Jennings v. Government Employees Ins. Co.

• Decision Date: 01 September 1983
• Docket Number: No. 27,27
• Citation: 488 A.2d 166,302 Md. 352
• Parties: , 53 USLW 2446 Frederick L. JENNINGS v. GOVERNMENT EMPLOYEES INSURANCE COMPANY. ,
• Court: Maryland Court of Appeals

Page 352

302 Md. 352

488 A.2d 166, 53 USLW 2446

Frederick L. JENNINGS v. GOVERNMENT EMPLOYEES INSURANCE COMPANY.

No. 27, Sept. Term, 1983.

Court of Appeals of Maryland.

Feb. 22, 1985.

G. Richard Collins, Camp Springs, and George M. Blumenthal, Suitland, for appellant.

Francis J. Ford, Rockville (Ford & O'Neill, Rockville, on the brief), for appellee.

Argued before MURPHY, C.J., SMITH, ELDRIDGE, COLE, DAVIDSON ^*, RODOWSKY and COUCH, JJ.

ELDRIDGE, Judge.

The issue before the Court is the validity of the so-called "household exclusion" clause of an automobile liability insurance policy.

On October 3, 1981, in Prince George's County, Maryland, Frederick L. Jennings was a passenger in an automobile owned by him and operated by his stepson Hong M. Kim, which was involved in an accident. At the time of the accident Mr. Jennings carried a policy of automobile liability insurance issued by Government Employees Insurance Company (GEICO). The policy contained the following exclusionary language:

"EXCLUSIONS:

When Section 1 does not apply:

1. Bodily injury to an insured or any family member of an insured residing in the insured's household is not covered."

At the time of the accident Jennings and Kim resided in the same household.

Jennings brought a negligence action against his stepson Kim in the Circuit Court for Prince George's County, seeking to recover damages for personal injuries sustained in the accident. GEICO received timely notification of the accident and of the suit but refused to provide a defense for Kim. Kim defaulted, and a default judgment was entered in favor of Jennings for one hundred thousand dollars.

Jennings then brought the present declaratory judgment action against GEICO, again in the Circuit Court for Prince George's County, seeking a declaration that GEICO was obligated, by virtue of the insurance policy issued to Jennings, to pay the judgment obtained against Kim. Jennings asserted that the household exclusion in the policy was "void because it is contrary to statute." GEICO answered by denying liability on the basis of the household exclusion, which it claimed was valid. GEICO also sought a declaratory judgment that it was "not obligated to pay any claim or judgment obtained in favor of the Plaintiff ... against ... Kim as a consequence of the accident of October 3, 1981" and that Jennings was "not entitled to any coverage under Section 1 of the policy ... on account of any injuries sustained by him in the accident of October 3, 1981." Both sides filed motions for summary judgment.

Thereafter, the circuit judge signed and filed an order which simply stated "that the Motion for Summary Judgment filed by the Defendant Government Employees Insurance Company be and the same is hereby granted and judgment is hereby entered in favor of the Defendant." Later "[j]udgment ... in favor of the defendant" was entered on the docket.

Jennings took an appeal to the Court of Special Appeals, and, prior to argument in that court, we issued a writ of certiorari.

(1)

Before addressing the merits of the contentions on appeal, it is appropriate to comment upon a procedural point.

In an action properly brought under the Declaratory Judgments Act, the court ordinarily must declare the rights of the parties in light of the issues raised. Maryland Code (1974, 1984 Repl.Vol.), § 3-406 of the Courts and Judicial Proceedings Article; Mauzy v. Hornbeck, 285 Md. 84, 90-91, 400 A.2d 1091 (1979). In Robert T. Foley Co. v. W.S.S.C., 283 Md. 140, 155, 389 A.2d 350 (1978), quoting from Dart Drug Corp. v. Hechinger Co., 272 Md. 15, 29, 320 A.2d 266 (1974), we stated:

" 'While a declaratory decree need not be in any particular form, it must pass upon and adjudicate the issues raised in the proceeding, to the end that the rights of the parties are clearly delineated....' "

Moreover, if a plaintiff seeks a declaratory judgment that a contractual clause or legal provision is invalid, "and the court's conclusion regarding ... validity ... is exactly opposite from the plaintiff's contention, nevertheless the court must, under the plaintiff's prayer for relief, issue a declaratory judgment setting forth the court's conclusion as to validity." East v. Gilchrist, 293 Md. 453, 461 n. 3, 445 A.2d 343 (1982). See also Woodland Beach Ass'n v. Worley, 253 Md. 442, 448, 252 A.2d 827 (1969).

Finally, an order stating only that one party's motion for summary judgment is granted, such as the order filed in the present case, fails to comply with the Declaratory Judgments Act requirement that the court declare the parties' rights in light of the issues presented. Robert T. Foley Co. v. W.S.S.C., supra, 283 Md. at 155, 389 A.2d 350.

