Pedersen v. Republic Ins. Co.

• Decision Date: 01 September 1987
• Docket Number: No. 147,147
• Citation: 532 A.2d 183,72 Md.App. 661
• Parties: Thomas E. PEDERSEN, Jr., et ux. v. REPUBLIC INSURANCE COMPANY, et al. ,
• Court: Court of Special Appeals of Maryland

Page 661

72 Md.App. 661

532 A.2d 183

Thomas E. PEDERSEN, Jr., et ux. v. REPUBLIC INSURANCE COMPANY, et al.

No. 147, Sept. Term, 1987.

Court of Special Appeals of Maryland.

Nov. 5, 1987.

Francis John Gorman (Moore, Carney & Ryan and Joseph Pokorny, on the brief), Towson, for appellants.

Victor I. Weiner (Leonard L. Lipshultz and Lipshultz and Hone, Chartered, on the brief), Silver Spring, for appellee, Republic Ins. Co.

Andre R. Weitzman, on the brief, Baltimore, for appellee, Eugene Miller.

Argued before GILBERT, C.J., and GARRITY and POLLITT, JJ.

POLLITT, Judge.

This is an appeal from a declaratory judgment determining that a homeowner's policy of insurance issued by Republic Insurance Company, appellee, to Thomas E. Pedersen, Jr., and Joan C. Pedersen, appellants, did not provide coverage for claims made against the Pedersens by Eugene Miller, Jr., based on an alleged negligent entrustment of an automobile by the Pedersens to their son, Thomas E. Pedersen, III.

Republic insured the Pedersens under a standard homeowner's policy which provided coverage for, among other things, personal liability and medical payments to others. Included within the definition of "insured" were relatives residing in the Pedersen household. The policy provided:

SECTION II--EXCLUSIONS:

1. Coverage E--Personal Liability and Coverage F--Medical Payments to Others do not apply to bodily injury or property damage:

* * *

* * *

e. arising out of the ownership, maintenance, use, loading or unloading of:

* * *

* * *

(2) a motor vehicle owned or operated by, or rented or loaned to any insured....

Eugene P. Miller, Jr., sued appellants in the Circuit Court for Baltimore County. He alleged that the Pedersens had negligently entrusted the use of a vehicle to their son when they knew or should have known that such use would likely cause injury to others. He further alleged the son operated that vehicle in a negligent manner, causing serious injuries to Miller, a passenger in the vehicle. He sought damages of one million dollars.

Mr. and Mrs. Pedersen then filed this action, seeking a declaration from the court that Republic was obligated to defend the action brought against them by Miller and to provide coverage for any liability found to exist. The trial court (Hennegan, J.) found no potentiality that the claim could be covered by the policy and granted summary judgment in favor of Republic. The Pedersens appealed. We shall affirm.

The obligation of an insurer to defend its insured under a contract provision such as here involved is determined by the allegations in the tort actions. If the plaintiffs in the tort suits allege a claim covered by the policy, the insurer has a duty to defend. [citations omitted] Even if a tort plaintiff does not allege facts which clearly bring the claim within or without the policy coverage, the insurer still must defend if there is a potentiality that the claim could be covered by the policy.

Brohawn v. Transamerica Ins. Co., 276 Md. 396, 407-08, 347 A.2d 842, 850 (1975), rev'g 23 Md.App. 186, 326 A.2d 758 (1974) (emphasis in original). See also Ed. Winkler & Son v. Ohio Cas. Ins., 51 Md.App. 190, 441 A.2d 1129 (1982). Thus, we must examine the facts as alleged in the underlying tort action.

Miller alleged that Thomas E. Pedersen, III, the son of appellants, was not a licensed driver, the privilege having been denied him by the State of Maryland due to repeated violations of the motor vehicle laws, and "the unsafe and reckless manner in which he operated a motor vehicle, causing many serious collisions and inflicting serious personal injury on blameless vehicle operators and passengers." He further alleged that appellants, despite their knowledge of such facts, and in breach of their duty to refrain from entrusting a vehicle to a careless, reckless, unfit and unsafe driver, "did entrust to and facilitated the use of" a vehicle by the son. He alleged the Pedersens entrusted the vehicle to their son by selling it to their daughter, "whom they knew would in turn permit the son to use [it] at his pleasure." Title to the vehicle remained in the father. After alleging his injury due to the negligent operation of the vehicle, he alleged, as previously noted, that the Pedersens knew or should have known the use of the vehicle by the son would likely cause unreasonable risk of harm to others.

