was a
driver, his vehicle was not covered, and the policy covered only two vehicles, not three.
(Indeed, the number of vehicles covered did not return to three until Duckett-Murray was
added to the policy in November 2003.)
The changes in risks covered in that period of time were reflected by premium
changes as well: from November 4, 1999, to November 4, 2001, the premium for motor
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vehicle insurance under the policy decreased by $821. That means that during the time
that Barbara was effectively the sole Policyholder—after Edison died and before Mary
was added as a Policyholder—expanded UM coverage equal to liability coverage might
not have resulted in a premium increase and it would have been Barbara’s sole decision
whether to execute a waiver of equal coverage.15 Thus, the risks covered were
meaningfully altered and the decision about a waiver was in the hands of someone with
no connection to the policy before equality of coverage became the law on October 1,
1992.
There were many other significant changes to the policy in subsequent years.
Indeed, by the time of the policy year in which the accident happened, Mary had died and
Barbara was the sole Policyholder; Duckett-Murray, who was not an insured driver in
1992, was a driver and her vehicle was covered; the policy again insured three vehicles;
and none of those vehicles had been covered under the policy in 1992. Bertha was the
only driver under the 1992 policy who still was a driver under the policy at the time of
the accident. The insuring company had changed (although there is no evidence as to
why), as had the policy number. We are not suggesting that these changes, in and of
15
The waiver form provided by the MIA includes a one-page “Notice” explaining
the benefits of UM coverage and the status of the law and a one-page “Waiver of
Increased Limits of Uninsured Motorist Coverage in Maryland.” The Waiver page is
completed by the insurer to reflect the default benefits available and the premium, as well
as the benefits elected by the consumer and the premium for the lesser benefits. See
“Notice and Waiver of Increased Limits of Uninsured Motorist Coverage,” available at
https://perma.cc/8YGZ-U4J8 (last visited on Nov. 22, 2017).
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themselves, would not have been sufficient to make the policy effectively “new.” We
conclude, however, that the changes in the policy during the 1998 through 2000 period
took it out of the category of a routine renewal policy and triggered application of
equality of coverage under Ins. section 19-509(e)(2). They were major material changes
that altered the risks insured and the decision-makers and would have justified the
insureds’ thinking that the policy was new.16
Because there was no waiver, the Policy must be treated as providing UM
coverage limits equal to the $300,000 liability limits, as a matter of law. Ins. § 19-
510(b)(2). The circuit court erred by granting partial summary judgment to Encompass
on the issue of UM limits under the Policy. We shall vacate the $75,000 judgment
against Encompass. On remand, the court shall enter a revised judgment in favor of
Duckett-Murray and against Encompass for $192,148.15.
JUDGMENT AGAINST APPELLEE
ENCOMPASS VACATED. CASE
REMANDED TO THE CIRCUIT COURT
FOR PRINCE GEORGE’S COUNTY TO
ENTER NEW JUDGMENT AGAINST
ENCOMPASS IN ACCORDANCE WITH
THIS OPINION. COSTS TO BE PAID BY
APPELLEE ENCOMPASS.
16
We note that, in any given case, regardless of whether there has been a material
change in a policy, there is nothing to prohibit the insurer from providing the notice and
opportunity to waive in accordance with Ins. sections 19-509 and 19-510. Indeed, when
because of some changes to a policy there is even the prospect of a dispute, it may be
prudent for the insurer to do so.
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