Aetna Cas. and Sur. Co. v. Hartford Acc. & Indem. Co.

• Decision Date: 01 September 1987
• Docket Number: No. 859,859
• Parties: The AETNA CASUALTY AND SURETY COMPANY v. HARTFORD ACCIDENT & INDEMNITY COMPANY. HARTFORD ACCIDENT & INDEMNITY COMPANY v. SCHOENFELD INSURANCE ASSOCIATES, INC. ,
• Court: Court of Special Appeals of Maryland

Page 539

74 Md.App. 539

539 A.2d 239

The AETNA CASUALTY AND SURETY COMPANY v. HARTFORD ACCIDENT & INDEMNITY COMPANY.

HARTFORD ACCIDENT & INDEMNITY COMPANY v. SCHOENFELD INSURANCE ASSOCIATES, INC.

No. 859, Sept. Term, 1987.

Court of Special Appeals of Maryland.

April 6, 1988.

William V. Cerbone, Jr., Silver Spring (S. Kennon Scott, David C. Barclay and Hartman & Crain, Annapolis, on the brief), for appellant, Aetna.

Frank J. Vecella (Patricia F. O'Connor, Constance D. Burton, and Anderson, Coe & King, Baltimore, on the brief), for appellant/appellee, Hartford.

Thomas M. Trezise (Gary M. Burt and Semmes, Bowen & Semmes, Baltimore, on the brief), for appellee, Schoenfeld.

Argued Before WEANT, ALPERT and POLLITT, JJ.

POLLITT, Judge.

This case is the aftermath of a tragic accident occurring on 21 August 1979 in Ocean City, Maryland, in which Philip Rubin was fatally injured by an automobile driven by Steven Marc Cohen and owned by Sidney Herman Cohen. The Estate of Philip Rubin and his surviving parents sued the Cohens and obtained judgments against them in the amount of $702,000. Those judgments were affirmed by this Court in Cohen v. Rubin, 55 Md.App. 83, 460 A.2d 1046, cert. denied, 297 Md. 311 (1983). At the time of that accident, the vehicle involved was insured under a personal automobile policy issued by The Aetna Casualty and Surety Company (Aetna) to Sidney Cohen, which provided liability coverage of $300,000. Aetna defended the case on behalf of the Cohens and, after exhausting all appeals, paid the Rubins its policy limits of $300,000 plus accrued interest of $50,958.58.

On 31 January 1985, the Cohens filed suit against Aetna, alleging Aetna's bad faith in refusing to settle that case for the policy limits when it had an opportunity to do so, thereby causing the Cohens to become individually liable for the excess judgment of $402,000.

Aetna filed a third party claim against Hartford Accident & Indemnity Company (Hartford) and Schoenfeld Insurance Associates, Inc. (Schoenfeld) for contribution and/or indemnification in the event that the Cohens prevailed in their bad faith claim against Aetna. In that third party claim, Aetna alleged that two policies of insurance issued by Hartford to the Cohens provided concurrent coverage for the claim of the Rubins. Both of the Hartford policies and the Aetna policy were issued to the Cohens through Schoenfeld, an independent agency alleged by Aetna to be the agent of both Aetna and Hartford. Aetna alleged that the Cohens notified Schoenfeld of the Rubins' claim shortly after the accident and that Schoenfeld failed to notify Hartford, thereby breaching Schoenfeld's duty owed Aetna. Hartford filed a cross-claim against Schoenfeld, asserting that if coverage existed under its policies, which it denied, then Schoenfeld had a duty to notify Hartford and failed to do so.

The case was tried before a Baltimore City jury in July of 1986. The jury found in favor of the Cohens against Aetna and awarded damages of $290,471. It found in favor of Hartford and Schoenfeld on the third party claims filed against them by Aetna. Pursuant to instructions from the court, it did not reach the cross-claim of Hartford against Schoenfeld. Subsequently, the court entered judgment for Schoenfeld on the cross-claim.

The Cohens appealed the adequacy of the verdict. Aetna appealed from the judgment in favor of the Cohens and from the judgments in favor of Hartford and Schoenfeld. Hartford cross-appealed from the failure of the trial court to grant its motion for judgment and from the judgment for Schoenfeld on Hartford's cross-claim. The Cohens and Aetna settled. The Cohens dismissed their appeal. Aetna dismissed its appeal from the judgment for the Cohens, and dismissed its appeal from the judgment in favor of Schoenfeld. Remaining for our consideration are Aetna's appeal from the judgment for Hartford; Hartford's appeal from the failure of the trial court to grant its motion for judgment; and Hartford's appeal of the judgment for Schoenfeld on Hartford's crossclaim.

The Appeal By Aetna

In its appeal, Aetna presents two issues:

1. Whether the trial court erred in admitting evidence regarding the interpretation and meaning of the terms of the Hartford policy and Hartford's intent in issuing the policy; and

2. Whether the court erred in its instructions to the jury regarding the principles to be applied in determining coverage under the Hartford insurance policy.

