UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-1819
MANOR CARE OF AMERICA, INC., formerly known as
Manor Care, Incorporated, a Delaware
corporation,
Plaintiff - Appellant,
versus
PROPERTY & CASUALTY INSURANCE GUARANTY
CORPORATION, a private corporation formed by
the State of Maryland,
Defendant - Appellee.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. Benson Everett Legg, Chief District Judge.
(CA-02-4206-1)
Argued: May 23, 2006 Decided: July 18, 2006
Before MICHAEL, MOTZ, and SHEDD, Circuit Judges.
Reversed and remanded by unpublished per curiam opinion. Judge
Shedd wrote a concurring opinion.
ARGUED: Gerald R. Kowalski, COOPER & WALINSKI, L.P.A., Toledo,
Ohio, for Appellant. Edward Mark Buxbaum, WHITEFORD, TAYLOR &
PRESTON, L.L.P., Baltimore, Maryland, for Appellee. ON BRIEF: Jodi
D. Spencer, COOPER & WALINSKI, L.P.A., Toledo, Ohio, for Appellant.
Albert J. Mezzanotte, Jr., Emily A. Daneker, WHITEFORD, TAYLOR &
PRESTON, L.L.P., Baltimore, Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
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PER CURIAM:
Property and Casualty Insurance Guaranty Corporation
(PCIGC), the insurance guaranty fund created by the Insurance
Article of the Maryland Code, §§ 9-301 et seq. (guaranty fund or
statute), covers an insolvent insurer’s unpaid obligation under a
policy “issued to a resident” of Maryland, § 9-301(d)(1)(i)(1).
The question in this case is when a policyholder must be a resident
to have its claim covered by PCIGC. We hold that the statute
requires a policyholder to be a resident of Maryland at the time
the policy is issued. The district court’s summary judgment to the
contrary -- that the statute requires residency at the time the
claim is submitted to PCIGC -- is therefore reversed.
I.
A.
PCIGC is a private, nonprofit, nonstock corporation that
collects assessments for and administers Maryland’s guaranty fund.
See Md. Code Ann., Ins. § 9-302. PCIGC steps into “the shoes of
the insolvent insurer,” Igwilo v. PCIGC, 750 A.2d 646, 650 (Md.
Ct. Spec. App. 2000) (internal quotation marks omitted), and,
subject to certain limits, fulfills the obligations that the
insolvent insurer should have fulfilled to Maryland residents, Joe
Shifflett, Inc. v. PCIGC, 551 A.2d 913, 915 (Md. Ct. Spec. App.
1989). The corporation’s avowed purpose is to “provide a mechanism
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for the prompt payment of covered claims under certain policies and
to avoid financial loss to residents of [Maryland] who are
claimants or policyholders of an insolvent insurer.” § 9-302(1).
Insurance companies must be members of PCIGC as a
condition of their authority to transact business in Maryland.
§ 9-304(b). As members, they must pay an annual assessment to
cover the expenses of PCIGC, including expenses arising from any
member’s insolvency. § 9-306(d). This assessment, levied by
PCIGC, is in the same proportion that “the net direct written
premiums of the member insurer for the preceding calendar year
. . . bears to the net direct written premiums of all member
insurers for the preceding calendar year.” § 9-306(d)(2).
Manor Care of America, Inc. (Manor Care) is a Delaware
corporation that owns and operates nursing homes and other long-
term health care facilities throughout the country. Manor Care had
its principal place of business in Maryland until September 1998,
when it moved to Ohio. From June 1, 1993, through June 1, 1997,
while a resident of Maryland, Manor Care was insured under a
comprehensive general liability insurance policy issued by PHICO
Insurance Company (PHICO), a company authorized to sell insurance
in Maryland. Manor Care contends that the premiums it paid to
PHICO during this four-year period were remitted in part to PCIGC
as part of PHICO’s annual assessment, though PCIGC disputes this
contention.
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In February 2002 PHICO was declared insolvent and ordered
into liquidation by the Commonwealth Court of Pennsylvania. Manor
Care thereafter requested that PCIGC fulfill the obligations that
PHICO should have fulfilled under the policy: that is, cover
liability claims asserted against Manor Care (and its related
affiliates and subsidiaries) for incidents occurring during the
policy period, June 1, 1993, through June 1, 1997. PCIGC
repeatedly refused to provide coverage on the ground that Manor
Care is not a Maryland resident under the guaranty fund statute.
B.
