Md. Top Court Backs Commercial Auto Liability Limit

The Maryland Court of Appeals has upheld liability limits for commercial auto policies where an employee is injured while a passenger in a vehicle driven by a fellow worker.

Maryland's highest court made its Nov. 14 decision in Wilson v. Nationwide Mutual Insurance Co., upholding an intermediate appellate court finding that an exclusion in a commercial automobile liability policy limiting coverage for injuries caused by a fellow-employee is valid and enforceable.

According to court documents, on June 20, 2002, the plaintiff, Taylor F. Wilson, was a passenger in a company car driven by fellow employee Daniel McFarland, who fell asleep and struck another vehicle head-on.

The accident caused Mr. Wilson severe injuries, and he subsequently underwent two operations to remove more than ten feet of his small intestine. His medical expenses exceeded $100,000.

Mr. Wilson brought an action against Mr. McFarland, his employer Allegheny Industries Inc. and its automobile liability insurer Nationwide. Allegheny at the time had two policies with Nationwide: a business automobile policy with a $1 million limit and a workers' compensation policy.

According to the opinion, the auto policy contained language stating the insurance did "not apply to 'bodily injury' to any fellow 'employee' of the "insured' arising out of and in the course of the fellow employee's employment or while performing duties related to the conduct of your business.

"However, this exclusion does not apply for coverage up to the minimum [$20,000] limit specified by the Maryland Vehicle Law."

Mr. Wilson sought a declaratory judgment invalidating the "fellow-employee" exclusion of liability coverage for his injuries, arguing that it had not been recognized by the Maryland legislature when it framed the state's compulsory insurance requirement.

But the high court found that the law created a floor--not a ceiling--for coverage and said in its decision that "under the auto policy in this case, Allegheny is able to minimize the increased premiums associated with maintaining coverage under two policies, a business automobile policy and a workers' compensation policy."

The Court of Appeals said it would be "acting as a legislative body if we were to conclude that Nationwide or Allegheny acted outside their rights when they contracted to reduce coverage consistent with the Maryland compulsory insurance statutes. Compulsory insurance requires minimum auto liability insurance coverage. Only the General Assembly or the parties to the contract may increase the amount of coverage, in this context, not the courts."

In its decision, the high court upheld a Court of Special Appeals ruling overturning a summary judgment granted to Mr. Wilson by a Maryland Circuit Court.

Robert J. Hurns, counsel for the Property Casualty Insurers Association of America (PCI), said that in light of the decision, "insurers know that an exclusion that applies only to coverage above the minimum liability limits of Maryland's compulsory insurance law is valid and enforceable." The PCI had filed a friend of the court brief in the case.