Larimore v. American Ins. Co.

• Decision Date: 01 September 1987
• Docket Number: No. 42,42
• Citation: 552 A.2d 889,314 Md. 617
• Parties: Douglas F. LARIMORE v. The AMERICAN INSURANCE COMPANY et al. ,
• Court: Maryland Court of Appeals

Page 617

314 Md. 617

552 A.2d 889

Douglas F. LARIMORE v. The AMERICAN INSURANCE COMPANY et al.

No. 42, Sept. Term, 1987.

Court of Appeals of Maryland.

Feb. 6, 1989.

Robert W. King, Greenbelt, for appellant.

James S. Wilson (James M. Brault and Brault, Graham, Scott & Brault, on the brief), Rockville, for appellees.

Argued before MURPHY, C.J., ELDRIDGE, COLE, RODOWSKY, McAULIFFE and ADKINS, JJ. and CHARLES E. ORTH, Jr., Associate Judge of the Court of Appeals of Maryland (retired), Specially Assigned.

ELDRIDGE, Judge.

Under Maryland's compulsory motor vehicle insurance law, there must be maintained on every motor vehicle required to be registered in Maryland certain security, usually in the form of a motor vehicle liability insurance policy, which provides coverage for the payment of liability claims. Maryland Code (1987), § 17-103(a) of the Transportation Article. In addition, every motor vehicle liability insurance policy issued, sold, or delivered in Maryland must provide specified minimum liability coverage. Code (1957, 1986 Repl.Vol.), Art. 48A, § 541(a). In addition to mandatory liability insurance, the statutory provisions require various other coverages for Maryland motor vehicles and in Maryland motor vehicle insurance policies. Finally, the statutory provisions authorize specified exclusions to the required security and required insurance coverages. See generally Nationwide v. USF & G, 314 Md. 131, 550 A.2d 69 (1988), and cases there cited.

Turning to the case at bar, the issue before us is whether a "fellow employee" exclusion in a motor vehicle liability insurance policy is valid in light of Maryland's compulsory motor vehicle insurance law and Maryland's workers' compensation law. ¹

Douglas E. Larimore and Joseph Benjamin Williams were both employees of Moving Masters, Inc., and, while in the course of their employment, were involved in an accident giving rise to this litigation. Williams was driving a truck or tractor (without the trailer attached) owned by Moving Masters, and he accidentally backed the vehicle over Larimore's legs, causing serious injuries. The truck was covered under Moving Masters' motor vehicle liability insurance policy issued by the American Insurance Company, and containing liability limits of $500,000.00. Williams was an insured under that policy.

Larimore filed a claim with the Workmen's Compensation Commission and received workers' compensation benefits. Larimore also brought a tort action in the Circuit Court for Prince George's County against Williams. Copies of Larimore's pleadings in the tort action were sent to the American Insurance Company. American, however, denied coverage and refused to provide Williams with a defense. The basis for the insurer's denial of coverage was the "fellow employee" exclusion in the policy. That exclusion provided:

"This insurance does not apply to:

* * *

* * *

"4. Bodily injury to any fellow employee of the insured arising out of and in the course of his or her employment."

The tort action concluded with Larimore obtaining a default judgment against Williams in the amount of $200,000.00.

Thereafter, Larimore filed in the Circuit Court for Prince George's County the present action against the American Insurance Company. Larimore sought a declaratory judgment that the motor vehicle was covered by the insurance policy at the time of the accident, that the fellow employee exclusion was void under Maryland's compulsory insurance law, and that the American Insurance Company was contractually bound to pay the judgment against Williams. The American Insurance Company defended on the ground that the fellow employee exclusion was valid. Both sides filed motions for summary judgment, in which the only disputed issue was the validity of the fellow employee exclusion. After a hearing, the circuit court granted the American Insurance Company's motion and issued a declaratory judgment that the fellow employee exclusion was valid under Maryland law and was applicable to this case.

