Nationwide Mut. Ins. Co. v. Webb, s. 513

• Decision Date: 11 January 1980
• Docket Number: 545,Nos. 513,s. 513
• Citation: 44 Md.App. 547,409 A.2d 1127
• Parties: NATIONWIDE MUTUAL INSURANCE COMPANY v. William Jackson WEBB. MARYLAND AUTOMOBILE INSURANCE FUND v. Anthony J. FRANZ, Ind. and t/a Diamond Cab.
• Court: Court of Special Appeals of Maryland

Page 547

44 Md.App. 547

409 A.2d 1127

NATIONWIDE MUTUAL INSURANCE COMPANY v. William Jackson WEBB.

MARYLAND AUTOMOBILE INSURANCE FUND v. Anthony J. FRANZ, Ind. and t/a Diamond Cab.

Nos. 513, 545.

Court of Special Appeals of Maryland.

Jan. 11, 1980.

John W. T. Webb, Salisbury, with whom were Ernest I. Cornbrooks, III and Webb, Burnett & Duvall, Salisbury, on brief, for appellant in No. 513.

Thomas S. Simpkins, Princess Anne, for appellee in No. 513.

Sidney G. Leech, Baltimore, with whom were Semmes, Bowen & Semmes, Baltimore, on brief, for appellant in No. 545.

Douglas W. Knight, Baltimore, with whom were Leonard, Phillips & Knight, Baltimore, on brief, for appellee in No. 545.

Argued before MORTON, THOMPSON and LOWE, JJ.

LOWE, Judge.

We are reporting two cases in this opinion because of a common question of law decided diametrically at the trial level in different circuits. In each instance, however, an insurer is the appellant and the appellees are individuals who have recovered from their insurers under policies containing an uninsured motorist provision as required by Md.Code Art. 48A, § 541(c), which provides that

" . . . every policy of motor vehicle liability insurance issued . . . shall contain coverage . . . For damages which the insured is entitled to recover from the owner or operator Of an uninsured motor vehicle because of bodily injuries sustained in an accident arising out of the ownership, maintenance, or use of such uninsured motor vehicle." (Emphasis added).

At the root of both appeals is how the insured's entitlement to recover such damages from the uninsured motorist can be established sufficiently to compel contractual compliance by the insurer under its mandated endorsement. Until July 24, 1979, it had not been established whether an insured could sue his insurer directly under the uninsured motorist provision, or whether he must sue the tortfeasor directly, thus permitting the company to oppose contractual entitlement under the uninsured motorist provision by defending the liability of the tortfeasor. In Reese v. State Farm Mut. Auto. Ins., 285 Md. 548, 403 A.2d 1229 (1979), however, the Court of Appeals laid to rest that concern, pointing out that the former prohibitions against suing or impleading a tortfeasor's liability insurance carrier was predicated upon the absence of a direct contractual obligation. But that impediment does not preclude suit directly against an insured's own carrier under an uninsured motorist's provision. The Court of Appeals, following the majority view, held that:

"He (the insured) has the option of bringing a contract action against his insurer or a tort action against the uninsured motorist." Id. at 554, 403 A.2d at 1232.

In each of the cases with which we deal here, the insured opted to bring a tort action against the uninsured motorist, and in each case obtained a judgment. In case No. 513, the trial judge, in the Circuit Court for Wicomico County, relied upon a judgment on the merits to enter a summary judgment on behalf of the insured. In case No. 545, the Superior Court of Baltimore City declined to enter summary judgment on the question of liability despite a default judgment against the uninsured, but decided the case in favor of the insured after hearing the facts. Before discussing the common question relating to the summary judgment motions, perhaps more detail would be helpful in each case.

In appeal No. 513, Nationwide Mutual Insurance Company (Nationwide) complains that the Circuit Court for Wicomico County granted appellee William Jackson Webb's Motion for Summary Judgment for $16,591.77 against it, predicated upon a judgment entered against an uninsured motorist by whom Webb had been injured as the result of an accident. Nationwide, with notice of the prior action, did not intervene as permitted of right by Md.Rule 208 a, which reads:

"Upon timely application a person shall be permitted to intervene in an action: (a) when the representation of the applicant's interest by existing parties is or may be inadequate and the applicant is or may be bound by a judgment in the action; or (b) when the applicant is so situated as to be adversely affected by a distribution or other disposition of property which is in the custody or subject to the control or disposition of the court or an officer thereof."

