UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 05-1819

MANOR CARE OF AMERICA, INC., formerly known as

Manor Care, Incorporated, a Delaware

corporation,

Plaintiff - Appellant,

versus

PROPERTY & CASUALTY INSURANCE GUARANTY

CORPORATION, a private corporation formed by

the State of Maryland,

Defendant - Appellee.

Appeal from the United States District Court for the District of

Maryland, at Baltimore. Benson Everett Legg, Chief District Judge.

(CA-02-4206-1)

Argued: May 23, 2006 Decided: July 18, 2006

 

Before MICHAEL, MOTZ, and SHEDD, Circuit Judges.

Reversed and remanded by unpublished per curiam opinion. Judge

Shedd wrote a concurring opinion.

ARGUED: Gerald R. Kowalski, COOPER & WALINSKI, L.P.A., Toledo,

Ohio, for Appellant. Edward Mark Buxbaum, WHITEFORD, TAYLOR &

PRESTON, L.L.P., Baltimore, Maryland, for Appellee. ON BRIEF: Jodi

D. Spencer, COOPER & WALINSKI, L.P.A., Toledo, Ohio, for Appellant.

Albert J. Mezzanotte, Jr., Emily A. Daneker, WHITEFORD, TAYLOR &

PRESTON, L.L.P., Baltimore, Maryland, for Appellee. 
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Unpublished opinions are not binding precedent in this circuit.

See Local Rule 36(c).
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PER CURIAM:

Property and Casualty Insurance Guaranty Corporation

(PCIGC), the insurance guaranty fund created by the Insurance

Article of the Maryland Code, §§ 9-301 et seq. (guaranty fund or

statute), covers an insolvent insurer’s unpaid obligation under a

policy “issued to a resident” of Maryland, § 9-301(d)(1)(i)(1).

The question in this case is when a policyholder must be a resident

to have its claim covered by PCIGC. We hold that the statute

requires a policyholder to be a resident of Maryland at the time

the policy is issued. The district court’s summary judgment to the

contrary -- that the statute requires residency at the time the

claim is submitted to PCIGC -- is therefore reversed.

I.

A.

PCIGC is a private, nonprofit, nonstock corporation that

collects assessments for and administers Maryland’s guaranty fund.

See Md. Code Ann., Ins. § 9-302. PCIGC steps into “the shoes of

the insolvent insurer,” Igwilo v. PCIGC, 750 A.2d 646, 650 (Md.

Ct. Spec. App. 2000) (internal quotation marks omitted), and,

subject to certain limits, fulfills the obligations that the

insolvent insurer should have fulfilled to Maryland residents, Joe

Shifflett, Inc. v. PCIGC, 551 A.2d 913, 915 (Md. Ct. Spec. App.

1989). The corporation’s avowed purpose is to “provide a mechanism
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for the prompt payment of covered claims under certain policies and

to avoid financial loss to residents of [Maryland] who are

claimants or policyholders of an insolvent insurer.” § 9-302(1). 

Insurance companies must be members of PCIGC as a

condition of their authority to transact business in Maryland.

§ 9-304(b). As members, they must pay an annual assessment to

cover the expenses of PCIGC, including expenses arising from any

member’s insolvency. § 9-306(d). This assessment, levied by

PCIGC, is in the same proportion that “the net direct written

premiums of the member insurer for the preceding calendar year

. . . bears to the net direct written premiums of all member

insurers for the preceding calendar year.” § 9-306(d)(2). 

Manor Care of America, Inc. (Manor Care) is a Delaware

corporation that owns and operates nursing homes and other longterm health care facilities throughout the country. Manor Care had

its principal place of business in Maryland until September 1998,

when it moved to Ohio. From June 1, 1993, through June 1, 1997,

while a resident of Maryland, Manor Care was insured under a

comprehensive general liability insurance policy issued by PHICO

Insurance Company (PHICO), a company authorized to sell insurance

in Maryland. Manor Care contends that the premiums it paid to

PHICO during this four-year period were remitted in part to PCIGC

as part of PHICO’s annual assessment, though PCIGC disputes this

contention. 
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 In February 2002 PHICO was declared insolvent and ordered

into liquidation by the Commonwealth Court of Pennsylvania. Manor

Care thereafter requested that PCIGC fulfill the obligations that

PHICO should have fulfilled under the policy: that is, cover

liability claims asserted against Manor Care (and its related

affiliates and subsidiaries) for incidents occurring during the

policy period, June 1, 1993, through June 1, 1997. PCIGC

repeatedly refused to provide coverage on the ground that Manor

Care is not a Maryland resident under the guaranty fund statute. 

B.

