STATE FARM MUTUAL AUTOMOBILE INS. CO. v. Gregorie, 738

• Decision Date: 31 March 2000
• Docket Number: No. 738,738
• Citation: 748 A.2d 1089,131 Md. App. 317
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. Corazon A. GREGORIE, et al.
• Court: Court of Special Appeals of Maryland

748 A.2d 1089

131 Md. App. 317

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. Corazon A. GREGORIE, et al.

No. 738, Sept. Term, 1999.

Court of Special Appeals of Maryland.

March 31, 2000.

Michael J. Budow (Laura Basem Jacobs, Richard E. Schimel and Budow and Noble, P.C., on the brief), Bethesda, for appellant.

William N. Zifchak (Sasscer, Clagett & Bucher, on the brief), Upper Marlboro, for appellees.

Argued before WENNER, BYRNES and ADKINS, JJ.

ADKINS, Judge.

We examine in this appeal the nature and extent of the prejudice from an insured's refusal to cooperate, that a liability insurer must show, pursuant to Md.Code (1995, 1997 Repl.Vol.), § 19-110 of the Insurance Article ("IA") in order for the insurer to be relieved from its obligation to provide insurance coverage. State Farm Mutual Automobile Insurance Company, appellant, contends that the Circuit Court for Prince George's County erred in finding that prejudice existed, but nonetheless imposed liability for coverage. Allstate Insurance Company ("Allstate"), appellee, defends the decision of the circuit court, contending that it properly made a factual finding regarding the extent to which appellant was actually prejudiced and required coverage only to that extent.

FACTS AND LEGAL PROCEEDINGS

This case arises out of an automobile accident that occurred on the Capital Beltway ("Beltway") on February 10, 1994. Appellee Corazon A. Gregorie was a passenger in a car she owned that was operated by Mark Winston. At some time after midnight, Latricia S. Kirby Agbemashion¹ ("Kirby") was also driving a car on the Beltway and was traveling in front of Gregorie's car in the same lane and direction. At some point, Gregorie's car struck the rear end of Kirby's vehicle.

Significant disputes arose concerning the circumstances surrounding the accident. According to Gregorie, it had snowed heavily earlier in the day and at that time the roads were wet and damp. She testified, however, that when Winston and she were driving on the Beltway around midnight, the snow had stopped and the roads had been plowed and were dry. She further testified that when Winston and she approached their exit on Kenilworth Avenue:

I noticed a very slow moving dark car that had no lights on it, no taillights, no license lights.

* * *

I didn't say anything, because I was waiting to exit—I was waiting for either [Winston] to exit or brake. He was not doing anything after a couple of seconds, and at that point I said look out, because apparently he didn't see the car.

* * *

[I said look out] because I would have reacted at that point. I would have either been—I would have applied my brakes.

* * *

Winston did apply the brakes at that point, and very shortly after we crashed into the car in front of us, [Kirby's] car.

Winston corroborated Gregorie's version of the incident. He testified that at the time of the accident the temperature was freezing "[t]here was a slight dampness to the pavement, slight discoloration. Other than that, the pavement on the Beltway was clear." According to Winston,

That section of the Beltway was dark. It was about a hundred yards before the ramp started off to the right, and there were lights on the ramp. But on a portion of the Beltway the roadway was dark and the pavement was dark also.

* * *

As I looked, double clutched and looked to the right from my rearview mirror ... [Gregorie] said look out.... I immediately went on the brakes when I saw ahead of me a car with no lights. My initial reaction to that car was that it was stopped in the Beltway.

* * *

I went full on the brakes. But even as I was going through on the brakes, it was not a question of avoiding that person, it was just too late, it was a question of how much speed I was going to scrub [sic] off before I went into that car ahead of me.

My car swerved about five degrees to the right once I applied the brakes. And it was in that position that I went directly into the rear of the car ahead of me.

* * *

—while I was in the middle of my skid there, I saw what I believed to be a slight flicker, signal flicker of red light to the rear.

After the accident, appellant interviewed Kirby. Kirby claimed that she was driving "about 50, 55" and that she was worried about ice on the road. She also stated that she believed that the other car involved in the accident was "going too quickly." Linda Weiner was driving behind Winston in the same lane at the time of the accident. In a statement made to appellant's representative, she stated that Kirby's car was "going very, very slow, or just stopped completely" and that she saw that Kirby's car "had on its hazards." She further stated that the weather was clear and she did not see any ice on the roadway. Finally, she stated that she and the other cars on the Beltway were traveling at approximately the same rate of speed as Winston.

