Agency Ins. Co v. State Farm Mut. Auto. Ins. Co

• Decision Date: 08 July 2010
• Docket Number: 2009.,No. 595,595
• Citation: 998 A.2d 936,193 Md.App. 666
• Parties: AGENCY INSURANCE CO.v.STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., et al.
• Court: Court of Special Appeals of Maryland

193 Md.App. 666

998 A.2d 936

AGENCY INSURANCE CO.v.STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., et al.

No. 595, Sept. Term, 2009.

Court of Special Appeals of Maryland.

July 8, 2010.

COPYRIGHT MATERIAL OMITTED

Ryan E. Naugle (Winn C. Friddell, on the brief) Towson, MD, for appellant.

Michael J. Budow & Thomas P. Ryan (Richard E. Schimel, Howard R. Meinster, Budow and Noble PC, on the brief) Bethesda, MD, for appellee.

Panel: DAVIS, WOODWARD and IRMA S. RAKER (Retired, Specially Assigned), JJ.

WOODWARD, J.

On December 10, 2007, Agency Insurance Company, appellant, sought a declaratory judgment in the Circuit Court for Baltimore County against State Farm Insurance Company (“State Farm”) and Allstate Insurance Company (“Allstate”), appellees, in order to determine the respective contractual responsibilities of the parties to provide insurance coverage arising from an automobile accident. After a one day bench trial, the trial court ordered on April 28, 2009, that neither State Farm nor Allstate was obligated to defend or indemnify the negligent driver. In this appeal, appellant presents two questions for review, which we have rephrased:

I. Did the trial court err by determining that State Farm was not obligated under its policy to defend or indemnify the driver of an insured vehicle who was not the named insured, a relative of the named insured, or permitted to drive the vehicle?

II. Did the trial court err by determining that Allstate was not contractually obligated to defend or indemnify its insured while he was operating a non-owned vehicle?

For the reasons stated herein, we shall affirm the judgment of the circuit court.

BACKGROUND

This appeal arises from a fatal automobile accident that occurred in Frederick County, Maryland. In December of 2005 Barbara Brooks owned a 1999 Ford Escort (the “Escort” or the “car”) that was insured by State Farm. On December 30, 2005, Aaron Zufall was driving the Escort with Brooks' minor daughter, Emily Pugh, and Tom Mullinex as passengers. While traveling on State Route 75, the Escort struck a 1995 Honda Civic driven by Lauren DeLodovico. Both Pugh and DeLodovico were killed as a result of the accident.

Under State Farm's policy covering the Escort, Brooks was listed as a named insured and Pugh was covered as a resident relative. Zufall was an insured under an Allstate policy that was issued to his parents, Harry and Robin Zufall. DeLodovico was an insured under a policy with appellant, which contained a $50,000.00 uninsured motorist provision.

On December 10, 2007, appellant filed a Complaint for Declaratory Judgment, which requested that the court “[d]etermine and adjudicate the rights and liability of the parties with respect to the policies involved.” A one-day trial was held on April 2, 2009. After certain stipulations were placed on the record, Brooks was the only witness to testify.

Brooks testified that she purchased, maintained, and insured the Escort. According to Brooks, the car was titled and registered in her name only. Brooks stated that she placed certain restrictions on Pugh's use of the Escort. Brooks instructed Pugh, who was a senior at Frederick High School at the time of the accident, that she was only permitted to drive the car to school, work, and when she was volunteering at Frederick Memorial Hospital. If Pugh wanted to use the car for any other purpose, Brooks required her to ask permission, state where she was going, and call when she arrived at her destination. Although Brooks testified that she told Pugh numerous times that no one else was to drive the Escort, Brooks admitted that she previously had granted Pugh's request to allow Zufall, who was then dating Pugh, to drive the car so that Pugh and Zufall could go to Medieval Times in Anne Arundel County. According to Brooks, she was unaware of any other occasion that Zufall drove the Escort.

Brooks then recounted that she permitted Pugh to drive to Zufall's house on December 30, 2005, and spend the night there. Brooks understood that Zufall and Pugh planned to pick up some other friends and travel to Burkittsville. Brooks testified that, after confirming that Zufall had an operational car, she instructed Pugh that Pugh was only allowed to drive the Escort to Zufall's house and back. The car was to remain parked at the Zufall residence once Pugh was there, and she was not to do any additional driving that evening. Brooks never told Zufall of these restrictions. Brooks also provided a statement to State Farm that she never gave Zufall permission to drive the Escort on the evening of December 30, 2005.

