Erie Insurance Exchange v. Heffernan, Misc. No. 2, September Term, 2006 (Md. App. 4/10/2007)

CourtCourt of Special Appeals of Maryland
Docket NumberMisc. No. 2, September Term, 2006.
Decision Date10 April 2007

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Misc. No. 2, September Term, 2006.
Court of Appeals of Maryland.
April 10, 2007.

United States District Court for the District of Maryland Civil No. CCB-05-1888.

Bell, C.J., Raker, Wilner*, Cathell, Harrell, Battaglia, Greene, JJ.

Opinion by GREENE, J.

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We have before us two questions of law certified by the United States District Court for the District of Maryland pursuant to the Maryland Uniform Certification of Questions of Law Act (Maryland Code, §§ 12-601 through 12-613 of the Cts. & Jud. Proc. Article). The questions arise from an action by Edmund and Diane Heffernan ("the Heffernans"), Maryland residents, against Erie Insurance Exchange ("Erie"). The Heffernans seek damages pursuant to the uninsured/underinsured motorist coverage provisions in two insurance policies issued by Erie. The auto policy provides uninsured/underinsured motorists benefits in the amount of $300,000 per person/$300,000 per accident. A second policy, the personal catastrophe policy, provides an additional $1,000,000 in uninsured/underinsured motorists benefits. The parties were unable to come to an agreement on issues of liability and damages. As a result, the Heffernans filed suit against Erie in the Circuit Court for Baltimore City. Erie removed the case to the United States District Court for the District of Maryland.

The questions certified to us are:

1. In a case involving a claim for benefits pursuant to the uninsured/underinsured provisions of an auto mobile insurance contract executed in Maryland, where the car accident occurred in Delaware, should Maryland or Delaware law be applied to determine what the claimants would be "entitled to recover" because of the accident?

2. If Delaware law governs the tort issues of this case under lex loci delicti, would Maryland's public policy exception to that doctrine nonetheless require application of:

a. Maryland's statutory cap on non-economic damages, Md. Code Ann., Cts. & Jud. Proc. § 11-108, where the insured and the insurer both reside in Maryland, the covered automobiles are garaged in Maryland, and the contract was executed and administered in Maryland?

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b. Maryland's contributory negligence principles?

In answer to the first question, the substantive law of Delaware applies to determine what the claimants would be "entitled to recover" because of the accident. In answer to the second question, Maryland's public policy exception to the doctrine of lex loci delicti does not require the application of Maryland's statutory cap on non-economic damages. Similarly, neither the circumstances of the case nor the public policy exception requires the application of Maryland's contributory negligence principles.


We adopt the facts as recited in the Certification Order issued by the District Court in this case:

On April 18, 2003 at about 6:30 a.m., Mallory Heffernan, a minor, was fatally injured in an automobile accident that occurred on Route 301 in the State of Delaware. Ms. Heffernan (hereinafter "Decedent") was transported from the scene and taken to a Delaware hospital, where she subsequently died. The Decedent and another minor, Curtis Jones, had been passengers in a vehicle driven by John McMahon, Jr., also a minor, and owned by his mother, Angela McMahon. The accident occurred when John McMahon, Jr. apparently fell asleep at the wheel and collided with a tractor-trailer. At the time of the accident, the Decedent resided with her parents, Edmund and Diane Heffernan, in Queenstown, Maryland. The driver, John McMahon, Jr., and the other passenger, Curtis Jones, were step-brothers who resided with Mr. McMahon's father and Mr. Jones's mother in Ingleside, Maryland.

The group of teenagers, all Maryland residents, had driven from Maryland to Pennsylvania after school on April 17, 2003 in order to attend a concert in Allentown, Pennsylvania that night. After the concert, they began to make their way back to Maryland. The group first drove a friend home to Kutztown, Pennsylvania. After doing so, they became lost and called the Heffernans to help them get directions

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back to the highway. The group then drove an other friend home to Swedesboro, New Jersey. The occupants of the McMahon vehicle were on their way back to Maryland, driving through Delaware, when the accident occurred at approximately 6:30 a.m. As planned prior to the trip, John McMahon, Jr. was the only individual in the group who drove the car throughout the entire trip to or from the concert.

