Case Title: Gallegos v. Allstate

Citation: 372 Md. 748

Docket Number: 54/02

State: maryland

Court: Maryland Supreme Court

Date: 2003-02-12T00:00:00Z

Document:
Christina Gallegos, et al. v. Allstate Insurance Company
No. 54, Sept. Term, 2002
Insurance Article § 19-202 does not preclude the exclusion from home day care endorsement
in homeowners’ insurance policy of liability for off-site injury to child while passenger in
motor vehicle.
IN THE COURT OF APPEALS OF MARYLAND
No. 54
September Term, 2002
______________________________________
Christina Gallegos, et al.
v.
Allstate Insurance Company
______________________________________
Bell, C.J.
Eldridge
Raker
Wilner
Cathell
Harrell
Battaglia,
   JJ.
______________________________________
Opinion by Wilner, J.
______________________________________
Filed:   February 12, 2003
1 A family day care home is defined as a residence in which family day care is
(continued...)
This case involves the interplay between Maryland Code, §§ 19-106 and 19-202 of
the Insurance Article, each relating to insurance coverage for family day care providers.
Section 19-106 requires insurers who write motor vehicle insurance in the State to offer
certain minimum coverage to policyholders who are registered as family day care providers,
to protect against liability arising from the day care activity while the child is a passenger in
the insured motor vehicle.  Section 19-202 requires insurers who write homeowner’s
insurance to offer to such persons general liability coverage of at least $300,000 for injuries
arising from family day care activity.
The issue before us is whether § 19-202 permits homeowner’s policies containing that
coverage to exclude liability for injury to a child (in this case the death of a child) that occurs
(1) while the child is in the care of the insured as part of the family day care activity, but
(2) while the child is a passenger in an automobile away from the insured’s home.  The
Circuit Court for Montgomery County and the Court of Special Appeals answered in the
affirmative, and so shall we.
BACKGROUND
The underlying facts are not in substantial dispute.  Maryland Code, § 5-550 of the
Family Law Article, requires the State Department of Human Resources to implement a
registration system for family day care homes.1  With certain exceptions not relevant here,
1(...continued)
provided.  Family Law Art. § 5-501(f).  Family day care, in turn, is defined as “the care given
to a child under the age of 13 years or to any developmentally disabled person under the age
of 21 years, in place of parental care for less than 24 hours a day, in a residence other than
the child’s residence, for which the day care provider is paid.”  Id., § 5-501(e).  A day care
provider is the adult who has primary responsibility for the operation of a day care home.
§ 5-501(d).  The statute uses the term “family day care.”  The insurance policy uses the term
“home day care.”  For purposes of this case, they are synonymous and we use them
interchangeably.
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§ 5-552 provides that a family day care home may not operate in Maryland unless it is
registered.  Brenda Ann Eply was a registered family day care provider, operating from her
rented home at 18 Maplewood Court in Gaithersburg.  One of the children in her care was
two-and-a-half year old Stacy Stinger.
On June 7, 1999, Ms. Eply and Stacy drove from her home to another house, where
she was scheduled to perform cleaning services.  Upon arrival, Eply brought Stacy into the
house, but when he became sleepy, she returned him to her minivan, secured him in a safety
seat, closed the windows, and left him there unattended while she completed her work.  The
outside temperature that day was above 90 degrees, and, at some point, Stacy was overcome
by the heat and died of hyperthermia.  On April 5, 2000, Stacy’s parents, Christina Gallegos
and Thomas Stinger, filed a wrongful death action against Eply in the Circuit Court for
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Montgomery County, seeking damages of $1,000,000.
Ms. Eply had in force two insurance policies from respondent, Allstate Insurance
Company.  One was a standard policy of motor vehicle insurance, with a per person liability
limit of $20,000 – the minimum required by Maryland law (see Maryland Code, § 17-103 of
the Transportation Article).  That policy had no special endorsement for family day care
activity, but Allstate has conceded liability under the policy and has offered to pay the policy
limit of $20,000, presumably on its acceptance of the claim that Stacy died, due to Eply’s
negligence, while he was a passenger in the covered vehicle.