Instead, Nationwide elected to rely upon two provisions of its policy which it contends permits it to readjudicate the underlying question of entitlement, I. e., the uninsured's liability. The primary provision states that:

"No judgment against any person . . . shall be conclusive, as between the Insured (Webb) and the Company, of the issues of liability . . . unless such judgment is entered pursuant to an action prosecuted by the Insured with the written consent of the Company."

Obviously, the insured had not obtained written consent of the Company to Prosecute the suit against the uninsured tortfeasor. In fact, four days after that suit was entered, the Company declined liability.

The second provision that Nationwide relies upon as a condition precedent with which Webb has failed to comply is the specific type of notice that the Company requires when suit is Instituted against an uninsured tortfeasor. The policy states:

"If . . . the Insured . . . shall institute any legal action for bodily injury against any person . . . a copy of the summons and complaint or other process . . . shall be forwarded immediately to the Company . . . ."

Again the insured did not comply. Rather a letter containing notification of the pending suit including docket entries, etc., was sent four and one-half months after suit was instituted; however, no "summons and complaint or other process" was ever served upon or mailed to Nationwide. To underscore or emphasize these provisions the contract sets forth that:

"No action shall lie against the Company unless, as a condition precedent thereto, the Insured or his legal representative has fully complied with all the terms of this endorsement."

In case No. 545, the Superior Court of Baltimore City denied a summary judgment motion predicated upon the prior default judgment entered against the tortfeasor. However, it ruled in the insured's favor after hearing the facts. The insurer, Maryland Automobile Insurance Fund (MAIF), has appealed complaining that under the trial judge's findings of fact he was compelled by law to find that appellee Anthony J. Franz (Franz), was contributorily negligent in the accident with the uninsured motorist. The common question in the two cases before us, however, is raised by cross-appeal in which Franz contends that the Superior Court erred in denying him summary judgment on the liability issue. That denial was predicated upon a policy provision similar to the one in case No. 513 which required written consent by the insurer to prosecute a suit against an uninsured motorist before a default judgment in such case would bind the company.

"No default judgment against any known person or organization alleged to be legally responsible for the bodily injury or property damage shall be conclusive, as between the insured and the company, as to the establishment of legal liability or of the amount of damages to which the insured is legally entitled, unless such judgment is entered pursuant to an action prosecuted by the insured with the written consent of the Company."

In this case, however, there is no notice question, as there is in 513, since MAIF conceded in its answer to motion for summary judgment that it

"had notice of the suit instituted against the uninsured motorist . . . .",

and relied entirely on its having never given written consent to prosecute that suit.

res judicata

As is apparent from the elliptical quote in § 541(c) above, the language establishing the "critical coverage" to be in each policy issued in Maryland, guarantees payment 1) "for damages" which the insured is 2) "entitled to recover" from an uninsured motorist. Reese, supra at 555, 403 A.2d 1229. That which constitutes Entitlement is a question of fact dependent upon the liability of an uninsured motorist to the insured. Obviously if an uninsured motorist is not liable for an insured's damages, the insured would not be "entitled to recover" against him and, therefore, is not covered by the provision as against his insurer. This provides the insurer a coverage defense against its insured based on lack of entitlement; but to avail itself of that defense it must assume the role of the uninsured motorist. Any coverage defense based upon a liability determination is necessarily a derivative one. To the extent of that defense, the insurer has an interest mutual with that of the uninsured motorist and becomes therefore a "privy" of the uninsured. From this it follows that if the issue of liability is determined as between the uninsured motorist and the insured, that determination is res judicata not only as to the uninsured motorist but, assuming notice of the action, also as to the insurer whose rights are derived through the insured.

"The basic rule of res judicata is that facts or questions which were in issue in a previous action and were therein determined by a court which had jurisdiction of the parties and the subject matter are conclusively settled by a final judgment in the first case and may not again be litigated in a subsequent action between the same parties Or their privies even though the subsequent suit takes a different form or is based on a different cause of action. Sterling v. Local 438, etc., 207 Md. 132, 113 A.2d 389; Snodgrass v. Stubbs, 192 Md. 287, 64 A.2d 130; De Maio v. Lumbermens Mutual, 247 Md. 30, 230 A.2d 279." Pat Perusse Realty v. Lingo, 249 Md. 33, 35, 238 A.2d 100, 102 (1968) (emphasis added).

This bar to relitigating the same issues was predicated upon a "(p)ublic policy against repetitive identical litigation", Id. at 45, 238 A.2d at 107, and has been reemphasized in ...