Opinion ID: 1924955
Heading Depth: 1
Heading Rank: 9

Heading: Maryland's Public Policy Exception

Text: As discussed supra, under lex loci delicti, Delaware law should govern what the Heffernans are entitled to recover. In answer to the second certified question, Maryland's public policy exception to the doctrine of lex loci delicti does not require the application of Maryland's statutory cap on non-economic damages, Md.Code. Ann., Cts. & Jud. Proc. § 11-108. As discussed infra, Maryland's statutory cap is inapplicable for a number of reasons. First, it does not apply because it is part of the substantive law of Maryland, not our procedural law. Next, the insurer is not entitled to assert as a defense every statutory limitation on the recovery of damages. Lastly, this is not a situation in which the Maryland Legislature has stated that the statutory cap should be applied in a breach of contract action against the insurer on the basis of an uninsured/underinsured motorist claim. There exists a well established exception to the traditional rule of lex loci delicti. [10] Under the exception, the law of the forum will be applied whenever the law of the place of the wrong is contrary to a strong public policy of the forum state. See Schmidt v. Driscoll Hotel, Inc., 249 Minn. 376, 82 N.W.2d 365 (1957). Erie argues that even if we apply lex loci delicti, Maryland's public policy exception to that doctrine, nonetheless, requires application of Maryland's statutory cap and Maryland's contributory negligence principles. We disagree because pursuant to lex loci delicti, we apply the substantive law of the place of the injury. The Heffernans contend that Maryland's public policy must be very strong and not merely a situation in which Maryland law is different from the law of another jurisdiction. In Bethlehem Steel Corp. v. G.C. Zarnas & Co., Inc., 304 Md. 183, 498 A.2d 605 (1985), before the Court was a conflict of law question; specifically, whether a provision of a construction contract executed in Pennsylvania was contrary to Maryland public policy and therefore unenforceable. In that case we said, that merely because Maryland law is dissimilar to the law of another jurisdiction does not render the latter contrary to Maryland public policy and thus unenforceable in our courts. Rather, for another state's law to be unenforceable, there must be `a strong public policy against enforcement in Maryland,' or `a public policy sufficient to require the application of law other than the law of the place of the contract,' Bethlehem Steel Corp., 304 Md. at 189, 498 A.2d at 608 (citations omitted). In that case, the Court determined that, in § 5-305 of the Courts and Judicial Proceedings Article, the General Assembly explicitly determined the public policy regarding the type of indemnity clause at issue and accordingly held that Maryland public policy is sufficiently strong to preclude an application of Pennsylvania law under the circumstances of that case. In Texaco, Inc. v. Vanden Bosche, 242 Md. 334, 340, 219 A.2d 80, 83 (1966), this Court noted that a public policy which will permit a state to refuse to enforce rights created by the law of a sister state must be very strong indeed (citations omitted) (finding persuasive indications that Virginia law imposing personal liability on directors, officers and agents of foreign corporations would be valid in a lawsuit in Maryland). In Harford Mut. Ins. Co. v. Bruchey, 248 Md. 669, 674, 238 A.2d 115, 117 (1968), this Court considered whether Maryland had such a strong public policy in favor of recovery by a husband for loss of consortium as to require its courts to refuse to apply the law of a sister State which does not recognize such a right. The Court, relying on Vanden Bosche, saw merely a difference of law between the place of the wrong and the forum and not an overriding public policy of the forum, and therefore held that the public policy was insufficient to invalidate the application of lex loci delicti. Bruchey, 248 Md. at 676, 238 A.2d at 119. We have applied the same public policy exception analysis under the lex loci contractus rule. In Kramer v. Bally's Park Place, Inc., 311 Md. 387, 535 A.2d 466 (1988), the question was whether a New Jersey gambling contract violated Maryland public policy such that a Maryland court should refuse to apply New Jersey law. Richard Kramer wrote a check in the amount of $5000, payable to Bally's Park Place, as consideration under a gambling contract or payment of a gambling debt. Kramer, 311 Md. at 389, 535 A.2d at 467. Kramer argued, inter alia, that gambling debts are not recognized as legal or valid in Maryland. Citing Zarnas, supra, we noted that for Maryland public policy to override the lex loci contractus rule, the public policy must be very strong and not merely a situation in which Maryland law is different from the law of another jurisdiction. Kramer, 311 Md. at 390, 535 A.2d at 467 (citations omitted). In Kramer, we reviewed previous decisions regarding gambling debts as well as statutory provisions relating to the enforcement of gambling debts or contracts. The Court noted that the statute regarding gambling debts at issue in that case, Md.Code (1957, 1982 Repl.Vol.), Art. 27, § 243, differ[ed] significantly from the statute at issue in [ Zarnas ] . . . [and that statute] unequivocally told the Maryland judiciary that certain indemnification provisions were `void and unenforceable' and expressly stated that such provisions [were] `against public policy.' Kramer, 311 Md. at 395, 535 A.2d at 470 (citations omitted). Further, the Court determined that the controlling statute did