The second policy – the one at issue – was a Renters Policy applicable principally to
Eply’s home.  The Renters Policy contained three kinds of basic coverage – Coverage C,
providing coverage for damage to or the loss of personal property owned or used by Ms.
Eply; Coverage X, providing family liability protection; and Coverage Y, providing guest
medical protection.  Under Coverage X, Allstate agreed, subject to exceptions and limitations
stated in the policy, to pay damages that Ms. Eply became legally obligated to pay because
of bodily injury arising from an “occurrence,” an “occurrence” being defined as an accident,
including continuous exposure to substantially the same harmful conditions.  The policy
listed 16 exclusions from that coverage, among them being injuries intended or reasonably
expected to result from intentional or criminal acts or omissions of an insured, injuries
covered by workers’ compensation, injuries arising from the ownership, occupancy, or use
of aircraft or certain motor vehicles, injuries arising from the ownership, occupancy, or use
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of watercraft away from the insured home, injuries arising from the discharge of toxic
substances (unless the discharge was sudden and accidental), injuries arising from the
rendering or failure to render professional services or from business activities of an insured,
and injuries caused by war or warlike acts.
Under Coverage Y, Allstate agreed, subject to listed exceptions, to pay certain medical
and medically-related expenses sustained as the result of an occurrence.  As with Coverage
X, the policy listed certain circumstances – 13 in number – that were excluded.  Many were
the same as those excluded from Coverage X, including injuries arising from the rendering
or failure to render professional services, from business activities of the insured, or from the
ownership, occupancy, or use of certain motor vehicles.  
By special Home Day Care Coverage Endorsement, a fourth type of coverage --
Coverage DC – was included in the Renter’s Policy.  Subject to certain exceptions, that
endorsement extended Coverages X and Y to injuries arising from the operation of Ms.
Eply’s home day care business.  The endorsement declared non-applicable to this coverage
the exclusions in Coverages X and Y for injuries arising from the rendering or failure to
render professional service or from Ms. Eply’s business activities, but said nothing with
respect to the other exclusions listed under Coverages X and Y.  In addition, the policy
excluded from DC coverage (1) injuries arising out of sexual molestation, corporal
punishment, or physical or mental abuse inflicted by or at the direction of an insured or an
employee of an insured, and (2) injuries occurring at the residence premises and arising from
2 As noted, Allstate does not contest liability under the motor vehicle policy and has
agreed to defend and indemnify Eply under that policy.  What drives this case, of course, is
the fact that the limit of liability under that policy is only $20,000.  
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the ownership, maintenance, use, or occupancy of draft or saddle animals, vehicles used with
such animals, motorized land vehicles, or watercraft by an insured.  The limit of liability
under Coverage DC was $300,000.
On July 14, 2000 – while the wrongful death action against Eply was in its early stage
-- Allstate filed an action for declaratory judgment in the Circuit Court for Montgomery
County, naming Eply and Stacy’s parents as defendants.  We shall refer to the defendants,
collectively, as Gallegos.  Upon the filing of the declaratory judgment action, and by
agreement, further proceedings in the wrongful death action were stayed.
In its complaint, Allstate asserted that, because Stacy’s death was caused and occurred
away from Eply’s home and while Stacy was a passenger in a motor vehicle, there was no
coverage or potentiality of coverage under the Renter’s Policy and that Allstate therefore had
no duty to defend or indemnify Eply under that policy.2  Both sides filed motions for
summary judgment. Allstate relied on exclusions for injuries arising from the ownership, use,
or occupancy of a motor vehicle in both Coverages X and Y and in Coverage DC. Gallegos
contended (1) that those exclusions were not permitted by § 19-202 and were therefore void
as against public policy, and (2) that, in any event, the only effective exclusion was that
applicable to the DC coverage which, by its terms, was limited to injuries occurring at the
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residence and therefore did not apply to injuries resulting from the use of a motor vehicle
away from the home.
