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

 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