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Maryland Court upholds waiver of UM coverage

In Swartzbaugh v. Encompass Insurance Company of America, No. 100, September Term 2011 (Md. April 25, 2012), the Court held that in the context of a waiver of UM benefits under a Maryland motor vehicle insurance policy, the phrase "first named insured" refers to a person insured under the policy and specifically named in the policy, who acts on behalf of the other insured parties and is designated as such in the policy documents.  In so holding, the Court rejected the insured's argument that the "first named insured" literally means the first rated driver listed on the policy. 

The compulsory minimum automobile insurance liability limits under Maryland law are currently $30,000 per person for personal injuries, $60,000 aggregate, and $15,000 for property damage.  A policy must include UM coverage, which under Maryland law refers both to uninsured as well as under-insured motorists.    Under the Maryland Insurance Code, the default limits of UM coverage must be equal to the liability coverage under the policy.  However, this level of coverage may be waived in favor of a lower amount that is at least equal to the minimum coverage required by the motor vehicle law.  The waiver must be in writing on a form devised by the Maryland Insurance Administration that complies with the applicable statute.  Thus, the waiver is supposed to be signed by the "first named insured", as required by statute.  However, the statute does not define what the "first named insured" means.

In the Swartzbaugh case, the waiver was signed by Mrs. Swartzbaugh, who handled the family finances with respect to insurance, and who had applied for the insurance.  The policy listed three vehicles, and named her husband, herself, and her daughter as drivers.  Unfortunately, the daughter was later injured by an under-insured driver while she was riding as a passenger.  The daughter challenged the effectiveness of the waiver of UM coverage, on the grounds that Mrs. Swartzbaugh was not in fact the "first named insured" on the policy -- rather, the father was actually the first name listed in a section labeled "Policyholder." 

The Court of Appeals rejected this view, finding that name order was not determinative.  Rather, the named insureds are entitled to determine who will exercise that choice and serve as primary or first named insured.  The MIA waiver form fills that gap be requiring the individual who executes the form to certify his or her status as "first named insured."  The Court found that this was preferable to an arbitrary designation of first named insured as whomever's name was typed first on the policy.

Posted by David B. Stratton on 05/21/2012 at 12:49 AM
InsuranceMarylandMotor Vehicle AccidentsPermalink

Maryland Bankruptcy Court: Trustee cannot rely on sec. 544(a)(1) or (3) to avoid equitable lien

In Janet M. Nesse, Trustee v. GMAC Mortgage, LLC, Adversary No. 11-00290 (Bankr. D. Md. Apr. 19, 2012), the Bankruptcy Court considered the issue whether the Trustee could utilize sec. 544(a)(1) or (3) to avoid an equitable lien against property held as tenants by the entireties where only on spouse is a debtor in bankruptcy.  The Court concluded that the Trustee cannot rely on sec. 544(a)(1) or (3) to avoid the equitable lien, and that GMAC was entitled to relief under the doctrine of equitable subrogation.  The Court granted summary judgment in favor of GMAC.

The GMAC deed of trust was never recorded.  However, it was undisputed that the facts made out a prima facie claim under Maryland law of the equitable subrogation of GMAC to the loan and a deed of trust executed in favor of MortgageIT.  The Trustee, however, argued that sec. 544(a) allowed her to avoid GMAC's equitable lien and defeat GMAC's equitable subrogation claim.  She argued that she had the rights and powers of a judicial lien creditor under sec. 544(a)(1) and a bona fide purchaser of the Property without knowledge of the GMAC deed of trust under sec. 544(a)(3), and that those rights and powers enabled her to defeat GMAC's equitable subrogation claim.  The Trustee also argued that the debtor's spouse consented to allowing her to sell the Property, and that consent bolstered the Trustee's standing under sec. 544.

GMAC argued that sec. 544(a) is not available because only the Debtor, and not the spouse, is the subject of this bankruptcy proceeding and the spouse's consent is irrelevant.

The Court found that Maryland law defeats the Trustee's claim.  In Maryland, creditors of only one spouse may not reach tenancy by the entireties property for satisfaction of their claims.  Property held as tenants by the entireties cannot be taken to satisfy individual debts of a husband and wife.  Thus, in Maryland, a "creditor that extends credit to the debtor" could not obtain a judicial lien on property owned as tenants by the entireties.  Accordingly, the Trustee could not avoid GMAC's equitable lien armed with the powers of sec. 544(a)(1).

