JESSICA N. WOZNICKI
GEICO GENERAL INSURANCE COMPANY JEANNINE MORSE
ERIE INSURANCE EXCHANGE
Argued: March 9, 2015
Circuit Court for Cecil County Case Nos. 07-C-12-000568, 07-C-11-000221
Barbera, C.J., Harrell, Battaglia, Greene, McDonald Watts, Cathell, Dale (Retired, Specially Assigned), JJ.
We are called upon to resolve an issue of critical importance for those traversing the many roads of Maryland, namely, the circumstances under which an insurer providing uninsured ("UM") motorist coverage may disclaim any such liability owed to its insured.Because of the common issues of law, we have consolidated two civil cases for the purpose of this opinion. We granted separate petitions for certiorari in Woznicki v. GEICO Gen. Ins. Co., 439 Md. 694, 98 A.3d 233 (2014) and Morse v. Erie Ins. Exch., 439 Md. 694, 98 A.3d 233 (2014), to answer the following questions:
(1) Did the Court of Special Appeals err when it held that, as a matter of law, the UM carrier did not waive its right to receive written notice of a pending settlement with the tortfeasor's insurance carrier where there was unequivocal testimony from Petitioner's counsel that he received oral consent to settle from a UM carrier claims representative?
(2) Did the Court of Special Appeals err when it held that the uninsured motorist (UM) carrier did not bear the burden of proving prejudice arising from Petitioners' failure to give written notice of the pending settlement with the tortfeasors' insurance carrier?
As explained in greater detail below we shall answer each of the questions in the negative and affirm the respective judgments of the Court of Special Appeals.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Jessica N. Woznicki
Woznicki's dispute with GEICO arises out of injuries sustained in a motor vehicle collision between Woznicki and James Bowman Houston ("Houston"), which occurred on November 12, 2010. Woznicki was struck, while operating an automobile in Cecil County, after Houston failed to yield the right-of-way while making a turn. It is undisputed that the accident was caused entirely by the negligence of Houston.
At the time of the accident, Houston was insured by Nationwide Insurance Company ("Nationwide") under a motor vehicle liability insurance policy which carried a liability limit of $20, 000. Woznicki was covered by a motor vehicle liability insurance policy issued by GEICO. Under the insurance policy, GEICO provided uninsured/underinsured motorist ("UM/UIM") coverage of $300, 000. As a condition to UM coverage under the GEICO policy, Woznicki was required to notify GEICO of any settlement offer which would exhaust the tortfeasor's liability insurance policy limits and obtain GEICO's consent to settle prior to accepting any such settlement with the tortfeasor. For a discussion of the policy language see infra.
As a result of the injuries sustained during the accident, Woznicki asserted a claim against Houston, through her then-counsel, Ben T. Castle ("Castle"), a Delaware attorney. Nationwide offered to settle all claims for $20, 000-Houston's liability policy limit-in exchange for a release of all claims against Nationwide and Houston at some time in March, 2011. In a letter dated March 29, 2011, Nationwide wrote to Castle stating "[t]he enclosed Release of All Claims document confirms our settlement with you/your client." On the same day, Castle sent a letter to the GEICO claims adjuster handling the matter, Ms. Rebecca Davis, stating, in part:
At this time it appears that the driver of the car that caused the accident injuring Ms. Woznicki, James Houston, has only limited liability coverage through Nationwide Insurance Company. We will provide more information as it becomes available.
The letter does not mention the Nationwide settlement offer letter received by Castle on the same day.
Central to the dispute between Woznicki and GEICO before this Court, Castle contacted GEICO by phone at some point on or about July 7, 2011,  and obtained, what Castle and Woznicki characterize as GEICO's oral consent to settle without prejudice to any potential UM claim against GEICO. Castle, who was unable to reach Ms. Davis, the claims adjuster assigned to Woznicki's case, could not recall who he spoke with about the matter. Castle only remembered that the person was a woman.
By letter dated July 7, 2011, Woznicki executed a Release of all claims against Houston. The same day, Castle wrote to GEICO, stating:
The tortfeasor's insurance carrier, Nationwide, has a limited bodily injury liability policy of $20, 000 and has tendered those limits to the injured driver, Jessica Woznicki. We are writing to request GEICO's consent to acceptance of the settlement.
Enclosed for your file is a copy of the Nationwide Policy insuring tortfeasor, James B. Houston, and the Release in exchange for the $20, 000.
GEICO responded on August 15, 2011, denying "any and all Underinsured Motorist (UIM) coverage to [Woznicki] . . . because [Woznicki] failed to obtain our consent to settle, which is required by both [§ 19-511 of the Insurance Article] and [Section IV of] the policy contract."