Although not specifically alleged in the tort action, facts developed in the instant case showed that the son had accumulated 40 points assessed against his driver's license. ¹ Although an adult, the son resided with his parents. As a condition of his residence with them, the parents required that the son turn over his car keys to them and refrain from driving. While the parents were vacationing in Ocean City, the son obtained the keys and drove the vehicle, negligently causing the accident in which Miller was injured. As previously mentioned, title to the vehicle remained in the name of the father. He had sold the car to his daughter who had, in turn, sold it to her brother. The daughter carried liability insurance on the car with The Ohio Casualty Company. Ohio Casualty had settled Miller's claim against the son for $50,000 and obtained a joint tort-feasor release.

Because the Maryland appellate courts have not previously addressed the question of whether an action for negligent entrustment falls within the exclusionary language of the homeowner's policy, appellants assert there was, at least, a potentiality of coverage. They further posit the language of the policy "must be ambiguous or there would not be such a split among jurisdictions" which have decided the question. As did the trial court, we disagree. Relying on Kahlenberg v. Goldstein, 290 Md. 477, 431 A.2d 76 (1981), Judge Hennegan found the "tort of negligent entrustment involves concurrent causation," and, therefore, the injuries sustained by Miller "arose out of the use of a motor vehicle operated by an insured." Thus, he reasoned there was no potentiality that the claim could be covered by the policy.

In Kahlenberg, the Court of Appeals said:

[T]he tort of negligent entrustment involves concurrent causation. The negligence of the supplier consists of furnishing the chattel with the requisite knowledge. This sets in motion one chain of causation which may or may not in fact result in injury. The other chain of causation involves the conduct of the immediate tortfeasor. If physical harm results to one within the class of foreseeable plaintiffs, as a result of the use of the chattel by the entrustee in a manner, which, because of the youth, inexperience or otherwise of the entrustee, the supplier knew or had reason to know was a likely use and which would involve an unreasonable risk of physical harm, the two chains of causation converge and liability is imposed on the supplier, for his own negligence. [emphasis supplied]

Kahlenberg, supra, 290 Md. at 489-90, 431 A.2d at 83-84.

In Rispoli v. Jackson, 51 Md.App. 606, 445 A.2d 349, cert. denied, 294 Md. 142 (1982), we dismissed an appeal concerning a negligent entrustment count when appellant had accepted the benefit of a judgment in his favor on a negligence count. We said:

While the counts may represent different causes of action, they are not separate and distinct because they involve precisely the same accident, the same injuries and the same principal.

Rispoli, supra, 51 Md.App. at 611, 445 A.2d at 351.

We also do not find "such a split among jurisdictions" which have decided the question as appellants would have us believe. At least 25 jurisdictions have held the policy exclusion in question applicable to claims of negligent entrustment. ² Assuming some disagreement among various courts, such disagreement does not suggest the terms of the policy are ambiguous. Appellants suggest no specific ambiguities, and we find no ambiguities in the clause in question. "[T]he fact '[t]hat a term cannot be precisely defined so as to make clear its application in all varying factual situations does not mean that it is ambiguous.' " Winterwerp v. Allstate Ins. Co., 277 Md. 714, 718, 357 A.2d 350, 353 (1976) ( quoting Allstate v. Humphrey, 246 Md. 492, 229 A.2d 70 (1967)). Maryland adheres to the rule "that the intention of the parties is to be ascertained if reasonably possible from the policy as a whole." Penn., Etc., Ins. Co. v. Shirer, 224 Md. 530, 536, 168 A.2d 525, 528 (1961). In interpreting insurance contracts, words are to be given their customary and normal meaning. Absent ambiguity, construction of the contract is within the province of the court and Maryland has not adopted the rule that an insurance policy is to be most strongly construed against the insurer. Gov't Employees Insur. v. DeJames, 256 Md. 717, 261 A.2d 747 (1970).

Giving the words in the exclusionary clause their customary and normal meaning, we have no difficulty in concluding that Miller's claim against the Pedersens arose out of the use of a motor vehicle owned or operated by an insured.

Courts in other jurisdictions which have addressed this issue, under similar factual situations with identically worded policy exclusions, have emphasized the underlying negligence of the entrustee in holding the exclusion relieves the insurer from providing coverage and a defense.

The Superior Court of Delaware, in Ins. Co. of North America v. Waterhouse, 424 A.2d 675 (Del.Super.Ct.1980), said:

Admittedly, the tort of negligent entrustment involves conduct which, in part, is distinct from the operation of the instrumentality which inflicts the harm. It is the negligent entrusting which creates the unreasonable risk, although the magnitude of the harm may depend upon the dangerous character of the product entrusted. See, Prosser, Law of Torts (4th Ed.) p. 678. It is not difficult to envision situations in which the type of instrumentality entrusted, (e.g., a gun or explosives), squares with the insurer's obligation to defend...