State Farm Mut. Auto. Ins. Co. v. Insurance Com'r

• Decision Date: 02 November 1978
• Docket Number: No. 156,156
• Citation: State Farm Mut. Auto. Ins. Co. v. Insurance Com'r, 392 A.2d 1114, 283 Md. 663 (Md. 1978)
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. INSURANCE COMMISSIONER of the State of Maryland.
• Court: Maryland Supreme Court

Page 663

283 Md. 663

392 A.2d 1114

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. INSURANCE COMMISSIONER of the State of Maryland.

No. 156.

Court of Appeals of Maryland.

Nov. 2, 1978.

Thomas J. Wohlgemuth, Annapolis (Smith & Wohlgemuth, Annapolis, and Joseph A. Schwartz, III, Baltimore, on the brief), for appellant.

Richard J. Brooks, Asst. Atty. Gen., Baltimore (Francis Bill Burch, Atty. Gen., Baltimore, on the brief), for appellee.

Argued before MURPHY, C. J., and SMITH, DIGGES, LEVINE, ^* ELDRIDGE, ORTH and COLE, JJ.

ELDRIDGE, Judge.

Maryland Code (1957, 1972 Repl.Vol., 1978 Cum.Supp.), Art. 48A, § 539, provides that every motor vehicle liability insurance policy issued, sold or delivered in Maryland after January 1, 1973, afford a minimum of $2,500.00 medical, hospital, disability and loss of income benefits covering the named insured and other specified categories of persons injured in an accident. These benefits, commonly referred to as "Economic Loss" or "Personal Injury Protection" or "PIP" benefits, are under § 540 payable without regard to the fault or non-fault of the insured or the recipient in causing or contributing to the accident. Section 543(d) of Art. 48A mandates that the PIP benefits "shall be reduced to the extent that the recipient has recovered benefits under workmen's compensation laws of any state or the federal government." ¹ The substantive issue in this case involves an interpretation of this offset provision contained in § 543(d). In addition, two procedural questions are presented by the petitioner.

The facts underlying this controversy are undisputed. Patrick Morris was employed on July 31, 1974, by the Washington Gas Light Company. While driving his own automobile in the course of his employment, Morris's vehicle was struck in the rear. Consequently, he sought and recovered workmen's compensation benefits in the amount of $379.50 from his employer's insurance carrier. Subsequently, Morris pursued a tort claim against the negligent third party, and this resulted in a settlement. Out of the settlement proceeds, Morris reimbursed $379.50 to the workmen's compensation insurance carrier, as required by Code (1957, 1964 Repl.Vol., 1978 Cum.Supp.), Art. 101, § 58. Morris then filed a claim for PIP benefits in the amount of $1,119.28 against his own automobile insurance carrier, State Farm Mutual Automobile Insurance Company. State Farm paid only $739.78, maintaining that under § 543(d) of Art. 48A, the $1,119.28 PIP benefits should be reduced by the $379.50 workmen's compensation benefits which Morris received.

Morris filed a protest with the Insurance Commissioner, arguing that since he paid back to his employer's workmen's compensation carrier $379.50 out of the proceeds of the settlement with the tortfeasor, he had not "recovered" workmen's compensation benefits within the meaning of § 543(d). A hearing on the protest was held on August 26, 1975, attended by Morris and his attorney as well as by a representative of State Farm and its attorney. More than thirteen months later, on October 5, 1976, the Insurance Commissioner rendered a decision, holding that Morris's receipt of the $379.50 workmen's compensation benefits was "only a technical, and not a true receipt, a (receipt) in name only, and certainly does not fall within the purview of the Statute as monies 'recovered.' " The Commissioner ordered State Farm to pay Morris $379.50 plus interest.

As authorized by and in accordance with Art. 48A, § 40, and Maryland Rule B2, State Farm appealed the Commissioner's decision to the Baltimore City Court. State Farm served copies of its order for appeal and its petition under Rule B2 e upon the attorney for Morris. In addition, the Insurance Commissioner's office sent to Morris's attorney a "Certificate of Compliance With Maryland Rule B2 d," notifying him of the appeal. Subsequently, a copy of the certificate of the Insurance Commissioner, certifying the contents of the administrative record, as provided for by Art. 48A, § 40(3), was served upon Morris's attorney. And a copy of the Insurance Commissioner's answer to State Farm's petition was served upon Morris's attorney. Nevertheless, neither Morris nor his attorney appeared before the Baltimore City Court.