I

In its third party claim against Hartford, Aetna alleged coverage under two policies. The first was policy number 30AB300297, issued by Hartford to Majestic Distilling Co., Inc., a business owned by Sidney Cohen, which policy had been listed on the police report of the fatal accident as providing coverage for the vehicle involved. That policy expressly excluded Steven Cohen from its coverage and Aetna abandoned any claim under that policy. The second policy, number 30GE301039, was issued by Hartford to "Sidney H. Cohen & Consumer Rent-A-Car t/a Wholesale Heaven." Aetna contends that the trial court erred in admitting extrinsic evidence to explain and determine the terms of that policy. It posits that "the parole [sic] evidence rule precluded the admission of extrinsic evidence ... where the terms of the policy were clear and unambiguous on its face." It contends that the policy unambiguously provided Cohen with personal liability coverage as well as business coverage. Hartford, with equal vigor, contends the policy unambiguously provided coverage solely for Cohen's garage business, known as "Wholesale Heaven." The fact that each of them asserts the policy is unambiguous strongly suggests that the policy may well be ambiguous.

While it is well established that the parol evidence rule precludes the admissibility of extrinsic evidence to vary, alter or contradict a writing which is complete, unambiguous and valid in the absence of fraud, accident or mutual mistake, Foreman v. Melrod, 257 Md. 435, 263 A.2d 559 (1970), the rule is inapplicable to the facts of the case before us.

Where ambiguities exist as to the meaning of words or terms in the writing or to the application of them under the surrounding circumstances, extrinsic evidence is admissible for the purpose of clarifying the ambiguities. Admiral Builders v. South River Landing, 66 Md.App. 124, 128, 502 A.2d 1096, 1098 (1986). Over Aetna's objection, the trial court permitted oral testimony of Hartford's claims manager regarding the extent of coverage under the "GE" Garage Policy. The court also permitted the oral testimony of Schoenfeld regarding Sidney Cohen's intent in obtaining the Hartford policy.

The trial court's initial determination as to the need for extrinsic evidence is reviewed under the clearly erroneous standard of Rule 1086. Admiral Builders, supra.

[A] trial court's conclusion that ambiguity exists in a writing is an exercise in judgment which should be overturned only if no reasonable suggestion of ambiguity can be entertained.

Whether the court was "clearly erroneous" is an inquiry we answer not by re-examining the writing to see if we think it ambiguous; we review merely to determine whether the trial court's decision is based on evidence legally sufficient to support such a finding. [emphasis in original]

Admiral Builders, supra, 66 Md.App. at 128-29, 502 A.2d at 1099.

Furthermore, "in the initial determination of ambiguity, vel non, extrinsic evidence need not be excluded from the trial court's consideration (so long as that evidence does not vary, alter, or contradict the plain meaning of the writing) because, until the evidence is heard, ambiguity or the lack thereof cannot be fully appreciated." Admiral Builders, supra, 66 Md.App. at 129, 502 A.2d at 1099. "In the event of an ambiguity in the terms of a contract, the courts must necessarily look to the intention of the parties at the time of the making of the contract." Hardy v. Brookhart, 259 Md. 317, 326-27, 270 A.2d 119, 125 (1970).

Applying the test set forth in Admiral Builders, supra, we find there was a "reasonable suggestion of ambiguity" with regard to the insurance policy.

First, declarations in Hartford's policy state that it is a "Garage Policy" identified as No. 30 GE 301039. The named insured is Sidney Cohen & Consumer Rent-a-Car, Trading As Wholesale Heaven, 814 Ritchie Highway, Glen Burnie, Maryland. It designates the named insured's business as a "Non-Dealer," organized in the form of an individually owned business as opposed to a partnership or corporation.

Appellant argues that since the "Individual" designation is marked with an "X," the policy is thus an individual policy to Mr. Cohen, and as such, makes the policy unambiguous on its face, thus precluding the admission of extrinsic evidence. We are not persuaded.

Emphasis should not be placed on a particular provision of an insurance policy, rather, the policy should be read as a whole to determine its true import. Simkins Ind., Inc. v. Lexington Ins., 42 Md.App. 396, 401 A.2d 181, cert. denied, 285 Md. 730 (1979). In the policy before us, Aetna focuses on the particular word "Individual" without due consideration to the entire provision and the entire declaration. As stated above, "Individual" pertained to the type of business organization and not the type of policy. The policy stated: "Form of Named Insured's Business: } Individual [ ] Partnership [ ] Corporation [ ] Other." Furthermore, the entire "Declarations" portion of the policy indicates that it was a business policy and not an individual policy. It expressly states that it is a "Garage Policy," designating a trade name as an insured and designating the insured's business as a "Non-Dealer."

Furthermore, Part IV--Liability Insurance section of the original policy reads as follows:

A. WE WILL PAY.

1. We will pay all sums the insured legally must pay as damages because of bodily injury or property damage to which this insurance applies caused...