In December 2002 Manor Care sued PCIGC in diversity in
the U.S. District for the District of Maryland, seeking (1) a
declaratory judgment that its claims are “covered claims” under
§ 9-301(d), and (2) damages from PCIGC’s failure to defend and
indemnify it against malpractice and other claims that would have
been covered by its policy with PHICO. The district court allowed
limited discovery on whether the claims are covered under § 9-
301(d). The parties stipulated that none of the parties suing
Manor Care (the claimants) are Maryland residents. After the
limited discovery ended, PCIGC filed a motion for summary judgment
on the ground that Manor Care is not a Maryland resident within the
meaning of “covered claim.”
The district court granted summary judgment to PCIGC upon
concluding that eligibility for coverage turns on current residency
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-- that is, residency at the time the policyholder submits a claim
to PCIGC. Because Manor Care was not a Maryland resident in 2002
when it submitted its claims to PCIGC, the court concluded that
Manor Care’s claims are not “covered claims” under § 9-301(d).
Manor Care appeals.
II.
The dispute centers on when a policyholder must be a
Maryland resident for a claim to be a “covered claim” under § 9-
301(d)(1)(i)(1). “Covered claim” is defined in part as:
an insolvent insurer’s unpaid obligation, including an
unearned premium[,] that . . . arises out of a policy of
the insolvent insurer issued to a resident or payable to
a resident on behalf of an insured of the insolvent
insurer.
Id. (emphasis added). “Resident,” in turn, is defined as “an
individual domiciled in the State” or a “corporation or entity
whose principal place of business is in the State.” § 9-301(h).
PCIGC argues that to qualify for coverage a policyholder
must be a current resident, specifically, a resident at the time it
submits a claim to PCIGC (and after its insurer has gone
insolvent). Manor Care counters that current residency has no
bearing on whether a claim is covered. Rather, residency at the
time that the relevant insurance policy was issued is controlling.
Because Manor Care was a resident of Maryland when PHICO issued the
policy on June 1, 1993, and renewed it on June 1, 1994, June 1,
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1995, and June 1, 1996, Manor Care maintains that it is a resident
within the meaning of “covered claim,” § 9-301(d).
Maryland’s rules of statutory interpretation are in line
with the norm. “The cardinal rule . . . is to ascertain and
effectuate the intention of the legislature.” Degren v. State, 722
A.2d 887, 895 (Md. 1999) (internal quotation marks and citation
omitted). The starting point for determining legislative intent is
the language of the statute itself. Courts generally do not look
beyond the statute’s words if they are “plain and free from
ambiguity, and express[] a definite and simple meaning.” Id. When
the statutory language is ambiguous, courts consider “not only the
literal or usual meaning of the words, but their meaning and effect
in light of the setting, the objectives and purpose of the
enactment.” Tucker v. Fireman’s Fund Ins. Co., 517 A.2d 730, 732
(Md. 1986). In case of ambiguity, courts “may [also] consider the
consequences resulting from one meaning rather than another, and
adopt that construction which avoids an illogical or unreasonable
result, or one which is inconsistent with common sense.” Id.; see
also Romm v. Flax, 668 A.2d 1, 2 (Md. 1995).
We agree with Manor Care’s reading of the statute. For
a claim to be covered, it must arise out of an insurance policy
that was “issued to a resident.” § 9-301(d)(1)(i)(1). The meaning
of this phrase is plain and free from ambiguity. The phrase
unmistakably tethers the residency requirement to a particular
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event, the issuance of the policy. To be eligible for coverage, a
policyholder must have been a Maryland resident when the policy was
issued, not when the claim is submitted to PCIGC.
This interpretation is not upended by the statute’s
present-tense definition of a corporate “resident.” § 9-301(h)(2)
(“‘Resident’ means . . . a corporation . . . whose principal place
of business is in the State.”). When the definition of a corporate
resident is read into the “issued to a resident” language in
§ 9-301(d)(1)(i)(1), it is clear that the Maryland residency must
be contemporaneous with the issuance of the policy.
Although we find no ambiguity in the provision at issue,
further analysis reveals that our straightforward reading is in
line with “[t]he setting, the objectives and purpose of the
[guaranty fund] enactment.” Tucker, 517 A.2d at 732. Our reading,
moreover, achieves a result that is logical, reasonable, and
consistent with common sense. See id.
In 1986 the Maryland legislature established PCIGC in its
current form, creating a self-financing guaranty fund. See Ward
Elec. Servs., Inc. v. PCIGC, 599 A.2d 81, 85-86 (Md. 1991)
(discussing concerns of General Assembly and aims of 1986
enactments). The legislature made clear that PCIGC is not “‘an
instrumentality of the State’” and that its liabilities are not the
State’s. Id., 599 A.2d at 86 (citing preamble, Chapter 161 of Acts
of 1986). PCIGC is instead a private corporation that assesses
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each of its members, or authorized insurers, an annual fee “in
amounts necessary to pay” its expenses, including the covered
claims of insolvent insurers. § 9-306(d).
