The defendant business procured commercial auto and excess policies from the plaintiff insurer through a premium finance company. The policies expressly provided that the insurance would be provided in return for the payment of policy premiums. The insured made the initial premium payments but failed to make subsequent premium payments to the premium financing company. The policies were therefore cancelled and the premium finance company notified the insured that the policies were cancelled due to the failure to pay premiums.
Approximately a month after the policies were cancelled, a defendant driving the insured business’ automobile was involved in an accident causing injuries to an underlying plaintiff. The insurer initially retained counsel to defend the insured, but then brought this action seeking a declaration that the policies were cancelled prior to the accident and that the insurer had no duty to defend or indemnify the insured or the driver of the automobile.
The insurer was awarded default judgments against all of the defendants except the underlying plaintiff. The underlying plaintiff contended that the insurer waived its right to deny coverage and that the insurer should be estopped from asserting that right. The underlying plaintiff contended that the insurer advised the underlying plaintiff that there was valid coverage for the accident, that he relied on the insurer’s conduct, and that the insurer’s delay in instituting litigation caused him to incur expenses.
The court determined that because the policies were cancelled prior to the accident, the insurer was not obligated to defend or indemnify any party with respect to the accident. The court found that waiver did not apply because the doctrine of waiver cannot be used to create coverage in Maryland. The court also found that estoppel did not apply because estoppel cannot create or extend insurance coverage where it does not exist. Therefore, the court granted summary judgment to the insurer.