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Appeals Court Revives Lawsuit Over Coverage Dispute with Insurer

On Behalf of | Aug 3, 2023 | car accidents |

The Appellate Court of Maryland has ruled in favor of a car crash victim seeking additional compensation from her insurance company. The decision means the plaintiff’s fight to recover an additional $20,000 under her policy’s uninsured motorist coverage can now move forward. It’s also important for auto accident victims who end up in coverage disputes with their insurance companies.

The plaintiff was injured in 2018 when an uninsured driver rear-ended the car in which she was riding. She underwent surgery to remove a cyst she claimed was aggravated by the crash. But her insurance company, State Farm, disputed the surgery was necessary and paid only part of her claim under her policy’s uninsured motorist coverage.

The plaintiff then filed a lawsuit against State Farm in Montgomery County Circuit Court, alleging breach of contract for failing to pay the full $50,000 policy limit. While that lawsuit was pending, she also filed a complaint with the Maryland Insurance Administration (MIA) under a state law allowing administrative complaints against insurers for failure to act in good faith.

The MIA awarded the plaintiff $29,510, finding State Farm had not acted in bad faith. She appealed that decision to the Office of Administrative Hearings (OAH). OAH held a hearing and affirmed the MIA’s decision.

The plaintiff then amended her circuit court lawsuit to include a claim under state law allowing lawsuits in court alleging an insurer’s lack of good faith. But the circuit court dismissed the amended lawsuit entirely, ruling that the OAH decision prevented her from litigating the same issues in court under a legal doctrine called “collateral estoppel.”

Collateral estoppel means that when a court decides an issue in a case, that decision is binding in later court cases involving the same parties. This prevents parties from having to re-litigate the same issue over and over again in different lawsuits.

The circuit court said the woman’s only option after the OAH decision was to appeal it through a petition for judicial review, not file a new civil claim in court.

But the Appellate Court reversed that ruling, finding the circuit court had made a mistake in concluding that the OAH decision blocked the civil action in court.

The judges said Maryland state laws allow an insured to bring a civil claim after exhausting administrative remedies, and that filing an administrative appeal to the OAH satisfies the requirement to receive a “final decision” before going to court.

“We think the legislature intended to require an insured to exhaust their administrative remedies before resorting to the civil action in circuit court and that part of those administrative remedies is the hearing before the OAH that results in a final decision,” the court wrote.

Because the laws specifically contemplate court action after administrative proceedings, the purpose was not to block subsequent lawsuits on collateral estoppel grounds, the court found.

“Undoubtedly, the General Assembly determined that compliance with [the laws], including completion of administrative proceedings under [the insurance statute], should not foreclose an insured’s other civil actions against the insurer, such as a breach of contract claim,” the ruling stated.

The court also noted that a “Fiscal Note” to the original legislation said the “bill does not limit the right of any person to maintain a civil action otherwise available under any other provision of law.”

As a result, the appeals court reversed the dismissal of the case and sent it back to the circuit court for renewed consideration under the proper legal standards.

If you’re involved in an auto accident or a coverage dispute with your insurer, an auto accident attorney can help. An insurance coverage attorney can help you navigate the legal process and ensure your rights are protected. The attorneys at Maronick Law LLC have experience with Glen Burnie, Annapolis, Baltimore, Essex, Ocean City, Towson, White Marsh auto accident and insurance coverage legal matters.

Maronick Law LLC is open during the pandemic and continues to meet your legal needs. We can meet with you remotely if you have access to Zoom. You can contact the law office at 410-881-4022 or via our website for a free consultation.



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