As a practical matter, a portion of the premiums that
Maryland residents pay to authorized insurers are passed onto PCIGC
in the form of annual assessments. As the Maryland Court of
Appeals has observed, “The legislative purpose [behind PCIGC] was
to protect Maryland policyholders who would pay as part of their
premiums the assessments levied by PCIGC to pay the covered claims
in the [indemnity company’s] insolvency.” Ward Elec. Servs., Inc.,
599 A.2d at 86 (emphasis added). In light of this purpose, it
would be illogical to exclude from coverage a policyholder that was
a resident when its policy was issued and whose premiums helped
finance PCIGC, but award coverage to a new or recent resident whose
premiums did not support the guaranty fund.
PCIGC’s counterarguments are unavailing. PCIGC points
primarily to the statute’s legislative history and divergence from
the Model Insurance Guaranty Association Act (Model Act) to argue
that only claims of current residents are covered. The legislative
history, as sparse as it is, does not support PCIGC’s position.
Before 1975 the definition of “covered claim” specified that the
claimant or insured must be “a resident of this State at the time
of the insured event.” 1975 Md. Laws, ch. 651 at 2999 (setting
forth in brackets the language to be deleted by amendments). In
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1975 the Maryland legislature deleted this language as part of a
comprehensive overhaul of the definition of “covered claim” and
adopted the current definition with its “issued to a resident”
language. (The legislature added the affiliated definition of
“resident” eleven years later, in 1986. See 1986 Md. Laws, ch.
440.) According to PCIGC, the Maryland legislature intended this
change to benefit current residents, not past residents. This
argument goes too far, however. The Maryland legislature, by
deleting “resident at the time of the insured event,” did not
delete all references to past events; it simply replaced one past
referent with another. Instead of being a resident at the time of
the insured event, the policyholder must be a resident when the
insurance policy was issued. For example, if a one-year policy was
issued to a Maryland resident on January 1, 2004, the policyholder
would still be considered a “resident” for purposes of § 9-301(d)
if it had moved to another state by the time that the event giving
rise to the claim occurred, say six months later.
For similar reasons, PCIGC’s reliance on the relevant
Model Act is unpersuasive. Like the pre-1975 Maryland statute, the
Model Act incorporates the phrase, “resident of this state at the
time of the insured event,” into the definition of “covered claim.”
Model Ins. Guar. Ass’n Act § 5(F)(1). PCIGC contends that as of
1975 the Maryland legislature intended its guaranty fund statute to
diverge from the Model Act and benefit only current residents, not
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past residents. Cf. Bethesda Mgmt. Servs. Inc. v. Dep’t of
Licensing and Regulation, 350 A.2d 390, 395 (Md. 1976) (explaining
in another context that the Maryland legislature, in adopting but
sightly altering the Model State Administrative Procedure Act, left
“little doubt” that it intended to modify that particular model
act). Endorsing Manor Care’s interpretation would, in PCIGC’s
view, contravene this legislative intent by effectively adopting
the Model Act’s language. But, as just explained, our holding
today does not align the Maryland statute with the Model Act.
Rather, it recognizes what the plain language and the statutory
purpose make clear. A policyholder, to be eligible for coverage,
must be a resident at the time its insurance policy was issued, not
at the time of the insured event (as the Model Act provides) or at
the time of submitting a claim to PCIGC (as PCIGC urges).
For the foregoing reasons, we reverse the district
court’s grant of summary judgment to PCIGC. A policyholder is a
Maryland resident within the meaning of § 9-301(d)(1)(i)(1) if it
was a resident when its insurance policy was issued. Because Manor
Care was a Maryland resident between 1993 and 1997, it satisfies
the residency requirement for a “covered claim” under the statute.
On remand the district court will enter summary judgment in favor
of Manor Care on the residency issue.
REVERSED AND REMANDED
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SHEDD, Circuit Judge, concurring:
I concur in the result reached by the majority. I write
separately to note that I would hold that the statutory phrase
“issued to a resident” is ambiguous. Under Maryland law, a statute
is ambiguous “[w]hen there is more than one reasonable
interpretation” of the statute. Moore v. State, 879 A.2d 1111,
1113 (Md. 2005). I believe that the phrase “issued to a resident”
could reasonably be interpreted to mean (1) issued to one who was
a resident at the time the policy was issued, or (2) issued to one
who is currently a resident. Notwithstanding this ambiguity, I
believe that the legislative history and policy behind the statute,
as discussed in the majority opinion, lead to the conclusion that
the majority’s result is correct.
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