After a hearing and the announcement of its conclusions from the bench, the court,
on April 25, 2000, entered an order that granted Allstate’s motion and declared that there was
no potentiality of coverage under the Renter’s Policy and that Allstate therefore had no
obligation under that policy to defend or indemnify Ms. Eply for any claims arising from
Stacy’s death.  In reaching that conclusion, the court rejected the construction placed on the
policy by Gallegos and held that the more limited exclusion in the DC coverage for injuries
arising from motorized land vehicles at the residence did not limit the effect of the exclusions
in Coverages X and Y for injuries arising from the use of motor vehicles.  It also concluded
that those exclusions were not prohibited by § 19-202 and were therefore not against public
policy.  
Aggrieved, Gallegos appealed, but, in Gallegos v. Allstate, 144 Md. App. 213, 797
A.2d 795 (2002), the Court of Special Appeals affirmed, largely for the reasons stated by the
trial judge.  On the public policy issue, the intermediate appellate court noted that the cases
in which we have invalidated coverage exclusions on public policy grounds all involved
insurance coverages that were mandated by statute and declared that § 19-202 was not such
a statute.  It did not require home day care providers to purchase special coverage for their
business activity but simply required insurers to offer such coverage.  Accordingly, the court
concluded that § 19-202 was “not a compulsory liability insurance statute and a motor
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vehicle exclusion is not precluded by the legislature.”  Id. at 230, 797 A.2d at 805.  The court
also rejected Gallegos’s additional arguments that (1) as a matter of policy construction, the
only applicable motor vehicle exclusion was that stated in Coverage DC, which was
inapplicable to the situation at hand, and (2) because Stacy was not really a “passenger” in
the van, the motor vehicle policy did not cover the injuries, that there was therefore a gap in
coverage, and that the gap should be closed by extending coverage under the Renter’s Policy.
Id. at 233-37, 797 A.2d at 807-09.  Gallegos poses a number of questions in this Court, but
they all relate to whether the motor vehicle exclusion is permissible under § 19-202.  We
shall deal generally with that issue but shall treat one aspect of her argument separately.
DISCUSSION
Whether § 19-202 Permits Exclusions Relied Upon by Allstate
Section 19-202 of the Insurance Article provides as follows:
“An insurer that issues or delivers a policy or contract of
homeowner’s liability insurance in the State shall offer to
provide to a policyholder, who is registered as a family day care
provider under Title 5, Subtitle 5, Part V of the Family Law
Article, coverage of at least $300,000 for liability that results
from bodily injury, property damage, or personal injury arising
out of an insured’s activities as a family day care provider.”
Section 19-106 of that Article states:
“An insurer that issues or delivers a policy or contract of motor
vehicle liability insurance in the State shall offer to provide to
a policyholder, who is registered as a family day care provider
under Title 5, Subtitle 5, Part V of the Family Law Article,
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coverage in at least the amount required under § 17-103 of the
Transportation Article for liability that results from bodily
injury:
(1) to a family day care child while the child is a passenger 
in an automobile; and
(2) that arises out of an insured’s activities as a family day
           care provider.”
Gallegos looks at § 19-202 and sees nothing in it that permits any exclusions from the
coverage that homeowner insurers are required to offer.  Section 19-106, in her view, is
essentially irrelevant.  Family day care providers like Eply can purchase home day care
endorsements to their motor vehicle policy if they want, but whether they do or do not has
no effect on how § 19-202 should be construed.  As a public policy additive for her position,
she suggests that § 19-202 serves three important public goals that would be lost if the statute
is construed in the manner stated by the lower courts: (1) because it applies only to registered
family day care providers, it encourages such persons to register with the Department of
Human Resources and submit to regulation by that Department; (2) by assuring access to
affordable liability coverage, it encourages persons to become family day care providers and
thus helps to ensure the continued availability of that service; and (3) it increases the
likelihood that parents of children in family day care homes will receive adequate
compensation in the event of injury to their children while in day care.  Gallegos worries that,
if insurers are allowed to create contractual exclusions, the exclusions can, in effect, swallow
up the coverage that the Legislature mandated be offered, thereby frustrating the purpose of
the statute.
