Title: MAIF v Perry

State: maryland

Issuer: Maryland Supreme Court

Document:

Maryland Automobile Insurance Fund v. Ralph Perry
No. 43, Sept. Term, 1999
Owner of insured vehicle with PIP coverage not disqualified from receiving PIP benefits for injuries
sustained while occupying insured vehicle because owner also owns another uninsured vehicle.
Circuit Court for Baltimore City
Case No. 97297078/CC7217
IN THE COURT OF APPEALS OF MARYLAND
No. 43
September Term, 1999
______________________________________
MARYLAND AUTOMOBILE
INSURANCE FUND
v.
RALPH PERRY
______________________________________
Bell, C.J.
Eldridge
Rodowsky
Raker
Wilner
Cathell
Harrell,
   JJ.
______________________________________
Opinion by Wilner, J.
______________________________________
Filed:    December 8, 1999
 Effective October 1, 1997, the insurance laws formerly contained in Article 48A of the Code
1
were recodified in the new Insurance Article.  For convenience, we shall use the current code
references, except when the context requires otherwise.
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In January, 1994, respondent, Ralph Perry, owned two cars — a 1991 Chevrolet that
was insured by the Maryland Automobile Insurance Fund (MAIF) and a 1990 Chevrolet that
was uninsured.  On January 24, while driving the insured vehicle, he was in an accident and,
as a result, incurred medical expenses and wage losses aggregating $1,373.  His MAIF
insurance policy contained Personal Injury Protection (PIP) coverage that provided for the
payment of up to $2,500 for such medical expenses and wage losses.  Notwithstanding that
coverage, MAIF refused to pay the benefits, contending that (1) Perry’s ownership of an
uninsured vehicle caused him to be in violation of Maryland Code, § 17-103 of the
Transportation Article, and (2) as a result of that violation,  payment of the PIP benefits was
precluded by Maryland Code, Article 48A, § 543(b)(2), which appears now as § 19-
513(c)(2) of the Insurance Article.    
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Aggrieved at that response, Perry sued MAIF in the district court and lost.  On appeal,
however, the Circuit Court for Baltimore City reversed and entered judgment for Perry.  We
granted MAIF’s petition for certiorari to consider whether Perry’s ownership of an
uninsured vehicle bars him from recovering PIP benefits under the MAIF policy.  We shall
affirm the judgment of the circuit court.
Maryland law requires that the owners of  motor vehicles required to be registered
have certain minimum insurance coverage (or comparable security acceptable to the Motor
Vehicle Administration).  It requires insurance companies writing motor vehicle insurance
With enumerated exceptions not apparently relevant here, §13-402 of the Transportation
2
Article requires every motor vehicle driven on a Maryland highway to be registered.  Section 13-401
prohibits persons from driving an unregistered vehicle on Maryland highways and further prohibits
the owner of an unregistered vehicle from allowing such a vehicle to be driven on those highways.
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in Maryland to offer that minimum coverage as well as certain other coverages that an
insured may opt to decline or limit.  The requirements imposed upon vehicle owners to have
the mandated security are provided for in title 17 of the Transportation Article.  The
requirements imposed upon insurance companies to offer the specified coverages are found
in title 19, subtitle 5 of the Insurance Article.  In a nutshell, the Transportation Article
focuses on the owners and drivers of motor vehicles; the Insurance Article focuses on
insurance companies and their insureds.  The two parts of the Code obviously need to be
read together, in harmony.
Section 17-104 of the Transportation Article requires the owners of  motor vehicles
subject to registration in Maryland to maintain certain required security during the
registration period and prohibits the Motor Vehicle Administration from issuing or
transferring the registration of a motor vehicle unless the owner or prospective owner
furnishes satisfactory evidence that the required security is in effect.   The nature and extent
2
of the required security is set forth in § 17-103.  With exceptions not relevant here, that
section requires the security to be in the form of an insurance policy providing (1) liability
coverage for bodily injury or death arising from an accident of up to $20,000 for one person
and up to $40,000 for two or more persons; (2) liability coverage for damage to the property
of others of up to $10,000; (3) unless waived, the benefits described under § 19-505 of the
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Insurance Article as to basic primary coverage (PIP coverage); and (4) the benefits required
under § 19-509 of the Insurance Article as to required additional coverage
(uninsured/underinsured motorist coverage).  A person who fails to maintain the required
security is subject to a variety of civil penalties, including suspension of the person’s driving
privileges and monetary fines.  See § 17-106.  A person who knowingly drives an uninsured
motor vehicle or an owner who knowingly permits one to be driven is subject as well to
criminal penalties.  See §§ 17-107, 27-101(h).  For a first offense, the person is subject to a
$1,000 fine and a year in jail.
