Nationwide Mut. Ins. Co. v. Shilling

• Decision Date: 20 April 2020
• Docket Number: No. 38, Sept. Term, 2019,38, Sept. Term, 2019
• Parties: NATIONWIDE MUTUAL INSURANCE COMPANY v. Margaret SHILLING
• Court: Court of Special Appeals of Maryland

468 Md. 239

227 A.3d 171

NATIONWIDE MUTUAL INSURANCE COMPANY

v.Margaret SHILLING

No. 38, Sept. Term, 2019

Court of Appeals of Maryland.

April 20, 2020

Argued by Jennifer L. Matzye (Nationwide Mutual Ins. Co., Linthicum, MD), on brief, for Petitioner

Argued by Ryan P. Richie (Jennifer L. Allen, Wilson and Parlett, Upper Marlboro, MD), on brief, for Respondent

Argued before: Barbera, C.J., McDonald, Watts, Hotten, Getty, Booth, Glenn T. Harrell, Jr. (Senior Judge, Specially Assigned), JJ.

Getty, J. Uninsured and underinsured motorist coverage is a statutorily required component of every motor vehicle liability insurance policy issued in Maryland. Md. Code (1957, 2017 Repl. Vol., 2019 Supp.), Insurance ("IN") §§ 19-509 to 19-511. This mandatory coverage protects insured drivers involved in motor vehicle accidents from paying out-of-pocket expenses when the liable party, a tortfeasor, is either completely uninsured or inadequately insured to cover the extent of the insured's injuries.

In this case, an underinsured tortfeasor extended to the insured a policy limits settlement offer of $20,000, which the latter accepted. The insured, in turn, attempted to collect additional underinsured motorist benefits from her own insurer, which covered up to $300,000 per person for bodily injury caused by an uninsured or underinsured motorist. This case requires us to determine when the statute of limitations begins to run against the insured in an underinsured motorist claim against her insurer. The controlling statute of limitations provision, Md. Code (1957, 2013 Repl. Vol.), Courts and Judicial Proceedings ("CJ") § 5-101, requires that "[a] civil action at law shall be filed within three years from the date it accrues."

In light of this Court's prior jurisprudence interpreting the uninsured motorist statute and because an insured's action against his or her own insurer sounds in contract—where principles of contract law dictate that a contract action accrues upon breach—we hold that the statute of limitations begins to run in an underinsured motorist claim when the insurer breaches the contract to provide underinsured motorist benefits by denying the insured's claim.

BACKGROUND

Respondent Margaret Shilling ("Ms. Shilling") was injured in an automobile accident on April 19, 2011.¹ As Ms. Shilling was braking her vehicle because of slow traffic on Odenton Road in Anne Arundel County, she was hit from behind by a vehicle driven by Barbara Gates ("Ms. Gates"). After the initial impact pushed her automobile forward, Ms. Shilling applied the brakes to stop but was hit again by Ms. Gates. Ms. Shilling's injuries from the multiple-impact collision required medical treatment that continued from April 2011 to July 2014.

Ms. Gates was an underinsured motorist. Her motor vehicle liability insurance policy with Agency Insurance Company of Maryland ("Agency") provided up to $20,000 per person in bodily injury coverage. Ms. Shilling was insured by the Petitioner, Nationwide Mutual Insurance Company ("Nationwide"), under a motor vehicle liability insurance policy that included uninsured and underinsured motorist coverage in the amount of $300,000 per person in bodily injury coverage.

Settlement Negotiations with Agency

Nearly two years after the accident, on April 4, 2013,² Agency offered Ms. Shilling $20,000 to release all outstanding claims and causes of action against Ms. Gates resulting from the accident. Agency conditioned the offer on Nationwide's willingness to waive its subrogation rights and Ms. Shilling's signed release of all claims. On April 23, 2013, Nationwide advised Ms. Shilling's attorney that it would waive its subrogation rights against Ms. Gates. Ms. Shilling's attorney transmitted Nationwide's waiver of subrogation to Agency on January 27, 2014. In the same email, Ms. Shilling's attorney requested Agency's draft release. Ms. Shilling executed Agency's "Full Release of All Claims and Demands" (the "Release") on February 3, 2014. Ms. Shilling's attorney deposited the $20,000 settlement check into an escrow account on February 14, 2014.

Settlement Negotiations with Nationwide

According to the parties, Ms. Shilling and Nationwide began settlement discussions after April 23, 2013.³ On January 26, 2015, Ms. Shilling sent Nationwide a formal demand letter stating her desire to recover underinsured motorist benefits under the Nationwide policy. Ms. Shilling enclosed a chronology of her medical care as a result of the accident and supporting medical records. Nationwide confirmed receipt of Ms. Shilling's letter on February 2, 2015 and informed her that a review of the claim was pending. On February 6, 2015, Nationwide requested additional medical reports and records to aid in evaluating Ms. Shilling's claim. Thereafter, Nationwide contacted Ms. Shilling's attorney on four separate occasions in 2015—February 11, March 18, April 13, and June 12—to check on the status of the outstanding documents Nationwide requested. Nationwide did not deny Ms. Shilling's claim during these settlement negotiations.

