Maryland Plaintiff Seeks Liability Limits of Umbrella Insurance Policy for Fatal Car Accident

In some Maryland car accident cases, financial losses from personal injuries and property damage may be covered by more than one type of insurance policy.  In a September 29, 2021 case, the question for the Court of Special Appeals of Maryland was whether the liability limits of an auto insurance policy and an umbrella insurance policy could be combined, despite the household exclusion contained therein.

The case arose out of a tragic car accident that seriously injured the plaintiff and claimed the lives of her parents and sibling.  It occurred as plaintiff’s father was driving the family to a high school play.  As he made a left turn, their vehicle was struck by a sedan traveling at approximately 115 miles per hour.

At the time of the accident, the plaintiff’s father had a primary auto liability policy and an umbrella liability policy issued by the insurance company named as the defendant in the case.  The primary policy had a liability coverage limit of $500,000 for personal injuries and property damage for each accident.  The umbrella policy had a coverage limit of $2 million in excess of the automobile liability coverage.  The umbrella policy also contained a household exclusion provision, which stated that the policy did not cover claims for injuries to any person related to an insured by blood, marriage, or adoption residing in the household of the insured.

After the accident, the plaintiff tried to settle her claims with the insurance company for the combined policy limits of the auto liability and umbrella policies, i.e., $2.5 million.  The insurance company paid out only $500,000 under the father’s auto policy, asserting that the household exclusion applied to the claims.  The plaintiff sought a declaratory judgment from the court that proceeds from both policies were available to her.

In Maryland, a provision in an insurance policy is unenforceable if it conflicts with Maryland public policy, which is typically expressed by statute.  The plaintiff cited to MD Code § 5-806, which provides that an action for wrongful death or personal injury arising out of the operation of a motor vehicle may not be restricted by any insurance policy provisions, up to the limits of motor vehicle liability coverage or uninsured motor vehicle coverage.  In response, the insurance company argued that the statute refers only to the policy limits of the motor vehicle policy, not the umbrella policy.

The appeals court found that although the statute is ambiguous when read in isolation, its meaning is clear when considered within the context of the entire statutory scheme.  The court ultimately concluded that the phrase “motor vehicle liability coverage” in § 8-506 refers to a primary motor vehicle liability policy, and not to an umbrella policy.  As such, the household exclusion provision in the father’s umbrella policy could validly exclude coverage of the plaintiff’s claims.