## Facts

- Mallory Heffernan, a Maryland resident, was killed while riding as a passenger in a vehicle driven by another Maryland resident; the crash occurred in Delaware during a return trip from Pennsylvania.
- The driver allegedly fell asleep and collided with a tractor–trailer; the driver was underinsured relative to the losses claimed.
- Mallory’s parents held two Erie policies issued and delivered in Maryland for Maryland-garaged vehicles: (1) an auto policy with $300,000 UM/UIM limits and (2) an umbrella policy providing an additional $1,000,000.
- The policies promised to pay damages the insureds were “legally entitled to recover” from an owner or operator of an uninsured or underinsured motor vehicle.
- The insureds sought UM/UIM benefits and argued Delaware tort law controlled liability defenses and damages because the injury occurred in Delaware.
- Erie argued Maryland law should apply due to the Maryland-based policies and parties, and asserted Maryland contributory negligence (including alleged negligence by the parents) and Maryland’s statutory cap on noneconomic damages.
- In federal diversity litigation, the U.S. District Court for the District of Maryland certified questions to Maryland’s highest court on the applicable choice-of-law rules for the UM/UIM claim.

## Issues

1. In a UM/UIM benefits dispute under policies issued in Maryland to Maryland insureds, does Maryland choice-of-law require use of the accident-state’s substantive tort law to determine what the insured is “legally entitled to recover”?
2. If the accident-state’s substantive tort law applies, does Maryland’s public-policy exception nonetheless require applying Maryland’s noneconomic damages cap and Maryland contributory negligence instead?

## Decision

- The Court of Appeals of Maryland held that Delaware substantive tort law governed what the insureds were “legally entitled to recover” because the accident and injury occurred in Delaware.
- The court ruled that Maryland’s public-policy exception did not justify displacing Delaware law with Maryland’s noneconomic damages cap or Maryland contributory negligence.
- The court declined requests to replace lex loci delicti with a “most significant relationship” approach or renvoi in this context.

## Legal Principles

- Maryland applies lex loci delicti in tort conflicts: the substantive tort law of the place where the last event necessary to complete the tort occurred governs.
- In UM/UIM coverage, “legally entitled to recover” is a tort-based standard that incorporates the governing jurisdiction’s substantive tort rules on liability, defenses, and damages, absent policy language selecting a different rule.
- Maryland’s public-policy exception to lex loci delicti is narrow; a difference between Maryland and another state’s tort rules does not alone establish a sufficiently strong policy to override the otherwise applicable foreign law.
- Maryland’s noneconomic damages cap is part of Maryland substantive tort law and does not apply merely because a Maryland forum hears the dispute when foreign substantive law governs.

## Conclusion

For Maryland-issued UM/UIM policies covering a loss from an out-of-state accident, Maryland determines the insured’s recoverable damages by applying the substantive tort law of the accident state under lex loci delicti, and Maryland will not apply its noneconomic damages cap or contributory negligence through the public-policy exception absent a stronger conflict with fundamental Maryland policy.


Erie Ins. Exch. v. Heffernan, 399 Md. 598 (2007)