Maryland Court upholds waiver of UM coverage

In Swartzbaugh v. Encompass Insurance Company of America, No. 100, September Term 2011 (Md. April 25, 2012), the Court held that in the context of a waiver of UM benefits under a Maryland motor vehicle insurance policy, the phrase "first named insured" refers to a person insured under the policy and specifically named in the policy, who acts on behalf of the other insured parties and is designated as such in the policy documents. In so holding, the Court rejected the insured's argument that the "first named insured" literally means the first rated driver listed on the policy.

The compulsory minimum automobile insurance liability limits under Maryland law are currently $30,000 per person for personal injuries, $60,000 aggregate, and $15,000 for property damage. A policy must include UM coverage, which under Maryland law refers both to uninsured as well as under-insured motorists. Under the Maryland Insurance Code, the default limits of UM coverage must be equal to the liability coverage under the policy. However, this level of coverage may be waived in favor of a lower amount that is at least equal to the minimum coverage required by the motor vehicle law. The waiver must be in writing on a form devised by the Maryland Insurance Administration that complies with the applicable statute. Thus, the waiver is supposed to be signed by the "first named insured", as required by statute. However, the statute does not define what the "first named insured" means.

In the Swartzbaugh case, the waiver was signed by Mrs. Swartzbaugh, who handled the family finances with respect to insurance, and who had applied for the insurance. The policy listed three vehicles, and named her husband, herself, and her daughter as drivers. Unfortunately, the daughter was later injured by an under-insured driver while she was riding as a passenger. The daughter challenged the effectiveness of the waiver of UM coverage, on the grounds that Mrs. Swartzbaugh was not in fact the "first named insured" on the policy -- rather, the father was actually the first name listed in a section labeled "Policyholder."

The Court of Appeals rejected this view, finding that name order was not determinative. Rather, the named insureds are entitled to determine who will exercise that choice and serve as primary or first named insured. The MIA waiver form fills that gap be requiring the individual who executes the form to certify his or her status as "first named insured." The Court found that this was preferable to an arbitrary designation of first named insured as whomever's name was typed first on the policy.