 In December 2002 Manor Care sued PCIGC in diversity in

the U.S. District for the District of Maryland, seeking (1) a

declaratory judgment that its claims are “covered claims” under

§ 9-301(d), and (2) damages from PCIGC’s failure to defend and

indemnify it against malpractice and other claims that would have

been covered by its policy with PHICO. The district court allowed

limited discovery on whether the claims are covered under § 9-

301(d). The parties stipulated that none of the parties suing

Manor Care (the claimants) are Maryland residents. After the

limited discovery ended, PCIGC filed a motion for summary judgment

on the ground that Manor Care is not a Maryland resident within the

meaning of “covered claim.”

The district court granted summary judgment to PCIGC upon

concluding that eligibility for coverage turns on current residency
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-- that is, residency at the time the policyholder submits a claim

to PCIGC. Because Manor Care was not a Maryland resident in 2002

when it submitted its claims to PCIGC, the court concluded that

Manor Care’s claims are not “covered claims” under § 9-301(d).

Manor Care appeals.

II.

The dispute centers on when a policyholder must be a

Maryland resident for a claim to be a “covered claim” under § 9-

301(d)(1)(i)(1). “Covered claim” is defined in part as:

an insolvent insurer’s unpaid obligation, including an

unearned premium[,] that . . . arises out of a policy of

the insolvent insurer issued to a resident or payable to

a resident on behalf of an insured of the insolvent

insurer.

Id. (emphasis added). “Resident,” in turn, is defined as “an

individual domiciled in the State” or a “corporation or entity

whose principal place of business is in the State.” § 9-301(h). 

PCIGC argues that to qualify for coverage a policyholder

must be a current resident, specifically, a resident at the time it

submits a claim to PCIGC (and after its insurer has gone

insolvent). Manor Care counters that current residency has no

bearing on whether a claim is covered. Rather, residency at the

time that the relevant insurance policy was issued is controlling.

Because Manor Care was a resident of Maryland when PHICO issued the

policy on June 1, 1993, and renewed it on June 1, 1994, June 1,
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1995, and June 1, 1996, Manor Care maintains that it is a resident

within the meaning of “covered claim,” § 9-301(d).

Maryland’s rules of statutory interpretation are in line

with the norm. “The cardinal rule . . . is to ascertain and

effectuate the intention of the legislature.” Degren v. State, 722

A.2d 887, 895 (Md. 1999) (internal quotation marks and citation

omitted). The starting point for determining legislative intent is

the language of the statute itself. Courts generally do not look

beyond the statute’s words if they are “plain and free from

ambiguity, and express[] a definite and simple meaning.” Id. When

the statutory language is ambiguous, courts consider “not only the

literal or usual meaning of the words, but their meaning and effect

in light of the setting, the objectives and purpose of the

enactment.” Tucker v. Fireman’s Fund Ins. Co., 517 A.2d 730, 732

(Md. 1986). In case of ambiguity, courts “may [also] consider the

consequences resulting from one meaning rather than another, and

adopt that construction which avoids an illogical or unreasonable

result, or one which is inconsistent with common sense.” Id.; see

also Romm v. Flax, 668 A.2d 1, 2 (Md. 1995). 

We agree with Manor Care’s reading of the statute. For

a claim to be covered, it must arise out of an insurance policy

that was “issued to a resident.” § 9-301(d)(1)(i)(1). The meaning

of this phrase is plain and free from ambiguity. The phrase

unmistakably tethers the residency requirement to a particular
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event, the issuance of the policy. To be eligible for coverage, a

policyholder must have been a Maryland resident when the policy was

issued, not when the claim is submitted to PCIGC.

This interpretation is not upended by the statute’s

present-tense definition of a corporate “resident.” § 9-301(h)(2)

(“‘Resident’ means . . . a corporation . . . whose principal place

of business is in the State.”). When the definition of a corporate

resident is read into the “issued to a resident” language in

§ 9-301(d)(1)(i)(1), it is clear that the Maryland residency must

be contemporaneous with the issuance of the policy.

Although we find no ambiguity in the provision at issue,

further analysis reveals that our straightforward reading is in

line with “[t]he setting, the objectives and purpose of the

[guaranty fund] enactment.” Tucker, 517 A.2d at 732. Our reading,

moreover, achieves a result that is logical, reasonable, and

consistent with common sense. See id.

In 1986 the Maryland legislature established PCIGC in its

current form, creating a self-financing guaranty fund. See Ward

Elec. Servs., Inc. v. PCIGC, 599 A.2d 81, 85-86 (Md. 1991)

(discussing concerns of General Assembly and aims of 1986

enactments). The legislature made clear that PCIGC is not “‘an

instrumentality of the State’” and that its liabilities are not the

State’s. Id., 599 A.2d at 86 (citing preamble, Chapter 161 of Acts

of 1986). PCIGC is instead a private corporation that assesses
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each of its members, or authorized insurers, an annual fee “in

amounts necessary to pay” its expenses, including the covered

claims of insolvent insurers. § 9-306(d).