not clearly prohibit the gambling contract at issue, as the statute did in Zarnas, and that our holding in Bender v. Arundel Arena, 248 Md. 181, 236 A.2d 7, 11 (1967), established as a public policy that the enforceability of gambling debts and contracts largely depends on whether the type of gambling engaged in is legal or illegal. In light of our holding in Bender and because Maryland allowed some forms of gambling, we concluded that Maryland's public policy against gambling debts was not sufficiently strong to override the lex loci contractus principle. Erie contends that to achieve the goal of the non-economic damages cap, purportedly to reduce premiums and increase the amount of affordable insurance, it is imperative that this Court apply the cap in breach of contract actions against the insurer on the basis of uninsured/underinsured motorist claims. Further, Erie argues that the fact that the Maryland Legislature has created [a] statutory cap on non-economic damages[,] demonstrates Maryland's strong public policy to limit such damages as a means to ensure affordable insurance coverage. The Heffernans argue that the only reasonable construction of Maryland's non-economic damages statute is that the cap does not apply to contract claims for uninsured motorist benefits and that, even if Maryland tort law generally applies to the issue of `entitled to recover,' the cap cannot be used to diminish the recovery of the limits of insurance purchased by the insureds. Even assuming that the Heffernans' position on this point is correct, we need not and do not decide that issue in this case. In Murphy v. Edmonds, 325 Md. 342, 601 A.2d 102 (1992), the issue was whether Maryland's statutory cap on non-economic damages violated the Maryland Constitution. In holding that the statutory limit on non-economic damages in personal injury actions does not violate Maryland's constitutional guarantee of equal protection, the Court reviewed the Legislature's decision to enact the cap. In that case, we said that [s]ection 11-108 was enacted in response to a legislatively perceived crisis concerning the availability and cost of liability insurance in this State. This crisis resulted in the unavailability of liability insurance for some individuals and entities. . . . Murphy, 325 Md. at 368, 601 A.2d at 114. To that end, we opined that [t]he General Assembly's objective in enacting the cap was to assure the availability of sufficient liability insurance, at a reasonable cost, in order to cover claims for personal injuries to members of the public. Murphy, 325 Md. at 369, 601 A.2d at 115. Furthermore, in United States v. Streidel, 329 Md. 533, 620 A.2d 905 (1993), where the issue before the Court was the applicability of the non-economic damages cap in wrongful death actions, the Court reaffirmed the historical findings set forth in Murphy (declining to restrict the type of damages recoverable in a wrongful death action by application of the statutory cap and holding that the cap is inapplicable to a wrongful death action; and, further concluding that the Legislature did not intend personal injury, as used in the cap statute, to include damages recoverable in a wrongful death action). [11] The Court of Special Appeals' decision in Black v. Leatherwood Motor Coach Corp., 92 Md.App. 27, 606 A.2d 295 (1992), is particularly illustrative for present purposes. In Black, Virginia and District of Columbia residents brought an action against the Leatherwood company after they were injured while riding on a bus owned by that company. Black, 92 Md. App. at 31, 606 A.2d at 296-7. Following the trial, Leatherwood sought to have the jury's award to one of the injured parties and her husband reduced pursuant to Md. Code. Ann., Cts. & Jud. Proc. § 11-108. Leatherwood, on appeal, claimed that the trial judge erred when he failed to apply the `cap' on non-economic damages and reduce the jury's award . . . Leatherwood further argued that Maryland's non-economic damages cap is part of the procedural law of Maryland and, therefore, under lex loci delicti, the procedural law of the forum, in that instance, Maryland, should govern. At trial, all parties agreed that pursuant to the conflict of laws principle of lex loci delicti, the substantive tort law governing th[at] case was th[e law] of New Jersey. Black, 92 Md.App. at 37, 606 A.2d at 300. We agree with the Court of Special Appeals' assessment, in Black, that the substantive law was to be determined by the place of wrong, and the procedural law was to be determined by the law of the forum. Id. (citing Jacobs v. Adams, 66 Md.App. 779, 790, 505 A.2d 930 (1986) (holding that under the rule of lex loci delicti the substantive tort law is determined by the place of the wrong, in that case New Jersey, and the procedural law is governed by the law of the forum, in that case Maryland)). We further agree with the intermediate appellate court's holding that the statutory cap on non-economic damages is part of the substantive law of Maryland and that under the circumstances of that case there was no overriding public policy reason to apply the law of the forum. Further, the intermediate appellate court said that it found no modern Maryland cases which have, in fact, invalidated the lex loci delicti rule on public policy grounds . . . Black, 92 Md.App. at 43, 606 A.2d at 303. Specifically, we emphasize that the statutory cap is part of the substantive law of Maryland and it is, therefore, inapplicable to this case, which is governed by the substantive law of Delaware. Section 412 of the First Restatement of Conflicts of Laws supports our holding. Section 412 provides