Greentree v. Fertitta

ELDRIDGE, Judge. On June- 29, 1989, Susan Greentree was involved in an automobile accident with Neal Fertitta. According to the complaint which Ms. Greentree later filed, Mr. Fertitta’s vehicle crossed the center line of the highway and hit Ms. Greentree’s vehicle head-on. Ms. Greentree was seriously injured in the accident. She underwent a series of surgical procedures and extensive rehabilitation, and required medical care until June, 1992. On June 30, 1989, the day after the accident, Ms. Green-tree’s attorneys informed Mr. Fertitta’s insurer of her potential claim. Thereafter, they informed the insurer from time to time of the amount of Ms. Greentree’s medical bills and of her prognosis for recovery. The last of these communications was acknowledged by the insurer approximately three weeks before the expiration of the three-year general statute of limitations applicable to Ms. Greentree’s cause of action. In addition, Ms. Greentree’s attorneys sought to reach a settlement agreement with Mr. Fertitta’s insurer. When their attempts to settle ultimately proved unsuccessful, Ms. Greentree’s attorneys filed suit in the Circuit Court for Anne Arundel County against Mr. Fertitta on June 23, 1992, six days before the expiration of the three-year statute of limitations. Ms. Greentree’s complaint named Neal Fertitta as the sole defendant. When service was attempted upon Mr. Fertitta, Ms. Green-tree’s attorneys learned, for the first time, that Mr. Fertitta had died on March 6, 1991. The insurer had never revealed that fact to Ms. Greentree or to her attorneys.1 After learning of Mr. Fertitta’s death, Ms. Greentree’s counsel arranged for an estate to be opened for Mr. Fertitta on October 15, 1992. On October 21, 1992,2 the original — 624 — compláint was served upon the personal representative of the estate and a copy forwarded to the insurer. On November 20, 1992, attorneys employed by the insurer, representing the estate, entered their appearance and filed a motion to dismiss pursuant to Maryland Rule 2-322. The estate argued that the claim was time-barred by Maryland Code (1974, 1991 Repl.Vol.), § 8-104 of the Estates and Trusts Article. On January 14, 1993, Ms. Greentree amended her complaint to change the name of the defendant from “Neal Fertitta” to “the Estate of Neal Fertitta, Dorrie Moon, personal representative.” After a hearing, the trial court granted the estate’s motion to dismiss the amended complaint on the ground that it was untimely filed under § 8-103(a) of the Estates and Trusts Article, as it was not filed within nine months of Mr. Fertitta’s death.3 Ms. Greentree appealed to the Court of Special Appeals. In an unreported opinion, the intermediate appellate court held that the circuit court’s application of the nine-month limitation period set forth in § 8-103(a)(1) of the Estates and Trusts Article was erroneous. The appellate court held that because the decedent was covered by liability insurance at the time of the accident, a three-year limitations period, running from the date of the accident, was applicable under § 8-104(e) of the Estates and Trusts Article.4 Nevertheless, the Court of Special Appeals affirmed on an alternate ground which had been argued to the trial court. Relying on Burket v. Aldridge, 241 Md. 423, 216 A.2d 910 (1966), the intermediate appellate court reasoned that, under the circumstances of the present case, — 625 — the amendment substituting the estate for Fertitta did not relate back to the filing of the original complaint.5 In Burket, this Court held that an amendment substituting the personal representative of a decedent in a tort action, mistakenly instituted against the decedent after his death, did not relate back to the time of the filing of the original action so as to prevent the applicable statute of limitations from barring the action. Following its earlier decision in Hunt v. Tague, 205 Md. 369, 109 A.2d 80 (1954), this Court stated that “an action brought against a dead man is a nullity,” so that there was nothing to which the later complaint against the estate could relate back. Burket v. Aldridge, supra, 241 Md. at 430, 216 A.2d at 913. According to the estate in this appeal, Burket controls the present case and requires us to hold that Ms. Greentree’s complaint against Mr. Fertitta’s estate was untimely. The estate contends that Ms. Greentree’s claim against Mr. Fertit — 626 — ta’s estate cannot, under Burket, relate back to her timely complaint against Mr. Fertitta. Thus, the estate argues, Ms. Greentree’s complaint is barred by the statute of limitations. In response, Ms. Greentree contends, inter alia, that the estate may not successfully rely upon the statute of limitations. Ms. Greentree points out that “any judgment entered in this case is recoverable from, and limited to, Mr. Fertitta’s insurance coverage,” pursuant to Code (1974, 1991 Repl.Vol., 1994 Cum.Supp.), § 8-104(e) of the Estates and Trusts Article. In this regard, Ms. Greentree states that her attorneys had negotiated with Mr. Fertitta’s insurer for almost three years, from the day after the accident until approximately two weeks before suit was filed. Under these circumstances, Ms. Greentree contends, since “[i]t would be unjust to grant a windfall to the insurer for failing to disclose Mr. Fertitta’s death to Ms. Greentree’s counsel,” the estate should not be permitted to rely on the limitations defense. (Ms. Greentree’s brief at 8). We agree that § 8-104(e) of the Estates and Trusts Article is controlling in this case. In our view, however, the effect of § 8-104(e) is to create an exception to the Burket principle under circumstances like those in this case, for claims against decedents’ estates which are covered by insurance. Section § 8-104(e) therefore makes timely Ms. Greentree’s action against Mr. Fertitta’s estate. The Estates and Trusts Article sets forth both procedural and substantive rules governing the administration of estates. Sections 8-101 through 8-115 of the Article establish procedures whereby claims may be made against decedents’ estates. Section 8-104(e) of the Estates and Trusts Article sets forth separate procedures for those claims made against decedents’ estate which are covered by insurance. Section 8-104(e) provides in part as follows: “Where insurance exists. — (1) If the decedent was covered by a liability insurance policy which at the time the action is instituted provides insurance coverage for the occurrence, then, notwithstanding the other provisions of this section, an action against the estate may be instituted — 627 — after the expiration of the time designated in this section, but within the period of limitations generally applicable to such actions. (2) ... [I]f a verdict is rendered against the estate: (i) The judgment is not limited to the amount of insurance coverage for the occurrence; and (ii) The amount of the judgment that is recoverable from the estate is limited to the amount of the decedent’s liability insurance policy.” Thus, to the extent that a successful claim will be satisfied by the proceeds of an insurance policy, rather than by the assets of the estate, § 8-104(e) makes inapplicable certain procedural requirements which would generally apply to limit claims against estates. According to the estate’s theory in this appeal, the sole effect of § 8-104(e) upon the timeliness of claims against estates is to create an exception, for claims covered by insurance, from the special statute of limitations set forth in § 8-103(a) of the Estates and Trusts Article. Section 8-103(a) provides that a claim against a decedent’s estate must ordinarily be filed within six months of the decedent’s death or within two months of the mailing of notice by the personal representative, whichever is earlier. The estate contends that § 8-104(e) makes inapplicable to claims covered by insurance the limitations period set forth in § 8-103(a). Nevertheless, the estate argues that, despite § 8-104(e), all other rules governing the limitation of claims against estates, including common law rules, apply equally to claims covered by insurance and to claims seeking recovery from the assets of the estate. The estate reads § 8-104(e) too narrowly. While § 8-104(e)(1) does indeed state that a claim covered by insurance “may be instituted after the expiration of the time designated in this section,” the section itself, § 8-104, contains no time limitation. Furthermore, § 8 — 104(e)(1) provides more broadly that “notwithstanding the other provisions of this section, an action against the estate may be instituted after the expiration of the time designated in this section, but — 628 — within the period of limitations generally applicable to such actions.” Since subsections (a) to (d) of § 8-104 describe the manner and form in which claims against an estate must be presented, the statement in § 8-104(e) that it applies “notwithstanding the other provisions of this section” cannot refer to the other subsections of § 8-104, which have nothing to do with the timeliness of claims. It is unclear from the statutory language exactly which “other provisions” of law the General Assembly intended to make inapplicable to claims covered by insurance. In order to ascertain the scope of § 8 — 104(e), we must therefore look to the purposes of that provision.6 Section 8-104(e) .governs the limitations of claims against estates where “the decedent was covered by a liability insurance policy which at the time the action is instituted provides insurance coverage for the occurrence.... ” Thus, § 8-104(e) distinguishes claims which are to be paid from the assets of the estates from claims which are to be paid by the proceeds of a policy of liability insurance. Furthermore, § 8-104(e)(2) limits a claimant’s recovery under that section to the amount of the decedent’s liability insurance policy, regardless of the amount of the judgment entered against the estate. An action brought under § 8-104(e), therefore, ultimately seeks compensation only from the decedent’s insurer and not from the decedent’s estate. In deciding to what extent the Legislature intended the limitations period set forth in § 8-104(e) to supersede other rules of timeliness, it is significant that the procedural rules governing the limitation of claims which will be satisfied from — 629 — the assets of a decedent’s estate are not pertinent to claims which will be covered by insurance. The