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Allstate responds that neither statute requires a family day care provider to carry a
special home day care endorsement, but that they simply require homeowner and motor
vehicle insurers to offer the respective minimum coverage.  Because the coverage is not
mandated, Allstate contends that there is no public policy against excluding from the
coverage that is offered normal and traditional exclusions, especially the motor vehicle
exclusion, which, in light of § 19-106, can be covered under the motor vehicle policy.  The
legislative purpose of § 19-202, it urges, was not to increase the number of registered day
care providers or to provide pools of compensation for parents, but simply to make liability
insurance available and affordable to persons who run day care centers from their homes.
The issue is one of statutory construction, the rules for which are well-settled.  Our
goal is to ascertain and implement, to the extent possible, the legislative intent.  To do that,
we turn first to the language of the statute itself.  If, and only if, it proves impossible to
determine what the Legislature intended with respect to the question before us from the
language alone, we turn to other indicia that have proved useful in discerning that intent.  See
Caffrey v. Liquor Control, 370 Md. 272, 291-92, 805 A.2d 268, 279 (2002); Chen v. State,
370 Md. 99, 106, 803 A.2d 518, 521-22 (2002); Witte v. Azarian, 369 Md. 518, 525-26, 801
A.2d 160, 165 (2002).
Section 19-202, though mandating that homeowner insurers offer coverage “for
liability that results from [injury] arising out of an insured’s activities as a family day care
provider,” says nothing at all, one way or the other, as to whether the coverage offered may
3 Although we have held exclusions in policies that serve to detract from statutorily
mandated coverages to be in conflict with legislative policy and invalid for that reason, we
have also recognized that, even in policies affording mandated coverage, exclusions that do
not conflict with legislative policy are permissible.  See Jennings v. Government Employees
Ins., 302 Md. 352, 362, 488 A.2d 166, 171 (1985).
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contain exceptions or exclusions – in particular, an exclusion for injuries arising from the
ownership, use, or occupancy of a motor vehicle.  It is a matter of common knowledge, of
which we may take judicial notice, that liability insurance policies, even those providing
statutorily mandated coverages, often contain some permissible exclusions of one kind or
another,3 and, in the absence of any express indication in § 19-202, it is impossible to tell
from the language alone what the legislative intent was in that regard.  In that sense, and to
that extent, the language bearing on the issue before us is ambiguous, thus requiring that we
look deeper for some clue as to what the Legislature intended.  The most fertile source in this
case is the legislative history of the statute.
Sections 19-202 and 19-106 began life as SB 899 in the 1986 Session of the General
Assembly.  SB 899  was a departmental bill proposed by the Insurance Commissioner
through the Department of Licensing and Regulation.  As introduced, the bill would have
required insurers writing homeowner’s policies to offer to a policyholder registered as a
family day care home provider both (1) the option of purchasing coverage for liability as a
result of injury arising out of the insured’s activities as a family day care provider, in a
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minimum amount of $300,000, and (2) the option of purchasing coverage for liability as a
result of injury “to a family day care child while a passenger in an automobile arising out of
the insured’s activities as a family day care provider” in the minimum amount required under
§ 17-103 of the Transportation Article.  
In that form, the bill would have required that the motor vehicle coverage be offered
as part of the homeowner’s policy.  There was considerable evidence presented, in support
of the bill, that family day care providers were having great difficulty obtaining and keeping
liability insurance at affordable rates.  Because of the traditional exclusions in homeowner’s
policies for injuries resulting from business activities conducted in the home or from off-site
motor vehicle accidents, special endorsements were necessary, and many people found them
unavailable or unaffordable.  Some of the letters from home day care providers focused, at
least in part, on the need for motor vehicle coverage, noting that day care providers
sometimes transported children to and from school or on field trips of one kind or another.