Title 19, subtitle 5 of the Insurance Article, as noted, sets forth the kinds of primary
coverages that motor vehicle insurers are required to offer in Maryland policies.  There are
three such coverages:  PIP benefits, provided for in §§ 19-505 through 19-508;
uninsured/underinsured motorist coverage, provided for in §§ 19-509 through 19-511; and
collision coverage, provided for in § 19-512.  We are concerned here with the PIP coverage.
Section 19-505 requires that, unless waived by the insured in accordance with § 19-506, each
insurer who sells motor vehicle insurance in Maryland must provide PIP coverage of at least
$2,500 for (1) the first named insured under the policy and any family member of that
insured who resides in the insured’s household, who is injured in any motor vehicle accident,
including an accident that involves an uninsured motor vehicle; (2) any other individual who
is injured in a motor vehicle accident while using the insured vehicle with the permission of
the named insured; (3) an individual injured in a motor vehicle accident while occupying the
insured vehicle as a guest or passenger; and (4) an individual injured in a motor vehicle
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accident that involves the insured vehicle, either as a pedestrian or while in, on, or alighting
from a vehicle operated by animal or muscular power.
Section 19-505(c)(1)(i) allows insurers to exclude from PIP coverage certain
individuals who otherwise would be required to be covered.  They include an individual who
(1) intentionally causes the accident resulting in the injury; (2) is a non-resident injured as
a pedestrian in an accident that occurs outside Maryland; (3) is injured while operating or
voluntarily riding in a vehicle the person knows is stolen; or (4) is injured in a motor vehicle
accident while committing a felony or fleeing or eluding the police.  Section 19-505(c)(1)(ii)
provides further that PIP coverage will not extend to:
“the named insured or a family member of the named insured
who resides in the named insured’s household for an injury that
occurs while the named insured or family member is occupying
an uninsured motor vehicle owned by . . . the named insured; or
. . . an immediate family member of the named insured who
resides in the named insured’s household.”
(Emphasis added).
It is evident, if we just consider these provisions, that Perry would be entitled to PIP
benefits.  He was the named insured under a policy that, absent a waiver, was required to
contain, and did contain, PIP coverage, and he fell within none of the permissible exclusions.
Although he owned an uninsured motor vehicle, he was not occupying it when the injury
occurred.
MAIF’s defense arises from § 19-513, which sets forth certain limitations on the
recovery of benefits provided for in the subtitle.  Subsection (c) provides:
“(1) The insurer of a motor vehicle for which the coverage
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described in § 19-505 of this subtitle is in effect shall pay the
benefits described in § 19-505 of this subtitle to an individual
who is injured in a motor vehicle accident:
(i) while occupying the insured motor vehicle; or
(ii) by the insured motor vehicle as a pedestrian, while in,
on, or alighting from a vehicle powered by animal or muscular
power, or while on or alighting from an animal.
(2) An insurer may not pay benefits under paragraph (1) of this
subsection to an individual who is in violation of § 17-103 of the
Transportation Article.”
(Emphasis added).
MAIF’s argument is that Perry’s ownership of an uninsured motor vehicle — the 1990
Chevrolet — constituted a violation of § 17-103 and that, because he was in violation of that
section when the injury occurred, MAIF was forbidden to pay him the PIP benefits to which
he otherwise would have been entitled.  Citing Van Horn v. Atlantic Mutual, 334 Md. 669,
641 A.2d 195 (1994) and Pennsylvania Nat’l Mut. v. Gartleman, 288 Md. 151, 416 A.2d 734
(1980), MAIF stresses the strong legislative policy designed to assure that people who own
or operate motor vehicles in Maryland are financially responsible and urges that the
provision in § 19-513(c)(2), which it regards as precluding the payment of PIP benefits to
one who owns an uninsured vehicle, is in furtherance of that policy and should be enforced.