Estates and Trusts Article sets forth uniform procedures for opening estates,taking stock of the estates’ assets, handling claims from estate creditors, and distributing the remaining assets according to law. See Code (1974, 1991 Repl.Vol., 1994 Cum.Supp.), Titles 5, 7, 8 and 10 of the Estates and Trusts Article. The Estates and Trusts Article includes numerous provisions designed to promote speed and efficiency in estate administration. Thus, the Legislature established short time periods within which claimants could file claims against an estate, to be paid from the estate’s assets. See § 8-103(a) (claims against an estate must ordinarily be filed within six months of the decedent’s death). Moreover, a personal representative “is under a general duty to settle and distribute the estate of the decedent ... as expeditiously ... as is reasonable under the circumstances.” § 7-101. In addition, the Article fixes a limited time period within which a personal representative is required to distribute the estate assets. §§ 7-101, 7-305. This Court has recognized that “[t]he six-month statute of limitations in suits against executors or administrators has the ... purpose of requiring claimants seeking damages resulting from the negligence of the decedent to make claim by suit within six months so that the personal representative of the decedent can make the prompt settlement of the estate contemplated by the law....” Bertonazzi v. Hillman, 241 Md. 361, 367, 216 A.2d 723, 726 (1966). See also Yingling v. Smith, 259 Md. 260, 265, 269 A.2d 612, 614 (1970); MacBride v. Gulbro, 247 Md. 727, 730, 234 A.2d 586, 588 (1967); Burket v. Aldridge, supra 241 Md. at 428-429, 216 A.2d at 912. Where the claim against the estate is covered by insurance, however, considerations relating to the prompt distribution of estate assets are not as pertinent. In such situations the claimant ultimately seeks recovery, not from the estate to be distributed, but from the insurance company which assumed the risk of insuring the decedent. Consequently, late claims will not interfere with the personal representative’s statutory obligation to settle the estate expeditiously. — 630 — We must interpret § 8-104(e) in light of the fact that the procedural rules which favor early finality in the distribution of estates were intended to be relaxed with regard to claims covered by insurance. Section 8 — 104(e)(1) clearly states that, to the extent that a claim against an estate is to be satisfied by the proceeds of insurance, it may be filed “within the period of limitations generally applicable to such action.” In order to give effect to this statutory language, and to the substantial difference between those claims covered by insurance and those claims directed against the assets of the estate, the statement in § 8-104(e) that it governs claims covered by insurance “notwithstanding the other provisions of this section” must refer generally to the rules of timeliness contained in sections 8-101, 8-102 and 8-103 of the Estates and Trusts Article, and to any inconsistent common law rules incorporated therein. Consequently, when a claim against a decedent’s estate is covered by a policy of insurance, § 8-104(e) provides that the ordinary statute of limitations applies to the claim, notwithstanding rules relating to the filing of claims against decedents’ estates which might otherwise make the plaintiffs complaint untimely. Under § 8-104(e), therefore, a claim made within the limitations period generally applicable to the action is effective against the estate, where insurance coverage is available, to the extent that it would have been effective against the decedent, had he or she survived. In the present case, § 8 — 104(e) makes inapplicable, the rule of Burket v. Aldridge, supra, 241 Md. 423, 216 A.2d 910, which prevents a late claim against a decedent’s estate from relating back to a complaint filed against the decedent within the period of limitations, but after the time of death. By making the usual statute of limitations applicable to claims covered by insurance where the insured dies before suit is filed, § 8 — 104(e) fully implements the contract of insurance between the insurer and the insured. There is no reason to permit an insurance company to receive premiums for providing coverage for a particular risk, but to avoid paying under the policy because the unforeseen death of its insured allows it to take advantage of procedural rules governing the adminis — 631 — tration of estates. On the contrary, since the insurer would avoid liability under the policy at the expense of the person injured by the decedent, applying procedural rules governing estate administration to defeat a claim against an insurer undermines Maryland’s strong public policy of making compensation available to those injured in motor vehicle and other accidents. See Van Horn v. Atlantic Mutual Insurance Company, 334 Md. 669, 680, 641 A.2d 195, 200 (1994). In addition, claims covered by insurance generally differ from claims against the assets of an estate with respect to the provision of notice. The personal representative of a decedent’s estate may be entirely unaware of circumstances which might give rise to claims