The Senate Finance Committee took account of the concerns regarding motor vehicle
coverage but decided to place the obligation to offer such coverage on motor vehicle insurers
rather than on homeowner insurers.  Through an amendment to the bill, the Committee
deleted the requirement that homeowner’s insurers offer that coverage as part of the
homeowner’s policy and, instead, wrote new language requiring motor vehicle insurers to
offer to its policyholders who were registered family day care providers the option of
purchasing, as part of the motor vehicle policy, coverage for injuries to day care children
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while a passenger in the insured vehicle.  The bill passed as so amended.  It added a new
section 481D to Article 48A of the Code, to provide as follows:
“(a) Any insurer that issues or delivers a policy or contract of
homeowner’s liability insurance in Maryland shall offer, to any
policyholder who is registered under Part V of Title 5, Subtitle
5 of the Family Law Article as a family day care home provider,
the option of purchasing coverage for liability as a result of
bodily injury, property damage, or personal injury arising out of
the insured’s activities as a family day care provider in an
amount not less than $300,000.
(b) Any insurer that issues or delivers a policy or contract of
motor vehicle liability insurance in Maryland shall offer, to any
policyholder who is registered under Part V of Title 5, Subtitle
5 of the Family Law Article as a family day care home provider,
the option of purchasing coverage for liability as a result of
bodily injury to a family day care child while a passenger in an
automobile arising out of the insured’s activities as a family day
care provider in an amount not less than that required under §
17-103 of the Transportation Article.”
With minor style corrections, the law remained in that form until the enactment,
effective October 1, 1997,  of the new Insurance Article, which code-revised and reorganized
the insurance laws and repealed Article 48A.  The Insurance Article split the two provisions
of § 481D, putting what was subsection (a) into subtitle 2 of title 19, dealing with
homeowner’s insurance policies, as § 19-202, and placing subsection (b), dealing with motor
vehicle insurance, in subtitle 1 of title 19, as § 19-106.  No change was made, or intended,
to the substance of the law.  See Revisors Notes following §§ 19-106 and 19-202 in the 1997
4 The first publication of the Insurance Article in 1997 contained the Code Revision
Commission’s Revisor’s Notes, which explained the derivation of each 
section of the Article.
In 2002, the second volume of the Article, containing title 19, was republished and, in
accordance with standard legislative policy, the Revisor’s Notes with respect to the sections
in that volume were deleted.
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edition of the Insurance Article.4
The decision to shift the requirement of offering coverage for off-site injuries
resulting from the ownership, use, or occupancy of a motor vehicle, as part of a home day
care endorsement, from the issuers of homeowner’s policies to the issuers of motor vehicle
policies was obviously a knowing and deliberate one on the part of the Legislature and is
virtually conclusive evidence that it did not intend to preclude a motor vehicle exclusion in
day care endorsements in homeowner’s policies.  That inference is bolstered by a number of
related facts.
As even a casual perusal of the Insurance Article will attest, the Legislature is not a
novice when it comes to regulating insurance companies and practices.  It is familiar with
that industry and with the kinds of policies and contracts issued by insurance companies, and
it knows well how to mandate coverage and limit or preclude conditions to, exclusions from,
and limitations of, coverage.  See, for example, § 12-102 (insurance contract “shall contain
the standard provisions required under this article”); §§ 12-205 and 12-209 (precluding
policy from containing certain provisions); §§ 15-802, 15-803, 15-804, 15-807, 15-808
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through 15-831, and 15-834 through 15-839 (requiring certain coverages in health policies);
§§ 15-906 and 15-907 (mandating certain coverage in medicare supplement policies); §§ 16-
201 through 16-217 (required and prohibited provisions in life insurance policies); § 16-503
(mandatory provisions in annuity contracts); §§ 18-109 through 18-111 (required and
prohibited provisions in long-term care and home health care insurance); and §§ 19-504 and
19-509 (mandatory liability and uninsured motorist coverage in motor vehicle policies).
It has long been common for homeowner’s insurance policies to exclude liability for
off-site injuries arising from the ownership, use, or occupancy of motor vehicles.  See 12
George J. Couch, CYCLOPEDIA OF INSURANCE LAW § 44A:42 (2d ed., Ronald A. Anderson,
rev. vol., Mark S. Rhodes 1981) (A common exception of public liability insurance is the
exclusion with respect to the off-premises use of motor vehicles, for the reason that coverage
in such case is ordinarily procured as automobile public liability insurance); 7A John A.