State Farm's petition in the Baltimore City Court challenged the Insurance Commissioner's order on essentially two grounds. First, it asserted that the Commissioner's order was void because § 39(1) of Art. 48A states that "(w) ithin thirty (30) days after termination of the hearing . . ., (the Commissioner) shall make his order . . .," and the Commissioner took more than thirteen months to render his order in this case. Second, State Farm contended that the administrative decision was contrary to the provision in § 543(d) requiring that PIP benefits be reduced to the extent that workmen's compensation benefits have been recovered.

The Baltimore City Court affirmed the Insurance Commissioner's order. Regarding the thirty day requirement of Art. 48A, § 39(1), the court stated in its oral opinion that despite the use of the word "shall," the provision is "directory only" and, in any event, no prejudice had been shown by the delay. The court went on to agree with the Commissioner's interpretation of § 543(d), holding that the offset provision applies "only where Workmen's Compensation benefits are awarded and received and are not repaid."

State Farm then appealed to the Court of Special Appeals, raising the same two grounds for overturning the Insurance Commissioner's order. After briefs were filed and after oral argument, the Court of Special Appeals sua sponte dismissed the appeal, saying:

"We observe that the order for appeal does not include Mr. Morris as an appellee nor was service of the order for appeal made upon Morris pursuant to Md. Rule 1011 a. The appeal is patently defective because of the want of a necessary party, Mr. Morris."

This Court granted State Farm's petition for a writ of certiorari, believing that the dismissal of the appeal presented an important issue of appellate practice in administrative law cases. We shall hold that the Court of Special Appeals erroneously dismissed the appeal. Since the parties have also briefed and argued the insurance law issues raised by State Farm, and as these matters involve novel questions of statutory interpretation in this State, we shall also deal with the merits of State Farm's appeal instead of remanding the case for such purpose to the Court of Special Appeals.

(1)

Rule 1011 a, upon which the Court of Special Appeals relied in dismissing State Farm's appeal, requires that the party appealing to the Court of Special Appeals serve a copy of the order of appeal upon each other Party to the lower court proceeding or upon his attorney. However, it is clear that Morris, by failing to appear before the Baltimore City Court after having been properly notified of the pendency of the appeal on several separate occasions, lost his status as a "party." Therefore, under Rule 1011 a, State Farm was not obliged to serve Morris or his attorney with a copy of the order of appeal to the Court of Special Appeals.

Morris was clearly a "party" to the administrative proceedings, and, under Rule B2 d, the agency (I. e., Insurance Commissioner's office) was required to notify Morris or his attorney of the filing of the appeal to the Baltimore City Court. Morris v. Howard Res. & Dev. Corp., 278 Md. 417, 365 A.2d 34 (1976). In the instant case, Morris's attorney was properly notified by the Insurance Commissioner's office.

If Morris desired to continue his status as a party, and to participate in the Baltimore City Court judicial review proceeding as a party, he was required to file a demurrer or an answer within thirty days after the filing of State Farm's petition. This is clearly mandated by Rule B9:

"A party to the proceeding before the agency, or to whom the agency is required by law to give notice of the action appealed from, Who desires to participate in the appeal as a party, . . . shall file with the clerk of the court, within thirty days after the filing of the petition of appeal, or such longer or shorter time as may be fixed by the Court, a demurrer, or an answer admitting or denying a fact alleged in such petition and asserting briefly such defense as he or it may see fit, or other appropriate pleading. . . ." (Emphasis supplied.)

As we recently stated in the Howard Res. & Dev. Corp. case, 278 Md. at 423, 365 A.2d at 37, one who has the status of a party at the administrative level, and is thus entitled to notice of the judicial review proceeding, "abandons this status by failing to file in the . . . court an answer or other permissible pleading as directed by Rule B9. . . ." Morris, by failing to file an answer or other pleading in the Baltimore City Court, abandoned his status as a party to the judicial review proceeding. Consequently, there was no requirement that he be served with a copy of the order of appeal to the Court of Special Appeals.

This conclusion, as to insurance appeals specifically, is confirmed by the language of the Insurance Code. Article 48A, § 40(1), provides in pertinent part (emphasis supplied):

"An appeal from the Commissioner shall be taken only from an order or hearing or with respect to a matter which the Commissioner has refused a hearing. Any person who was a party to such hearing, or whose pecuniary interests are directly and immediately affected by any such order or refusal and who is aggrieved thereby may, within 30 days . . . appeal from such order or hearing or such refusal of a hearing. The appeal shall be taken to the Baltimore City Court, by filing written notice of appeal in such court and by filing a copy of such notice with the Commissioner . . . . An appeal taken pursuant to this subsection shall be captioned in the name of the person filing the appeal, as the party appellant, versus the Insurance Commissioner of...