As a practical matter, a portion of the premiums that

Maryland residents pay to authorized insurers are passed onto PCIGC

in the form of annual assessments. As the Maryland Court of

Appeals has observed, “The legislative purpose [behind PCIGC] was

to protect Maryland policyholders who would pay as part of their

premiums the assessments levied by PCIGC to pay the covered claims

in the [indemnity company’s] insolvency.” Ward Elec. Servs., Inc.,

599 A.2d at 86 (emphasis added). In light of this purpose, it

would be illogical to exclude from coverage a policyholder that was

a resident when its policy was issued and whose premiums helped

finance PCIGC, but award coverage to a new or recent resident whose

premiums did not support the guaranty fund.

PCIGC’s counterarguments are unavailing. PCIGC points

primarily to the statute’s legislative history and divergence from

the Model Insurance Guaranty Association Act (Model Act) to argue

that only claims of current residents are covered. The legislative

history, as sparse as it is, does not support PCIGC’s position.

Before 1975 the definition of “covered claim” specified that the

claimant or insured must be “a resident of this State at the time

of the insured event.” 1975 Md. Laws, ch. 651 at 2999 (setting

forth in brackets the language to be deleted by amendments). In
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1975 the Maryland legislature deleted this language as part of a

comprehensive overhaul of the definition of “covered claim” and

adopted the current definition with its “issued to a resident”

language. (The legislature added the affiliated definition of

“resident” eleven years later, in 1986. See 1986 Md. Laws, ch.

440.) According to PCIGC, the Maryland legislature intended this

change to benefit current residents, not past residents. This

argument goes too far, however. The Maryland legislature, by

deleting “resident at the time of the insured event,” did not

delete all references to past events; it simply replaced one past

referent with another. Instead of being a resident at the time of

the insured event, the policyholder must be a resident when the

insurance policy was issued. For example, if a one-year policy was

issued to a Maryland resident on January 1, 2004, the policyholder

would still be considered a “resident” for purposes of § 9-301(d)

if it had moved to another state by the time that the event giving

rise to the claim occurred, say six months later. 

For similar reasons, PCIGC’s reliance on the relevant

Model Act is unpersuasive. Like the pre-1975 Maryland statute, the

Model Act incorporates the phrase, “resident of this state at the

time of the insured event,” into the definition of “covered claim.”

Model Ins. Guar. Ass’n Act § 5(F)(1). PCIGC contends that as of

1975 the Maryland legislature intended its guaranty fund statute to

diverge from the Model Act and benefit only current residents, not
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past residents. Cf. Bethesda Mgmt. Servs. Inc. v. Dep’t of

Licensing and Regulation, 350 A.2d 390, 395 (Md. 1976) (explaining

in another context that the Maryland legislature, in adopting but

sightly altering the Model State Administrative Procedure Act, left

“little doubt” that it intended to modify that particular model

act). Endorsing Manor Care’s interpretation would, in PCIGC’s

view, contravene this legislative intent by effectively adopting

the Model Act’s language. But, as just explained, our holding

today does not align the Maryland statute with the Model Act.

Rather, it recognizes what the plain language and the statutory

purpose make clear. A policyholder, to be eligible for coverage,

must be a resident at the time its insurance policy was issued, not

at the time of the insured event (as the Model Act provides) or at

the time of submitting a claim to PCIGC (as PCIGC urges).

For the foregoing reasons, we reverse the district

court’s grant of summary judgment to PCIGC. A policyholder is a

Maryland resident within the meaning of § 9-301(d)(1)(i)(1) if it

was a resident when its insurance policy was issued. Because Manor

Care was a Maryland resident between 1993 and 1997, it satisfies

the residency requirement for a “covered claim” under the statute.

On remand the district court will enter summary judgment in favor

of Manor Care on the residency issue.

REVERSED AND REMANDED
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SHEDD, Circuit Judge, concurring:

I concur in the result reached by the majority. I write

separately to note that I would hold that the statutory phrase

“issued to a resident” is ambiguous. Under Maryland law, a statute

is ambiguous “[w]hen there is more than one reasonable

interpretation” of the statute. Moore v. State, 879 A.2d 1111,

1113 (Md. 2005). I believe that the phrase “issued to a resident”

could reasonably be interpreted to mean (1) issued to one who was

a resident at the time the policy was issued, or (2) issued to one

who is currently a resident. Notwithstanding this ambiguity, I

believe that the legislative history and policy behind the statute,

as discussed in the majority opinion, lead to the conclusion that

the majority’s result is correct.