Continental Casualty Company v. Kemper Insurance Company (Ct. of Special Appeals)

Filed April 2, 2007. Opinion by Judge J. Frederick Sharer.

From the official headnote:

Insurance contracts - exclusion of coverage to employee operating his own vehicle - not ambiguous - not contrary to public policy - exclusion not previously discussed by Maryland court

Policy provision in commercial automobile insurance policy that covers the auto of an employee while in the course of his employment, but excludes coverage to the employee if the auto is owned by the employee or a member of his family or household is not ambiguous.

Exclusion provision is likewise not contrary to stated public policy when minimum compulsory motor vehicle insurance law is complied with.

Judgment below that Kemper wrongly denied coverage under its policy and awarding damages and attorney fees to Continental was REVERSED on appeal.

This case arose out of an automobile accident in which the driver of one vehicle ("Green") filed suit against the other driver ("Piazza") and her (Green's) insurance company ("Kemper") for injuries received, but did not name Piazza's employer. It was uncontested that Piazza was driving his own vehicle while conducting his employer's business. A portion of the damages were paid by Piazza's personal carrier, and the remaining portion by Kemper pursuant to its underinsured motorist coverage of Green.

Kemper sought, but had not received, an agreement to defend and indemnification from Piazza's employer's insurance company ("Continental"), and subsequent to the judgment sought a declaratory judgment that Continental had been obligated to defend Piazza and must reimburse Kemper for the balance of the judgment. The trial agreed, ordering Continental to reimburse Kemper and pay its attorney fees, and Continental appealed.

At issue was an exclusion in Continental's policy, which defined an "insured" under the policy to include "[a]nyone else while using with your permission a covered “auto” you own, hire or borrow except: * * * [y]our employee if the covered “auto” is owned by that employee or a member or his or her household."

The Court found that, although Kemper argued ambiguity, it offered no alternative to the plain meaning of the provision, instead suggesting that the exclusion was inconsistent with the inclusive language requiring that "all autos" be covered, and that there should be no logical difference between driving a company car and the employee's car. While not disagreeing with the pragmatic concept, the Court noted that, absent conflict with statutory provisions or public policy, insurers are entitled to limit their liability and enforce reasonable restrictions upon the obligations they assume. While the precise language had not yet been interpreted under Maryland or Texas law (the latter being the jurisdiction whose law applied to the insurance contract), other jurisdictions had, in favor of enforcing the exception, and the Court agreed.

Kemper had also argued against enforcing the exclusion on public policy grounds. The Court rejected the challenge, since the public policy of requiring insurance coverage of motorists was met by Kemper's obligation to pay the judgment, and the issue here was only a matter of which insurer would ultimately be held liable for the judgment. The Court found that Kemper was the appropriate insurer to have to pay, and reversed the decision below.

The opinion is available in PDF format.