Buckley v. Brethren Mut. Ins. Co.

• Decision Date: 26 September 2012
• Docket Number: No. 1855,Sept. Term, 2010.,1855
• Parties: Ember Louise BUCKLEY v. The BRETHREN MUTUAL INSURANCE COMPANY.
• Court: Court of Special Appeals of Maryland

207 Md.App. 574

53 A.3d 456

Ember Louise BUCKLEY

v.The BRETHREN MUTUAL INSURANCE COMPANY.

No. 1855, Sept. Term, 2010.

Court of Special Appeals of Maryland.

Sept. 26, 2012.

John B. Bratt (Miller & Zois, LLC, on the brief) Glen Burnie, MD, for appellant.

Kathleen M. McDonald (Kerr McDonald, LLP, on the brief) Baltimore, MD, for appellee.

Panel: EYLER, DEBORAH S., WOODWARD and KEHOE, JJ.

KEHOE, J.

This case involves a dispute between Ms. Ember L. Buckley, appellant, and her automobile insurance company, The Brethren Mutual Insurance Company (“Brethren”), appellee. After suffering injuries as the passenger in a vehicle involved in an accident, Buckley recovered a settlement against GEICO, the driver's insurance company. Buckley then filed a breach of contract claim against Brethren in the Circuit Court for Baltimore County after Brethren refused to issue a payment to Buckley under the uninsured/underinsured motorist (“UM”) provision of her insurance policy. Buckley appeals from an entry of summary judgment entered in favor of Brethren. There are two issues before us in this appeal:

I. Whether, in the context of the UM settlement procedures set out in Md.Code Ann. Ins. § 19–511, the circuit court erred in ruling that Buckley's claim for UM benefits against Brethren was barred by a general release executed in favor of GEICO that released GEICO and “all other persons, firms or corporations.”

II. Whether Brethren's response to the settlement offer executed between Buckley and GEICO constituted a consent to the settlement.

With regard to the first issue, we conclude that the circuit court erred in ruling that Buckley's claim for UM benefits was barred by the release that she executed with GEICO. As for the second issue concerning Brethren's consent, it is our view that further fact finding is needed to resolve this matter. We vacate the order granting summary judgment and remand this case to the circuit court. On remand, the court must determine if Brethren's response to GEICO's settlement offer with Buckley constituted a consent to the settlement.¹

Factual and Procedural Background

Buckley was involved in a car accident as a passenger in a vehicle on March 18, 2007. The accident was caused by Mr. Harvey L. Betts, the owner and operator of the vehicle in which Buckley was a passenger.

Betts was covered by a liability insurance policy issued by GEICO, with policy limits of $100,000. On Betts's behalf, GEICO offered to settle Buckley's injury claim by paying her the policy limit of $100,000. In return, GEICO requested that Buckley execute “a full and final Release of any and all claims and liens.”

Buckley maintained an automobile insurance policy with Brethren. The Brethren policy provided Buckley with UM benefits in the amount of $300,000.

Buckley's counsel at the time ² sent two letters to Brethren to obtain Brethren's consent to accept the settlement offer issued by GEICO. The letters were received by Ms. Karen Kidwell, Brethren's adjuster assigned to Buckley's bodily injury claim. In her answers to interrogatories, Ms. Kidwell explained that she understood that “Harvey Betts' automobile policy had insufficient limits to pay damages for Plaintiff's injuries” and that Buckley's “medical bills incurred were more than Mr. Betts' insurance limits.” On October 30, 2007, Ms. Kidwell sent Buckley's counsel a letter confirming that “[w]e will waive any subrogation action against Mr. Betts.”

After receiving this letter from Brethren, Buckley accepted the settlement offer that GEICO extended on behalf of Betts. In exchange for payment of $100,000, Buckley executed a broad release form with GEICO, provided by GEICO. The relevant language in the release states:

I/we, Ember Buckley ... for and in consideration of a draft for the sum of one hundred thousand dollars ($100,000.00) ... do ... hereby remise, release, and forever discharge Harvey Betts, Releasee(s), successors and assigns, and/or his, her or their associates, heirs, executors and administrators, and all other persons, firms or corporations of and from any and every claim, demand, right or cause of action, of whatever kind of nature, on account of or in any way growing out of any and all personal injuries and consequences thereof ... resulting or to result from an accident that occurred on or about the eighteenth day of March, 2007, at or near Saw Mill Court Baldwin, MD.

(Bold in original; italics and underline added).

After executing the release, Buckley requested payment from Brethren to cover her remaining medical expenses under the UM provision of her insurance policy with Brethren. Brethren refused to pay.

