West American v. Popa

• Citation: 352 Md. 455,723 A.2d 1
• Decision Date: 22 December 1998
• Docket Number: No. 28,28
• Parties: WEST AMERICAN INSURANCE COMPANY v. John POPA, et al.
• Court: Court of Appeals of Maryland

723 A.2d 1

352 Md. 455

WEST AMERICAN INSURANCE COMPANY v. John POPA, et al.

No. 28, Sept. Term, 1996.

Court of Appeals of Maryland.

December 22, 1998.

Reconsideration Denied February 5, 1999.

George M. Church (Francis V. Kenneally, Church & Houff, P.A., on brief), Baltimore, for petitioner.

Marc Seldin Rosen (Colleen A. Cavanaugh, Scanlan & Rosen, P.A., on brief), Baltimore, for respondents.

Argued before BELL, C.J., and ELDRIDGE, RODOWSKY, CHASANOW, KARWACKI¹, RAKER and ROBERT C. MURPHY (Retired, specially assigned), JJ.

ELDRIDGE, Judge.

This case presents several issues arising under the uninsured motorist provisions contained in a policy of automobile insurance sold in Maryland.

I.

On July 1, 1991, Jonathan David Popa was operating an automobile which was stopped below the crest of a hill on U.S. Route 1 in Cecil County, Maryland. His vehicle was struck by a Maryland State Police car driven by Trooper Rodney Manuel, resulting in Jonathan's death. The car which Jonathan was operating at the time was owned by his parents and insured under a policy issued by West American Insurance Company. The policy contained uninsured and underinsured motorist coverage in the amount of $300,000.

On July 1, 1992, Jonathan's parents, John and Tommie Sue Popa, individually and as personal representatives of Jonathan's estate, filed suit in the Circuit Court for Cecil County against Trooper Manuel, the Maryland State Police and the State of Maryland, asserting wrongful death and survival claims. Trooper Manuel subsequently filed a separate suit in the Circuit Court for Cecil County against Jonathan's estate for his personal injuries arising out of the accident. The Popas promptly notified West American of both lawsuits, and West American retained counsel to defend Jonathan's estate in the action filed by Trooper Manuel. West American did not at that time seek to intervene in the action filed by the Popas.

The two cases were consolidated, and a jury trial was held from January 24 through January 27, 1994. During the first day of the trial, the counsel retained by West American settled Trooper Manuel's suit against Jonathan's estate. The trial continued on the Popas' wrongful death and survival claims, and the jury returned a verdict finding that Trooper Manuel was negligent and that Jonathan was not contributorily negligent. The jury awarded a total of $867,000 in damages. Judgment was entered in that amount against the State of Maryland only on January 31, 1994. By letter dated February 7, 1994, the Popas made a claim for underinsured motorist benefits under the policy issued by West American, seeking the full amount of their coverage less any amount paid by the State.

Meanwhile, the State filed a motion pursuant to Maryland Rule 2-535 to reduce the judgment to $50,000 because state law at the time limited the State's liability under the Maryland Tort Claims Act, Maryland Code (1984, 1993 Repl.Vol.), § 12-101 et seq. of the State Government Article, to $50,000. The circuit court denied the State's motion on March 3, 1994, but did file an order prohibiting the Popas from executing on the judgment against the State for any amount in excess of $50,000.

Four days later, on March 7, 1994, West American filed a motion to intervene and a motion for reconsideration of the court's March 3, 1994, order. Prior to a hearing on these motions, the State tendered payment of $50,000; the Popas accepted this payment and filed an order of satisfaction. On May 12, 1994, after a hearing, the court denied both of West American's motions. West American took no appeal from the May 12th order of the Circuit Court for Cecil County.

In the interim, the Popas filed in the Circuit Court for Baltimore County the present breach of contract action, seeking underinsured motorist benefits under the West American policy. Both sides filed motions for summary judgment. After a hearing, the circuit court on January 18, 1995, denied West American's motion, granted the Popas' motion, and entered judgment in their favor for $250,000.

West American appealed from the judgment of the Circuit Court for Baltimore County, and the Court of Special Appeals affirmed. West American Ins. Co. v. Popa, 108 Md.App. 73, 670 A.2d 1021 (1996). West American then filed a petition for a writ of certiorari which this Court granted. West American Insurance v. Popa, 342 Md. 391, 676 A.2d 79 (1996). The questions presented by West American in its petition for a writ of certiorari are as follows:

"1. Under the circumstances that existed at the time of the underlying tort trial, was mere knowledge by West American that the tort suit was pending sufficient to satisfy due process notice requirements?

"2. Are the Popas legally entitled to recover benefits from the State of Maryland?

