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Dolan v. Kemper Independence Insurance Co.

Court of Special Appeals of Maryland

June 28, 2018

GARY DOLAN, et al.

          Circuit Court for Anne Arundel County Case No. C-02-CV-16-001592

          Graeff, Nazarian, Arthur, JJ.


          ARTHUR, J.

         This appeal stems from a declaratory judgment action in which appellee Kemper Independence Insurance Co. sought to establish that it had no duty to pay underinsured motorist (UIM) benefits to appellant Gary Dolan. In support of its position, Kemper cited Mr. Dolan's unwillingness to participate in an examination under oath (EUO). Kemper argued that, by refusing to submit to an EUO, Mr. Dolan had breached the insurance contract. Kemper also argued that, under its policy, submission to an EUO was a condition precedent to Mr. Dolan's ability to file suit against Kemper for breach of contract.

         The Circuit Court for Anne Arundel County declared that Mr. Dolan was not entitled to UIM benefits under the policy. Mr. Dolan appealed. We affirm.

         Factual and Procedural History

         The parties stipulated to the relevant facts:

         On October 27, 2010, Mr. Dolan was a passenger in a vehicle operated by Windy Marie Dolan. The vehicle was involved in an accident. Mr. Dolan sustained injuries as a result of the accident.

         Mr. Dolan's parents had an automobile insurance policy with Kemper. Mr. Dolan claimed UIM benefits as a "family member" under his parents' policy.[1]

         Section III, Part E, of the policy that Kemper issued to Mr. Dolan's parents states, in pertinent part, as follows:

We have no duty to provide coverage under this policy unless there has been full compliance with the following duties:
B. A person seeking any coverage must:
1. Cooperate with us in the investigation, settlement or defense of any claim or suit.
3. Submit, as often as we reasonably require:
b. To examination under oath and subscribe the same.

         Under Section II, Part F, of the Kemper policy, "No legal action may be brought against [Kemper] until there has been full compliance with all the terms of this policy."

         Sometime in late 2010 or early 2011, Kemper became aware of the accident in which Mr. Dolan was injured. Anticipating that Mr. Dolan might make a claim for UIM benefits, Kemper requested that he give a recorded statement. Mr. Dolan's counsel denied the request.

         On March 10, 2011, Kemper sent a formal request for a recorded statement via a letter to Mr. Dolan's counsel. Counsel denied that request as well.

         On April 12, 2011, Kemper, through counsel, sent a written request for an EUO to Mr. Dolan's counsel. Two days later, Mr. Dolan's counsel responded by email, stating that Kemper was not entitled to an EUO until Mr. Dolan made a formal claim for UIM benefits.

         On August 8, 2011, Kemper received a letter from Mr. Dolan's counsel. The letter represented that Ms. Dolan's insurer, Nationwide Mutual Insurance Co., had tendered its policy limits of $50, 000 in settlement of Mr. Dolan's claims against her.

         Under Md. Code (1996, 2006 Repl. Vol.), § 19-511 of the Insurance Article, as it read in 2011, Kemper had 60 days from August 8, 2011, to decide whether to consent to the settlement. If Kemper consented to the settlement, it would waive its right to "contest the issues of tort liability" in Mr. Dolan's action to recover on the policy. Maurer v. Pennsylvania Nat'l Mut. Cas. Ins. Co., 404 Md. 60, 75 (2007); Morse v. Erie Ins. Exch., 217 Md.App. 1, 21 (2014), aff'd sub nom. Woznicki v. GEICO Gen. Ins. Co., 443 Md. 93 (2015). If, however, Kemper refused to consent to the settlement, it was required to pay the amount of the settlement offer to Mr. Dolan in order to preserve its defenses in a UIM claim.[2]

         On September 22, 2011, Kemper notified Mr. Dolan, in writing, that it would not consent to Nationwide's settlement offer. On the same day, Kemper advanced the $50, 000 that it was required to pay to preserve its right to contest issues of tort liability. Mr. Dolan accepted Kemper's check, thereby triggering his UIM claim against the Kemper policy.[3]

         At some point after the claim was triggered, Kemper requested an EUO. The record does not reflect what response, if any, Kemper received.

         On October 28, 2011, Mr. Dolan's counsel wrote to Kemper's counsel. The letter transmitted information about Mr. Dolan's injuries, requested information about the dollar amount of UIM coverage under the Kemper policy, and asked whether Kemper would tender the policy limits. The letter confirms that by that date Mr. Dolan had made a formal claim for UIM benefits.

         On November 7, 2011, Kemper's counsel wrote to Mr. Dolan's counsel. In that letter, Kemper's counsel confirmed an agreement with Mr. Dolan's counsel that Kemper was entitled to an EUO. Kemper's counsel requested dates for the EUO.

         On November 13, 2011, Kemper's counsel sent a follow-up email to Mr. Dolan's counsel, offering proposed dates for an EUO. Mr. ...

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