263 F.

2d 852

INLAND MUTUAL INSURANCE COMPANY, Appellant,

v.
Clifton William STALLINGS; Thomas W. Smack, Infant; John
D.
Ramsey and Nellie Ramsey, surviving parents of Russell L.
Ramsey, deceased; John D. Ramsey, Administrator of the
Estate of Russell L. Ramsey, deceased; Rita Lucille Rodda,
Infant; et al., Appellees.
No. 7741.

United States Court of Appeals Fourth Circuit.

Argued Nov. 6, 1958.
Decided Jan. 21, 1959.

Edward F. Shea, Jr., Baltimore, Md. (Sherbow & Sherbow and Theodore
Sherbow, Baltimore, Md., on brief), for appellant.
Everett L. Buckmaster and M. King Hill, Jr., Baltimore, Md. (Clater W.
Smith, Herbert F. Murray, Clark, Smith & Prendergast, Baltimore, Md.; J.
Wilmer Johnson, Prince Frederick, Md.; Samuel D. Hill, Buckmaster,
White, Mindel & Clarke, and Melvin J. Sykes, Baltimore, Md., on brief),
for appellees.
Before SOBELOFF, Chief Judge, HAYNSWORTH, Circuit Judge, and
BOREMAN, District Judge.
SOBELOFF, Chief Judge.

Inland Mutual Insurance Company brought suit for declaratory judgment to

determine its obligations to Clifton W. Stallings and to persons making claims
against him for injuries sustained in an automobile collision. Inland's liability,
if any, arises from an automobile liability policy issued to Stallings pursuant to
the Maryland Financial Responsibility Law.
The policy, issued in February, 1956, covered a 1951 Ford, the only motor

vehicle then owned by Stallings. On July 3, 1956, he purchased an additional

car, a 1950 Ford, but Inland was not notified and did not learn of it until August
8. On July 14, 1956, Stallings was involved in an accident while driving the
recently acquired 1950 Ford.

'Newly Acquired Automobile' Clause

Inland's policy contained Insuring Agreement IV(a)(4), entitled 'Newly

Acquired Automobile,' which extends coverage to:

'an automobile, ownership of which is acquired by the named insured who is

the owner of the described automobile, if the named insured notifies the
company within thirty days following the date of its delivery to him, and if
either it replaces an automobile described in this policy or the company insures
all automobiles owned by the named insured at such delivery date; but the
insurance with respect to the newly acquired automobile does not apply to any
loss against which the named insured has other valid and collectible insurance.
The named insured shall pay any additional premium required because of the
application of the insurance to such newly acquired automobile.'

The District Judge held that this clause extended coverage to the 1950 Ford at
the time of the accident.

1. That Stallings did not notify Inland within thirty days after acquiring the
1950 Ford is inconsequential, for coverage under this provision is automatically
effected on the newly acquired automobile for thirty days irrespective of notice,
and as here, the insured is protected against liability accruing within that time.
The cases so hold almost without exception. Western Casualty & Surety
Company v. Lund, 10 Cir., 1956, 234 F.2d 916, 919; Hoffman v. Illinois Nat.
Casualty Co., 7 Cir., 1947, 159 F.2d 564, 566; 34 A.L.R.2d 936, 934.

Appellant's reliance upon Wilkins v. Inland Mutual Ins. Co., 4 Cir., 1958, 253
F.2d 489, is unwarrantable, for this decision is not in conflict with the District
Court's holding in the present case. Involved in Wilkins was a question of the
coverage of a specified automobile after the death of its owner, the insured. The
clause substituting the personal representative as the insured, with the power in
him then, under the omnibus clause, to authorize others to operate the car at the
insurer's risk, was conditioned on notice of death being given within sixty days.
The case at bar is wholly different. It involves no problem of change of risk by
substituting an unknown insured for the one named, but relates to an insurer's
liability for damages caused by the person named in the policy while operating

an after-acquired vehicle.
9

2. Nor is automatic coverage limited to replacement vehicles, as the appellant

claims, for the clause speaks in the alternative and applies where the described
vehicle is replaced or where the company insures all automobiles then owned
by the insured. It would be unwarranted and arbitrary to restrict this rule to one,
rather than both, of the situations provided for. Birch v. Harbor Ins. Co., 1954,
126 Cal.App.2d 714, 272 P.2d 784.

