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Application of Uninsured Motorist Coverage to Renewal Policies

August 5, 2020

The Court of Special of Appeals in the case of Duckett-Murray v. Encompass Insurance Company of America interpreted the language “issued or delivered” as it applies to uninsured motorist (“UM”) coverage in motor vehicle insurance policies.  In 1992, the Maryland Legislature amended the Insurance Article to require that UM limits must equal liability limits, unless the named insured waives equality of coverage in writing.  In an uncodified section, the law provided that this provision applied only to policies “issued or delivered on or after” October 1, 1992.

In 2014, Plaintiff was injured in an accident caused by an uninsured motorist.  Plaintiff had UM coverage through a policy originally issued in 1987 to her grandparents and aunt.  The policy was renewed annually with changes including the removal and addition of insureds and insured vehicles.  At the time of the accident, Plaintiff had liability limits of $300,000 and made a demand to her UM carrier for damages.  The UM carrier took the position that she had only $75,000 in UM coverage under the policy and the equality of coverage law did not apply to Plaintiff’s policy because it was merely renewed each year, and not new.  The trial court agreed and granted partial summary judgment in favor of the UM carrier as to the amount of UM coverage.  At trial, the jury returned a verdict in excess of $75,000 but less than $300,000.  Plaintiff appealed the grant of summary judgment and the Court of Special Appeals reversed the decision of the trial court.  

The language at issue, or some variation thereof, appears throughout the motor vehicle insurance code, but it is not defined in the code nor has it previously been interpreted by case law.  A review of the legislative history of the UM statute reveals the Legislature’s intent behind the law is to maximize UM coverage and was “aimed at providing full recovery to the highest number of victims of uninsured motorists and underinsured motorists, with the financial risk and burden being borne by the private sector.”  As such, the Court adopted a “materiality” standard to assess whether the UM equality of coverage law applies to a renewal policy.  

In this case, the Court held that the policy was not simply renewed, but was materially altered to constitute a new policy “issued and delivered” as a matter of law.  Specifically, from October 1, 1992, to the date of the accident, the original named insured died, a vehicle was removed and another added, and a policyholder and driver was added.  These events resulted in changes in premiums and introduced a new decision maker responsible for waivers affecting the policy.  Accordingly, the Court held that Plaintiff’s policy was “issued and delivered” within the meaning of the UM equality of coverage requirement and no waiver having been executed, the UM carrier was required to provide UM coverage limits equal to Plaintiff’s $300,000 liability limits.  It should be noted that whether changes to a policy are material so as to create a new policy will be reviewed on a case by case basis and if in dispute, should be submitted to a fact finder.

The language at issue in this case also appears in a recently-enacted statute, Section 19-509.1 of the Insurance Article, which provides that any policy “issued, sold or delivered” in Maryland after July 1, 2018, must offer “enhanced” uninsured and under-insured motorist coverage.  The Duckett-Murray case is clearly instructive as to whether a UM carrier will be required to offer “enhanced” UM coverage at a policy renewal.  

If an insured elects “enhanced” UM coverage, in essence, the UIM carrier will no longer receive an offset for the limits of the tortfeasor’s liability coverage.  For example, if both the tortfeasor and the Plaintiff have $30,000 liability and UIM limits, the available “enhanced” coverage will be $60,000 ($30,000 from the tortfeasor’s policy and $30,000 from the UIM carrier’s policy).  Where the tortfeasor’s policy is $100,000 and the Plaintiff’s $30,000, the potential coverage would now be $130,000 ($100,000 from the tortfeasor’s policy and $30,000 from the UIM carriers).  Prior to the enactment of Section 19-509.1, no UIM claim would have accrued.