The depositions of Zufall and Mullinex were also introduced into evidence. Both stated that the plan for the evening of December 30, 2005, was to pick up Mullinex's cousin in Union Bridge and then drive to Burkittsville. Zufall testified that Pugh volunteered the use of the Escort and gave the keys to him. Mullinex, however, claimed that Pugh handed over the keys after Zufall stated his desire to drive the car. Zufall maintained that he was unaware that Pugh was only permitted to drive the Escort to his home that evening and asserted that Pugh never communicated any restrictions that Brooks placed on the car's use. Zufall stated that he had driven the Escort on a number of previous occasions and that Pugh had given him permission to drive the car. Both Zufall and Mullinex stated that they did not have any conversation with Brooks regarding the use of the Escort that evening.

On April 28, 2009, the trial court ruled that neither State Farm nor Allstate was required to defend or indemnify Zufall, because he did not have permission to drive the Escort at the time of the December 30, 2005 accident. A timely notice of appeal followed.

DISCUSSION

Standard of Review

Our review of a trial court's declaratory judgment regarding the scope of coverage under an automobile insurance policy is governed by Maryland Rule 8-131(c). Mundey v. Erie Ins. Grp., 167 Md.App. 444, 450-51, 893 A.2d 645 (2006) aff'd, 396 Md. 656, 914 A.2d 1167 (2007). Rule 8-131(c) provides:

(c) Action tried without a jury. When an action has been tried without a jury, the appellate court will review the case on both the law and the evidence. It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses.

Under the clearly erroneous standard, we do not disturb the factual findings of the trial court if they are supported by competent and material evidence. Thomas v. Capital Med. Mgmt. Assocs., LLC, 189 Md.App. 439, 453, 985 A.2d 51 (2009). This Court, however, does not defer to a trial court's conclusions on issues of law. Karsenty v. Schoukroun, 406 Md. 469, 502, 959 A.2d 1147 (2008). “[U]nder Maryland law, an insurance policy is a contract.” Anderson v. Gen. Cas. Ins. Co., 402 Md. 236, 246, 935 A.2d 746 (2007). As the interpretation of a contract is ordinarily a legal question, we review the judgment of the trial court de novo.

Mundey, 167 Md.App. at 451, 893 A.2d 645.

I.

Did the trial court err by determining that State Farm was not obligated under its policy to defend or indemnify the driver of an insured vehicle who was not the named insured, a relative of the named insured, or permitted to drive the vehicle?

Because an insurance policy is a contract, the usual principles of contract interpretation apply, “which require that a contract be interpreted as a whole, in accordance with the objective law of contracts, to determine its character and purpose.” Anderson, 402 Md. at 246, 935 A.2d 746. The Court of Appeals has stated:

“An insurance policy is a contract between the parties, the benefits and obligations of which are defined by the terms of the policy.” Thus, “[w]e look first to the contract language employed by the parties to determine the scope and limitations of the insurance coverage.” When interpreting the language of a contract, “we accord a word its usual, ordinary and accepted meaning unless there is evidence that the parties intended to employ it in a special or technical sense.”

Clendenin Bros., Inc. v. U.S. Fire Ins. Co., 390 Md. 449, 458-59, 889 A.2d 387 (2006) (citations omitted) (alterations in original). “Maryland does not follow the rule that insurance policies should, as a matter of course, be construed against the insurer.” Dutta v. State Farm Ins. Co., 363 Md. 540, 556, 769 A.2d 948 (2001).

The case sub judice regarding State Farm requires the interpretation of the “omnibus clause” of State Farm's policy. An omnibus clause extends coverage under an automobile insurance policy to individuals other than the named insured. Salamon v. Progressive Classic Ins. Co., 379 Md. 301, 315, 841 A.2d 858 (2004); Andrew Janquitto, Maryland Motor Vehicle Insurance § 7.7, at 198 (2d 1999). “The purpose of an omnibus clause is to protect the named insured, the persons within the omnibus clause, and the public generally and its members injured by the negligent operation of the insured automobile on a public highway.” 12 Couch on Insurance (“Couch on Insurance”) § 45:293 at 617-18 (2d 1981). Specifically, the omnibus clause serves three objectives:

(1) It gives the injured person a right to proceed against the insurer in cases in which the insurer would not otherwise be liable because the automobile was not driven by the original insured, his employee, or under other circumstances imposing liability upon the original insured for the operation of the automobile.

(2) It gives the additional insured the protection of automobile liability insurance without his having procured such a policy, for an omnibus clause creates liability insurance in favor of others than the named insured as meet the descriptions outlined in the respective policies, to the same degree and with the same effect as though such a person's name had been specifically stated in the policy as an insured, or as though the insured had been

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