Consequently, whether or not the household exclusion provision in the subject insurance policy is valid, the circuit court's order in this declaratory judgment action was improper.

(2)

Turning to the merits, Jennings concedes that he falls within that class of persons barred from recovery under the language of the policy and that, therefore, GEICO is under no obligation to satisfy the outstanding judgment if the policy exclusion is valid. Jennings argues, however, that the exclusion is invalid under the public policy of Maryland embodied in the Transportation Article ¹ and the Insurance Code, ² in that it denies the benefits of compulsory automobile liability insurance to a class of claimants.

GEICO, in defending the validity of the household exclusion clause, relies inter alia on the fact that no Maryland statutory provision expressly forbids the household exclusion in an automobile liability insurance policy.

It is settled that a clause in an insurance policy, which is contrary to "the public policy of this State, as set forth in ... the Insurance Code" or other statute, is invalid and unenforceable. Guardian Life Ins. v. Ins. Comm'r, 293 Md. 629, 643, 446 A.2d 1140 (1982). See, e.g., Ins. Comm'r v. Metropolitan Life, 296 Md. 334, 340 n. 6, 463 A.2d 793 (1983); Nationwide Mutual Ins. v. Webb, 291 Md. 721, 730, 436 A.2d 465 (1981); Pennsylvania Nat'l Mut. v. Gartelman, 288 Md. 151, 156, 416 A.2d 734 (1980); Reese v State Farm Mut. Auto Ins., 285 Md. 548, 552 n. 1, 403 A.2d 1229 (1979); State Farm v. Md. Auto. Ins. Fund, 277 Md. 602, 356 A.2d 560 (1976). In our view, the household exclusion clause is inconsistent with the public policy which the General Assembly adopted in Ch. 73 of the Acts of 1972, providing for compulsory automobile insurance for all Maryland automobiles with specified required coverages.

Prior to 1972, this Court upheld the applicability of household exclusions in automobile insurance policies under some circumstances but not under others. Compare, e.g., Parker v. St. Farm Mut. Auto. Ins., 263 Md. 206, 209-211, 282 A.2d 503 (1971), and Kelsay v. State Farm Insurance, 242 Md. 528, 219 A.2d 830 (1965), with State Farm v. Briscoe, 245 Md. 147, 153, 225 A.2d 270 (1967) ("the probability that collusion ... could prejudice the insurer is so remote that the household exclusion does not operate to relieve the insurer from the obligation to defend"). Beginning in 1972, however, the General Assembly substantially changed the public policy of this State with regard to motor vehicle insurance and reparations for damages caused by motor vehicle accidents. By Ch. 73 of the Acts of 1972, as supplemented by later statutes such as Ch. 562 of the Acts of 1975, primarily codified in §§ 17-101 through 17-110 of the Transportation Article, and §§ 234B, 240AA through 242, 243 through 243L, 539 through 547 of the Insurance Code (Art. 48A), the General Assembly mandated that all Maryland automobiles, plus many other types of motor vehicles, be covered by automobile insurance policies containing certain types of required coverages. ³ Thus each automobile insurance policy must contain coverage for the following: liability insurance 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;" ⁴ property damage liability insurance of up to $10,000; ⁵ medical, hospital, disability and funeral benefits up to $2,500 covering insureds and their families, as well as specified classes of other persons, regardless of fault; ⁶ and uninsured motorist coverage. ⁷ Other coverages must be offered to an insured. ⁸

In the same statutory provisions enacted in 1972 and thereafter, the General Assembly expressly authorized specified exclusions from the required coverages. For example, under Art. 48A, § 240C-1, where an insurer would be authorized to cancel or nonrenew an automobile insurance policy because of the driving record or claims experience of one or more but less than all of the insureds under the policy, the person or persons with the poor record can be excluded from the policy in lieu of cancellation or nonrenewal. Other permissible exclusions from certain coverages are set forth in Art. 48A, §§ 541(c)(2) and 545.

Although this Court has not considered the so-called household exclusion in light of the above-reviewed statutory provisions, we have taken the position that generally we will not insert exclusions from the required coverages beyond those expressly set forth by the Legislature. DeJarnette v. Federal Kemper Ins. Co., 299 Md. 708, 725, 475 A.2d 454 (1984); Pennsylvania Nat'l Mut. v. Gartelman, supra 288 Md. at 156, 159-160, 416 A.2d 734. The policy involved in the Gartelman case excluded from the medical, disability, etc. coverage mandated by Art. 48A, § 539, (i.e., the PIP coverage), an insured who is injured while occupying a motor vehicle owned by a named insured. Like GEICO in the case at bar, the insurer in Gartelman contended "that there is 'no statutory bar or evidence of intent to preclude such an exclusion,' " 288 Md. at 155-156, 416 A.2d 734. This Court, in an opinion by Judge Davidson, held that the exclusion was invalid, saying (id. at 156, 416 A.2d 734):

"Section 545...