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Invalid exclusion does not invalidate the entire policy



Following a car accident in March 2016, the complainant Dinora Dominquez sought insurance cover from her insurer, the Government Employers Insurance Company ("GEICO"). When GEICO denied Dominquez's claim for coverage, she sued GEICO for breach of contract. GEICO requested a summary judgment and the district court granted GEICO's motion. In Dinora Dominquez v. State Employees' Insurance Company, No. 811-2020, Court of Special Appeals of Maryland (13 September 2021), the Special Court of Appeal was asked to declare an exception in GEICO's policy of violating public order and reversing the district court's grant of summary judgment.

FACTS AND PROCEDURES

Facts were indisputable. On the morning of March 22, 2016, Dominquez was driving as a passenger in his adult daughter Elena Dominquez's car. About 6:05 a.m., an unknown person who was driving an unidentified vehicle hit the back of Elena's car. The vehicle then fled the scene before Elena or Dominquez could identify its driver. The collision resulted in Dominquez suffering serious injuries.

At the time of the collision, Elena was living in a Dominquez household and Elena's vehicle was insured by a GEICO insurance company, which gave uninsured motorists damages of $ 30,000 per individual and $ 60,000 per event. However, Dominquez was insured under a separate GEICO insurance policy that she and her husband had purchased through GEICO to cover their own vehicle (the "GEICO Policy"). The GEICO policy gave Dominique (and her husband) single limits for uninsured / underinsured coverage of $ 300,000 per individual and occurrence.

GEICO accepted the claim made by Dominquez under Elena's policy, but denied that Dominquez was claiming under her GEICO Policy. Dominquez sued GEICO for breach of contract based on GEICO's denial of her claim for uninsured motor vehicle coverage under her GEICO policy. GEICO eventually requested a summary assessment, arguing that an exclusion from the GEICO policy in law made it possible to deny Dominquez's claim. The district court granted a summary judgment in favor of GEICO.

DISCUSSION

In general, appellate courts will only consider the grounds on which the district court granted a summary judgment. However, there is an exception to this general rule where an appellate court can confirm the district court on another ground as long as the court had no room to deny a summary judgment on that ground.

  • A Maryland charter authorizes motor insurance companies to include provisions in their insurance policies that exclude certain requirements from the otherwise mandatory uninsured motor insurance policies of the insurance companies;
  • An insurer [GEICO] tried to include such an exclusion in its insurance, but the express conditions for the exclusion were impermissible broader than the clear conditions in [the] statutes allow – thus sweeping into the ambitious exclusion claims that the insurer could not legally exclude; and
  • A claim arose that the insurer could have excluded from coverage if its policy contained an exclusion that accurately tracked the statutory language.

Ms. Dominquez also acknowledged that if the GEICO policy had accurately tracked the statutory language allowing the exclusion, GEICO could also have legally denied her claim. Dominquez, however, argues that the GEICO policy language is unacceptably broad in violation of the Charter and argues that when an exclusion in an insurance policy is unlawfully broad, the "right of the court" is to invalidate the exclusion "in its entirety."

Mrs Dominquez claims that the GEICO policy is unlawfully broad, according to Maryland law, it would only be invalid to the extent that it contravenes the Charter.The Charter underlying this case, Md. ., 2020 Supp.), § 19-509 (f) (1) in the insurance article (“Ins.”), Provides:

(f) An insurer may exclude from the uninsured motor insurance required in this section benefits for:

(1) the named insured or a family member of the insured who resides in the named insured's household for an injury that occurs when the named insured or family member occupies or is hit as a pedestrian by an uninsured motor vehicle a v the insured or a close family member of the insured who resides in the insured household [.]

The purpose of this charter is to prevent a family from avoiding paying premiums for UM / UIM coverage on all vehicles and to be able to claim UM / UIM benefits from the first insurer even though no premium has been paid to the first insurer to cover the other vehicles.

Regarding uninsured motorist coverage, th e GEICO policy contains in the relevant part: “We [GEICO] will pay damages for bodily injury and property damage caused by an accident that insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle arising from the ownership, maintenance or use of that vehicle. The GEICO policy then lists several exceptions or circumstances in which it will refuse to provide coverage. The relevant exclusion here states that GEICO's uninsured motor insurance does not apply: “For bodily injury suffered by a insured while driving a motor vehicle owned by a insured and is not described in the declarations and is not covered by the insurance for bodily injury and property damage for this insurance.

Ms. Dominquez acknowledged that her daughter Elena, who was living in her household at the time of the accident, also qualifies as "insured" under the GEICO policy, and that Elena's vehicles are not described in the GEICO insurance declarations. Due to the fact that Dominique, an insured, injured herself in a motor vehicle owned by another insured (her daughter Elena) that was not specifically covered by the GEICO policy, the GEICO policy allows GEICO to deny Dominquez coverage for the damages she sustained. in Elena's vehicle.

"The Maryland Act is clear: when the contractual provisions of an insurance are in conflict with a specified public order, the insurance provision is invalid, but only to the extent of the conflict between the specified public order and the contractual provision . "(Emphasis added) A contractual provision that violates public order is invalid, but only to the extent of the conflict between the specified public order and the contractual provision.

Regardless of the type of exclusion in question, the Maryland Court of Appeal has consistently annulled an exclusion only to the extent that it is contrary to established public order.

In conclusion, assuming that the exclusion of the GEICO policy is invalid because it excludes coverage where the damage occurs in any family member's vehicle as opposed to only one immediate family member's vehicle under the statute, the measure would be to interpret the exclusion to ensure that it complies with the Charter. Here, that measure would limit the exclusion to immediate family members provided for in the charter. As Dominquez admits that she could not recover uninsured motorist benefits from the exclusion of the GEICO policy if it is interpreted in accordance with the Charter, and because it complied with the Charter, GEICO was entitled to a summary assessment of Dominiquezz's claims for benefits under the GEICO policy.

Insured persons often try to stack UM / UIM insurances that were not intended to be stacked – a way of covering serious damages where the primary insurance is insufficient. Insurance companies work in accordance with state law to avoid stacking because they did not collect the appropriate premium for two or more insurances that pay damages for a single accident in a single insured car.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims handling, bad faith insurance and insurance fraud almost as much for insurers and policyholders.

He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance and claims management attorney and more than 54 years in the insurance industry.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award. For the past 53 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their indemnity staff to become insurance professionals.

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