Law Summary

IV. INSURANCE

1. Motor Vehicle Insurance - Primary Coverage:
   
   
   1. Minimum liability coverage required:
      
      
      1. Claims for bodily injury or death arising from an accident:
         $20,000 per person and $40,000 per occurrence;
         
         
      2. Property damage of others: $10,000.
         Maryland Transportation Code Annotated § 17-103.
         
         
   2. Personal injury protection coverage (PIP):
      
      
      1. Minimum limits: $2,500 unless waived by first named insured;
         
         
      2. Benefits provided: reasonable and necessary expenses arising from an accident including medical, surgical, diagnostic, etc. and, in the case of an income producer, payment for up to 85% of income lost. Maryland Insurance Code Annotated § 19-505(b);
         
         
      3. Individuals covered: generally the named insured and family members, however, the Maryland statute does provide coverage for others under certain circumstances. Maryland Insurance Code Annotated § 19-505(a);
         
         
      4. Waiver: required minimum PIP limits may be waived by first named insured who executes an affirmative written waiver in the form prescribed by the Maryland statute. Maryland Insurance Code Annotated § 19-506(a);
         
         
         1. Is waiver by first named insured binding on all those covered by the policy? Yes. Maryland Insurance Code Annotated § 19-506(b)(2).
            
            
         2. If an insured waives PIP benefits under his own policy, he cannot collect those benefits from another insurer. Maryland Auto Ins. Fund v. Perry, 356 Md. 668, 741 A.2d 1114 (1999).
            
            
      5. Exclusions: The Maryland statute permits specific exclusions to PIP coverage which are set forth in the statute itself. Maryland Insurance Code Annotated § 19-505(c). Exclusions to the policy that conflict with the required coverages are invalid. Nasseri v. Geico, 390 Md. 188, 888 A.2d 284 (2005); Pennsylvania Nat'l. Mut. Cas. Ins. Co. v. Gartelman, 288 Md. 151, 416 A.2d 734 (1980);
         
         
      6. May an insurer seek subrogation for PIP benefits paid? No. Maryland Insurance Code Annotated § 19-507(d). NOTE: The same rule applies where the policy offers so-called "Med-Pay" benefits: subrogation is not permitted. Maryland Insurance Code Annotated § 19-109;
         
         
      7. Coordination of PIP Coverage: In Maryland, insurance "follows the vehicle" which is to say, with respect to PIP coverage, the insurer of the motor vehicle occupied by the injured party is primarily liable. Nasseri v. Geico, 390 Md. 188, 888 A.2d 284 (2005). See also Bishop v. State Farm Mutual Auto Insurance, 360 Md. 225, 757 A.2d 783 (2000) (where injured passenger obtained PIP benefits from his own insurer, he could still recover PIP benefits from insurer of the occupied motor vehicle with his insurer then being entitled to a refund);
         
         
      8. May a PIP insurer apply a medical utilization ("fee review") schedule to medical bills submitted by an insured for reimbursement under PIP coverage? Yes, but such a process must not be the sole criteria for challenging the "reasonableness" of the charges or the insurer runs the risk of violating Maryland regulations COMAR 31.15.07.03B(13) which make it unlawful for a PIP insurer to "refuse to fully satisfy claims for arbitrary or capricious reasons." This view was expressed by the Maryland Associate Commissioner, Property and Casualty via a bulletin issued on April 25, 2000. Regrettably, no particular guidance was given on the subject of what else an insurer utilizing such a review must show.
         
         
      9. Bad faith and extra-contractual liability: There can be limited recovery for extra-contractual damages based on an insurer's bad faith refusal to pay a PIP claim. An insured who proves that an insurer did not act in good faith may recover expenses and litigation costs, including reasonable attorney's fees not exceeding one-third of the actual damages recovered, in addition to actual damages not exceeding the policy limits and interest. MD Insurance Code Ann. §27-1001.
         
         
      10. The worker's compensation offset: Maryland permits an insurer to offset its liability to pay PIP benefits by amount of worker's compensation benefits actually received by the insured. Maryland Insurance Code Annotated §19-513(e); Smelser v. Criterion Insurance Company, 293 Md. 384, 444 A.2d 1024 (1982).
          