As for sec. 544(a)(3), that section allows the Trustee to avoid an interest avoidable by "a bona fide purchaser of real property ... From the debtor . . . ."  However, under Maryland law, there can be no bona fide purchaser of real property from one spouse, where the property is owned in tenancy by the entireties.  Section 544(a)(3) cannot give the Trustee the status of a bona fide purchaser of the Property from the Debtor where there is no way, under Maryland law, that anyone could obtain that status.

The consent of the spouse could not give the Trustee the standing of a bona fide purchaser because the Trustee had actual knowledge of GMAC's equitable lien.

Deborah M. Whelihan of Jordan Coyne & Savits, L.L.P. was co-counsel for GMAC Mortgage, LLC in this matter.

Posted by David B. Stratton on 05/15/2012 at 01:10 PM

Maryland Premises Liability: Pit Bull Owners and Landlords Strictly Liable for Dog Bites

In Dorothy M. Tracey v. Anthony K. Solesky, et al., No. 53, Sept. Term 2012 (Md. Apr. 26, 2012), a 4-3 majority opinion, the Maryland Court of Appeals modified the common law liability principles that previously applied and established a strict liability standard against owners and landlords for harboring or control in cases of Pit Bull and/or cross-bred Pit Bull dog attacks on humans on the basis that such animals are inherently dangerous.

A tenant in the defendant landlord’s building owed a pit bull that had escaped from pen with only a 4 foot high fence and an open top.  The Court described the pen as obviously inadequate.  On the day of the attack which gave rise to this action, the pit bull escaped from the pen twice.  In the first instance, the pit bull escaped and attacked a boy, however, the owner was apparently able to restrain the dog and put it back in the pen.  A short time later, the dog escaped the pen a second time and attacked a young boy, Dominic Solesky, the minor Plaintiff.  Dominic was mauled by the dog, and sustained life threatening injuries, having to undergo multiple surgeries, spending seventeen days in the hospital, and one year in rehabilitation.

At the close of the Plaintiff’s case, the trial court granted the Defendant landlord’s Motion for Judgment, ruling that there was insufficient evidence to permit the issue of common law negligence to be presented to the jury. On appeal, the Court of Special Appeals reversed the decision of the trial court holding that sufficient evidence did exist as to the extent of the landlord’s knowledge as to whether the dog was dangerous in respect to the common law standards in dog attack negligence cases for the issue to go to a jury.

When the matter came before the Court of Appeals, the Court stated that the trial court was correct on the state of the common law relating to dog attacks in law in existence at the time.  Prior to Tracey, the common law in Maryland was that “in order to render the owner liable in damages to one bitten by his dog, it must be proved not only that the dog was fierce, but that the owner had knowledge that he was fierce”, which was a question that had to be determined by a jury.  However, deciding that the common law did not reflect the dangerous nature and numerous lawsuits that resulted from dog attacks specifically by pit bull dogs, the Court decided to change the common law.

The Court cited to numerous Maryland cases over the past 100 years involving attacks by pit bulls focusing on the dicta in Matthews v. Amberwood Associates Limited Partnership, Inc., 351 Md. 544, 719 A.2d 119 (1998).  The Court also cited several other federal and state cases as well as news articles and other reports detailing the significant number of injuries and fatalities associated with the pit bull breed and the dangers presented by them.  In particular, the Court repeatedly cited studies that showed that those injured or killed by dog attacks were disproportionally by pit bulls.  Similarly, the Court quoted sources which stated that pit bull attacks, unlike attacks by other dogs, occur more often, are more severe, and are more likely to result in fatalities.  Also, pit bulls tend to be stronger than other dogs, often giving no warning signals before attacking, are less willing than other dogs to retreat from an attack, even when they are in considerable pain. 