On August 19, 2008, Buckley filed a breach of contract claim in the Circuit Court for Baltimore County, demanding judgment against Brethren for the policy limits of $300,000.³ Brethren's original answer to the complaint cited, inter alia, failure to state a claim, contributory negligence and assumption of the risk as possible defenses. After receiving document production from Buckley, including a copy of the release, Brethren filed an amended answer specifically asserting that Buckley's claim was barred by the release that she executed with GEICO.

Both parties filed motions for summary judgment concerning the release and its effect on Buckley's claim against Brethren. Brethren argued that “the language of the Release, which is clear on its face, released all claims Buckley may have had against anyone in the world,” therefore summary judgment in its favor was proper. Buckley argued that “the Release ... only releases Harvey Betts and not [Brethren] from liability in this case.” Buckley also argued that this interpretation is logical because she acted in accordance with Md. Code Ann. Ins. § 19–511 (1997, 2011 Repl.Vol.),which sets out the rules for collecting a UM payment from insurance carriers like Brethren.

The circuit court conducted a hearing on the parties' motions for summary judgment on July 21, 2009. At the hearing, Buckley raised an additional argument that Brethren was equitably estopped from asserting the release as a defense because Buckley executed the release in reliance on Brethren's consent to her doing so.

On August 2, 2010, the circuit court entered summary judgment in favor of Brethren. The court concluded that the release that Buckley executed with GEICO released Betts, GEICO, “and all other persons, firms or corporations ... of whatever kind of nature ...” The circuit court found that “Pemrock, Inc. v. Essco, Co., 252 Md. 374, 249 A.2d 711 (1969) stands for the proposition that when an insured party signs an integrated, broad-form release, releasing not only the settling tortfeasor/releasee (and his or her insurer) but also ‘all other persons, firms [and] corporations,’ the prophylactic language in the written release must be given dispositive significance.” Ms. Buckley filed a motion for reconsideration, which was denied.

While the instant litigation was pending before the circuit court, Buckley filed a complaint against Brethren with the Maryland Insurance Administration (“MIA”) pursuant to § 27–1001 of the Insurance Article. The issue before the MIA was “whether Brethren acted with an absence of good faith in refusing to pay Plaintiff's [UM] claim.” ⁴

The MIA concluded that Brethren acted in the absence of good faith. It began its discussion by stating the following:

Undoubtedly, there is a fine line between a responsible insurer legitimately defending a claim and an insurer whose sole aim is to avoid the payment of a valid claim. The record of the instant case demonstrates that Brethren's goal was to avoid paying the policy limit of $200,000.00 on a claim that clearly warrants the payment of policy limits as the claimant had serious injuries, legitimate medical expenses of over $200,000.00, ongoing medical issues, as well as pain and suffering.

An insurer fails to make an informed decision based on honesty and diligence when it denies payment of a claim for reasons that are contrary to the clear dictates of Maryland law.

The MIA proceeded to discuss the parties' contentions issue by issue. Most relevant to the proceedings before us, the MIA considered Brethren's argument that the release must be read to release Brethren from its obligation to pay money under the UM policy with Buckley. The MIA concluded that “[t]his position is inconsistent with the plain language of § 19–511(e).” The MIA reasoned:

Here, the release was executed within th[e] clear statutory framework [of § 19–511], which defines the permissible scope of a release when UM insurance is involved. Brethren cites a number of cases to support its position that the release must be read to release Brethren. However, none of the cases cited involve releases executed pursuant to the statutory requirements of § 19–511 and they are, therefore, inapposite.

Section 19–511 governs UM settlement procedures and must be read within the context of Maryland's strong public policy favoring compensation of those injured by UM drivers. Forbes v. Harleysville Mut. Ins. Co., 322 Md. 689, 697 (1991). Section 19–511(e) dictates that a release in a UM case cannot prejudice any claim that the injured person may have against the UM insurer. Therefore, the release in the instant case, like [a] provision of an insurance policy, must be viewed as having been drafted and signed consistently with the enabling statute. See, Parsons v. Erie Ins. Group, 569 F.Supp. 572, 579 (D.Md.1983) (provision of policy that conflicts with requirements of UM statute is invalid); Forbes v. Harleysville Mut. Ins. Co., 322 Md. 689, 698 (1991) (policy limitations on coverage or exclusions inconsistent with purpose of UM statutory provisions, are unenforceable); Pennsylvania Nat. Mut. Cas. In. Co. v. Gartelman, 288 Md. 151, 156 (1980).

In fact, Brethren concedes that the release was executed “[a]s per the terms of § 19–511(e).” The record clearly indicates that all parties, including Brethren, intended that...