Lane v. Nationwide Mut. Ins. Co., 83

• Decision Date: 01 September 1988
• Docket Number: No. 83,83
• Citation: 582 A.2d 501,321 Md. 165
• Parties: William E. LANE et ux. v. NATIONWIDE MUTUAL INSURANCE COMPANY. ,
• Court: Maryland Court of Appeals

Page 165

321 Md. 165

582 A.2d 501

William E. LANE et ux. v. NATIONWIDE MUTUAL INSURANCE COMPANY.

No. 83, Sept. Term, 1988.

Court of Appeals of Maryland.

Dec. 3, 1990.

Walter E. Laake, Jr., Greenbelt (Walter D. Webster and Paul R. Montemuro, Salisbury, on brief), for petitioner.

Ernest I. Cornbrooks, III (Carolyn Hammond, Webb, Burnett, Jackson, Cornbrooks & Wilber, on brief), Salisbury, for respondent.

Argued before MURPHY, C.J., and ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS ^* and BLACKWELL, ^* JJ.

ELDRIDGE, Judge.

The issue in this case concerns the time when the statute of limitations begins to run in an action for uninsured motorist benefits.

William and Mildred Lane, husband and wife, received permanent injuries in an automobile accident in Montgomery County. The Lanes had an automobile liability insurance policy with Nationwide Mutual Insurance Co., which was in effect at the time of the accident. The accident occurred when a vehicle, driven by Guy Callaway, attempted to pass the Lanes on the left and was forced off the road by an oncoming vehicle, owned by Michael McKenna and driven by Joseph Warren. The oncoming vehicle driven by Joseph Warren collided with the Lanes' vehicle. The Lanes notified their insurer Nationwide shortly after the accident.

The Lanes filed a tort action against Warren, McKenna and Callaway in the Circuit Court for Montgomery County on December 14, 1982. Sometime before the tort action was filed, the Lanes had learned that Warren and McKenna were uninsured. On December 17, 1982, Nationwide was notified of the suit when the Lanes' attorney sent copies of the complaint to Nationwide's claims adjuster handling the case and to Nationwide's district office in Annapolis, Maryland. In the December 17, 1982, letter to Nationwide, which accompanied the copies of the tort complaint, the Lanes' attorney informed Nationwide that Warren and McKenna were uninsured. ¹ Nevertheless, Nationwide made no effort to intervene in the tort suit.

On April 17, 1986, while the tort action was still pending and untried, the Lanes instituted the present action by filing a complaint in the Circuit Court for Wicomico County against Nationwide for breach of contract, seeking recovery of uninsured motorist benefits under their policy with Nationwide. The Lanes' complaint alleged that their injuries "were the direct and proximate result of the negligence of" McKenna and Warren, that McKenna and Warren were uninsured, that the Lanes had previously demanded that Nationwide pay for their injuries pursuant to the uninsured motorist provisions of their insurance policy, and that Nationwide had breached the insurance contract by its failure to compensate the Lanes for their injuries. Nationwide filed a motion for summary judgment, asserting that the action was barred by the three-year statute of limitations, Maryland Code (1974, 1989 Repl.Vol.), § 5-101 of the Courts and Judicial Proceedings Article. Nationwide argued that the three-year statute of limitations began to run when the plaintiffs learned that Warren and McKenna were uninsured and that the plaintiffs admitted that they had this knowledge prior to April 1983. The circuit court, agreeing with Nationwide that the statute of limitations began to run when the Lanes learned that Warren and McKenna were uninsured, granted Nationwide's motion for summary judgment.

The Lanes appealed to the Court of Special Appeals, which affirmed in an unreported opinion. The intermediate appellate court concurred with the circuit court's view that a cause of action by an insured against his or her insurer for uninsured motorist benefits accrues when the insured learns that the tortfeasors are uninsured. The Court of Special Appeals held that the statute of limitations began to run against the Lanes when they learned that Warren and McKenna were uninsured, despite the pendency of a tort suit against Warren and McKenna.

The Lanes thereafter filed in this Court a petition for a writ of certiorari which we granted.

Maryland's Insurance Code, Art. 48A, § 541, requires that every motor vehicle liability insurance policy "issued, sold, or delivered in this State ... shall contain" uninsured motorist coverage. ² We have dealt with this statutorily mandated uninsured motorist coverage in several recent cases, pointing out that it embodies a public policy " 'to assure financial compensation to the innocent victims of motor vehicle accidents who are unable to recover from financially irresponsible uninsured motorists.' " Lee v. Wheeler, 310 Md. 233, 238, 528 A.2d 912, 915 (1987), quoting from Pennsylvania Nat'l Mut. v. Gartelman, 288 Md. 151, 157, 416 A.2d 734, 737 (1980). See also, e.g., Hoffman v. United Services Auto. Ass'n, 309 Md. 167, 522 A.2d 1320 (1987); Nationwide Mutual Ins. v. Webb, 291 Md. 721, 436 A.2d 465 (1981); Reese v. State Farm Mut. Auto. Ins., 285 Md. 548, 403 A.2d 1229 (1979); State Farm v. Md. Auto. Ins. Fund, 277 Md. 602, 605, 356 A.2d 560, 562 (1976) (where Chief Judge Murphy for the Court referred to "the remedial nature of the statutory plan, which dictates a liberal construction in order to effectuate its purpose of assuring recovery for innocent victims of motor vehicle accidents").