against the estate. By contrast, a contract of insurance ordinarily provides that the insurer must receive early notice of a potential claim in order to trigger its obligations under the policy. Thus, an insurer typically has notice of a claim against an insured long before suit is filed. Indeed, the filing of suit is often, as in the present case, the consequence of protracted, but ultimately unsuccessful, settlement negotiations. In Burket v. Aldridge, supra, 241 Md. at 428, 216 A.2d at 912, this Court quoted Justice Jackson’s description of the purposes of statutes of limitation from Order of Railroad Telegraphers v. Railway Express Agency, Inc., 321 U.S. 342, 348-349, 64 S.Ct. 582, 586, 88 L.Ed. 788, 792 (1944), stating as follows: “ ‘Statutes of limitation, like the equitable doctrine of laches, in their conclusive effects are designed to promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared. The theory is that even if one has a just claim it is unjust not to put the adversary on notice to defend within the period of limitation and that the right to be free of stale claims in time comes to prevail over the right to prosecute them.’ ” — 632 — As § 8-104(e) recognizes, considerations with respect to notice which are pertinent to uninsured claims against decedents’ estates do not apply where the claim is covered by a policy of insurance. In the present case, Ms. Greentree filed suit against Mr. Fertitta within the three-year statute of limitations applicable to her action. Under § 8-104(e), therefore, her action was timely, notwithstanding the special time limitations upon the administration of estates established by the Estates and Trusts Article and by the Burket principle. JUDGMENT OF THE COURT OF SPECIAL APPEALS REVERSED. CASE REMANDED TO THE COURT OF SPECIAL APPEALS WITH DIRECTIONS TO REVERSE THE JUDGMENT OF THE CIRCUIT COURT FOR ANNE ARUNDEL COUNTY AND TO REMAND THE CASE TO THAT COURT FOR PROCEEDINGS NOT INCONSISTENT WITH THIS OPINION. RESPONDENTS TO PAY COSTS. Footnotes [1] There is a factual dispute with respect to whether or not the insurer had prior knowledge of Mr. Fertitta's death. [2] There a dispute, which is not pertinent to the issues before us, as to whether service occurred on the 20th or 21st of October. [3] Mr. Fertitta died on March 6, 1991; therefore, according to the trial court, the complaint should have been filed by December 6, 1991. Section 8-103(a)(1) of the Estates and Trusts Article was amended in 1992. This amendment changed the limitations period for filing claims against an estate from nine months to six months, but the amendment was effective only as to estates of persons who died on or after October 1, 1992. [4] The parties agree in this Court that this is the applicable limitations period. [5] Under our liberal rule governing the amendment of pleadings, amendments should "be freely allowed when justice so permits.” Maryland Rule 2-341(c). But, as the Court observed in Crowe v. Houseworth, 272 Md. 481, 485-486, 325 A.2d 592, 595 (1974), it may at times be difficult to determine the consequences of an amended pleading: "A frequently encountered problem, which is the result of the more liberal use of amendments, is whether a new action has commenced, an action which may be barred by limitations, or whether the doctrine of relation back is applicable: that is, whether the assertion of the original complaint tolled the running of the statute. The modern view seems to be that so long as the operative factual situation remains essentially the same, no new cause of action is stated by a declaration framed on a new theory or invoking different legal principles. As a consequence, the doctrine of relation back is applied, and the intervention of a plea of limitations prevented An amended complaint changing the name of a defendant in the action, filed after the statute of limitations has run, may either seek to substitute a new party for the defendant originally named, or may correct a misnomer of the originally named defendant. The effect of an amended complaint ordinarily depends upon whether the “correct” defendant was intended to be sued originally and whether the "correct” defendant would be unfairly prejudiced by allowing the amendment to relate back to the time of the filing of the original complaint. See, e.g., McSwain v. Tri-State Transportation, 301 Md. 363, 369-371, 483 A.2d 43, 46-47 (1984); W.U. Tel. Co. v. State, Use Nelson, 82 Md. 293, 306-307, 33 A. 763, 764 (1896). [6] Moreover, we must interpret § 8-104(e) in light of the overall purposes of the Estates and Trusts Article. See Bertonazzi v. Hillman, 241 Md. 361, 216 A.2d 723 (1966); Chandlee v. Shockley, 219 Md. 493, 150 A.2d 438 (1959). The General Assembly has set forth in § 1-105 of the Estates and Trusts Article the general purpose of the legislation: "The purpose of the estates of decedents law is to simplify the administration of estates, to reduce the expenses of administration, to clarify the law governing estates of decedents, and to eliminate any provisions of prior law which are archaic, often meaningless under modern procedure and no longer useful. This article shall be liberally construed and applied to promote its underlying purpose.”