Ward v. Nationwide Mut. Auto. Ins. Co., 125

• Decision Date: 01 September 1990
• Docket Number: No. 125,125
• Citation: 328 Md. 240,614 A.2d 85
• Parties: Jeanne O. WARD et al. v. NATIONWIDE MUTUAL AUTOMOBILE INSURANCE COMPANY. ,
• Court: Maryland Court of Appeals

Page 240

328 Md. 240

614 A.2d 85

Jeanne O. WARD et al. v. NATIONWIDE MUTUAL AUTOMOBILE INSURANCE COMPANY.

No. 125, Sept. Term, 1990.

Court of Appeals of Maryland.

Oct. 26, 1992.

Edward C. Bou, Washington, D.C., argued and on brief (Stephen A. Bou, Edward C. Bou, P.C., on brief), for plaintiffs.

John A. Buchanan, Upper Marlboro, argued and on brief (Giancarlo M. Ghiardi, Sasscer, Clagett, Channing & Bucher, on brief), for defendant.

Argued before MURPHY, C.J., ELDRIDGE, RODOWSKY, McAULIFFE, CHASANOW and KARWACKI, JJ., and Charles E. ORTH, Jr., Judge of the Court of Appeals (Retired, Specially Assigned).

ELDRIDGE, Judge.

This case involves claims under an automobile insurance policy for personal injury protection (PIP) benefits. Both Maryland and the District of Columbia have statutory provisions relating to claims for PIP benefits under automobile insurance policies, and the issues before us concern which statutes are applicable, as well as the meaning of the applicable statutory provisions.

The action arose out of an automobile accident which occurred on March 19, 1988, in Adelphi, Maryland. The six plaintiffs, who are Jeanne O. Ward, Jessica M. Ward, Danielle Ward, Dawn Ward, Wanda Miles, and Olivia C. Miles, were traveling in an automobile on University Boulevard in Adelphi when their vehicle was struck in the rear by an automobile driven by the defendant Muthuvel Chelliah. The four Ward plaintiffs and the defendant Chelliah are residents of Maryland. The two Miles plaintiffs are residents of the District of Columbia.

The automobile in which the plaintiffs were traveling was owned by Lillie and Russell Miles, who are the parents of the plaintiff Wanda Miles and the grandparents of the plaintiff Olivia C. Miles. Lillie and Russell Miles are also residents of the District of Columbia, residing in the same household as Wanda and Olivia Miles. The Miles automobile was registered in the District of Columbia. It was covered by an automobile insurance policy which was executed and delivered in the District of Columbia by the defendant Nationwide Mutual Automobile Insurance Company. Lillie and Russell Miles were the named insureds in the policy.

The six plaintiffs on April 27, 1988, each submitted a complete application for PIP benefits on Nationwide's forms. In a letter accompanying these applications, the plaintiffs asserted their rights to "PIP benefits available under the policy of insurance and paid for by the insured," and also informed Nationwide that they intended to assert third party liability claims against Muthuvel Chelliah. ¹ Nationwide denied the applications for PIP benefits on the theory that, under District of Columbia law, the plaintiffs must elect either to receive PIP benefits or to maintain a third party liability claim, but that the plaintiffs could not elect both.

The plaintiffs later commenced the present action by filing a complaint in the Circuit Court for Prince George's County, naming both Muthuvel Chelliah and Nationwide as defendants. In the first six counts of the complaint, the plaintiffs sought damages from Chelliah, alleging that his negligent driving caused the accident which resulted in injuries to each of the six plaintiffs. In counts seven through twelve, the plaintiffs sought damages from Nationwide based on Nationwide's refusal to pay PIP benefits in accordance with the insurance policy issued on the Miles automobile.

Nationwide moved for summary judgment. In its motion, Nationwide argued that the insurance contract was issued in the District of Columbia on an automobile which was registered in the District of Columbia, and that, therefore, District of Columbia law should apply under the principle of lex loci contractus. Furthermore, Nationwide argued that the applicable District of Columbia law requires an injured person to make an election between PIP coverage and a third party liability claim. According to Nationwide, the plaintiffs were not eligible for PIP benefits because, at the time of their application for the benefits, the plaintiffs advised Nationwide of their intent to pursue a third party liability claim.

In response to Nationwide's motion for summary judgment, the plaintiffs argued that, because the accident occurred in Maryland, the law of Maryland should control under the principle of lex loci delicti. ² The plaintiffs alternatively argued that, as long as they applied for PIP benefits within the sixty day time period provided by District of Columbia law, "an insured is entitled to personal injury protection coverage, regardless of any liability claim that may arise out of the accident."

