Erie Ins. Co. v. Chops

• Decision Date: 01 September 1989
• Docket Number: No. 123,123
• Parties: ERIE INSURANCE COMPANY v. Jonetta CHOPS et al
• Court: Maryland Court of Appeals

Page 79

322 Md. 79

585 A.2d 232

ERIE INSURANCE COMPANY v. Jonetta CHOPS et al.

No. 123 Sept. Term, 1989.

Court of Appeals of Maryland.

Feb. 11, 1991.

William M. Rudd (Anderson, Rudd & Donahue, both on brief), Cumberland, for appellant.

Nicholas J. Monteleone (Hidey, Coyle & Getty, both on brief), Cumberland, for appellees.

Argued before ELDRIDGE, RODOWSKY McAULIFFE and CHASANOW, JJ., HARRY A. COLE ^* and WILLIAM H. ADKINS, ^** Associate Judges of the Court of Appeals (retired), and CHARLES E. ORTH, Jr., Associate Judge of the Court of Appeals (retired), Specially Assigned.

McAULIFFE, Judge.

Jonetta Chops and her husband ("the Chops") suffered damages as a result of an automobile accident which occurred on 8 September 1983, in Morgantown, West Virginia. For purposes of this case, the parties agree that the accident was solely the fault of Carol Iser, who was driving an automobile owned by her and registered in Maryland. At the time of the accident, Iser's vehicle was uninsured, because on 4 July 1983, just over two months before the accident, Erie Insurance Company (Erie) had cancelled Iser's automobile liability insurance policy for nonpayment of premium. Notwithstanding the lack of insurance, the plaintiffs ¹ sued Erie in the Circuit Court for Allegany County, alleging Erie was liable because it had breached a duty imposed upon it by statute to immediately notify the Motor Vehicle Administration (MVA) of the cancellation of Iser's automobile insurance policy. The plaintiffs argued that Erie's violation of the statute made it liable just as if the insurance policy had not been cancelled or, in the alternative, that Erie's violation of the statute was evidence of negligence which was a proximate cause of the plaintiffs' loss. Following a trial before the court, essentially on stipulated facts, the plaintiffs were granted judgment against Erie ² in the amount of $22,416 and costs. Erie appealed to the Court of Special Appeals, and we issued a writ of certiorari on our own motion before the case was considered by the intermediate appellate court.

The question before us is whether Erie was properly found liable, either under a theory of negligence, or of strict liability on a private cause of action created by statute. Rather clearly, we think, the trial judge's determination that Erie failed to notify the MVA of the cancellation of Iser's insurance within the time required by the statute is supported by the evidence. Section 17-106(b) of the Transportation Article, Maryland Code (1977, 1987 Repl.Vol.) requires immediate notification:

After July 1, 1983, each insurer or other provider of required security immediately shall notify the Administration of only those terminations or other lapses that are final and occur within the first 6 months of any required security issued to or provided for a resident of this State.

Iser obtained the required insurance from Erie on 6 January 1983, and made a partial payment of the premium. In April, Erie sent to Iser a notice of proposed cancellation because of Iser's failure to make a required installment payment of the premium. Erie then received an additional partial payment from Iser, and extended the coverage to 4 July 1983. At the same time, Erie notified Iser that if the additional payment due was not received by that time, her insurance would be cancelled effective 4 July 1983. No additional payments were made, and the insurance was cancelled in accordance with the notice. Erie first notified the MVA of the cancellation by letter mailed 14 August 1983, 40 days after the cancellation. ³ The trial judge did not err in finding that this notice failed to satisfy the requirement of the statute that the insurer "immediately shall notify" the MVA of terminations or lapses which are final. ⁴

In an appropriate case, the violation of a statutory regulation is evidence of negligence, and that negligence will be actionable if it is a proximate cause of injury or damage to the plaintiff. Dean v. Redmiles, 280 Md. 137, 151-53, 374 A.2d 329 (1977); Ford v. Bradford, 213 Md. 534, 541, 132 A.2d 488 (1957). The Court of Special Appeals has noted that the breach of a statutory duty may be considered as some evidence of negligence when the plaintiff is a member of the class of persons the statute was designed to protect and the injury was of the type the statute was designed to prevent. Pahanish v. Western Trails, Inc., 69 Md.App. 342, 362, 517 A.2d 1122 (1986).