It relies as well on three intermediate appellate court decisions from Pennsylvania construing
what MAIF regards as a comparable statute to require the denial of  PIP benefits to one who
owns an uninsured vehicle.  See Kresge v. Keystone Ins. Co., 567 A.2d 739 (Pa. Super.
1989); Mowery v. Prudential Prop. & Cas. Ins., 535 A.2d 658 (Pa. Super. 1988); Allen v.
Erie Ins. Co., 534 A.2d 839 (Pa. Super. 1987).  We believe that the Pennsylvania statute is
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not comparable to § 19-513(c)(2) and that the Maryland provision was not intended to create
the result MAIF seeks.
The Pennsylvania statute, 75 Pa. C.S.A. § 1714, is part of that State’s Motor Vehicle
Financial Responsibility Law.  It provides, in relevant part, that “[a]n owner of a currently
registered motor vehicle who does not have financial responsibility . . . cannot recover first
party benefits.”  In the cases cited by MAIF, the Pennsylvania court sustained the
constitutionality of that statute and enforced it in accordance with the legislative intent
behind it.  As noted by the Allen court:
“In passing the Act [meaning the entire Motor Vehicle Financial
Responsibility Law], the Legislature was primarily concerned
with the rising consumer cost of automobile insurance, created
in part by the substantial number of uninsured motorists who
contributed nothing to the pool of insurance funds from which
claims were paid. . . .  The Act has the effect of requiring all
owners of registered vehicles to share in the burden of insurance
before they can obtain the benefits.  By denying benefits to a
certain class of people — those not insuring their registered
vehicles — the Act encourages the purchase of insurance by all
owners who register vehicles which can be legally operated on
the highways.”
Allen, 534 A.2d at 840-41.
We have no quarrel with the three Pennsylvania decisions.  It seems evident that
§ 1714 was designed and intended by the Pennsylvania legislature to do what the court said.
It is equally evident, however, that the Maryland provision, § 19-513(c)(2), had a very
different purpose and was not intended to disqualify a person from recovering PIP benefits
to which the person is otherwise entitled, merely because that person owns an uninsured
motor vehicle that was not involved in the accident.
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Most of what is now contained in title 19, subtitle 5 of the Insurance Article and the
basic required security provisions of title 17, subtitle 1 of the Transportation Article were
enacted in 1972, by 1972 Md. Laws, ch. 73.  That was a comprehensive law that, among
other things, inaugurated compulsory insurance or other required security, established MAIF
as an insurer of last resort, prohibited the arbitrary cancellation and non-renewal of motor
vehicle insurance policies, and required policies to contain collision and PIP coverage.
Under that law, and until 1989, PIP coverage up to $2,500 was mandatory; unless equivalent
benefits were provided through another policy approved by the Insurance Commissioner, it
had to be included in every motor vehicle insurance policy and could not be declined or
waived by the insured.  See former Maryland Code (1957; 1986 Repl. Vol.), Article 48A, §
539; Transportation Article (1987 Repl. Vol. and 1988 Supp.), § 17-103(b)(3). Former § 545
of Article 48A, as enacted in 1972 and until amended in 1989, listed the only exclusions
allowed from the mandated PIP coverage, which were those now specified in § 19-
505(c)(1)(i) — individuals who intentionally cause the accident, are injured while voluntarily
riding in a vehicle known to be stolen, are injured while in the commission of a felony or
while eluding the police, or are non-resident pedestrians injured in an accident occurring
outside Maryland.  Section 17-103(b)(3) of the Transportation Article, which now requires
PIP coverage “unless waived,” did not then contain that condition; the requirement was
absolute.