At trial, [Erie] believes that it will introduce evidence that the Decedent called her parents at home in Maryland at least twice between midnight and 4:40 a.m., during their drive back to Maryland. Further, [Erie's] evidence would show that, during these calls, the Decedent informed her parents that they were too tired to continue and requested her parents' permission to stop traveling for the night and sleep at the home of friends in either Kutztown, Pennsylvania or, later, in Swedesboro, New Jersey. [Erie] believes that it will present evidence showing that her parents refused these requests and demanded that the group continue the drive home.

At trial, [the Heffernans] believe that they will introduce evidence that there were telephone contacts between them and Mallory. Further, [the Heffernans] believe that they would present evidence that at no point during the en tire evening were any requests made to them for permission to stop nor at any point were [the Heffernans] advised that the driver or any of the other persons in the vehicle being driven by John McMahon were suffering from fatigue.

At the time of the accident, the Decedent's parents, Edmund and Diane Heffernan, carried a Pioneer Family Auto Policy (#Q01080493M) and a Personal Catastrophe Policy (#Q312350156M) with [Erie]. These are Maryland policies, designed to comply with Maryland mandatory insurance requirements, which were issued, sold and delivered in Maryland to Maryland residents, Edmund and Diane Heffernan. Their auto policy included underinsured motorists coverage in the amount of $300,000 per person/ $300,000 per accident; the catastrophe policy provided $1,000,000 in underinsured motorists coverage. It is agreed that the vehicle driven by Mr. McMahon was an underinsured motor vehicle with respect to the Erie policy.

The Heffernans and Erie were unable to come to an agreement on issues of liability and the amount of benefits to be paid, and the Heffernans filed suit against Erie in the Circuit Court for Baltimore City, Maryland, se eking dam ages pursuant to the underinsured motorists coverage. [Erie] then removed the case to the United States District Court for the District of Maryland. The underinsured motorists

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coverage in the Erie policies provided, in part that Erie would pay damages (up to the applicable limits) "that the law entitles you" to recover from the owner or operator of an underinsured motor vehicle. [The Heffernans] have asserted that Maryland's non-economic damages cap, Md. Code Ann., Cts. & Jud. Proc. § 11-108, does not limit the damages available to them. [Erie] contends that § 11-108 applies to limit the damages available. In addition, [the Heffernans] assert that Delaware's tort law including the comparative negligence doctrine should be applied to determine whether, and to what extent, they are entitled to recover from the uninsured motorist. [Erie] contends that Maryland law, including the doctrines of contributory negligence and assumption of risk, should be applied.


What is ultimately at issue in this case is whether, in determining what the law, and therefore the policies, entitle the insureds to recover, Maryland would apply its own law or Delaware law. The auto mobile liability insurance policies issued to the Heffernans by Erie in this case were issued in Maryland. As discussed, supra, at the time of the collision, the vehicle operated by Mr. McMahon was underinsured with respect to the uninsured/underinsured motorist provisions of the Erie policy because the damages the Heffernans seek exceed the tortfeasor's liability insurance policy limits. In West American Ins. Co. v. Popa, 352 Md. 455, 462-63, 723 A.2d 1, 4-5 (1998), we said that

[u]nder the Maryland uninsured/underinsured motorist statutory provisions, when an insured under an automobile insurance policy has incurred damages as a result of the allegedly tortious driving by an uninsured or underinsured motorist, the insured has the option of initially bringing a contract action against his or her insurer to recover under the policy's uninsured/underinsured motorist provisions or of initially bringing a tort action against the tortfeasor. When the insured chooses the second option, and notifies his or her insurer of the tort action, the issues of the un insured/underinsured defendant's liability

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and the amount of damages are resolved in the tort action.

(Citations omitted.) Here, the Heffernans chose to bring a contract action1 against their insurer, Erie, and settled the tort claim against the underinsured tortfeasor, prior to filing a tort suit, because the tortfeasor's liability insurer offered its policy limits, which amounted to $35,000.2 Erie waived any right to subrogation in allowing the Heffernans to accept the amount offered.

Erie contends that to determine an insurer's liability (what the Heffernans are "entitled to recover") amounts to an interpretation of the contract and that it was contemplated by both

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parties that the policies would be interpreted by referencing Maryland law only, despite the fact that the automobile collision occurred in Delaware. The issue, Erie asserts, is properly decided under Maryland contract law. In Erie's view, the interpretation of "entitled to recover" requires reference to "general principles of tort law" only and is not a mixed question of contract and tort law. Erie argues...

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