Moreover, we have held, in accordance with the great majority of jurisdictions in this country, that an action by an insured against his own insurance company for uninsured motorist benefits "is clearly a contract action" and therefore is "governed by the principles and procedures applicable to contract actions generally." Reese v. State Farm Mut. Auto. Ins., supra, 285 Md. at 553, 403 A.2d at 1232. In addition, under Art. 48A, § 541(c), an insured has the option of initially bringing a contract action against his uninsured motorist carrier or of initially bringing a tort action against the uninsured tortfeasor and thereafter bringing a contract action against the uninsured motorist carrier. Nationwide Mutual Ins. v. Webb, supra, 291 Md. at 736, 436 A.2d at 474; Reese v. State Farm Mut. Auto. Ins., supra, 285 Md. at 554, 403 A.2d at 1233. ³

Turning to the present case, the decisions below cannot be squared either with general contract principles or with this Court's opinions. By holding that the statute of limitations began to run as soon as the Lanes learned that the tortfeasors were uninsured, the Court of Special Appeals in effect held that limitations in a contract action begin to run before there is a breach of contract. Moreover, the Court of Special Appeals' holding is inconsistent with the insured's statutory options.

In holding that the Lanes' action was barred by limitations, the Court of Special Appeals chiefly relied upon its earlier opinion in Yingling v. Phillips, 65 Md.App. 451, 501 A.2d 87 (1985). Consequently, an examination of the Yingling case is appropriate. The relevant facts of that case were as follows. On December 17, 1978, John Yingling was driving an automobile, owned by Joseph Phillips and insured by Prudential Property and Casualty Company, when two tires on the vehicle went flat. While Yingling was changing the tires on the shoulder of the road, a vehicle driven by Linda Miller and owned by National Car Rental Systems struck Yingling, causing serious personal injuries. Yingling, on May 2, 1979, filed a tort action against Miller and National Car Rental. The insurer of National Car Rental's vehicle refused to provide a defense to Miller on the ground that she was driving the vehicle without permission and thus was not an insured under the policy. Apparently there was no other automobile liability insurance covering Miller. Prudential, the insurer of the vehicle driven by Yingling, was notified of the tort suit but did not intervene. On September 5, 1980, while the tort action was pending, Prudential filed an action against Yingling and others for a declaratory judgment that Prudential had no liability under the uninsured motorist provision of the policy; this action was subsequently dismissed without prejudice. In the tort action, summary judgment was granted in favor of National on the ground that Miller did not have permission to use the vehicle. Yingling obtained a judgment against the uninsured motorist Miller for $99,240.15, on June 8, 1983. After Prudential refused to pay this judgment, Yingling on July 25, 1984, brought a declaratory judgment action against Prudential and others, seeking, inter alia, a declaration that Prudential was liable for the tort judgment under the uninsured motorist coverage of its policy. The trial court dismissed Yingling's declaratory judgment action on the ground that it was barred by limitations, and the Court of Special Appeals affirmed on the same ground.

In Yingling, the Court of Special Appeals rejected the contention that the three-year statute of limitations did not begin to run against Prudential until Yingling recovered a judgment against the uninsured tortfeasor. Instead, the intermediate appellate court held that Yingling's cause of action against Prudential for uninsured motorist benefits accrued, and the statute of limitations began to run, when the insurance companies "made it clear that they rejected any possibility of coverage." 65 Md.App. at 458, 501 A.2d at 90. The Court of Special Appeals in Yingling, as it did later in the case at bar, relied upon language from this Court's opinion in Reese v. State Farm Mut. Auto. Ins. supra, 285 Md. at 554, 403 A.2d at 1233, " 'that an insured need not, as a condition for recovery against his insurer under an uninsured motorist's endorsement, sue and obtain a judgment against the uninsured tortfeasor.' " 65 Md.App. at 457, 501 A.2d at 90. The Court of Special Appeals itself then stated: "In other words, the insured's breach of contract action against his insurer accrued when it denied coverage, not when the insured recovered judgment against the tortfeasor." Ibid. According to the Court of Special Appeals, when the liability insurer...