Appleman, INSURANCE LAW AND PRACTICE § 4500.02 (rev. vol. Walter F. Berdal 1979)
(same).  See also David B. Harrison, Annotation, Construction and Effect of Provision
Excluding Liability for Automobile-Related Injuries or Damage from Coverage of
Homeowner’s or Personal Liability Policy, 6 A.L.R.4th 555, 558 (1981 & Supp. 2001):
“Because of the wide availability of automobile liability
insurance, and because of the fact that the inclusion of coverage
for automobile-related injuries and property damage in
insurance contracts providing general liability protection would
substantially increase the insurer’s risks and would necessitate
an increase in the applicable insurance premiums, the general
liability coverage afforded by homeowner’s insurance policies
and by personal liability insurance policies is frequently made
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subject to a policy exclusion applicable to automobile-related
injuries and property damage.”
We may fairly assume that, in amending SB 899 as it did, the Legislature was aware of that
practice, and yet, in its choice of language, opted not to prohibit such an exclusion but rather
to leave the motor vehicle coverage to motor vehicle policies.
Gallegos complains that to permit the exclusion would leave a gap in coverage, either
because insureds may not purchase a day care endorsement to their motor vehicle insurance
or because their motor vehicle insurance, as here, may be considerably less than $300,000.
As noted, she urges as well that the exclusion may cause day care providers not to register
with the Department of Human Resources or to cease operation entirely.  There are several
answers to that kind of argument.  One, of course, is that the statute does not mandate
coverage and therefore anticipates that, through the free choice of insureds not to purchase
coverage or even through exclusions or limitations in both policies, there may be gaps.  The
major gaps posited by Gallegos are not inherent, however.  Had Ms. Eply purchased
$300,000 of coverage on her motor vehicle policy, as she could have done, there would be
no gap here.  Indeed, she would not even have had to purchase a special day care
endorsement on the motor vehicle policy, for, as noted, Allstate has conceded coverage under
the basic policy.  
 It seems clear to us that the thrust and purpose of § 19-202 was to permit home day
care providers to overcome the standard exclusion in homeowner’s policies for injuries
arising from business pursuits.  That was the predominant problem with respect to
5 We are dealing here only with the exclusion for off-site injuries arising from the
possession, use, or occupancy of a motor vehicle and not with any of the other exclusions
listed as part of Coverages X, Y, or DC, and we express no opinion as to whether any of
them might conflict with the legislative purpose reflected in § 19-202.
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homeowner’s insurance.  As noted in McCloskey v. Republic Ins. Co., 80 Md. App. 19, 28-
30, 559 A.2d 385, 389-90 (1989), the prevailing rule was that home day care operations, as
opposed to occasional babysitting, constituted a business pursuit and thus fell within the
standard exclusion for such pursuits.  
For all of these reasons, we agree with the two lower courts that the exclusions relied
upon by Allstate are not prohibited by § 19-202.5 
Whether Stacy Was A Passenger
Part of Gallegos’s attack on the motor vehicle exclusion is in the form of a syllogism.
She urges, as her major premise, that, even if § 19-202 permits an exclusion for offsite
injuries resulting from the ownership, use, or occupancy of a motor vehicle, that exclusion
would be permissible only if the injury was otherwise covered under the motor vehicle
policy.  Her minor premises are (1) that, under the motor vehicle policy, there would be
coverage only if Stacy was a “passenger” in the minivan, and (2) that he was not a passenger.
Ergo, she argues, as there was no coverage under the motor vehicle policy, there must be
coverage under the homeowner’s policy.
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The argument is flawed because all three of the underlying premises are incorrect.
First, as we have already stated, the effect of § 19-202 does not depend on whether an
insured even purchases a motor vehicle policy, much less whether he/she purchases a home
day care endorsement to such a policy.  It was not intended, or effective, to mandate coverage
and does not preclude a motor vehicle exclusion under a homeowner’s policy.  Second, there
clearly was liability under the motor vehicle policy in this case; Allstate conceded such
liability, and for good reason.  Finally, it is ludicrous to suggest that Stacy, strapped into a
car seat in the vehicle, was not a passenger.  
JUDGMENT 
OF 
COURT 
OF 
SPECIAL
APPEALS AFFIRMED, WITH COSTS.