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02/14/92 GOVERNMENT EMPLOYEES INSURANCE COMPANY v.

February 14, 1992

GOVERNMENT EMPLOYEES INSURANCE COMPANY, APPELLANT
v.
GROUP HOSPITALIZATION MEDICAL SERVICES, INC., APPELLEE



Appeal from the Superior Court of the District of Columbia; (Hon. Harriett R. Taylor, Trial Judge)

Before Ferren and Terry, Associate Judges, and Gallagher, Senior Judge.

The opinion of the court was delivered by: Terry

TERRY, Associate Judge: This is an appeal from a trial court order granting summary judgment to appellee, Group Hospitalization Medical Services, Inc. The parties are both insurance companies which dispute the ultimate liability for an auto-mobile-motorcycle accident that occurred in Maryland. Because the appeal presented two questions of first impression under Maryland law, which governs this case, we certified those questions to the Maryland Court of Appeals for resolution in accordance with Rule 8-305 of the Maryland Rules of Procedure. The opinion filed by that court in response to our inquiry persuades us that the trial court's grant of summary judgment must be reversed.

I

The underlying facts are not in dispute. On May 25, 1985, Frederick Proctor and a passenger were traveling south on Piscataway Road in Clinton, Maryland, on Proctor's motorcycle when a car driven by Louise Thompson came out of a driveway onto Piscataway Road. Proctor's motorcycle struck Thompson's car as Thompson, attempting to turn northward, crossed the southbound lane. The motorcycle slid sideways, turned on its side, and skidded approximately sixty-eight feet onto the right shoulder, then began to dig into the dirt and vaulted into the air, overturning. At this point the passenger was thrown from the motorcycle. The motorcycle continued to travel through the air another thirty-three feet, then hit the ground, vaulted, overturned again, and traveled an additional twelve feet through the air before coming to rest.

Investigating police officers determined that the motorcycle was being driven at a very high rate of speed, greater than sixty-five miles per hour. They also ascertained that Proctor, the driver of the motorcycle, had been drinking, and several witnesses reported that the motorcycle had rapidly accelerated just before the collision.

Group Hospitalization Medical Services, Inc. ("GHI"), had an insurance contract with Mr. Proctor which provided that, in the event he was injured as a result of the negligence of another person, GHI would be subrogated to Proctor's rights against that person. Pursuant to this contract, GHI paid a total of $21,518.26 for medical services rendered to Proctor as a result of his injuries. The contract further provided that GHI would have the right to obtain from Proctor any payments he received from the other person as the result of such injuries, or from any insurance company making such payments, up to an amount sufficient to reimburse GHI for any medical expenses it paid.

At the time of the accident, Louise Thompson was insured by Government Employees Insurance Company ("GEICO") with policy limits of $25,000/$50,000 per accident. On December 19, 1985, GHI sent GEICO written notice of its subrogation rights with respect to any settlement that GEICO might make with Proctor. On the same date, GHI sent a letter to Proctor and his attorney notifying them of GHI's right of subrogation and its right to recover any fees for medical expenses received by them from, or on behalf of, the other party involved in the accident, Louise Thompson.

On January 7, 1986, GEICO, despite the contributory negligence of Mr. Proctor (which is stipulated in this case), *fn1 settled Proctor's claim against Thompson for the policy limit of $25,000. An internal GEICO memorandum dated January 2, 1986, reveals that GEICO received GHI's December notice, which the memorandum characterized as a "lien letter." After receiving payment from GEICO, Proctor declared bankruptcy. GHI filed a claim in the bankruptcy proceedings to recover the amount of its subrogated medical expenses, but the claim was disallowed as not recoverable from Proctor.

On May 14, 1986, GHI sent a second letter to GEICO, again giving notice of GHI's right of subrogation and the amount claimed, $21,518.26. GEICO replied in a letter dated June 9, 1986, informing GHI that $25,000 had been paid to Proctor and his attorney on January 7 and stating that, since the policy limit had been exhausted, GEICO would not honor any subrogation lien.

GHI then filed this action seeking judgment against GEICO in the amount of its subrogation claim, plus interest and costs The parties filed cross-motions for summary judgment. The trial court concluded that GEICO was liable to GHI and, by settling with Proctor, had waived its contributory negligence defense. The court then granted GHI's motion and entered judgment in favor of GHI for $21,518.26. GEICO noted this appeal.

Upon discovering that the case presented two issues which were still undecided by the Maryland courts, we certified the following questions to the Maryland Court of Appeals:

1. Under Maryland law, may GEICO defend against GHI's subrogation claim by asserting that Proctor was contributorily negligent, despite having been notified of GHI's right of subrogation before it paid Proctor's claim against Thompson, GEICO's insured?

2. Under Maryland law, did a contractual relationship exist between GHI (as Proctor's subrogee) and GEICO, so that GEICO's failure to include GHI in its settlement negotiations ...


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