Woznicki, represented by new counsel, filed a Complaint and Demand for Jury Trial against GEICO on April 3, 2012, for breach of the insurance policy. Woznicki sought to hold GEICO liable for damages in excess of the $20, 000 she received from Nationwide. After filing its answer, GEICO moved for summary judgment on the grounds that Woznicki was precluded from receiving UM benefits under the insurance policy because she failed to obtain GEICO's consent to settle as required by Maryland law and the insurance policy. Following a hearing on the matter, the trial judge granted GEICO's motion. Judge J. Frederick Price explained from the bench:
It's clear and undisputed that Section 19-511 was not complied with. In other words, there is-the plaintiff's attorney did not comply with that section. And that's also referenced-incorporated into the policy; therefore, the terms of the policy were not complied with. That's undisputed, I believe. But the court finds that there could be a question of waiver. And I believe that these matters could be waived.
The question then arises is does the vague reference to a telephone conversation constitute-or viewed in a light most favorable to the plaintiff, does that constitute sufficient evidence to be material in a decision.
And quite simply, the court finds that under the facts of this case that that reference to a telephone call, with nothing more than has been put forth today, does not constitute sufficient evidence to be material, to affect the decision.
The Court of Special Appeals upheld the decision of the trial court. Woznicki v. GEICO Gen. Ins. Co., 216 Md.App. 712, 90 A.3d 498 (2014). Specifically, the intermediate appellate court concluded that (1) an insurer could waive the requirements of Section 19-511 of the Insurance Article, (2) Woznicki failed to demonstrate a dispute as to material fact concerning whether GEICO had waived such requirements, and (3) GEICO was not required to demonstrate prejudice caused by Woznicki's breach of Section 19-511 or the insurance policy in order to deny her UM coverage.
B. Jeannine Morse
Petitioner, Jeannine Morse ("Morse"), was injured in a motor vehicle collision on April 28, 2007 in New Castle, Delaware, when her vehicle was struck by a vehicle driven by Paula Smallwood ("Smallwood"). As a result of her injuries, Morse incurred medical expenses in excess of $22, 500. At the time of the collision, Smallwood, the at-fault driver, carried automobile liability insurance with Nationwide Insurance Company ("Nationwide"). Smallwood's policy with Nationwide included a single incident liability limit of $15, 000. Also at the time of the collision, Morse maintained UM/UIM coverage through her motor vehicle insurance policy with Respondent, Erie Insurance Exchange ("Erie"), with bodily injury limits of $250, 000. Morse's "Uninsured/Underinsured Motorists Coverage Endorsement" in her policy with Erie contained a condition that required Morse to notify Erie of any settlement offer which would exhaust the tortfeasor's liability insurance policy limits and to obtain Erie's consent to settle prior to accepting any such settlement with the tortfeasor. For a discussion of the policy language see infra.
After the accident, Morse retained a Delaware attorney, Beverly A. Bove, Esq. ("Bove"), to represent her. Upon demand from Bove, on October 13, 2008, Nationwide offered Morse its entire $15, 000 policy limit in settlement of Morse's claims against Smallwood. Nationwide also sent Bove a notarized letter confirming that Smallwood had no other insurance polices applicable to Morse's claims. On October 14 or 15, 2008, Bove contacted by telephone a claims adjuster at Erie to report Morse's UM claim and the settlement offer from Nationwide. In a letter dated October 27, 2008, Bove sent Erie a copy of the Nationwide settlement offer letter. The letter to Erie was not sent by certified mail and was addressed to an incorrect P.O. box. Erie contends that it did not receive the letter until December 5 or 6, 2008. Meanwhile, Morse accepted Nationwide's settlement offer and signed a Release of All Claims on November 3, 2008. Accordingly, at the time of Morse's acceptance of Nationwide's settlement offer, Erie had not given its consent. Morse's attorney wrote on the release: "[N]othing contained in this release waives, limits, or extinguishes any future claims for UM/UIM or PIP benefits."
On February 4, 2009, after accepting Nationwide's settlement offer, Bove first informed Erie by telephone that she had accepted Nationwide's settlement offer and signed a release. Following the February 4th telephone conversation, Erie requested by phone and by mail a copy of the release on March 19 and 27, 2009, respectively. Erie did not receive a copy of the signed release until July 8, 2009, over seven months after it was executed, and nearly four months after Erie requested a copy of the release by letter.