10

3. Inland contends that it did not insure all automobiles owned by Stallings
when the 1950 Ford was delivered to him on July 3, since the records of the
Department of Motor Vehicles show that on July 3 Stallings was not only the
owner of the 1951 Ford, insured by Inland, but also owned a 1948 Ford, not
insured by it. The District Judge's finding as a fact that on July 3 Stallings
owned only the 1951 Ford is amply supported by the evidence. Stallings'
testimony, uncontradicted, was that one week before July 3 he delivered
possession of the 1948 car and the certificate of title thereto to Dorsey Gray, an
automobile dealer. Such delivery and assignment of title were sufficient to pass
ownership at that time if the parties so intended, Md. Code (1957), Uniform
Sales Act, Art. 83, Sec. 36(1), even though there has not been compliance with
the registration law of the state. Hofslund v. Metropolitan Casualty Ins. Co. of
New York, 7 Cir., 1951, 188 F.2d 188. Moreover, the registration records are of
little significance in determining passing of title in this case, for the transferee,
as a registered automobile, dealer, was not required to forward the certificate of
title to the Department of Motor Vehicles. Md. Code (1957), art. 66 1/2, Sec.
47(a).

11

4. Inland also submits that the provision referring to insuring all automobiles
applies only where the policy is issued as a fleet policy to cover several
automobiles, and is not applicable where the insured owns only one vehicle. No
such distinction can be inferred from the wording of the policy. The same
argument was rejected in Horace Mann Mutual Casualty Company v. Bell,
D.C.W.D.Ark.1955, 134 F.Supp. 307. Home Mut. Ins. Co. of Iowa v. Rose, 8
Cir., 1945, 150 F.2d 201, relied on by Inland, is only dictum to the contrary.

12

The 'Newly Acquired Automobile' clause, we conclude in agreement with the

District Court, extended automatic coverage to the 1950 Ford on July 14, 1956,
the date of the collision.1
Maryland Financial Responsibility Law

13

Stallings' driver's license had been revoked for three moving traffic violations
occurring before he was twenty-one years of age. To regain his license he was
required to furnish 'proof of his continuing financial responsibility in the future.'
Md.Code (1957), Art. 66 1/2, Sec. 118(b). Sec. 139(a)2 of the Maryland
Financial Responsibility Law allows a person to furnish such proof by obtaining
insurance applying only to motor vehicles owned by him, but this limited 'proof'
restricts his lawful operation to those vehicles specifically designated or
appropriately referred to in the proof filed. Such restriction is stamped on the
driver's license. The following subsection, 139(b), allows removal of such
restriction if the person files proof of financial responsibility by reason of an
'operator's policy of insurance, insuring such operator or chauffeur while
operating any motor vehicle.'

14

The policy Inland issued to Stallings covered the 1951 Ford and, in addition,
included an 'Operators Only Endorsement' insuring Stallings while operating
any motor vehicle not owned by him.3 As proof of Stallings' financial
responsibility, Inland sent an SR22 certificate4 to the Department of Motor
Vehicles, and in reliance upon this the Department issued Stallings an
unrestricted driver's license. The SR22 certified that Inland issued to Stallings
(1) insurance coverage in respect to the 1951 Ford and also (2) an 'operator's
policy.'

15

Effect of 'Operators Only Endorsement'