Consequently, by modifying Maryland’s common law standard for negligence in dog attack cases, the Court held it was pit bulls are inherently dangerous activity for which landlords may be held strictly liable, stating “When an owner or a landlord is proven to have knowledge of the presence of a pit bull or cross-bred pit bull (as both the owner and landlord did in this case) or should have had such knowledge, a prima facie case is established. It is not necessary that the landlord (or the pit bull’s owner) have actual knowledge that the specific pit bull involved is dangerous.” Tracey at 8.

Accordingly, Maryland common law now finds the owner or landlord is strictly liable for the injuries inflicted in a pit bull attack if a plaintiff proves that the landlord knew or had reason to know the dog being kept on the premise was a pit bull or cross-bred pit bull mix.

Judges Greene, Harrell, and Barbera dissented from the Majority’s ruling in part because it makes the issue of whether a dog is actually harmless, or the owner or landlord has any reason to know that the dog is dangerous, irrelevant to the standard of strict liability. Rather, liability will attach solely on the basis of the breed of the dog.   The dissent was also critical of the Majority for grounding its ruling upon the perceptions about a particular breed of dog, rather than upon adjudicated facts showing that the responsible party possessed the requisite knowledge of the animal’s inclination to do harm, thereby transforming a clear factual question into a legal question in an effort to create liability on the part of the landlord.

Posted by Robert A. Anderson on 05/11/2012 at 10:41 AM

Maryland workers’ compensation: causal relationship required to relate a second injury to original

A recent Maryland Court of Special Appeals decision, Washington Metropolitan Area Transit Authority v. Williams, 2012 Md. App. LEXIS 46 (Md. Ct. Spec. App. 2012) has clarified the status of the law in Maryland with respect to the causal relationship required to demonstrate that a second injury (which is not physically related to the original injury, such as where a knee injury causes back pain) is causally related to an original injury, and thereby compensable.

Jan Williams, the claimant, was a mechanic for WMATA and was working for his employer in 2008 when he injured his back and left knee on the job.  In March of 2009, Mr. Williams was injured while returning from lunch to physical rehabilitation for the first injury when a driver backed into him, causing injury to Williams' right knee.  The Maryland Workers' Compensation Commission found the second injury to be causally related to the original injury, and the Maryland Circuit Court for Prince George's County affirmed that finding.  However, the Court of Special Appeals reversed, and found that the second injury was not causally related to the original injury.

WMATA relied upon a 1996 Maryland Court of Appeals decision, Mackin v. Harris, 342 Md. 1 (1996) in support of its assertion that the second injury was not causally related to the original injury.  In Mackin, the employee had slipped and fallen on a patch of ice on his way to obtain physical therapy for a work-related injury.  Id. at p. 2-3.  The Mackin court noted that for a subsequent injury to be compensable, it must be the "direct and material result of a compensable primary injury."  Id. at 7.  The Mackin court went on to note that while Professor Lex. K. Larson, a noted authority in the field of Workers Compensation law, advocated a "but-for causation" approach to the issue, the Mackin court felt this was too broad a standard, and that acceptance of that standard "leads to rather extraordinary results."  Id. at p. 9.

The Williams court found that while the Prince George's County Circuit Court had utilized Mackin in its analysis of the issue, the Circuit Court had missed the fact that the Mackin court advocated for a much more narrow standard-- namely, that the subsequent injury must have been a "direct causal connection" between the original compensable injury and the subsequent injury in order to have been proximately caused by the original injury.  2012 Md. App. LEXIS at p. 11.  Using that standard, the Williams court concluded that Mr. Williams second injury directly resulted from a cause unrelated to the first injury-- namely, the driver's actions in striking Mr. Williams with his car in the parking lot.  Id. at p. 12.  Because the driver's actions had no connection whatsoever to the original injury, there was no proximate cause between the original injury and the subsequent injury.  (Had the same situation been presented using the "but-for" standard of causation, the claim would arguably have been compensable-- as but for the original injury, Mr. Williams would not have been in the parking lot and would not have been struck.)

While the Court reversed the Circuit Court's findings, it remanded the matter in order to resolve a different issue-- whether the subsequent injury would be compensable as a new work-related injury, standing alone.  As such, the matter was remanded to the Maryland Workers' Compensation Commission to determine that issue. 



Posted by Padraic K. Keane on 05/07/2012 at 05:04 PM
MarylandWorkers CompensationPermalink