"(a) Did the filing of an Order of Satisfaction to the judgment entered in the underlying tort case against the State of Maryland extinguish the Popas' entitlement to further recovery and thereby bar their claim for underinsured motorist benefits against West American?

"(b) Did the State's sovereign immunity for all amounts greater than $50,000 preclude the Popas from being legally entitled to recover any additional benefits from the State and if so, is their claim for underinsured motorist benefits against West American likewise barred?

"3. If the West American policy exceptions excluding coverage for self-insured or government owned vehicles are void, are they only void to the extent of the $20,000/$40,000 statutory limits?"

We will address each of these issues in turn.

II.

Although West American acknowledges that it "knew about the Popas' suit against Trooper Manuel and the State," it contends that "[m]ere knowledge of an underlying suit is not enough" to "satisfy due process notice requirements." (Petitioner's brief at 6). West American argues that "due process notice requirements" mandate that the insurer know that an uninsured motorist claim will be made or "have a reasonable belief" that such a claim will be made in order for the insurer to be bound by the outcome of the underlying tort action. (Ibid.). West American cites no authority for its position.

In Nationwide Mutual Ins. v. Webb, 291 Md. 721, 749 n. 12, 436 A.2d 465, 481 n. 12 (1981), this Court, citing cases from other jurisdictions, stated: "[A]lthough no pertinent policy clause in this case required notice to the [uninsured motorist] insurer of the tort action, considerations of due process do require such notice in order for an [uninsured motorist] insurer to be bound by the outcome of the tort action." We went on in the Webb opinion to reject the uninsured motorist insurer's argument that the insured was required to send to his uninsured motorist insurer the pleadings in the underlying tort case, saying: "We are aware of no authority, however, supporting the position that the pleadings in the tort case must be forwarded to the insurer." Ibid. We also pointed out that it has been held that the notice "requirement `does not become operative until an insured reasonably believes he has an uninsured motorist claim.'" Ibid. The Court concluded in Webb that, because a notice of the tort suit was sent to the uninsured motorist insurer four months before the trial of the tort case, "[i]t would certainly seem that such notice was sufficient to meet due process requirements." Ibid.

Nothing in Webb or any other case, to the best of our knowledge, suggests that due process requires that the uninsured or underinsured motorist carrier be told or have a reasonable belief, before the trial of the tort case, that an uninsured or underinsured motorist claim will be made. Instead, the Webb opinion stands for the proposition that if the uninsured/underinsured motorist carrier has notice of the underlying tort suit and an opportunity to intervene, due process requirements are satisfied, and the carrier is ordinarily bound by the determinations made in the tort case. Other cases are to the same effect. See, e.g., Champion Ins. Co. v. Denney, 555 So.2d 137, 139-140 (Ala.1989)

("An insurer, however, should not be bound by such a judgment unless it had full notice and adequate opportunity to intervene"); Briggs v. American Family Mut. Ins. Co., 833 P.2d 859, 864 (Colo.App.1992) ("if an insurer has been given adequate notice of the proceeding and an opportunity to protect its interests it will it be bound by a judgment against the uninsured motorist"); State Farm Mut. Auto. Ins. Co. v. Glover, 113 Ga.App. 815, 820-821, 149 S.E.2d 852, 856 (1966); Vernon Fire and Casualty Ins. Co. v. Matney, 170 Ind.App. 45, 49-50, 351 N.E.2d 60, 63-64 (1976); Guillan v. Watts, 249 Kan. 606, 617, 822 P.2d 582, 590 (1991) ("Once the insured has notified his insurer and the insurer elects not to intervene and become a party to the action, the insurer is bound by the judgment"); Wells v. Hartford Accident and Indemnity Co., 459 S.W.2d 253, 259 (Mo.1970) ("an uninsured motorist carrier is estopped to relitigate the issues necessarily decided in an action brought by its insured against an uninsured motorist, if the uninsured motorist carrier has been given full and adequate notice and an opportunity to intervene and defend when the insured litigates the issues of liability and damages with the uninsured motorist tort-feasor"); Heisner v. Jones, 184 Neb. 602, 611, 169 N.W.2d 606, 612 (1969); Burge v. Mid-Continent Casualty Co., 123 N.M. 1, 4-5, 933 P.2d 210, 213-214 (1996) (collecting cases).²

Under the Maryland uninsured/underinsured motorist statutory provisions, when an insured under an automobile insurance policy has incurred damages as a result of the allegedly tortious driving by an uninsured or underinsured motorist, the insured has the option of initially bringing a contract action against his or her insurer to recover under the policy's uninsured/underinsured motorist provisions or of initially bringing a tort action against the tortfeasor. Lane v....