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Swartzbaugh v. Encompass: Maryland High Court Uninsured Motorist Opinion

Most people - actually most lawyers - don't understand insurance. This is not a commentary on intelligence.  Insurance has just become increasingly complicated.  The complexity causes lawsuits and forces courts to deal with the confusion. As a case-in-point, the Maryland Court of Appeals (the highest court in Maryland) recently decided Swartzbaugh v. Encompass. This decision involves the question of which family member has the authority to waive certain types of automobile insurance known as "enhanced uninsured motorist coverage."

What is Uninsured Motorist Coverage?

First, a quick primer on insurance. If you drive a car or have family members who drive a car, please read this section. It is important, and it might compel you to change your insurance coverage. In Maryland, automobile policies come with a type of coverage known as uninsured/underinsured (UM/UIM). This is insurance designed to protect a car's driver and occupants in two automobile accident scenarios:

  1. a negligent driver has too little insurance coverage to pay for injuries caused by the collision
  2. a negligent driver is completely uninsured or cannot be located (hit-and-run or "phantom driver")

Basically, this insurance protects you from the bad insurance decisions made by all the other drivers in the world. If another driver has no insurance or too little insurance and causes an accident with you, your insurance company is supposed to step in and take care of you. In Maryland, all insured vehicles must have at least $30,000/$60,000 in uninsured and underinsured motorist coverage (that means a maximum $30,000 per person in an accident, with an absolute limit of $60,000 to be paid for the entire accident). However, you can choose to have more anything more than those minimums are called "enhanced uninsured/underinsured motorist benefits." In our opinion, you should have more. We recommend that you get as much as you can afford it doesn't amount to much more in your premium per year. A $250,000/$500,000 won't cost you much more (it's even better to get $500,000/$1,000,000).

The Facts of the Swartzbaugh Case

In Swartzbaugh, there are three relevant people: Mom, Dad, and Daughter. Mom handled all of the family's insurance. She took care of obtaining and signing for the automobile insurance policy. She told her insurance agent that she wanted only the minimum amount of UM/UIM, and she signed a form to that effect (at the time she signed, the minimums were $20,000/$40,000). Had she not signed the waiver, she would have been entitled to $250,000/$500,000 in UM/UIM benefits. Ten years after signing that form (called a waiver), Daughter was in a significant car accident. The other driver's insurance company paid their limits, which was not enough to take care of the costs of Daughter's injuries. The Swartzbaugh family then went after their insurance company, trying to get underinsured motorist coverage benefits. A lawsuit was filed in Carroll County by Frank Murer, a Baltimore lawyer. Frank is an excellent advocate and a friend of Miller & Zois. Encompass was represented by McCarthy Wilson, LLP, a quality insurance defense firm that does a lot of work for Allstate - which owns Encompass - and Erie Insurance. This was a fair fight.

Why Swartzbaugh is Important: First-Named Insured

So here is one case that is created by confusing insurance terms. The entire thrust of the case centers on whether Mom had the right to waive the "enhanced" uninsured/underinsured for her entire family. That means the court had to decide whether Mom was the "first-named insured." The court had to decide it because that term is not defined anywhere in Maryland law, even though the Courts told the Legislature back in 1996 that it would be a good idea to define it.

The lawyer for the Swartzbaugh family, desperate to find more coverage for the Daughter's accident, argued that "first-named insured" meant exactly that the insured who was first listed on the insurance document. Dad's name was first in line on the "Policyholder" section of the insurance policy, so the lawyer argued that Dad was the first-named insured and the only one with the power to waive enhanced UM/UIM.

As the Court says, the order of the insureds on any particular document is probably happenstance, and not relevant of any hierarchy. The Court of Appeals, in the first appellate opinion written by new Judge Robert N. McDonald, disagreed with the family's argument and decided that a more loose definition was appropriate. They ruled that "first-named insured" was simply a convenience. Not all people named in the insurance policy need to sign, so the people signing an insurance policy could designate the first-named insured through those documents. Indeed, Mom signed the UM/UIM waiver above a line that read "first-named insured."

The Court's ruling is logical and consistent with common sense. When a family contracts for insurance, or changes insurance provisions, there is usually someone in charge to handle it. Maybe mom, maybe dad, and maybe it changes from time-to-time. In most cases, signer will have authority from the rest of the family. There was no evidence in this case that Mom didn't have the authority from the family to make these decisions that would be a different case. I'm betting that when MOm signed for her insurance, had no idea what UM/UIM was. She just knew that her yearly premiums were $204.00 cheaper (it averages out to $17.00 per month - crazy right?). Her insurance agent probably didn't really explain UM/UIM, and why it is so important. The Court mentioned that "[i]t simply appears that the family regrets that decision in light of subsequent events." Of course they do. For a measly $204 per year, her daughter would have been protected instead of having a virtually worthless claim.

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