Proceedings in the Circuit Court for Anne Arundel County

On September 23, 2016, Ms. Shilling filed suit against Nationwide in the Circuit Court for Anne Arundel County. Under Nationwide's underinsured motorist coverage, Ms. Shilling sought the balance of unpaid damages not covered by Agency's $20,000 settlement. Nationwide filed a motion to dismiss, arguing that Ms. Shilling's claim was time-barred because the three-year statute of limitations under CJ § 5-101 had expired. The circuit court held a hearing on February 7, 2017.

At the hearing, the parties disagreed about the relevant event that triggers the statute of limitations. Nationwide averred that the statute of limitations should begin to run when the tortfeasor's insurance policy is exhausted. According to Nationwide, the date of exhaustion occurred in mid-April 2013 when Ms. Shilling accepted Agency's settlement offer. Ms. Shilling countered that the statute of limitations "always begins to run on the date of denial," i.e., when the insurer denies the insured's claim for additional benefits. Under this theory, Ms. Shilling argued that the statute of limitations never began to run against her because Nationwide had not formally denied her claim for underinsured motorist benefits.

The circuit court agreed with Nationwide, and by Memorandum Opinion and Order, granted Nationwide's motion to dismiss on July 28, 2017, reasoning:

On April 23, 2013[,] a contract was formed by the settlement agreement in this case. Notwithstanding the fact that a demand letter was sent in January 2015 and that there were discussions between the parties taking place through June 2015, the statute of limitations on the breach of contract action began running on the date of settlement with [Agency].^{[4 ]} Thus, if [Ms. Shilling] believed there was a breach by [Nationwide, Ms. Shilling] needed to file suit by April 23, 2016. [Ms. Shilling] failed to do so.

Ms. Shilling noted a timely appeal to the Court of Special Appeals on August 16, 2017 (Docket No. 1154, Sept. Term, 2017). While pending in the Court of Special Appeals, Ms. Shilling advised Nationwide that she did not execute Agency's release until February 3, 2014, approximately ten months after Nationwide consented to Agency's settlement offer, causing the parties to file a Joint Motion to Stay Appeal and Remand to the Circuit Court. The Court of Special Appeals granted the parties' motion on January 29, 2018. The intermediate appellate court remanded the case to the circuit court

for the purpose of determining whether, in the context of [Ms. Shilling's] underlying claim for breach of an underinsured motorist contract, the date of exhaustion of the tortfeasor's policy is (1) the date the insurer consented to the settlement with the tortfeasor, (2) the date the insurer and tortfeasor signed the Release, or (3) the date the settlement check was deposited.

On remand, the circuit court held another hearing to determine when the statute of limitations began to run. The circuit court considered three possible dates of exhaustion: (1) April 23, 2013—the date Nationwide consented to the settlement agreement with Agency; (2) February 3, 2014—the date Ms. Shilling executed the release; or (3) February 14, 2014—the date Ms. Shilling's attorney deposited the settlement check. Nationwide maintained that the tortfeasor's liability coverage is exhausted "when the underinsured carrier consents [to settlement.]" Ms. Shilling adapted her argument to address the question posed by the Court of Special Appeals. At the remand hearing, Ms. Shilling argued that "exhaustion occurs when [a] settlement is reached between the tortfeasor and the [insured.]"

The circuit court issued a second order on April 30, 2018, finding that "April [23], 2013 is the date of the exhaustion of [Ms. Gates'] policy in this case."⁵ Therefore, the circuit court held that Ms. Shilling's suit was time-barred. Ms. Shilling again noted a timely appeal to the Court of Special Appeals on May 14, 2018 (Docket No. 515, Sept. Term, 2018). Ms. Shilling also filed a Motion to Lift Stay and Consolidate Appeals, which the Court of Special Appeals granted on June 6, 2018.

Proceedings in the Court of Special Appeals

The Court of Special Appeals reversed the judgment of the circuit court in a reported opinion.

Shilling v. Nationwide Ins. Co. , 241 Md. App. 261, 209 A.3d 802 (2019).⁶ Distilling the basic principles of Lane v. Nationwide Mutual Insurance Co. , 321 Md. 165, 582 A.2d 501 (1990), and Pfeifer v. Phoenix Insurance Co. , 189 Md. App. 675, 985 A.2d 581 (2010), the Court of Special Appeals held that Ms. Shilling's suit was not time-barred because "the earliest date for commencing contract limitations is February 3, 2014, the date when Ms. Shilling, with Nationwide's permission, accepted [Agency's] offer of $20,000 and executed the Release in favor of [Ms. Gates]. That is the date when [Ms. Gates'] coverage was ‘exhausted’...