Essential to the proof of any cause of action for negligence is the establishment of a legally cognizable duty owed by the defendant to the plaintiff, or to a class of persons to which the plaintiff is a member. Jacques v. First Nat'l Bank, 307 Md. 527, 531-34, 515 A.2d 756 (1986). We pointed out in Jacques that a "tort duty" does not necessarily coexist with a moral duty, or with a duty imposed by contract, or even with a duty imposed by statute. Id. at 534, 515 A.2d 756.

Plaintiffs do not contend that Erie's failure to immediately notify the MVA proximately caused the accident. Rather, they contend that Erie's omission caused Iser to be uninsured at the time of the accident. They reason that if Erie had given notice to the MVA, the MVA would have notified Iser that the registration for her motor vehicle was suspended, and Iser would probably have obtained the required insurance or stopped operating the unregistered and uninsured motor vehicle. ⁵

This theory of liability immediately raises questions of causation, and one of the contentions pressed by Erie on appeal is that the plaintiffs' evidence was insufficient to support a finding that Erie's delay in giving notice to the MVA was a proximate cause of Iser's operation of an uninsured motor vehicle on the date of the accident. ⁶ Erie also contends that plaintiffs' failure to offer any evidence of Iser's financial ability to pay the damages is fatal to the plaintiffs' cause of action, because the absence of insurance coverage would be of no consequence if plaintiffs were able to collect their judgment from Iser without difficulty.

We do not reach these issues of causation because we hold that the duty imposed upon Erie by the statute was not a "tort duty"; that is, the statute did not create a legally cognizable duty running from Erie to all persons who might thereafter suffer economic damage by reason of involvement in an accident with an uninsured motorist upon Erie's failure to give immediate notice to the MVA of the termination of coverage. We further hold that the legislature did not intend to create a new cause of action imposing strict liability on an insurer who failed to give immediate notice of cancellation to the MVA.

In Jacques, we discussed the factors to be considered in determining whether a particular duty should be recognized as one supporting a claim for damages for its breach. We said:

In determining whether a tort duty should be recognized in a particular context, two major considerations are: the nature of the harm likely to result from a failure to exercise due care, and the relationship that exists between the parties. Where the failure to exercise due care creates a risk of economic loss only, courts have generally required an intimate nexus between the parties as a condition to the imposition of tort liability. This intimate nexus is satisfied by contractual privity or its equivalent. By contrast, where the risk created is one of personal injury, no such direct relationship need be shown, and the principal determinant of duty becomes foreseeability. (Footnotes and citations omitted.)

307 Md. at 534-35, 515 A.2d 756. See also Village of Cross Keys v. U.S. Gypsum, 315 Md. 741, 751-54, 556 A.2d 1126 (1989); Council of Co-Owners v. Whiting-Turner, 308 Md. 18, 32-35, 517 A.2d 336 (1986); Wilmington Trust Co. v. Clark, 289 Md. 313, 327-28, 424 A.2d 744 (1981).

As we have noted, the nature of the harm that the legislature sought to protect against by the enactment of § 17-106(b) and related statutes was economic. Unlike the statutes governing the operation of vehicles on the highways, which have as their principal focus the safety of other motorists and pedestrians and the prevention of accidents, § 17-106(b) and related required security statutes seek to insure that there will be at least minimum limits of financial responsibility in the event an accident does occur. In short, the principal risk against which the statute is directed is the risk of economic loss, and not the risk of personal injury. Thus, in the absence of some indication of a contrary intention on the part of the legislature, a tort duty ordinarily will be recognized only where there is "an intimate nexus between the parties." Jacques, 307 Md. at 534, 515 A.2d 756. Here, no intimate nexus existed between Erie and the Chops. There was neither contractual privity nor its equivalent. The Chops were simply members of the general public who could have become involved in an accident with Iser.

Certainly, as the plaintiffs point out, recognition of a tort duty under these circumstances might serve as an additional inducement to insurers to give immediate notice of cancellation to the MVA. But that rationale would apply to most duties, and in the absence of other circumstances indicating that a tort duty should be recognized, it remains for the legislature to determine whether such a sanction is required. ⁷ ]

The plaintiffs argue that in the past the legislature specifically mandated the sanction of strict liability against an insurer for a violation of the notice provision which appeared in the insurance code. As a result, they argue, this Court should continue to recognize this legislative intent, notwithstanding the apparently inadvertent failure of the legislature to include the sanction in the Transportation Article. The plaintiffs incorrectly interpret the relevant statutes. Although the legislature has mandated insurance coverage in several instances as a sanction...