Last month, the Maryland Court of Appeals issued an important decision regarding the validity of insurance policy exclusions in situations where the insured might reasonably expect to be covered. The opinion is of particular import because most insured’s don’t read their policy in any detail and therefore don’t know what coverage exclusions it might contain.
In Stickley v. State Farm, the plaintiff was a passenger in a vehicle being driven by her husband when he negligently drove into an intersection and collided with another car. The husband was killed in the accident and the plaintiff suffered severe injury. The plaintiff and husband had a motor vehicle liability insurance policy with State Farm Mutual Automobile Insurance Company, and an umbrella policy with its subsidiary State Farm Fire and Casualty Company.
Following the accident, the plaintiff filed a claim under both policies. State Farm offered the plaintiff the full amount of coverage under the motor vehicle liability insurance policy, but denied coverage under the umbrella policy, citing an exclusion that precluded coverage for bodily injury resulting from the negligence of another insured household member.
The plaintiff filed a lawsuit to have the exclusion invalidated, claiming that Maryland Code § 19-504.1 requires insurers to provide the same amount of liability coverage under private passenger motor vehicle liability insurance to family members and non-family members. The plaintiff contended that, because State Farm did not offer equal coverage to both her and her husband, the exclusion in the umbrella policy was void.
The Court of Appeals determined that the exclusion was valid because the umbrella policy was supplemental to the motor vehicle liability insurance policy and was therefore, by definition, not a private passenger motor vehicle liability insurance policy that would fall under the purview of Maryland Code § 19-504.1.
This was not where the Court of Appeals analysis ended, however, as it also had to determine whether the exclusion in the umbrella policy violated public policy. The Court recognized that, generally, parties are permitted to contractually bind themselves as they see fit. However, when a contractual provision violates public policy the offensive provision is invalid.
The Court held that it would be a violation of public policy to enforce a household exclusion in a situation where an insured has not offered coverage for claims of family members equal to that for non-family members under a private passenger motor vehicle liability policy.
In determining that the exclusion at issue was not contrary to public policy, however, the Court concluded that the Maryland General Assembly did not intend to eliminate household exclusions altogether, but rather merely required insurers to offer the insured an opportunity to purchase liability limits for family members equal to that for non-family members.
As evidenced by the Court’s opinion in Stickley, it is of the utmost importance for an individual to review and understand the terms and conditions of his or her insurance policy to avoid ending up in a situation where coverage is denied based upon an overlooked exclusion.
The attorneys of Brassel Alexander, LLC have extensive experience representing individuals who have been injured in car accidents and are forced to deal with an uncooperative insurance company. If you or someone you know has been injured by the negligence of another, contact the attorneys of Brassel Alexander, LLC today.