At the conclusion of a hearing, the circuit court granted Nationwide's motion for summary judgment with respect to counts seven through twelve. Thereafter the case proceeded to trial on counts one through six. Subsequently, money judgments were entered in favor of the plaintiffs and against the defendant Chelliah.

The plaintiffs noted an appeal, challenging only the summary judgment in favor of Nationwide. Before argument in the Court of Special Appeals, this Court issued a writ of certiorari.

As previously stated, the insurance policy at issue in this case was executed in the District of Columbia on a vehicle registered in the District of Columbia. The insurance policy provided for "Personal Injury Protection options in accordance with the District of Columbia Compulsory No-Fault Motor Vehicle Insurance Act...." The basic provision of that statute relating to PIP benefits is District of Columbia Code Ann. (1981, 1988 Repl. Vol.), § 35-2104, which provides in relevant part as follows:

"Personal injury protection.

"(a) In general.--(1) In addition to insurance required to be provided by an insurer under § 35-2106, each insurer shall offer to each person required to have insurance under this chapter optional personal injury protection insurance as set forth in this section. Personal injury protection shall provide coverage for victims for injuries arising from accidents resulting from the operation or use of a motor vehicle by the insured or use of the insured motor vehicle within or outside the District. It shall provide benefits for medical and rehabilitation expenses, work loss, and funeral benefits as set forth in this section. Personal injury protection benefits are applicable only to a victim who is an insured or an occupant of the insured's vehicle or of a vehicle which the insured is driving.

* * * * * *

"(b) Payment without regard to fault.--The benefits set forth in this section with respect to personal injury protection shall be provided without regard to, and irrespective of, negligence, freedom from negligence, fault, or freedom from fault on the part of any person."

Lillie and Russell Miles, in their insurance policy with Nationwide, chose to purchase the optional PIP coverage provided for by § 35-2104. With respect to the automobile involved in the accident, they carried PIP coverage in the amount of $100,000.00 for medical expenses, $24,000 for work losses and $4,000 for funeral expenses. A premium was charged for each. The PIP endorsement to the insurance policy expressly covered persons other than the named insureds while those persons were occupying the insured vehicle. Furthermore, § 35-2104 of the D.C.Code, quoted above, provides that the PIP coverage is applicable to occupants of the insured vehicle.

Actions by insureds or persons covered under insurance policies, against their insurers, for benefits under so-called first party coverages such as PIP or uninsured motorist, are contract actions and are generally controlled by principles applicable to contract actions. Thus in Reese v. State Farm Mut. Auto. Ins., 285 Md. 548, 552-553, 403 A.2d 1229, 1231-1232 (1979), we stated:

"Under the statutorily required coverage, the defendant has directly promised to pay the insured plaintiff under certain conditions. Because it is a promise by the insurer to pay its own insured, rather than a promise to its insured to pay some third party, the uninsured motorist coverage is in insurance parlance 'first party coverage' like collision, comprehensive, medical payments or personal injury protection, and not 'third party coverage' such as personal injury or property damage liability insurance. A suit based upon the insured's allegations that he is entitled to payment under one of the first party coverage clauses in the contract he entered into with his insurance carrier, and that the carrier has refused payment thereby breaching its promise, is clearly a contract action.... [It is] governed by the principles and procedures applicable to contract actions generally."

See Lane v. Nationwide Mut. Ins. Co., 321 Md. 165, 169-170, 582 A.2d 501, 503 (1990); Nationwide Mutual Ins. v. Webb, 291 Md. 721, 735-736, 436 A.2d 465, 473-474 (1981). See also Insurance Com'r v. Prop. & Cas. Corp., 313 Md. 518, 529-532, 546 A.2d 458, 463-465 (1988). Therefore, the claims against Nationwide for PIP benefits, set forth in counts seven through twelve of the plaintiffs' complaint, are contract claims. They are governed by the principles applicable to contract claims, including contract choice of law principles. Cf. Volkswagen of America v. Young, 272 Md. 201, 220, 321 A.2d 737, 747 (1974) (a personal injury action based on breach of warranty is a contract action and thus is governed by contract choice of law principles).

As recently discussed in Allstate Insurance Company v. Hart, 327 Md. 526, 611 A.2d 100 (1992), in deciding questions of interpretation and enforceability of contract provisions, a Maryland court ordinarily should apply the law of the jurisdiction where the contract was made. This choice of law principle is referred to as lex loci contractus. See, e.g., Kramer v. Bally's Park Place, 311 Md. 387, 390, 535 A.2d 466, 467 (1988); Bethlehem Steel v. G. C. Zarnas & Co., 304 Md. 183, 188, 498 A.2d 605, 607 (1985); Traylor v. Grafton, 273 Md. 649, 660, ...