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Allstate Insurance Company v. State Farm Mutual Insurance Company No. 43, Sept. Term, 2000 - page 13 / 26





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On May 20, 1999, the issue of damages in the underlying tort acwastriedbeforeajuryand

resulted in a verdict in favor of Gregorie in the amount of $150,000. Application of the declaratory

judgment to that verdict meant that, given the policy limit of $100,000, State Farm retained liability for

$75,000 of the judgment entered for Gregorie.

On State Farm’s appeal, the Court of Special Appeals agreed that the insurer was actually

prejudiced by Kirby’s non-cooperation but, in a split decision, disagreed with the trial court’s analysis of

what might have occurred if Kirby had acted differently and cooperated. The approach of essentially

retrying the case on the evidence it assumed would have been offered, the court said, “requires speculation

about the missing testimony, and how a fact-finder would react to same.” State Farm v. Gregorie,

supra, 131 Md. App. at 335, 748 A.2d at 1099. Thetrial court, it held, had insuf icient information about

Kirby’s potential testimony to determine whether she would have been declared negligent had she testi ied.

Accordingly, the appellate court held that Kirby’s failure to cooperate “relieves [State Farm] of any liability

on the underlying claim.” Id. The court’s mandate, however, was simply to reverse the Circuit Court’s

judgment and not to remand the case for entry of a proper declaratory judgment.

We granted Allstate’s petition for certiorari to consider (1) the correct legal standard for

1(...continued) therights of the parties, along with any other order that is intended to be part of the judgment. Although the judgment may recite that it is based on the reasons set forth in an accompanying memorandum, the terms of the declaratory judgment itself must be set forth separately. Incorporating by reference an earlier oral ruling is not sufficient, as no one would be able to discern the actual declaration of rights from the documentposingasthejudgment. Thisisnotjustamatterofcomplyingwithahyper-technical rule. The requirement that the court enter its declaration inwriting is for the purpose of giving the parties and the public fair notice of what the court has determined. Another problem with the order entered in this case is that no declaration was made with respect to any liability on the part of Allstate, which was an issue in the case.

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