16

A driver to whom the Financial Responsibility Law does not apply is not
required in Maryland to carry and liability insurance. If he has insurance it
results from his voluntary agreement with the insurance company, and the
parties may decide upon such terms as they see fit, unless specifically
forbidden by law. It is different in the case of a driver who is required to file
proof of financial responsibility under the statute. To him no license may be
issued unless he effects insurance according to the statutory terms. The policy
is presumed to have been issued in compliance with these terms, and the law
incorporates them into the policy. 1 Couch, Cyclopedia of Insurance Law, 1929
ed., Sec. 150 at p. 297; Export Leaf Tobacco Co. v. American Ins. Co., 4 Cir.,
1958, 260 F.2d 839; Keystone Mutual Casualty Company of Pittsburgh, Pa. v.
Hinds, 1942, 180 Md. 676, 26 A.2d 761, 762; Wilkins v. Inland Mutual
Insurance Company, 4 Cir., 1958, 253 F.2d 489, 494. Since an unrestricted
driver's license could be issued to Stallings only upon compliance with Sec.
139(b), the parties concede that the 'Operators Only Endorsement' must be the
type defined in Sec. 139(b), i.e., 'insuring such operator or chauffeur while
operating any motor vehicle.'

17

The District Judge held that an 'operator's policy' issued pursuant to Sec. 139(b)
must cover the insured while operating any motor vehicle, regardless of
ownership, and therefore, the 'Operators Only Endorsement' was void insofar as
it may have attempted to exclude from coverage Stallings' operation of owned
vehicles, here the 1950 Ford.

18

Inland contends that an 'operator's policy,' within the purview of Sec. 139(b),
actually means a policy covering the insured while operating 'any motor vehicle
not owned by him.' This argument disregards the manifest purpose of the Act,
which is to protect the public from the reckless operation of motor vehicles by
irresponsible persons. The public is afforded protection by Section 139(a)
commensurate with the limited license issued thereunder, for the person subject
thereto can lawfully operate only those owned vehicles which are covered by
insurance. It cannot be said that Section 139(b) was intended to dilute the
public's protection by extending lawful operation to any motor vehicle without
requiring corresponding insurance for liability arising therefrom.

19

Inland's interpretation would attenuate Section 139(b) to permit the issuance of

an unrestricted license without requiring protection for damages caused by the
insured while operating a vehicle he owns but of which ownership he has failed
to notify the insurance company. The scheme of the legislation precludes any
action or inaction by the insured or the insurer, together or separately, to lessen
the public protection prescribed by the statute. Where the insurer, by its
certificate, induces the issuance of an unrestricted driver's license, if should be
and is required to respond in damages for the insured's operation of any motor
vehicle irrespective of ownership and irrespective of any conduct of the
insured.

20

The insurance company is not unreasonably burdened. In the ordinary

automobile liability policy issued to one not subject to the Financial
Responsibility Law and covering one described vehicle plus the owner's
operation of cars not owned by him, the premium is less than for a policy
covering one owned car plus an 'operator's policy' issued under Section 139(b).
Since the premium for covering one described vehicle is identical in both
instances, the higher premium obviously is predicated upon the broader
operator coverage required under the statute, namely, coverage of any vehicle
operated by the insured, regardless of ownership. We stress that it is solely in
reliance upon such broad coverage that the Department of Motor Vehicles is
permitted to restore an unrestricted license.
The Draft of the Uniform Motor Vehicle Act

21

The history of the legislation supports this view. In 1932 the National
Conference of Commissioners on Uniform State Laws drafted an automobile
liability security act which required the issuance of both a 'motor vehicle
liability policy' and an 'operator's policy,' the latter insuring liability arising out
of the operation by the insurance of 'any motor vehicle.' The Commissioners'
Prefatory Note, 11 U.L.A., p. 127, declares, in language too plain to be
misunderstood, that the Act is designed to require the driver to carry insurance
'against liability arising out of his operation of a motor vehicle no matter whose
motor vehicle it may be.'

22

While the draft prepared by the Commissioners is not identical with the
Maryland Act, it is closely similar in many respects, and substantially identical
in regard to the 'operator's policy.' We are of the opinion that the Maryland
Legislature intended to require as stated by the Commissioners, a 'policy
covering the operator, regardless of the ownership of the car which he is
operating * * * in the event of any accident occurring while the insured is at the
wheel.'