At the time of the accident, Kirby was insured under an automobile insurance policy ("policy") with appellant. After learning of the accident, appellant investigated the claim. In doing so, appellant: (1) obtained a recorded statement from Weiner and Kirby; (2) acquired a copy of the police report and a weather report for the day of the accident; and (3) took pictures of Kirby's vehicle.

Gregorie filed a complaint against Winston to recover for injuries she allegedly sustained in the accident. Winston then filed a Third-Party Complaint against Kirby seeking contribution and indemnification, and Gregorie amended her complaint to name Kirby as a co-defendant. Kirby also brought a separate action against Winston, which was consolidated with Gregorie's tort action. Winston then filed a counter-claim against Kirby in that action.

Appellant retained counsel to defend Kirby against Gregorie's and Winston's claims, and Kirby retained separate counsel to prosecute her own claims. Nevertheless, Kirby refused to cooperate with any of her attorneys. Apparently, Kirby relocated to Georgia and did not respond to appellant's repeated attempts to contact her. Specifically, appellant claims that it: (1) forwarded letters to Kirby by certified mail and first class mail requesting she contact appellant or counsel; (2) left at least ten messages by telephone at her residence; (3) contacted their local office in Georgia and had a representative go to Kirby's residence to obtain her cooperation; (4) retained a private investigator to confirm Kirby's whereabouts and attempt to contact her; and (5) offered to pay all expenses incurred by Kirby to participate in her defense. In total, appellant claims that it "undertook at least 84 attempts to contact [Kirby] and obtain her cooperation."

Kirby's deposition was noted for June 10, 1996, and October 3, 1996, but she failed to appear on both occasions. Additionally, appellant claims that it was unable to respond to written discovery and answer interrogatories due to Kirby's refusal to communicate with counsel. Gregorie and Winston subsequently filed motions for sanctions. By order dated May 6, 1997, the circuit court ordered that Kirby was "precluded from introducing any evidence of or concerning the circumstances surrounding the ... accident."

A trial was held on liability issues only. Again, Kirby failed to appear, and pursuant to the court order, appellant was forbidden to introduce any evidence in her defense. The jury returned a verdict against Kirby only in favor of Gregorie. Appellant filed a motion for judgment notwithstanding the verdict, which was denied.

Before a jury trial on damages, appellant brought a declaratory judgment action seeking a declaration that it was not obligated to defend and indemnify Kirby for any claim or judgment due to Kirby's failure to cooperate. Gregorie simultaneously brought a declaratory judgment action against appellant and the insurer of her vehicle, Allstate, seeking a declaration whether appellant or Allstate would be liable to Gregorie.

On March 5, 1999, the trial court found that Kirby had failed to cooperate with appellant and that appellant was actually prejudiced by her failure. The court entered an order holding that appellant was not obligated to defend or indemnify Kirby for claims that arose out of the accident. On Allstate's motion for reconsideration, however, the trial court held in a written opinion that appellant was obligated to defend or indemnify Kirby only to the extent that it was actually prejudiced. The trial court then examined the evidence presented at trial, and evidence that appellant proffered that it would have presented had Kirby cooperated. Based on this evidence, the trial court found that Kirby and Winston were both negligent, and that appellant was "responsibl[e] for fifty percent (50%) of Gregorie's damages up to the limits of [appellant's] liability coverage on the Kirby vehicle." This appeal followed.

DISCUSSION

a.

In a declaratory judgment action, the trial court determines issues of law and fact, and its conclusions as to the facts will not be disturbed unless clearly erroneous. See Aetna Cas. and Sur. Co. v. Brethren Mut. Ins., 38 Md.App. 197, 206, 379 A.2d 1234 (1977),

cert. denied, 282 Md. 730 (1978). In reviewing the trial court's legal conclusions, we must determine whether the trial court was legally correct. See Heat & Power v. Air Products, 320 Md. 584, 591, 578 A.2d 1202 (1990). Moreover, "in a declaratory judgment action which presents an issue of coverage under the terms of an insurance policy, `it is the function of the court to interpret the policy and decide whether or not there is coverage.' " Mitchell v. Maryland Casualty, 324 Md. 44, 56, 595 A.2d 469 (1991) (quoting St. Paul Fire & Marine Ins. v. Pryseski, 292 Md. 187, 194, 438 A.2d 282 (1981)).

b.

The policy between appellant and Kirby required her to cooperate with appellant, and assist in (1) making settlements, (2) securing and giving evidence, and (3) attending hearings and trials. Although Maryland courts have recognized the validity...