that [t]he measure of damages for a tort is determined by the place of the wrong. This Court approved the First Restatement of Conflict of Laws in Steger v. Egyud, 219 Md. 331, 337, 149 A.2d 762 (1959) (holding that New Jersey law applies and controls all matters of substance, including the extent of liability and the right to, and measure of contribution). We adhere to the principle of lex loci delicti. The substantive law of Delaware applies to the tort aspects of this direct action against the insurer for breach of contract. As discussed supra, Maryland's non-economic damages cap is substantive in nature and not part of the procedural law of Maryland. We agree with the rationale of the intermediate appellate court in Black that failure to apply the cap will [not] result in an increase in insurance premiums or decrease the availability of insurance for Maryland residents. Black, 92 Md.App. at 48, 606 A.2d at 305. Similar to the reasoning in Black, we conclude that the policies behind the cap on non-economic damages will not be offended by our reasoning in this case. The contract for uninsured/underinsured motorist coverage was based on the insurer's duty to pay benefits in situations where there was no or insufficient liability coverage. Uninsured/underinsured motorist benefits are designed to place the injured insured in the same position he would have been in had the tortfeasor maintained liability insurance or adequate liability insurance. Forbes v. Harleysville, 322 Md. 689, 709-10, 589 A.2d 944, 954 (1991). We find the rationale of Black persuasive, and hold that Erie has not met its heavy burden of establishing that Maryland public policy is sufficiently strong to warrant overriding the rule of lex loci delicti to require the application of Maryland substantive law to the tort aspects of this case. Although the statute at issue in Zarnas expressed a clear public policy sufficient to override the principle of lex loci contractus, as to Maryland's statutory cap on non-economic damages, Md.Code. Ann., Cts. & Jud. Proc. § 11-108, we do not see such a strong public policy expressed therein such that we should, by analogy, override the principle of lex loci delicti. Cf. Hood, 395 Md. at 625, 911 A.2d. at 851 (holding that denying Maryland residents the right to bring a wrongful birth action by applying North Carolina law would be contrary to a clear, strong and important Maryland public policy as reflected in statutory and case law). This Court is not persuaded that allowing the Heffernans, or others similarly situated, potentially to recover the full amount of the benefits, for which they contracted, will impact significantly the availability or affordability of liability insurance in the State of Maryland. This is merely a situation in which the law of Maryland and Delaware are different. The Maryland General Assembly has not addressed specifically the issue of the applicability of the non-economic damages cap to claims for uninsured/underinsured motorist damages and has not given an unequivocal directive to the Maryland Judiciary to apply the cap in these cases. See Bethlehem Steel, 304 Md. at 190, 498 A.2d 605. The principle of lex loci delicti, therefore, is enforceable in a breach of contract action against the insurer on the basis of an uninsured/underinsured motorist claim despite Maryland's cap on non-economic damages. Lastly, Erie contends that Maryland has a strong policy of adhering to the common law doctrines of contributory negligence and assumption of the risk. Erie relies, inter alia, on our decision Harrison v. Montgomery County Bd. of Ed., 295 Md. 442, 456 A.2d 894 (1983). Similarly, Erie argues that the decision of the Supreme Court of West Virginia in Mills v. Quality Supplier Trucking, Inc., 203 W.Va. 621, 510 S.E.2d 280 (1998) is persuasive, insofar as that case provides the proper framework for our decision in this case. The Heffernans, on the other hand, contend that the Court of Special Appeals' decision in Linton v. Linton, 46 Md.App. 660, 420 A.2d 1249 (1980), is more persuasive. The Heffernans urge this Court to adopt the same conclusion that the intermediate appellate court adopted in Linton; specifically, that Delaware's law is different than Maryland's, but Maryland's public policy is not offended by the application of Delaware's law. It is consistent with Maryland's public policy to apply the relevant substantive law of Delaware to the questions of liability and damages in this case. As we stated in Hauch, 295 Md. at 125, 453 A.2d at 1210, all questions concerning substantive tort law [should] be governed by the law of Delaware, as it is the state where the collision occurred. The principle of contributory negligence is a matter which relates to Maryland substantive law. The principle of comparative negligence, however, is a matter which relates to Delaware substantive law. See 10 Del. C. § 8132; Laws v. Webb, 658 A.2d 1000,1005 (Del.1995)(noting that [t]he enactment of the comparative negligence statute manifest[ed] a legislative intent to change Delaware's common law rule of contributory negligence). Thus, Erie's suggestion that this Court would apply Maryland substantive law to resolve the issues of liability and damages in this case is incorrect. There is a strong public policy in Maryland to apply the law of the place of the injury in tort conflict of law cases. With that policy in mind, we see no good reason to reject the application of Delaware substantive law to resolve the question of entitlement to recover damages. CERTIFIED QUESTIONS OF LAW ANSWERED AS SET FORTH ABOVE; COSTS TO BE EQUALLY DIVIDED BY THE PARTIES.