The Supreme Court of Maryland holds that an umbrella policy clause excluding claims against named insureds by members of the same household is enforceable.

08/18/2023

 Pedro Steven Buarque de
Macedo, et al. v. The Automobile Insurance Company of Hartford, Connecticut
480 Md. 200 (2022)

This case arose
from a catastrophic motor vehicle accident involving Michael Buarque de Macedo,
his wife Alessandra, and their three children. The Buarque de Macedo family was
driving home from a high school play when their vehicle was struck by a vehicle
driving 115 mph. Only one child survived but sustained permanent injuries.

Michael and
Alessandra Buarque, de Macedo had an automotive liability policy, with a
coverage limit of $500,000 and an umbrella policy, with a coverage limit of 2
million dollars. After the accident, the surviving child, the personal
representative of the estates of Alessandra and the deceased child (“the
Buarque de Macedos”) made policy limit demands on both policies. While the
insurer for the automobile liability policy paid the policy limits of $500,000,
the Automobile Insurance Company of Hartford, Connecticut (“AIC”), the insurer
for the umbrella policy, denied coverage for the accident. AIC denied coverage
because of an exclusion in the policy which stated it does not apply to “bodily
injury or personal injury to any person who is related by blood, marriage, or
adoption to an insured and who is a resident of the household of that person.”

This appeal came
before the Court after the Appellate Court of Maryland upheld the Circuit Court
of Montgomery County’s ruling on a motion for summary judgment, where the
circuit court found that the household exclusion provision in the umbrella
policy was enforceable. On appeal to the Supreme Court of Maryland, the central
issue centered on the Court’s interpretation of Md. Courts and Judicial
Proceedings Code Ann. § 5-806(b) which states:

The right of action by a parent or the
estate of a parent against a child of the parent, or by a child or the estate
of a child against a parent of the child, for wrongful death, personal injury,
or property damage arising out of the operation of a motor vehicle, as defined
in Title 11 of the Transportation Article, may not be restricted by the
doctrine of parent-child immunity or by any insurance policy provisions, up to
the limits of motor vehicle liability coverage or uninsured motor vehicle
coverage.

(Emphasis added). The Buarque de
Macedo family argued that the plain language of § 5-806(b) renders the umbrella
policy’s household exclusion void with respect to the surviving child, because
the umbrella policy included excess motor vehicle liability coverage.
Additionally, in Maryland, a provision in an insurance policy is unenforceable
if it conflicts with Maryland public policy. AIC argued that § 5-806(b), when
read with relevant provisions in the Insurance Article, makes it clear that the
General assembly intended for § 5-806(b) to be limited to the mandatory primary
layer auto coverage.

            The
Supreme Court of Maryland held that § 5-806(b) cannot be read in a vacuum and
must be read in conjunction with the relevant provisions in Title 19 of the
Insurance Article. The Court found that§ 5-806(b) referenced motor vehicle
liability coverage or uninsured motor vehicle coverage which strongly signaled
to the Court the General Assembly’s intent for § 5-806(b) to apply only to the
required primary liability coverage, and not to optional excess coverage
provided by an umbrella policy. The Court noted that the only reference to an
umbrella policy in Title 19 of the Insurance Article provides that an umbrella
policy may include the uninsured motorist coverage outlined in that section.
The Court also reaffirmed that an umbrella policy is not motor vehicle
liability insurance within the meaning of the relevant provisions of Title 19
of the Insurance Article. Accordingly, the Court affirmed the judgment of the
Appellate Court of Maryland.

Fernando D. Kirkman, Associate