On November 5, 2009, Rucker wrote Bove to advise her that Erie had denied Morse's UM claim, because she failed to send written notice of the Nationwide offer and accepted the offer without Erie's written consent. On June 17, 2011, Morse sued Erie in the Circuit Court for Cecil County for breach of contract. A jury trial was held on April 22-23, 2013, following which the jury returned a verdict in favor of Erie, finding that Erie did not breach its contract with Morse. Morse appealed.
In a reported opinion, a majority of the Court of Special Appeals affirmed, concluding that the failure to comply with the consent to settle procedure contained in the insurance policy and § 19-511 does not trigger Maryland's prejudice rules, and that, for the purposes of § 19-110, obtaining consent to settle is not the equivalent of providing notice. Morse v. Erie Ins. Exch., 217 Md.App. 1, 12, 90 A.3d 512, 518 (2014). The author of the dissenting opinion would have reversed, because, in that judge's view, construing the statute within the context and purpose of the statutory scheme, which is to maintain "balance between the insured's right to speedy recovery and the protection of the UM carrier's subrogation rights[, ]" leads to the conclusion that the insurer must show prejudice before disclaiming liability. 217 Md.App. at 37, 90 A.3d at 533.
Ultimately at issue in this case is the extent to which an individual's failure to comply with the settlement procedures outlined in Md. Code (1995, 2012 Repl. Vol., 2014 Supp.), § 19-511 ("Uninsured motorist coverage–Settlement procedures") of the Insurance Article affects that individual's right to receive UM coverage from his or her UM carrier. Accordingly, in reaching our conclusion, we must consider two sections of the Insurance Article. Under § 19-511:
(a) If an injured person receives a written offer from a motor vehicle insurance liability insurer or that insurer's authorized agent to settle a claim for bodily injury or death, and the amount of the settlement offer, in combination with any other settlements arising out of the same occurrence, would exhaust the bodily injury or death limits of the applicable liability insurance policies, bonds, and securities, the injured person shall send by certified mail, to any insurer that provides uninsured motorist coverage for the bodily injury or death, a copy of the liability insurer's written settlement offer.
(b) Within 60 days after receipt of the notice required under subsection (a) of this section, the uninsured motorist insurer shall send to the injured person:
(1) written consent to acceptance of the settlement offer and to the execution of releases; or
(2) written refusal to consent to acceptance of the settlement offer.
(c) Within 30 days after a refusal to consent to acceptance of a settlement offer under subsection (b)(2) of this section, the uninsured motorist insurer shall pay to the injured person the amount of the settlement offer.
(d)(1) Payment as described in subsection (c) of this section shall preserve the uninsured motorist insurer's subrogation rights against the liability insurer and its insured.
(2) Receipt by the injured person of the payment described in subsection (c) of this section shall constitute the assignment, up to the amount of the payment, of any recovery on behalf of the injured person that is subsequently paid from the applicable liability insurance policies, bonds, and securities.
(e) The injured person may accept the liability insurer's settlement offer and execute releases in favor of the liability insurer and its insured without prejudice to any claim the injured person may have against the uninsured motorist insurer:
(1) on receipt of written consent to acceptance of the settlement offer and to the execution of releases; or
(2) if the uninsured motorist insurer has not met the requirements of subsection (b) or subsection (c) of this section.
(f) Written consent by an uninsured motorist insurer to acceptance of a settlement offer under subsection (b)(1) of this section:
(1) may not be construed to limit the right of the uninsured motorist insurer to raise any issue relating to liability or damages in an action against the uninsured motorist insurer; and
(2) does not constitute an admission by the uninsured motorist insurer as to any issue raised in an action against the uninsured motorist insurer.
Secondly, we consider whether § 19-110 ("Disclaimers of coverage on liability insurance policies") applies to an insurer seeking to disclaim UM coverage to its insured for the insured's failure to comply with the requirements of § 19-511. Section 19-110 provides that:
An insurer may disclaim coverage on a liability insurance policy on the ground that the insured or a person claiming the benefits of the policy through the insured has breached the policy by failing to cooperate with the insurer or by not giving the insurer required notice only if the insurer establishes by a preponderance of the evidence that the lack of cooperation or notice has resulted in actual prejudice to the insurer.
