Court Opinion

ID: 7918330
Source: CourtListenerOpinion
Date Created: 2022-09-08 22:15:39.000202+00
Date Added: 2024-06-11T16:32:54.683317
License: Public Domain

ELDRIDGE Judge,
dissenting:
By enacting Maryland Code (1957, 1991 RepLVol.), Art. 48A, § 482, the General Assembly sought to protect consumers of liability insurance, as well as injured persons, by providing that an insurance company may not disclaim coverage under any liability insurance policy on the ground that the *423insured failed to give “requisite notice to the insurer” unless the insurer established that the failure resulted in actual prejudice. The Court today, however, would permit an insurance company to circumvent the statute by the simple expedient of defining terms in an insurance policy in a manner contrary to the ordinary meaning of those terms.
Under the insurance policy at issue in this case, the policy period was from April 2, 1987, to April 2, 1988.1 The accident occurred within this period. A claim was made by the third party to the insured on June 6, 1988, after the expiration of the policy period and the expiration of the extended reporting period for claims made. Immediately thereafter, the insured reported both the occurrence and the claim to the insurer. As later explained, the insurance policy had elements of both a claims made policy and an occurrence policy.
The majority’s analysis with respect to § 482 and the policy in this case is flawed for two reasons. First, the majority does not distinguish between the provisions of a claims made policy which establish coverage and the provisions which require notice. Second, the majority does not acknowledge the occurrence provisions of the policy and the applicability of § 482 to these provisions.
(1)
Article 48A, § 482, provides as follows:
“Disclaimer of coverage because of lack of notice or cooperation from insured.
“Where any insurer seeks to disclaim coverage on any policy of liability insurance issued by it, on the ground that the insured or anyone claiming the benefits of the policy through the insured has breached the policy by failing to cooperate with the insurer or by not giving requisite notice to the insurer, such disclaimer shall be effective only if the *424insurer establishes, by a preponderance of affirmative evidence that such lack of cooperation or notice has resulted in actual prejudice to the insurer.”
By its terms the statute applies to any policy of liability insurance. The majority holds that § 482 does not apply to reporting type claims made policies. The majority’s broad brush reasoning, however, extends beyond the context of this case in a way that might well undermine the effectiveness of § 482.
In a claims made policy, the event which normally triggers coverage is a third party making a claim upon an insured. The ordinary meaning of “claims made” in insurance parlance is that the critical moment for establishing coverage is the time at which the injured third person’s claim is made against the insured. St. Paul Fire & Marine Ins. v. House, 315 Md. 328, 333, 554 A.2d 404, 407 (1989) (“The ordinary meaning of ‘claim made’ refers to the assertion of a claim by or on behalf of the injured person against the insured”). In an occurrence policy the critical moment for establishing coverage is the injury causing accident itself.
Whether the insured event is the filing of a claim by the injured third person in a claims made policy, or the happening of an occurrence in an occurrence policy, notice provisions exist for both kinds of policies. In a claims made policy, notice to the insurer by the insured that a claim has been made against him typically is required. In an occurrence policy, notice to the insurer by the insured of the covered accident usually is required.
Section 482 deals with a liability policy’s notice provision, i.e., notice by the insured to the insurer of the happening of an event triggering coverage. It does not apply to the portion of the policy which establishes the essential terms for coverage, i.e., an accident/occurrence or the making of a claim by the injured third party. In a claims made policy the requirement that a claim against the insured be made during the policy period essentially defines the coverage available. The notice of which § 482 speaks, in a claims made policy, is the *425notice by the insured to the insurer that a claim against the insured has been made during the policy period. Both the language and purpose of § 482 require that it be applied to the clause in a claims made policy providing for notice to the insurer.
The majority, however, contends that, because T.H.E. Insurance Co. defined the time at which a claim is made as “when written notice of such claim is received and recorded by us,” this claims made policy makes the reporting of the claim by the insured to the insurer the insurable event. By allowing the insurer to define claims made in terms of notice to the insurer, and by holding that § 482 does not apply to this provision in a claims made policies, the majority opens the door for insurers to circumvent the statute.
As previously stated, the triggering event for coverage in a claims made policy is the making of a claim by an injured person. By attempting to alter the ordinary meaning of “claims made” to create coverage which hinges on receiving notice of such a claim from its insured, the insurance company is attempting to create a condition precedent to insurance coverage. This is precisely the situation the statute was designed to avoid.
