Silverton Elevators
• Facts
– Plaintiff employer give house and property
– Tornado does what tornados do
– Plaintiff sued under employees policy
Battle in Silverton
• Insurance company argues:
– Property not owned by policy
• Plaintiff argues:
– Defendant had waived the requirement that the
named insured own the property because insurance
company knew when issuing the policy knew that
plaintiff employee was the owner of the property
covered by the policy.
– Majority says waiver.
– Dissent says you can’t have waiver or estoppel if you
don’t have a contract in the first place.
Clark Peterson
• Employer fires employee for alcoholism.
• Employee sues and wins.
• Insurance company argues intentional act.
Doctrine of Reasonable
Expectations
•
Threshold Questions
1.
2.
•
Doctrine requires:
1.
2.
3.
•
Either policy is such that an ordinary layperson would
misunderstand its coverage, OR
Circumstances attributable to the insurer which would
foster coverage expectations.
is bizarre or oppressive.
eviscerates terms explicitly agreed to.
eliminates the dominant purpose of the transaction.
In other words, policy cannot withdraw with the
policy's left hand what is given with its right.
Taylor v. State Farm
• Bad faith case involving classic excess
verdict.
• UM release at issue: trial; thus, parol
evidence was admissible at trial.
• State Farm says unambiguous on four
corners of document.
Parol Evidence
• Corbin - extrinsic evidence
should then be admissible to
aid in interpretation.
• Williston – read the four
corners of the document.
Period.
Professor Corbin
• This is who I’m trying to make Corbin
– Wild liberal
– Hard drinking
– Sleeping with Julia Roberts
Corbin’s Rule
•
Two steps
1. Court considers the evidence that is alleged to
determine the extent of integration, illuminate the
meaning of the contract language, or demonstrate
the parties' intent.
•
Court eliminate the evidence that has no probative value in
determining the parties' intent.
2. The second step involves "finalizing" the court's
understanding of the contract.
•
Parol evidence rule applies and precludes admission of the
extrinsic evidence that would vary or contradict the
meaning of the written words.
Pacific Indemnity
•
How did the case end up in the Maryland Court
of Appeals?
–
4th Circuit sent under Uniform Certification of
Questions of Law Act. What does that mean?
•
Federal court wants help in interpreting Maryland law –
most states have same statute. Any federal court can do it.
–
A certification order shall set forth
1. the questions of law to be answered; and
2. a statement of facts relevant to the questions certified
and showing nature of the controversy in which the
questions arose
Pacific’s Argument
• $560,500 settlement; $200k in dispute.
Who pays for it?
– Pacific argues its policy "$ 200,000 each
claim $ 600,000 aggregate” means one $
200,000 for Mom’s claim and and another $
200,000 limit applies to the infant's claim
(which includes Dad’s claim given policy
language.
Interstate’s Position
• Three separate $ 200,000 limits
are implicated with one limit
applying to the claims of infant,
Mom, and Dad.
The Certified Question
• Construing Pacific's policy under Maryland law,
is Pacific liable to pay a separate $200,000
policy limit to Interstate for the claim of Dad for
the financial injury sustained by him as a result
of the insured's malpractice?
• Court of Appeals’ Answer?
Court of Appeals Holding
What do these wise judges say?
“DUNNO. But let’s talk insurance law!”
Maryland Insurance Law 101
• An insurance contract is just like any other contract is
measured by its terms (statute, regulation, public policy
exceptions).
• To determine intent, we construe the instrument as a
whole.
• Use everyday language.
• Ambiguous if it is "general" and may suggest two
meanings to a reasonably prudent layperson.
• If ambiguous, go to extrinsic evidence to determine the
intention of the parties and whether the ambiguous
language has a trade usage.
How to Define Injury?
• Interstate argues that the policy does not
expressly limit "injury" to bodily injury.
• Court says “injury is ambiguous” so it
cannot answer.
• Remember this: A term which is clear in
one context may be ambiguous in another.
Elsewhere, injury could be unambiguous.
Derivative Claims and Trade Claims
• Derivative claims argument from Pacific –
derivative claims not constitute separate claims
– All comes back to definition of injury which is different
in case cited by Pacific
– So we are back to injury = ambiguous
• Where the meaning is ambiguous, "extrinsic
evidence is admissible . . . to show the parties'
intent and to show whether the term does or
does not have a particular trade usage
• If no party presents extrinsic evidence bearing
upon the meaning of the ambiguous term,
construe against drafter.
So What Does This All Mean?
• COA says we don’t know because injury is
undefined.
• But… assuming trade usage is clear, use
industry standard which would view this as
two injuries