Parsons v. Erie Ins. Group

• Decision Date: 08 August 1983
• Docket Number: Civ. A. No. M-82-710.
• Citation: 569 F. Supp. 572
• Parties: Frances M. PARSONS, surviving spouse, and Anthony Parsons, Richard C. Parsons, Danny B. Parsons, individually and surviving infant children of Curtis Parsons, deceased, and Frances Parsons, individually and personal representative of the estate of Curtis Parsons, deceased, and Senida Murillo, a minor, by her guardian and next friend, Frances M. Parsons v. ERIE INSURANCE GROUP and Progressive Casualty Insurance Company.
• Court: U.S. District Court — District of Maryland

569 F. Supp. 572

Frances M. PARSONS, surviving spouse, and Anthony Parsons, Richard C. Parsons, Danny B. Parsons, individually and surviving infant children of Curtis Parsons, deceased, and Frances Parsons, individually and personal representative of the estate of Curtis Parsons, deceased, and Senida Murillo, a minor, by her guardian and next friend, Frances M. Parsons v. ERIE INSURANCE GROUP and Progressive Casualty Insurance Company.

Civ. A. No. M-82-710.

United States District Court, D. Maryland.

August 8, 1983.

COPYRIGHT MATERIAL OMITTED

A. Harold DuBois and Verderaime & DuBois, P.A., Baltimore, Md., and Edward D.E. Rollins, III, Elkton, Md., for plaintiffs.

Edward C. Mackie and Rollins, Smalkin, Richards & Mackie, Baltimore, Md., for defendant Erie Ins. Group.

David M. Buffington, Bruce R. Parker and Semmes, Bowen & Semmes, Baltimore, Md., for defendant Progressive Cas. Ins. Co.

MEMORANDUM AND ORDER

JAMES R. MILLER, Jr., District Judge.

On February 21, 1981, Curtis Parsons was driving his 1980 Pontiac Bonneville, Maryland license number AAE-631. He was accompanied by his wife, Frances Parsons, and their four children, Senida Murillo, Daniel Parsons, Anthony Parsons, and Richard Parsons. They were involved in a collision with a 1974 Oldsmobile, owned and driven by an uninsured motorist, Manuel Molina. The parties to this litigation agree that the accident was caused by the uninsured motorist. As a result of the accident, Curtis Parsons died and the remaining occupants of the 1980 Pontiac were injured.

This suit, originally instituted in the Circuit Court for Cecil County, was removed to this court by the defendants, the Erie Insurance Group (Erie) and the Progressive Casualty Insurance Company (Progressive) in March of 1982. Originally, Frances Parsons sought a declaratory judgment identifying the responsibility of the two defendants for the claims made by her on behalf of Curtis Parsons, the deceased, and Senida Murillo.¹ On March 4, 1983, Erie filed a Motion for Summary Judgment as to these claims.² Progressive and Frances Parsons filed oppositions to that motion.³ Thereafter, the complaint was amended to seek declaratory relief as to the claims of the remaining four occupants of the car.⁴ Subsequently, Progressive filed a Motion for Summary Judgment as to the claim made on behalf of Curtis Parsons and as to the claims made by or on behalf of the remaining occupants in the 1980 Pontiac.⁵ The plaintiffs and Erie responded separately to this motion.⁶ A hearing was held on the motions on July 22, 1983. In addition to the above, the plaintiffs and Erie have supplied additional argument to the court by letters.⁷

At the time of the accident in February 1981, two relevant insurance policies were in effect.

In November of 1980, Progressive issued Policy No. 1284867-0 to Curtis Parsons, and this policy was in effect in February of 1981 at the time of the accident. (Paper No. 22, Exh. C). The named insured was Curtis Parsons, and the insured vehicle was a 1981 Ford Escort. It is admitted that the 1980 Pontiac involved in the February accident was not listed as an insured vehicle in the policy issued by Progressive. While the Progressive policy did cover Curtis Parsons with respect to uninsured motorist coverage when he rode in or drove other cars, the policy did not apply to,

"bodily injury to an insured while occupying a highway vehicle (other than an insured highway vehicle) owned by a named insured or any relative resident in the same household as the named or designated insured."

The definition of "insured highway vehicle" in the policy excluded a motor vehicle owned by the named insured but not described in the policy declarations as an insured vehicle.⁸

Erie issued Policy No. M-06-73-00345R in June of 1978. (Paper No. 22, Exh. A). Although this policy was applied for by Curtis Parsons and was issued to him, the policy was intended to cover only Frances Parsons as a named insured. An endorsement to the aforesaid policy provided as follows:

"It is agreed that effective on and after the date shown below, the Erie shall not be liable for damages, losses, or claims caused while the motor vehicle described in the policy or any other motor vehicle to which the terms of the policy would ordinarily be extended is being operated by or in charge of

Curtis Parsons NAMED PERSONS (S)

whether or not such operation or charge was with the express or implied permission of a person insured under this policy."

