This past January, Judge Glenn T. Harrell, Jr. of the Appellate Court of Maryland (ACM) found in favor of an insurance company that disclaimed coverage, under a corporate automobile liability issued to a business, when the business’ owner sought coverage in his individual capacity. The case may prove instructive in guiding coverage decisions made by carriers moving forward.

In Jeffrey Beahm v. Erie Insurance Exchange, plaintiff Beahm sued his insurance carrier for breach of contract and negligent representation after having his claim denied. Beahm was injured when he, as a pedestrian, was hit by a car driven by a family member. The family member’s insurance did not cover all of Beahm’s medical expenses, so Beahm filed a claim for underinsured motorist coverage with Erie Insurance Exchange, under a policy he maintained as the owner of an IT consulting firm called Starboard Business Technologies, Inc. Beahm was the company’s President and CEO, and, at the time of the accident, the company had no employees. Beahm did not own any vehicles under his name, and the vehicles listed as covered under his policy were registered to Starboard.

The declarations page for the policy issued to Starboard by Erie identified Starboard as the “Named Insured” but also identified Beahm as the “Subscriber…the person who signed, or the organization that authorized the signing of, the Subscriber’s Agreement.” An endorsement to the policy defined the terms “you,” “your,” and “Named Insured,” as meaning the “Subscriber.” At trial, however, Erie argued that although Beahm signed as the “Subscriber,” he did so on behalf of Starboard, and hence only Starboard could be said to be the “Subscriber,” and Named Insured. Rather than send the case to the jury, the Circuit Court granted Erie’s motion for judgment at the close of Beahm’s case.

The ACM affirmed the Circuit Court’s holding. Judge Harrell noted that the definition of “Subscriber” included the crucial word “or”. Therefore, in addition to “the person who signed”, the term “Subscriber” could also mean “the organization that authorized the signing.” As this was a policy for Starboard, not Beahm, Beahm’s signature was therefore on behalf of Starboard. Indeed, the policy covered vehicles owned by Starboard, not Beahm. The Court noted,

under Beahm’s interpretation, any individual authorized to sign a Subscriber Agreement on behalf of a large corporation would receive the benefit of qualifying as a Subscriber and as “You,” “your,” or “Named Insured” under the policy. That would transform effectively a commercial automobile insurance policy into a personal automobile insurance policy for that one very fortunate individual, while any other officers, directors, and employees of the corporation would be covered only if they qualified for coverage under some other provision of the policy. Such an interpretation is not reasonable.

The Court, therefore, did not place any weight on the fact that Starboard had but one owner and no employees.

The ACM also affirmed the Circuit Court’s judgment in favor of Erie on Beahm’s negligent representation claim. At trial, Beahm testified that he originally had personal automobile insurance policy with Erie. In 2000, when Beahm formed Starboard, he and his insurance agent, Eichhorn, met for several hours, and Beahm was told that he needed to change his “policy to reflect the company” because “the vehicle was registered in the company’s name.” Beahm also testified that he thought (mistakenly) that the agent worked for Erie.

The ACM found that Beahm failed to establish that Erie had any ownership or control over Eichhorn or Eichhorn’s insurance agency, or that statements made allegedly by Eichhorn could be attributed to Erie. Likewise, Beahm did not offer any evidence to show that Eichhorn’s insurance agency was owned by Erie or was a captive of Erie. In addition, Beahm’s own testimony established that he was a sophisticated party that knew how insurance companies operated.            

Beahm did not file a petition for a writ of certiorari with the Supreme Court of Maryland, so the ACM’s holding will not be overturned. The Beahm decision should give carriers greater comfort when evaluating future denials of coverage in similar circumstances. It may also caution small businesses owners against treating corporate policies as covering their exposure as individuals.