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Md. Court of Appeals Revises Ruling

Jun 13, 2007

By Caryn Tamber

The Court of Appeals has apparently decided it made a mistake in an April decision containing a few dozen words that attorneys say could have radically changed the law in some car accident cases.

The top court's opinion in Erie Insurance Exchange v. Heffernan contained language suggesting that if a crash victim's insurance company approves a settlement between the victim and an underinsured driver's insurance company, the victim's insurer cannot then argue about who was liable for the accident.

Lawyers who work on auto insurance cases said at the time that it was strange for the court to make such a dramatic change in what amounted to little more than a footnote.

Wednesday, following a motion for reconsideration by Erie, the court reissued its opinion, minus the footnote and other references making the same point. It is unusual for the state's top court to change its mind on a substantive issue.

"I'm guessing either the court did not want to go in the direction we all perceived they did, or they just decided this wasn't the case to do it in," said Richard L. Nilsson of Goodell, Devries, Leech & Dann LLP, who does insurance defense work.

The underlying case was a suit filed by Maryland residents Edmund and Diane Heffernan against their insurer, Erie, for underinsured benefits connected to their teenaged daughter Mallory's death in a car accident in Delaware. Mallory died when the underinsured driver of the car she was riding in fell asleep and collided with a tractor- trailer.

The case was in U.S. District Court, but the federal judge asked the Court of Appeals to decide whether Maryland law or Delaware applies to the case.

In the course of deciding that Delaware law applies, the court dismissed Erie's argument that the Heffernans were partly liable for the accident. Judge Clayton Greene Jr. reasoned in a footnote that when the victim's insurer approved a settlement and waives subrogation - the right to sue the underinsured driver in the victim's stead - it cannot then dispute liability.

Attorneys said at the time the opinion might chill insurers' willingness to waive subrogation, resulting in more suits against underinsured motorists. They said it would force insurers into advancing their clients the money the clients would have received from the underinsured person's insurer.

"It was one of those rare cases where both sides didn't like it," said Ronald V. Miller Jr., who handles car accident cases on the plaintiff's side and teaches insurance at the University of Baltimore School of Law. "The only people who were happy [were] plaintiffs who had cases pending where subro[gation] was raised."

Last month, Erie filed for reconsideration, arguing that the court decided a question not before it and may have misunderstood the facts of the case, resulting in a "monumental change in the law as it is currently understood and practiced."

"Approval of a - settlement is not tantamount to participating in tort litigation and acquiescing in a consent judgment and settlement between the plaintiff and the tort defendant," Erie's lawyers wrote. "This Court's ruling completely ignores the distinction."

Erie argued that the decision would change the terms of its contract with the Heffernans by requiring it to pay damages that the couple was not entitled to recover from the underinsured driver.

On reconsideration, the court "just excised references to the effect of the waiver of subrogation because nobody had contended it caused Erie to waive any liability defenses such as comparative negligence or assumption of the risk that Erie wanted to raise," said Andrew Janquitto of Mudd, Harrison & Burch LLP, who represents the Heffernans.

In the April opinion, there was a sentence stating that Judge Irma S. Raker concurred in the judgment but not the opinion. The modified version released Wednesday did not contain that sentence, indicating that she approved the new opinion.

(c) 2007 The Daily Record (Baltimore). Provided by ProQuest Information and Learning. All rights Reserved.

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