General Release with Liability Insurer Does Not Preclude Recovery of Uninsured/Underinsured Payments from UM Carrier

The Brethren Mut. Ins. Co. v. Ember Louise Buckley, 2014 Med. LEXIS 140, 86 A.3d 665 (2014).

In an opinion issued in March of 2014, the Court of Appeals of Maryland held that UM carriers may be required to issue uninsured/underinsured payments to their insured, even if the insured has signed an agreement with a liability insurer releasing claims against known or unknown parties.  

 

Ember Buckley was involved in a single car automobile accident in which her boyfriend, Harvey L. Betts, was the driver.  As a result of the accident, Buckley sustained serious injuries, with medical bills relative to the accident exceeding $200,000.00.  Betts was covered by a liability insurance policy issued by GEICO with policy limits of $100,000.00.  Buckley had a policy with Brethren Mutual Insurance Company that included uninsured/underinsured motorist coverage.  GEICO offered policy limits to settle Buckley’s claim.  Buckley sent notice of the settlement offer from GEICO to Brethren, and Brethren agreed to waive any subrogation actions against Betts.  Buckley then signed a release of all claims against Harvey Betts, as well as a hold harmless agreement in favor of Betts and GEICO.  The language of the release provided that Buckley would release “…all other persons, firms or corporations of and from any and every claim…” resulting from the underlying accident.  Buckley then unsuccessfully tried to recover under the uninsured/underinsured provision of her policy with Brethren.  After Brethren denied her claim, Buckley filed suit in Baltimore County Circuit Court for breach of contract.   

At the trial level, both parties filed motions for summary judgment.  Brethren argued that Buckley signed a general release which released all parties, firms and corporations from future claims, regardless of being parties to the Release.  Buckley argued that the Release only applied to Betts and his insurer.  She further argued that the execution of the Release was in compliance with section 19-511 of the Insurance Article of the Maryland Annotated Code, which provides in pertinent part:

            (e) Acceptance of settlement offer.—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.

Md. Code Ann., Ins. § 19-511.

The Circuit Court granted summary judgment in favor of Brethren, and Buckley appealed.

The Court of Special Appeals, enforcing a strict interpretation of section 19-511, held that “executing a boilerplate, general release in favor of the liability insurer does not relieve the UM carrier from its contractual duty to issue a UM payment to its insured.” Buckley v. Brethren Mut. Ins. Co., 207 Md. App. 574, 587, 53 A.3d 456, 463 (2012).    The Court held that the executed Release was insufficient to relieve Brethren of its duty to pay under the uninsured/underinsured policy.  Brethren appealed to the Court of Appeals, which granted certiorari. 

Brethren argued that the language in the Release executed by Buckley was clear, and that Buckley released all future claims in connection with the accident, including claims against uncontemplated parties.  Brethren also argued that Buckley was not protected by section 19-511 because the Release was outside of the parameters of the statute. 

           

The Court of Appeals applied section 19-511 of the Insurance Article to the facts of the underlying case.  The Court referenced section 19-511, subsection (e), and found that the language of the statute does not require that the language of a release must be narrow in scope in order to fall within the statute’s protection.  The Court cited its opinion in Erie Ins. Exch. v. Heffernan for support, where it held that “the purpose of the uninsured motorist statute is to provide minimum protection for individuals injured by uninsured motorists and should be liberally construed to ensure that innocent victims of motor vehicle collisions are compensated for their injuries.” Erie Ins. Exch. v. Heffernan, 399 Md. 598, 612, 925 A.2d 636, 644 (2007). 

Ultimately, the Court could not find that the Release relieved Brethren of its duty to pay under the uninsured/underinsured provisions of Buckley’s policy.  To find that the Release relieved Brethren of its duty would not be consistent with the legislative intent of section 19-511.  Judgment of the Court of Special Appeals was affirmed. 

Ordinarily, a general release of all claims in favor of the liability insurer and signed by the UM carrier’s insured will likely not be a successful defense for the UM carrier in denying uninsured/underinsured payment.  Section 19-511 of the Insurance Article does not leave the UM carrier without options.  Those options include the ability to pursue any subrogation claims against the liability insurer.  Additionally, the statute requires the insured to inform the UM carrier of the liability insurer’s settlement offer.  The insured’s failure to comply with the requirements set forth in the statute may be used by the UM carrier as a defense for the denial of the claim. 

Contributed by Danielle Williamson, Esq.