General Acc. Fire & Life Assur. Corp., Ltd. v. Perry

• Decision Date: 01 September 1987
• Docket Number: No. 1447,1447
• Citation: 541 A.2d 1340,75 Md.App. 503
• Parties: GENERAL ACCIDENT FIRE & LIFE ASSURANCE CORPORATION, LTD. v. Michael D. PERRY. ,
• Court: Court of Special Appeals of Maryland

Page 503

75 Md.App. 503

541 A.2d 1340

GENERAL ACCIDENT FIRE & LIFE ASSURANCE CORPORATION, LTD. v. Michael D. PERRY.

No. 1447, Sept. Term, 1987.

Court of Special Appeals of Maryland.

June 9, 1988.

A. Gwynn Bowie, Jr. (Smith, Somerville & Case, on the brief), Annapolis, for appellant.

Edward H. Nabb, Jr., Cambridge, for appellee.

Argued before MOYLAN, BISHOP and POLLITT, JJ.

BISHOP, Judge.

Michael D. Perry, appellee, filed suit in the Circuit Court for Dorchester County (Edmondson, J.) seeking a declaratory judgment that an accident in which he was involved was covered by an automobile liability insurance policy issued to his mother, Elizabeth S. Perry, by appellant, General Accident Fire & Life Assurance Corporation, Ltd. (General Accident).

On October 9, 1987, the trial court issued a declaratory judgment which requires General Accident to provide appellee with coverage. On appeal, General Accident raises one issue:

Whether the trial court erred in declaring that, under the policy, appellee had a reasonable belief that he was entitled to use the insured vehicle and that appellee was, therefore, entitled to coverage under the policy.

FACTS

At all times relevant to the litigation, appellee did not possess a valid driver's license. Appellee testified that he was not able to obtain a driver's license because "when I was 16 years old, I was apprehended by the police for operating a vehicle without a driver's license." Nevertheless, at the age of nineteen, appellee purchased a pickup truck and since he was unable to title the truck in his name alone because he lacked a driver's license, he titled the truck in both his and his mother's names, as co-owners. Appellee also testified that he titled the truck in both names to obtain insurance. At all times relevant to the litigation, appellee lived at home with his parents.

Appellee's mother purchased insurance for the truck from General Accident. Appellee was not listed on the policy as a possible operator. Both appellee and his mother testified that appellee drove the truck on Maryland's public highways in Dorchester County and on the family's private property. Appellee had his parents' "permission" to drive the truck on the public highways, but only to go to work or to go to a local store.

Appellee testified that, on August 18, 1982, he took the truck, without his parents' permission, onto a public highway, and was involved in an accident injuring a passenger. Appellee's mother testified that had appellee asked for permission "to go where he went on the evening he had the accident" she would have denied him permission to use the truck. On cross-examination, appellee testified:

Q On the day in question you didn't have permission to use this pickup truck, did you?

A No.

Q And you didn't harbor any belief that you had a right to use it that day, did you?

A I didn't have no legal right, no.

Q You didn't believe you had a right to use it?

A I paid for the truck. I believe I had a right to use it.

Q On the day in question you didn't have reasonable belief, did you, that you could use this truck that day, because you didn't have a driver's license?

A No, I didn't have a driver's license.

Appellee also testified that he told one of General Accident's investigators, on the day of the accident, that "my mother's name was put on the bill of sale so I could purchase auto insurance on the vehicle." Appellee admitted lying to that investigator when he told the investigator that "the date of the accident ... was the first time I ever drove the vehicle."

The following portions of General Accident's policy are pertinent to the issue:

PART A--LIABILITY COVERAGE

We will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident.

* * *

"Covered person " as used in this part means:

1. You or any family member for the ownership, maintenance or use of any auto or trailer.

2. Any person using your covered auto.

* * *

EXCLUSIONS

A. We do not provide Liability Coverage for any person:

* * *

8. Using a vehicle without a reasonable belief that that person is entitled to do so. (Emphasis in original.)

In the policy "Family Member" is defined as "a person related to you by blood, marriage or adoption who is a resident of your household. This includes a ward or foster child."

Unless exclusion A.8. applies, General Accident concedes that appellee is covered under its policy. General Accident argues, however, that appellee was not legally entitled to drive on Maryland's public highways without a license, that appellee knew he did not have a license and, therefore, appellee knew that he was not supposed to drive on the highways. Based on these facts, General Accident concludes that appellee is not covered under the policy.