The exclusion relied upon by MAIF was not in the 1972 enactment and was thus
never part of the comprehensive required financial responsibility scheme enacted by the
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General Assembly, as apparently is the case in Pennsylvania.  When deciding both to require
minimum financial responsibility in the form of insurance and to mandate certain primary,
or first party, coverages as part of that insurance, the Legislature did not opt to deny PIP
benefits to persons otherwise entitled to them simply because they owned an uninsured
vehicle.  The thrust of the 1972 law was to extend, not restrict, insurance protection,
especially a limited amount of primary, no-fault benefits for wage loss and basic medical
expenses.  The Maryland response to the problem of uninsured motorists was the creation
of MAIF, to provide insurance for those persons who could not obtain it in the private
market, the preclusion of arbitrary cancellations and non-renewals of policies by private
insurers, and the civil and criminal penalties attached to owning or driving an uninsured
vehicle.
What is now § 19-513(c)(2) was enacted as part of a 1989 law that, for the first time,
allowed insureds to decline PIP coverage.  The requirement of that coverage was a major
innovation in 1972; it represented the State’s limited endorsement of the concept of no-fault
automobile insurance, then being widely touted as the answer to perceived flaws in our
system of compensating those injured in motor vehicle accidents.  The premiums for that
coverage, initially, were minimal, as low as $3.  Over the years, however, claims experience
caused PIP premiums to increase not only substantially but unevenly throughout the State.
Evidence presented to the General Assembly in 1989 showed a wide variation in PIP
premiums even for the best drivers, ranging, for one major insurance company, from $33 for
a resident of Allegany County to $194 for residents of certain areas of Baltimore City.
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MAIF rates for PIP coverage varied among its 14 geographic territories from $166 to $482.
Efforts were made as early as 1987 to alter or repeal the PIP requirement, and those
efforts bore fruit in 1989.  See 1989 Md. Laws, ch. 555.  The 1989 Act effected the change
by (1) amending § 17-103(b)(3) to add the condition, “unless waived,” to the requirement
of PIP coverage; (2) rewriting then-§ 539 of Article 48A — current § 19-505 — to add the
same condition and make conforming changes; (3) adding what is now § 19-506, setting forth
a detailed procedure for the waiver of PIP benefits by an insured; (4) adding to then-§ 543(b)
what is now § 19-513(c)(2) — the provision relied upon by MAIF; and (5) making
conforming changes to other sections.
The purpose and meaning of § 19-513(c)(2) is well-explained in the public legislative
history of the 1989 law.  A person injured in an automobile accident could be eligible for PIP
benefits from two or more sources — the insurer of the vehicle involved in the accident and,
if the person had his or her own insurance on another vehicle, from the insurer of that vehicle
as well.  See § 19-505(a)(1)(i).  The law always precluded collecting from both insurers (§
19-513(b)) and required, where coverage was available from both sources, that the benefits
be paid by the insurer of the vehicle involved in the accident.  See § 19-513(c)(1).  In
allowing insureds to waive PIP benefits under their own policies, however, the Legislature
determined that a waiver of PIP benefits was a total waiver, and that, if an insured waived
such benefits under his/her own policy, the insured could not collect those benefits from any
other insurer.  That purpose is stated expressly in the Floor Report of the House Economic
Matters Committee:
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“A waiver of the coverage would constitute a waiver of all PIP
benefits provided under the first named insured’s policy and any
other motor vehicle liability policy issued in Maryland.  In other
words, once PIP is waived, the persons to whom the waiver
applies cannot go against the PIP coverage of another driver
who has not waived merely because the first person waived
under their own policy.”
The Floor Report goes on to explain that the waiver of PIP coverage “is for the no-
fault remedy itself” and not merely the waiver under a specific policy:
“In other words, a person who has waived the add-on no-fault
benefit for himself and his family under his own policy should
not be able to recover PIP benefits merely because he happens
to be a passenger in an automobile for which PIP coverage has
not been waived.”
That explanation puts the purpose of the new language now appearing as § 19-
513(c)(2) in clear focus.  It was not to disqualify a person from PIP benefits merely because
the person owns an uninsured vehicle that was not involved in the accident, as MAIF
contends, but to disqualify only those persons who had deliberately waived PIP coverage
under their own policy, in accordance with § 19-506.  Perry, of course, is not subject to that
disqualification; he is seeking to collect PIP benefits from his own insurer and did not waive
his right to do so.
JUDGMENT OF CIRCUIT COURT FOR
BALTIMORE CITY AFFIRMED; PETITIONER
TO PAY THE  COSTS.