23

Inland points to the fact that in some cases courts have held that the operator's
policies did not cover cars owned by the insured. Employers Liability Assur.
Corp. v. Roux, 1953, 98 N.H. 309, 100 A.2d 416; American Casualty Co. of
Reading, Pa. v. Cioffi, 1958, 49 N.J.Super. 6, 138 A.2d 757; Ohm v. Fireman's
Fund Indemnity Co., 1957, 211 Or. 596, 317 P.2d 575. These citations, indeed,
point up the fallacy of the insurer's position here, for the financial
responsibility laws in those states specifically exclude from the purview of an
operator's policy the insured's use of vehicles he owns. Conspicuous in the
Maryland statute is the absence of such limitation. The point is illustrated by
Booth v. American Casualty Company, 261 F.2d 389, in which this Court held
that an operator's policy was consistent with the provisions of South Carolina's
Motor Vehicle Safety Responsibility Act, Code of Laws of South Carolina, Sec.
46-701 et seq. Sec. 46-750.23 defines an operator's policy as covering the
insured's use 'of any motor vehicle not owned by him.' The Maryland statute,
however, in Sec. 139(b) defines an operator's policy as one 'insuring such
operator or chauffeur while operating any motor vehicle,' without in terms
restricting the application of an operator's policy to vehicles not owned by the
insured.

24

We conclude that at the time of the accident the 'Newly Acquired Automobile'
clause extended coverage to the 1950 Ford and that, in addition, the 'Operators
Only Endorsement,' as evidenced by the SR22 certificate, extended coverage
because Stallings was the operator. The judgment of the District Court is,
therefore,

25

Affirmed.

Attention is directed to Mitcham v. Travelers Indemnity Co., 4 Cir., 1942, 127

F.2d 27. Appellant did not rely upon this case, perhaps because while the
language used in the Mitcham policy bears some resemblance to that in the
Stallings policy, there are striking differences in the fact situations. In Mitcham,
not only was notice of the purchase of the additional automobile not given
within the time required by the policy, but (unlike the instant case), the
accident, too, did not happen until after the expiration of the period. Moreover,
the Court expressly refrained from deciding the precise point here considered

'Sec. 139. Restriction in operating motor vehicles when proof of financial

responsibility has been filed
'(a) Designation of vehicles.-- When proof of financial responsibility is required
under Sections 118 and 119 of this article, and such proof is filed with and
accepted by the Department, applying to motor vehicles owned by the person
filing the said proof, it shall be unlawful for such person to operate any other
motor vehicle within this State, unless or until such other vehicle, be
specifically designated or appropriately referred to in the proof filed. The
Department shall endorse notice of such restriction upon the operator's or
chauffeur's license of such person. Violation of this section shall be deemed a
misdemeanor and upon conviction shall be punishable by a fine of ten dollars
($10.00) to one hundred dollars ($100.00).
'(b) Removal of restriction.-- Such operator or chauffeur so restricted may have
such restriction removed by filing proof of financial responsibility as required
by this article by means of an operator's policy of insurance, insuring such
operator or chauffeur while operating any motor vehicle.'

'Inapplicable to Vehicle Described as Unit No. 1

'Operators Only Endorsement
'In consideration of the premium specified for this policy, it is understood and
agreed that such insurance as is afforded under the terms and conditions of said
policy for liability imposed by law upon the Insured for injury to or death of
any person other than such Insured or for liability for damage to property,
applies to the named Insured with respect to his operation or use of any private
passenger automobile only of which the Insured is personally in control as
driver or occupant, subject to the following provisions:

'2. That such automobile is not owned in whole or in part by or registered in the
name of the named Insured;'
4

The SR22 form is entitled Maryland Financial Responsibility Insurance

Certificate and states as follows:
'The company * * * hereby certifies that there is in effect * * * a motor vehicle
liability policy, as defined in Sections 107 to 130 incl. (now 109-134), of the
Motor Vehicle Law of Maryland, issued by the company to Clifton William
Stallings, Barston P.O., Calvert County, Maryland, Policy Number 98860.
Effective from 2-10-56 to 2-10-57.
'The insurance hereby certified is as follows:
'Bodily Injury Liability X Property Damage Liability X applicable with respect
to:

The motor vehicle described herein

Operator's policy
1951 Ford 4 dr. sedan.
Serial No. BICS-111653 2. Operator's Policy X
Dated 2-9-56.
Inland Mutual Insurance Company.'