Court Finds for Victim Against Encompass in Uninsured Motorist Claim

In Duckett-Murray v. Encompass Ins. Co. of Am., Encompass did is best effort to try to refuse coverage when its insured need it after thirty years of receiving premiums from its insured.

This has to be the least shocking development since Kim Kardashian’s last divorce.  Listen, unlike a lot of lawyers, I understand when insurance companies fight like crazy in third party claims where the claimant is not their client. But this is a case where the family had been paying premiums for almost 30 years.  When an insurance company loses an appellate case on coverage involving their own insured, they should be ashamed of themselves.  Sure, you can argue it is a close call.  But don’t you want to err in favor of your own client?

Thankfully, the Court of Special Appeals ruled for the victim.  The key take-home lesson here is if there is any question about an umbrella or uninsured coverage, turn over every last stone. Because there is a real good chance you are going to find a path to move coverage.

Facts

A woman was injured in a car accident by a driver with no insurance.  She brought suit in Prince George’s County against the driver and against her own insurance company, Encompass Insurance Co. of America (“Encompass”), for uninsured motorist coverage.

Before trial, both parties sought summary judgment on the issue of how much uninsured motorist (“UM”) coverage Duckett-Murray had under her policy.  Under Maryland law all auto insurance policies issued after October 1, 1992, had to provide UM coverage that was equal to the amount of liability coverage unless waived by the insured (the “Equal Coverage Law”).  Duckett-Murray’s policy was originally issued in 1987 but had been repeatedly renewed every year since then.  I’d like to see the math on what was paid in insurance premiums since 1987 and how many claims had been paid during that period.  I’m betting Encompass did quite well.

Encompass argued that the Equal Coverage Law did not apply because the policy was issued before 1992.  Duckett-Murray asserted that it was essentially a new policy issued after 1992 and therefore she was entitled to UM coverage equal to her liability coverage because. Prince George’s County Judge John P. Davey ruled in favor of Encompass and Duckett-Murray appealed.

Issues Presented on Appeal

The case presented the Court of Special Appeals with 2 questions: (1) can a renewal of a pre-existing insurance policy ever be considered a “new” policy for purposes of the 1992 Equal Coverage Law; and if so (2) when will a renewal be treated as a “new” policy and therefore subject to the Equal Coverage Law?

Court’s Ruling on Issue #1

With respect to the first question, Encompass urged the Court to interpret the law very narrowly and hold that only policies that were newly originated after the 1992 cut-off fell under the Equal Coverage Law.  This would mean that policies issued prior to 1992 and subsequently renewed would never be subject to the new requirements.  The Court rejected this narrow interpretation noting that the obvious legislative intent of the Equal Coverage Law was to maximize the scope of UM coverage in Maryland.  In light of this underlying purpose, the Court found that renewals could potentially be “new” policies delivered after 1992 under the language of the Equal Coverage Law.

Court Ruling on Issue #2

shutterstock_97357133-300x182As to the question of when a renewal should be treated as a “new” policy the Court examined how other jurisdictions have decided this question under similar mandatory minimum coverage laws.  Specifically, the Court referenced cases in Utah and Hawaii which held that a renewal makes a “material” change to an existing policy it should be treated as a new insurance policy under mandatory coverage laws. See Iverson v. State Farm Mutual Ins. Co., 256 P.3d 222 (Utah 2011)(holding that when the relationship between insured and insurer is changed in a material way a renewal will be treated as a new policy under Utah’s equal coverage law); Allstate Ins. Co. v. Kaneshiro, 998 P.2d 490 (Haw. 2000)(finding that when a renewal makes a material change it creates a new policy of insurance).

The Court of Special Appeals adopted the same “materiality” test applied in these out of state cases.  Under this test, a renewal will be treated as a new policy of insurance if it changes the risk relationship between the insurer and insured in any meaningful way.  The Court went on to explain that the application of this “materiality” test should be based on the facts and circumstances of each case.

In Duckett-Murray, the court found that the Encompass policy in question had been renewed 22 times after the 1992 cut-off date. Over the course of these renewals the Court noted 3 material changes from the original policy: (1) the named insured on the original policy (Appellant’s grandmother) was now deceased; (2) a new named insured was added to the policy and an additional driver was also added; and (3) the number of vehicles covered by the policy was changed from 3 to 2.  The Court found that these were “material” changes because they amended meaningful aspects of the policy including the policy decision maker and the premiums.  As a result of these material changes, the renewal was effectively a “new” policy issued after the 1992 cut-off.  It was, therefore, subject to the Equal Coverage Law and Encompass was required to provide UM coverage up to the limits of liability coverage.

Meaning of This Case

The Maryland legislature wants drivers to have uninsured motorist coverage that matches your liability coverage.  Encompass is making the tough argument that this long time policyholder was never entitled to notice that this kind of insurance coverage was disfavored by Maryland law.  For a small premium increase, she could get in line with the legislatively preferred norm. You can’t give a heads-up about this?   That made this argument in spite of the fact that the terms of the policy changed wildly over the long course of the coverage.  How you can say the death of the named insured is not a material change in beyond me.  Anyway, the court did the right thing and gave this poor woman the uninsured motorist coverage money she is entitled to get.

  • Schwartzbaugh v. Encompass: another appellate case where Encompass tried to battle its own insured.  For the number of cases filed against Encompass by is own insured, how many people are treated unfairly and never hire a lawyer or do anything about it?
  • Umbrella coverage are not always what you think they are.  Why the details matter when making sure you are protected.
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