In Pacific Indemnity v. Interstate Fire & Casualty, 302 Md. 383, 388-389, 488 A.2d 486 (1985), the Court of Appeals said:

Construction of insurance contracts in Maryland is governed by a few well-established principles. An insurance contract, like any other contract, is measured by its terms unless a statute, a regulation, or public policy is violated thereby. To determine the intention of the parties to the insurance contract, which is the point of the whole analysis, we construe the instrument as a whole. Maryland courts should examine the character of the contract, its purpose, and the facts and circumstances of the parties at the time of execution.

In so doing, we accord words their ordinary and accepted meanings. The test is what meaning a reasonably prudent lay person would attach to the term. This Court has consulted Webster's Dictionary, Random House Dictionary, or, less often, Black's Law Dictionary.

In the first instance the inquiry is confined to analysis of the language used. Courts may construe unambiguous contracts as a matter of law.

The language used may be ambiguous if it is "general" and may suggest two meanings to a reasonably prudent lay person. If the language of the contract is ambiguous, extrinsic evidence may be consulted to determine the intention of the parties and whether the ambiguous language has a trade usage. Construction of the contract by the parties to it before the controversy arises is an important aid to interpretation of uncertain terms.

If the extrinsic evidence presents disputed factual issues, construction of the ambiguous contract is for the jury. The court may construe an ambiguous contract if there is no factual dispute in the evidence. (Citations omitted.)

In Truck Insurance Exchange v. Marks Rentals, 288 Md. 428, 435, 418 A.2d 1187 (1980), the Court stated, "it is a sound principle of contract construction that where one party is responsible for the drafting of an instrument, absent evidence indicating the intention of the parties, any ambiguity will be resolved against that party." (Citations omitted.)

Although exclusion A.8. has been construed by courts in other states, our construction will be one of first impression in Maryland. In Economy Fire & Casualty v. State Farm Mutual Insurance, 153 Ill.App.3d 378, 106 Ill.Dec. 543, 546, 505 N.E.2d 1334, 1337 (1987), the Court said:

Here, the insurance policy provides general coverage in one part and groups the exclusions, including the "reasonable belief" exclusion, in another part. This type of provision apparently replaces the traditional "omnibus" clause wherein the language of the policy provided for coverage where the use of the vehicle was with the permission or consent of the named insured. This may explain the paucity of cases in Illinois on this particular type of liability policy. (Citations omitted.)

Other courts have described the type of policy and exclusion at issue as an "easy reading" or so called "plain language" policy, of recent vintage. Georgia Farm Bureau Mutual v. Fire & Casualty Insurance, 180 Ga.App. 777, 350 S.E.2d 325, 326 (1986); Allstate Insurance Company v. United States Fidelity and Guaranty Company, 663 F.Supp. 548, 552 (W.D.Ark.1987).

Of the ten cases cited in the briefs, six upheld the validity of the insurer's exclusion ¹ and four required the insurer to provide coverage based on the ambiguity found in the exclusion. ² Our independent research has uncovered only four other cases which have addressed an issue related to this type of exclusion. Of those cases, two upheld the validity of the insurer's exclusion, ³ one reversed a lower court's judgment upholding the validity of the exclusion ⁴ and one did not decide the issue. ⁵

In Robertson v. Lumbermen's Mutual Casualty Co., 160 Ga.App. 52, 286 S.E.2d 305 (1981), overruled on other grounds, 182 Ga.App. 273, 355 S.E.2d 767, 769 (1987), a wife sued her husband for divorce. During the pendency of the divorce proceedings, the wife obtained an interlocutory order granting her exclusive possession and control over a car titled in the name of both her and her husband. The wife demanded the return of her husband's car keys, but he refused. Subsequent to the interlocutory order, but after the events which gave rise to the litigation, the wife titled the car in her name alone. Later, using his set of keys, the husband took the wife's car without her permission and was involved in an accident which resulted in injuries to others. The wife's insurance policy contained an exclusion of coverage "for any person using the vehicle who is without a reasonable belief that he is entitled to do so." Id., 286 S.E.2d at 307.

The court refused to require the insurer to provide coverage, and held that the husband could not have had a reasonable belief that he was entitled to use the wife's car because he knew of the divorce court's order giving the wife exclusive control and possession of the car; he knew that the wife had denied him her permission to use the car; that prior to his taking the car just before the accident, the car had been locked and previously he had been told to surrender his keys. Id., 286...