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Allstate Insurance Company v. State Farm Mutual Insurance Company No. 43, Sept. Term, 2000 - page 19 / 26

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Farm in this case. It asks that we adopt the standard stated, in dicta, by the Court of Special Appeals in

Harleysville Ins. Co. v. Rosenbaum, 30 Md. App. 74, 84, 351 A.2d 197, 202 (1976): “In order to

show ‘actual prejudice,’ it is necessary to show an act on the part of the insured ‘which had or could have

had any effect upon the jury which induced them or in any way caused them to render the verdict against

himself.’ Stated another way, the insurer must establish a substantial likelihood that if the cooperation or

notice clause had not been breached, the insuredwould not have been held liable.” (Quoting in part from

United States Fid. & Guar. Co. v. Williams, 148 Md. 289, 307, 129 A. 660, 667 (1925)).2 That

standard — of substantial likelihood that, had the breach not occurred, the result would have been different

  • Allstate argues, is consistent with the standard normally applied in determining the materiality of newly

discovered evidence forpurposes of granting new trials — is there a “substantial or signi icant possibility

that the verdict of the trier of fact would have been affected?” See Yorke v. State, 315 Md. 578, 556

A.2d 230 (1989).

State Farm points out that, in Washington v. Federal Kemper Ins. Co., 60 Md. App. 288,

482 A.2d 503 (1984), cert. denied, 302 Md. 289, 487 A.2d 292 (1985), the Court of Special Appeals

rejected that standard as being too strict, as requiring the insurer to prove a negative. In Washington,

the insurer did not receive notice of the suituntil after a verdict had been rendered and, in that context, it

found the Harleysville standard to be inapposite. “It is impossible” theWashington court concluded,

“for thecarriertodemonstratetothecourtwhatwitnesses it might have discovered, what defense it might

2That language is regarded asdicta because thedeclaratory judgment, from which the appeal was taken, was rendered before the underlying tort action was tried, and the holding in the case was that the declaration ofprejudicewaspremature. Theinsurerstillhadtherightandabilitytodefendtheclaim. The declaratory judgment with respect to prejudice was vacated for that reason.

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