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Allstate Insurance Company v. State Farm Mutual Insurance Company No. 43, Sept. Term, 2000 - page 3 / 26

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It is common, indeed universal, for automobile insurance policies to contain clauses that require an

insured who is involved in an accident to cooperate with the company in the investigation and resolution

of any claim made against the insured. In the case at bar, the policy, issued by petitioner State Farm

Insurance Company to Latricia Kirby, required Ms. Kirby, among other things, to “cooperate with us and,

when asked, assist us in:a. making settlements; b. securing and giving evidence; [and] c. attending and

getting witnesses to attend hearings and trials.”

Kirby was involved in an automobile accident and, eventually, two claims were made against her.

Although she initially cooperated with the insurer, her cooperation was short-lived. As a direct

consequence of her subsequent lack of cooperation, State Farm was precluded from defending the claims,

and a judgment in the amount of $150,000 was entered againstKirby. Maryland Code, § 19-110 of the

Insurance Article permits an insurer to disclaim coverage on the ground that the insured has breached the

policy by failing to cooperate with the insurer only if the insurer establishes that the lack of cooperation has

resulted in actual prejudice to the insurer. The Circuit Court for Prince George’s County found that State

Farm was actually prejudiced, but only to the extent of half of the judgment, and that it could therefore

disclaimonlytothatextent. TheCourtofSpecialAppealsconcludedthat,onthe record in this case, State

Farm was excused from paying the entire judgment. State Farm v. Gregorie, 131 Md. App. 317, 748

A.2d 1089 (2000).

BACKGROUND

The accident at issue occurred shortly after midnight on February 10, 1994, on the Capital

Beltway, near its intersection with Kenilworth Avenue. It had snowed heavily during the day and many of

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