Section 482 was enacted in response to the Court of Appeals’ decision in Watson v. United States Fidelity & Guar. Co., 231 Md. 266, 189 A.2d 625 (1963). In that case, this Court held that the policy provision requiring the reporting of an accident “as soon as practicable” was a condition precedent to any action on the policy. In Watson, the Court held that the condition was unsatisfied and that the insured was not entitled to coverage. In St. Paul Fire & Marine Ins. v. House, supra, we considered the General Assembly’s purpose in enacting § 482, stating that the statute “makes policy provisions requiring notice to, and cooperation with, the insurer covenants and not conditions. The statute measures by the standard of actual prejudice the materiality of any breach of those covenants by the insured for the purpose of determining if the *426breach excuses performance by the insurer.” 315 Md. at 332, 554 A.2d at 406 (emphasis added).
The obvious purpose of the statute was to prevent an insurance company from refusing to cover a matter on the sole ground that the company failed to receive timely notice from its insured. As we stated in House, “[a] policy defense resting on [the] covenant to give notice is foursquare within Art. 48A, § 482.” 315 Md. at 341, 554 A.2d at 411. Yet the majority, by accepting the insurers’ contorted definition of “claims made,” has signaled to the insurance industry that it may, by mere drafting, avoid the statute.
The majority opinion suggests that its holding is limited to claims made policies. The majority’s rationale, however, is not limited to claims made policies. An insurance company, in an occurrence policy, could define “occurrence” as notice to the insurer of the event or the accident. Under such a policy and the majority’s rationale, if there were no notice to the insurer during the policy period, there would be no occurrence for purposes of coverage and thus no disclaimer of coverage within the meaning of § 482.
Of course, § 482 only applies if, during the pertinent time, there existed a contract of insurance between the parties. In this case the claim was made by the injured person to the insured after the expiration of the original policy. Thus, the claims made provisions of the original policy were not in effect. It is for this reason that § 482 would not apply. Contrary to the majority’s view, § 482 is not rendered inapplicable because the claim was reported by the insured to the insurer after the end of the policy period or because § 482 does not apply to reporting type claims made policies.
(2)
If the above-discussed policy provisions were the only provisions implicated in the case, I would concur with the majority’s result although not its reasoning. This policy, however, is not strictly a claims made policy; it has occurrence policy ele*427ments. Under the circumstances, § 482 applies. The insurance contract states:
“COMMERCIAL LIABILITY CONDITIONS
sjc * * * * *
“2. Duties in the event of an Occurrence, Claim or Suit.
“a. You must see to it that we are notified as soon as practicable of an ‘occurrence’ which may result in a claim. To the extent possible, notice should include:
(1) How, when and where the ‘occurrence’ took place;
(2) The names and addresses of any injured persons and witnesses; and
(3) The nature and location of any injury or damage arising out of the ‘occurrence.’
“Notice of an ‘occurrence’ is not notice of a claim.
* * * * * #
“EXTENDED REPORTING PERIODS
“2. A Basic Extended Reporting Period is automatically provided without additional charge. This period starts with the end of the policy period and lasts for:
a. Five years for claims arising out of an ‘occurrence’ reported to us, not later than 60 days after the end of the policy period, in accordance with paragraph 2. a. of Section VI—Commercial General Liability Conditions.”
Under the policy if the insured notifies the insurer of an occurrence during the policy period or within 60 days thereafter, any claim made within five years of the expiration date is covered. The insured failed to provide notice to the insurer of the occurrence in this case. If the insured had provided notice of the occurrence, the claim, filed within five years of the end of the policy period, would have been covered.
This is precisely the type of situation that § 482 was designed to encompass. Section 482 provides that when an insured breaches an insurance policy by failing to give requisite notice of the event triggering coverage, the insurer must *428prove actual prejudice in order to rely on the breach to disclaim coverage. Since the trial court found as a fact that there was no actual prejudice, its judgment should be affirmed.
The majority’s broad opinion fails to effectuate the purpose of § 482 of the Insurance Code and allows insurers to establish conditions precedent to coverage based upon a failure to “cooperate with the insurer” or a failure to give “requisite notice to the insurer.” The majority’s opinion and decision cannot be squared with the General Assembly’s purpose in enacting § 482.
Judge ROBERT M. BELL has authorized me to state that he concurs with the views expressed herein.

. Because the trial judge did not address issues relating to the "renewal” policy, I do not comment on them here. I agree with the majority that a substantial controversy remains to be resolved with respect to the renewal policy and its May 27, 1988, retroactive date.