We review issues of statutory construction de novo. See Nesbit v. Gov't Emps. Ins. Co., 382 Md. 65, 72, 854 A.2d 879, 883 (2004) (quoting Walter v. Gunter, 367 Md. 386, 392, 788 A.2d 609, 612 (2002)) ("When the trial court's order 'involves an interpretation and application of Maryland statutory and case law, our Court must determine whether the lower court's conclusions are legally correct under a de novo standard of review.'"). It is well established that:
The cardinal rule of statutory interpretation is to ascertain and effectuate the intent of the Legislature. Statutory construction begins with the plain language of the statute, and ordinary, popular understanding of the English language dictates interpretation of its terminology. In construing the plain language, a court may neither add nor delete language so as to reflect an intent not evidenced in the plain and unambiguous language of the statute; nor may it construe the statute with forced or subtle interpretations that limit or extend its application. Statutory text should be read so that no word, clause, sentence or phrase is rendered superfluous or nugatory. . . . It is also clear that we avoid a construction of the statute that is unreasonable, illogical, or inconsistent with common sense.
We analyze the contested provisions of Maryland's Insurance Article in the context of the statutory scheme and construe the plain language so that the various sections of the article do not conflict with one another. . . . In addition, the meaning of the plainest language is controlled by the context in which it appears. As this Court has stated, because it is part of the context, related statutes or a statutory scheme that fairly bears on the fundamental issue of legislative purpose or goal must also be considered. Thus, not only are we required to interpret the statute as a whole, but, if appropriate, in the context of the entire statutory scheme of which it is a part.
Stickley v. State Farm Fire & Cas. Co., 431 Md. 347, 358-59, 65 A.3d 141, 148 (2013) (citations and quotations omitted).
A. Maryland's Uninsured Motorist Statute
Prior to addressing the questions raised before this Court, some background is appropriate. The settlement procedures of § 19-511 must be understood in the context of Maryland's uninsured motorist coverage scheme, now codified at §§ 19-509 – 19-511 of the Insurance Article. "This procedure was enacted in the context of a broader statutory goal to enable recovery for injured victims." Brethren Mut. Ins. Co. v. Buckley, 437 Md. 332, 348, 86 A.3d 665, 674 (2014) ("Buckley II"). The General Assembly enacted Maryland's UM statute in 1972, which provided originally, in relevant part, that:
[E]very policy of motor vehicle liability insurance issued, sold, or delivered in this State . . . MAY contain coverage, in at least the amounts required under Section 7-101 of Article 66 ½ of the Annotated Code of Maryland (1970 Replacement Volume and 1972 Supplement), for damages which the insured is entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injuries sustained in an accident arising out of the ownership, maintenance, or use of such uninsured motor vehicle.
State Farm Mut. Auto. Ins. Co. v. DeHaan, 393 Md. 163, 171-72, 900 A.2d 208, 213 (2006) (emphasis in original).
Since its enactment, the UM statute has undergone several changes, the most salient of which was the decision of the Legislature, in 1975, to make UM coverage mandatory for all motor vehicle liability insurers issuing, selling, or delivering such policies in the State by replacing the term "may" with "shall." 1975 Laws of Maryland 562. UM coverage has steadily expanded in scope over the past several decades. Importantly, the General Assembly recognized "uninsured motor vehicles" as including "underinsured motor vehicles." 1981 Laws of Maryland 510 (emphasis added). See also 1983 Laws of Maryland 656 (permitting excess coverage insurers to offer UM coverage); 1989 Laws of Maryland 542 (requiring motor vehicle liability insurers to offer insureds, in writing, the option to purchase higher UM limits); 1992 Laws of Maryland 641 (requiring insurers to provide UM coverage "equal to the amount of motor vehicle liability coverage"); 1995 Laws of Maryland 515 (expanding the definition of "uninsured motor vehicles").
As this Court explained in Erie Ins. Exch. v. Heffernan, 399 Md. 598, 925 A.2d 636 (2007):
The purpose of the uninsured motorist statute is to provide minimum protection for individuals injured by uninsured motorists . . . [the] statute creates a floor to liability not a ceiling. Consistent with the public policy of affording minimal protection for innocent victims, an insured can purchase "a higher amount of uninsured motorist insurance which will become available when the insured's uninsured motorist coverage, as well his damages, exceed the liability coverage of the tortfeasor."
399 Md. at 612, 925 A.2d at 644 (citations omitted). See also Nationwide Mut. Ins. Co. v. Webb, 291 Md. 721, 737, 436 A.2d 465, 474 (1981) (citation omitted) ("The courts have repeatedly stated that the purpose of uninsured motorist statutes is 'that each insured under such coverage have available the full statutory minimum to exactly the same extent as would have been available had the tortfeasor complied with the minimum requirements of the financial responsibility Law.'"); Kritsings v. State Farm Mut. Auto. Ins. Co., 189 Md.App. 367, 375, 984 A.2d 395, 399 (2009) ("The effect [of the UM statute] [i]s to provide an injured insured with compensation ...