St. Paul Fire and Marine Ins. Co. v. Molloy

• Decision Date: 09 October 1980
• Docket Number: No. 3,3
• Citation: 420 A.2d 994,46 Md.App. 570
• Parties: ST. PAUL FIRE AND MARINE INSURANCE COMPANY v. Charles J. MOLLOY et ux.
• Court: Court of Special Appeals of Maryland

Page 570

46 Md.App. 570

420 A.2d 994

ST. PAUL FIRE AND MARINE INSURANCE COMPANY v. Charles J. MOLLOY et ux.

No. 3.

Court of Special Appeals of Maryland.

Oct. 9, 1980.

Gary A. Godard, Rockville, with whom were Roy L. Mason and Donahue, Ehrmantraut & Montedonico, Rockville, on the brief, for appellant.

Terrell N. Roberts, III, Hyattsville, with whom was Emmett H. Nanna, Jr., Hyattsville, on the brief, for appellees.

Argued before GILBERT, C. J., and MORTON and MOORE, JJ.

GILBERT, Chief Judge.

The primary issue in this case is the extent to which an insurer waives available defenses upon the denial of liability of a claim asserted by an insured.

On January 22, 1978, the home of the appellees, Charles and Diane Molloy, was severely damaged by fire. When the fire occurred, the home was insured by the appellant, St. Paul Fire and Marine Insurance Co. The fire was discovered in the late afternoon by Mr. Molloy who, as the only one at home, drove some four miles to a local MacDonald's to telephone a report of the fire, passing on the way the homes of several neighbors as well as a few commercial establishments. Upon return to his home shortly thereafter, he found that the fire department had the blaze under control. When the fire investigators attempted to question him, Mr. Molloy hurriedly drove off, leaving the investigators to initiate a full siren chase after him. Despite the theatrical effort, Mr. Molloy was able to elude his pursuers. Subsequent to the conflagration, the fire investigators filed a report stating that the fire, which started in the hall closet, was ignited intentionally through the use of "an open flame device, such as a match or cigarette lighter." Soon afterward, the Prince George's County State's Attorney Office charged Mr. Molloy with arson. The charge was later nol prossed.

In accord with the terms of the insurance policy, the appellees filed a proof of loss statement with the appellant on April 11, 1978. Appellant denied liability on June 28, 1978, in a letter written to the appellees' attorney, stating as its reasons the appellees' failure "to use all reasonable means to save and preserve the property at and after the fire." At the time of the denial, the appellant possessed a copy of the fire investigator's report which suggested the possibility of arson. Additionally, the appellant had knowledge of Mr. Molloy's behavior a the time of and after the fire, and it was aware that arson charges had been brought against him, and that they were dropped. The appellees sued the appellant on the insurance contract to recover the loss sustained in the fire.

At trial, the appellees made a motion in limine to exclude all evidence indicating that Mr. Molloy had deliberately set fire to his home. A motion was also made by the appellees to sever Mrs. Molloy's interest under the insurance policy from that of her husband. The court reserved ruling on both motions; each was, however, granted at the close of the appellant's case. The jury was instructed to ignore all evidence suggesting that Mr. Molloy committed arson and to consider only whether both appellees had neglected to preserve the insured premises during and after the fire. A verdict was returned for the appellees.

The issues presented are fourfold: 1)whether the trial judge properly ruled that the appellant had waived the defense of arson due to its failure to notify the appellees of such defense at the time liability was denied; 2) whether Mrs. Molloy's interest in the insurance policy, held in tenancy by the entireties, could be severed from that of her husband; 3) whether the trial judge properly denied appellant's motion for a directed verdict on the issue of appellees' alleged failure to preserve their property during or after the fire; and 4) whether the trial judge erred in making several evidentiary rulings unfavorable to the appellant. We affirm the judgment of the trial court and now state our reasons.

Upon notification of an insured's claim, the insurer may either accept or deny liability. If the insurer denies liability, all defenses of which he has knowledge at the time of the denial must be asserted or else they are waived. 16A Appleman, Insurance Law and Practice § 9260 (1968); Couch on Insurance 2d § 71:43 (1968); 43 Am.Jur.2d Insurance § 1146 (1969); 45 C.J.S. Insurance §§ 706-707 (1946). Knowledge sufficient to constitute waiver "must be of the essential facts necessary to enable a person of ordinary prudence and judgment to act understandingly, and it must be knowledge as distinguished from mere inference." 45 C.J.S. Insurance § 696 (1946).

The application of this rule may vary from State to State according to its definition of waiver. Waiver is defined as:

" '... the intentional relinquishment of a known right, or such conduct as warrants an inference of the relinquishment of such right, and may result from an express agreement or be inferred from circumstances. And acts relied upon as constituting a waiver of the provisions of a contract must be inconsistent with an intention to insist upon enforcing such provisions.' " Rubinstein v. Jefferson National Life Insurance Co., 268 Md. 388, 392-93, 302 A.2d 49, 52 (1973), quoting Food Fair v. Blumberg, 234 Md. 521, 531, 200 A.2d 166, 172 (1964). (Citation omitted.)

Estoppel precludes a party from asserting a given right or defense, but it demands "ignorance of the party who invokes the estoppel ... and an innocent and deleterious change of position in reliance on such representations or conduct." 45 C.J.S. Insurance § 673; Rubinstein v. Jefferson National Life Insurance Co., supra 268 Md. at 393, ...