Larimore appealed, and the Court of Special Appeals affirmed, upholding the validity of the fellow employee exclusion. Larimore v. American Ins. Co., 69 Md.App. 631, 519 A.2d 743 (1987). The Court of Special Appeals recognized that the fellow employee exclusion was not specifically authorized by the statutory provisions relating to required security and motor vehicle liability insurance policies. The Court of Special Appeals went on to discuss Pennsylvania Nat'l Mut. v. Gartelman, 288 Md. 151, 416 A.2d 734 (1980); Jennings v. Government Employees Ins., 302 Md. 352, 488 A.2d 166 (1985), and other cases decided by this Court, indicating that the cases set forth the principle that " 'where a statute expressly provides for certain exclusions, others shall not be inserted.' " Larimore v. American Ins. Co., supra, 69 Md.App. at 637-638, 519 A.2d at 746-747. The Court of Special Appeals concluded, however, that the fellow employee exclusion should be upheld because of the availability of workers' compensation benefits. The intermediate appellate court explained (69 Md.App. at 638-639, 519 A.2d at 747):

"Unlike in Gartelman and Jennings, however, there is a compelling reason to permit the fellow employee exclusion in this case. Moving Masters's policy provides coverage to all non-employees injured by an employee's negligent operation of the employer's automobile in the course of employment. An employee engaged in an activity outside of his or her employment who is injured by a co-worker's negligent operation of the employer's vehicle is also covered under the language of the policy. The only class of persons not protected under the automobile liability provision is that comprised of employees whose injuries arise 'out of and in the course of [their] employment' due to a co-worker's negligent operation of a covered vehicle. This latter class of injured employees, however, is guaranteed, without litigating any issue of fault, worker's compensation benefits that may exceed the statutorily required $20,000 minimum motor vehicle liability coverage. Thus, Exclusion 4 is in harmony with the legislative purpose behind mandatory insurance of assuring at least a minimum recovery for damages incurred by victims of automobile accidents. It is one of those 'many exclusions in automobile insurance policies [that] do not conflict with legislative policy and are therefore valid.' Jennings, 302 Md. at 362, 488 A.2d 166."

And later (69 Md.App. at 640, 519 A.2d at 748):

"The public policy under mandatory motor vehicle insurance of protecting victims of automobile accidents is satisfied where an employer provides, and an injured employee is covered under, worker's compensation."

This Court granted Larimore's petition for a writ of certiorari which challenged the validity of the fellow employee exclusion. ²

On several occasions recently we have reiterated the principle that " 'where the Legislature has required specified coverages in a particular category of insurance, and has provided for certain exceptions or exclusions to the required coverages, additional exclusions are generally not permitted,' " Nationwide v. USF & G, supra, 314 Md. at 141, 550 A.2d at 74, quoting Gable v. Colonial Insurance Company, 313 Md. 701, 704, 548 A.2d 135, 137 (1988). See, e.g., Lee v. Wheeler, 310 Md. 233, 238-239, 528 A.2d 912, 915 (1987); State Farm Mut. v. Nationwide Mut., 307 Md. 631, 637-638, 516 A.2d 586, 589 (1986); Jennings v. Government Employees Ins., supra, 302 Md. at 359, 488 A.2d at 169; DeJarnette v. Federal Kemper Ins. Co., 299 Md. 708, 725, 475 A.2d 454 (1984); Pennsylvania Nat'l Mut. v. Gartelman, supra, 288 Md. at 156, 159-160, 416 A.2d 734.

In the view of both the Court of Special Appeals and the respondent American Insurance Company, an exception to the above-quoted principle is justified for the fellow employee exclusion. The American Insurance Company argues that the fellow employee exclusion does not violate statutory policy, as "[t]he public policy of the compulsory insurance laws is to assure compensation to innocent victims of motor vehicle accidents," and the "exclusion applies only where the injured employee is already entitled to compensation through workers' compensation." (Respondent's brief, pp. 11-12). The position of the Court of Special Appeals and the American Insurance Company is that the availability of compensation to the injured plaintiff from a collateral source, namely workers' compensation, warrants an exclusion from compulsory liability insurance in addition to those exclusions recognized by the Legislature.

One problem with the Court of Special Appeals' and the American Insurance Company's position is that the fellow employee exclusion operates regardless of whether the injured victim of the motor vehicle accident actually receives workers' compensation benefits, or, if he receives benefits, regardless of the amount of those benefits. The clause in the insurance policy does not provide for a set-off. Instead, it removes all insurance coverage and leaves the tort defendant uninsured if the tort plaintiff is a fellow employee, and if the accident arose out of and in the course of employment. Contrary to the view of the Court of Special Appeals, in some circumstances the injured fellow employee may not receive workers' compensation benefits equal to his actual tort damages up to $20,000.00.

There is, however, a more fundamental reason for rejecting the approach of the Court of Special Appeals and the American Insurance Company. The effect of collateral source payments, including workers' compensation benefits, upon the mandatory motor vehicle insurance coverages, has been extensively dealt with by the General Assembly in the Insurance Code, Art. 48A, §§ 540-545. For example, § 540 provides that collateral source benefits generally may not affect the payment of benefits required under § 539, but the section goes on to delineate an exception under...