## Facts

- Byron C. Bailer and Victoria Bailer purchased an Erie personal catastrophe (umbrella) liability policy, in addition to homeowners and auto policies.
- The umbrella policy defined covered “personal injury” to include enumerated offenses, including “invasion of privacy.”
- The umbrella policy also excluded coverage for “personal injury … expected or intended” by the insured.
- The Bailers hired Majbrit Meier as an au pair who lived in their home and had a private room and bathroom.
- Before allowing Meier to use a bathroom adjoining the Bailers’ bedroom, Mr. Bailer concealed a video camera aimed at the shower and recorded Meier.
- After learning she had been videotaped, Meier left and sued both Bailers for invasion of privacy (intrusion upon seclusion).
- Erie refused to defend or indemnify the Bailers, citing the intentional-acts exclusion.
- The Bailers filed a coverage action against Erie; the trial court granted summary judgment to Erie, and the case reached Maryland’s highest court on review of that ruling.

## Issues

1. Whether a policy that expressly includes “invasion of privacy” as covered “personal injury” nonetheless excludes coverage for an intrusion-upon-seclusion claim under an exclusion for personal injury “expected or intended” by the insured.
2. Whether the interaction between the explicit coverage grant and the intentional-acts exclusion creates ambiguity requiring construction in favor of the insured.

## Decision

- The court reversed the summary judgment for Erie.
- The court held the umbrella policy ambiguous because it simultaneously (1) covered “invasion of privacy” and (2) broadly excluded personal injury “expected or intended” by the insured.
- The court construed the ambiguity against the insurer and in favor of coverage, concluding that Meier’s intrusion-upon-seclusion claim fell within covered “invasion of privacy.”
- The case was remanded for further proceedings consistent with the holding that the claim was covered (with corresponding defense and indemnity consequences under the policy).

## Legal Principles

- Insurance policies are construed according to the meaning a reasonable insured would give the language, reading the contract as a whole.
- If policy language is ambiguous, courts construe the ambiguity against the insurer and in favor of coverage.
- A broadly worded “expected or intended” injury exclusion cannot be applied in a way that effectively nullifies an express coverage grant for an offense that is ordinarily intentional, where the policy’s structure creates an internal inconsistency.
- When a complaint alleges facts that potentially fall within coverage as properly construed, the insurer owes a duty to defend; coverage determinations may also control the duty to indemnify, subject to policy limits and the resolution of the underlying claim.

## Conclusion

The court held that an umbrella policy listing “invasion of privacy” as a covered personal injury is ambiguous when paired with a broad intended-injury exclusion that would eliminate coverage for the standard form of that tort; the ambiguity was resolved in favor of the insured, requiring coverage for the intrusion-upon-seclusion claim and reversal of summary judgment for the insurer.


Bailer v. Erie Ins. Exch., 344 Md. 515, 687 A.2d 1375 (Md. 1997)