(Paper No. 22, Exh. B, at 2) This policy was periodically renewed and was in effect as to Frances Parsons in February, 1981. At that time, the 1980 Pontiac was listed as an insured vehicle.⁹

I. Statutory Notice Requirements

The Md.Ann.Code, Art. 48A, §§ 240AA, 240B, 240C, 240C-1, and 240D outline the procedure which an insurance company must follow to effect a cancellation, nonrenewal, increase in premium or reduction of coverage under a motor vehicle liability insurance policy. Prior notice must be sent by the insurer to the insured, stating what action is to be taken, the proposed effective date of the action, the insurer's actual reasons for taking such action, identification of which persons are to be excluded from coverage, the right of the insured to replace the insurance through the Maryland Automobile Insurance Fund (MAIF), the right of the insured to protest the action, and the procedures for obtaining review from the State Insurance Commissioner of Maryland. § 240AA(b).

In September of 1975, Erie issued Policy No. M09-17-02292 with Frances and Curtis Parsons as named insureds. In its answers to interrogatories, Erie stated that, after learning of the history of Mr. Parsons' speeding violations, a notice of cancellation of the 1975 policy was sent by certified mail to Curtis and Frances Parsons on December 3, 1975. Erie also stated that as of January 17, 1976, any coverage under Policy No. M09-17-02292 had ended. (Paper No. 30, ¶¶ 4 & 5). At the hearing on July 22, 1983, all parties agreed that Policy No. M09-17-02292 is not at issue in this case and that it had been effectively cancelled.

In its Motion for Summary Judgment, Erie contended that, due to the endorsement attached to the 1978 Policy No. M06-73-00345R, it is not liable for any claims made on behalf of Curtis Parsons. In its response to the Motion, Progressive, joined by the plaintiffs, had originally alleged that Erie had not complied with the statutory prerequisites, Md.Ann.Code, Art. 48A, §§ 240AA, 240B, 240C, 240C-1, and 240D when excluding Curtis Parsons from coverage under the 1978 Erie policy endorsement and, therefore, the endorsement was invalid and coverage should be provided by Erie as required under § 240D.¹⁰

At the hearing, Progressive conceded that its pretrial investigation had produced no evidence that the proper notices had not been given under the aforesaid statutes. The plaintiffs made the same concession. Progressive additionally conceded the validity of the endorsement, while disagreeing with Erie as to its effect under the circumstances of this case. The plaintiffs continued to challenge the validity as well as the effect of the endorsement.

Subsequent to the hearing, however, the plaintiffs, by letter of July 25, 1983, noted that § 240C-1 applied only when there has been a "cancellation, nonrenewal or premium increase."¹¹ Because the Erie 1978 policy did not cancel, renew, or increase the premiums of any existing policy of insurance, the previous Erie insurance having expired in 1976, the plaintiffs belatedly asserted that § 240C-1 does not apply to this case.

Erie, by letter of July 27, 1983, agreed with plaintiffs' counsel that § 240C-1 is inapplicable based on the facts of the present case. For the same reasons, Erie contended that the procedural statutory requirements of §§ 240AA, 240B, and 240C similarly do not apply.

The above statutes appear to this court to encompass a statutory scheme, designed to regulate and monitor the cancellations of, or changes in, existing policies of insurance, whose purpose is to safeguard the interests of persons who are already insured.¹² There is no indication that regulation of new policies was intended to be achieved by these statutes. Consequently, this court concludes that the procedural requirements of Md.Ann.Code, Art. 48A, §§ 240AA, 240B, 240C, 240C-1, and 240D are not applicable to insurers when issuing totally new policies. Therefore, Erie's alleged failure to provide notice would not invalidate the endorsement to the 1978 Erie policy. In addition, the court concludes that the provisions of § 240C-1, applying as they do only to existing policies of insurance, were not intended to limit the "right of an insurer to select the risks it concludes profitable to insure." Insurance Commissioner of Maryland v. Allstate Insurance Co., 268 Md. 428, 440, 302 A.2d 200 (1973).

II. Statement of Positions

During the oral hearing and through papers filed with the court, the positions of the parties with respect to the claims made on behalf of Curtis Parsons and those claims made by or on behalf of the remaining parties for uninsured motorists (UM) benefits and personal injury protection (PIP) benefits have become clear.

Quite simply, Erie asserts that, under the plain language of the endorsement to the 1978 Erie policy, it is not liable for claims, losses, or damages caused while the 1980 Pontiac, the insured vehicle, was being operated by Curtis Parsons. Because Curtis Parsons was driving the Pontiac at the time of the February 1981 accident, Erie, pursuant to the endorsement, denied coverage for any claims made on behalf of Curtis Parsons or made by or on behalf of the remaining occupants of the Pontiac for UM or PIP benefits. Originally, Erie relied upon § 240C-1 as statutory approval for the endorsement. Acknowledging as it now does by post hearing letter that § 240C-1 does not apply to these facts, Erie argues that as an insurer it could unqualifiedly determine...