          
   3. Uninsured Motorist Coverage (UM):
      
      
      1. Amount of Coverage: Not less than $20,000 per person and $40,000 per occurrence (Maryland Transportation Code Annotated § 17-103) but not more than liability coverage provided by the policy. Maryland Insurance Code Annotated § 19-509(e)(2). NOTE: The Maryland statute further provides that unless waived the uninsured motorist coverage amount shall equal the amount of liability coverage provided by the policy. Maryland Insurance Code Annotated § 19-509(e)(2);
         
         
      2. Coverage Required: Damages which the insured (or a survivor) is entitled to recover from the owner/operator of an uninsured motor vehicle because of bodily injuries sustained in a motor vehicle accident arising out of the ownership, maintenance or use of the insured motor vehicle. Maryland Insurance Code Annotated § 19-509(c);
         
         
      3. Exclusions: The Maryland statute permits specific exclusions to UM coverage which are set forth in the statute itself. Maryland Insurance Code Annotated § 19-509(f);
         
         
         1. (i) UM coverage requires a direct causal relationship between the injury and the actual use of the vehicle: State Farm v. Dehaan, 393 Md. 163, 900 A.2d 208 (2006)(insured could not recover UM benefits for injuries sustained when shot by person who stole his car);
            
            
      4. Waiver: The minimum limits of $20,000 per person and $40,000 per occurrence may not be waived. A waiver from the statutory requirement that UM coverage equal the policy's liability coverage may be waived but only if the waiver is in writing and follows a statutorily mandated form. Maryland Insurance Code Annotated § 19-510;
         
         
      5. Limit of Insurer Liability: The amount of the UM coverage less those sums paid to insured that exhaust all applicable liability insurance policies. Maryland Insurance Code Annotated § 19-509(g). E.g., where a tortfeasor's liability coverage is $20,000 and insured's UM coverage is $100,000, the maximum liability of the insurer is $80,000;
         
         
         1. UM statute does not permit a reduction in uninsured motorist benefits by the amount paid pursuant to a medical payments endorsement. Lewis v. Allstate Ins. Co., 368 Md. 44, 792 A.2d 272 (2002).
            
            
         2. The word "exhaust" as used in statutory and policy provisions requires a payment in full such that insured's settlement with liability insurer for less than policy limits precluded UIM benefits. Kurtz v. Erie Insurance Exchange, 157 Md. App. 143, 849 A.2d 1050 (2004).
            
            
      6. May an Insurer Seek Subrogation for UM Coverages Paid? Yes, but note potential effect of non-compliance with UM settlement procedures mandated by Maryland law;
         
         
      7. The Mandatory UM Settlement Procedures: Maryland law provides that if an injured person receives a policy limits offer from a liability insurer, the injured person (presumably intending to make a UM claim) must copy the liability insurer's policy limits offer to the insurer offering UM coverage. Maryland Insurance Code Annotated § 19-511(a). Thereafter, but in any event not later than 60 days after the UM insurer's receipt of the notice of a policy limits offer, the UM insurer must send the injured person either (a) written consent to the acceptance of the settlement offer and the execution of releases or (b) a written refusal to so consent. Maryland Insurance Code Annotated § 19-511(b); Keeney v. Allstate Ins. Co., 130 Md.App. 396, 746 A.2d 947 (2000).
         
         If the UM insurer consents to the settlement, the injured person may accept the policy limits, and execute releases in favor of the liability insurer and its insured "without prejudice to any claim the injured person may have against [the UM carrier]." Section 19-511(e) (emphasis added);
         
         If the UM insurer refuses to consent to the settlement, the UM insurer must, within 30 days of the written refusal, pay the injured person the amount of the policy limits offer. Section 19-511 (c);
         
         A UM insurer who refuses to consent to settle and pays the policy limits offer as provided in § 19-511(c) preserve[s] its subrogation rights against the liability insurer and its insured. Section 19-511 (d);
         
         If the UM insurer makes the aforementioned payment the Maryland statute establishes an assignment, up to the amount of the payment, in favor of the UM insurer against any recovery ultimately made by the injured person against the available liability coverage. Section 19-511(d)(2);
         
         If the UM insurer fails to comply with the statute by either refusing to consent and making payment or by granting consent to the settlement all as provided in § 19-511(b)(c), the injured person may accept the policy limits offer without prejudice to his claim against the UM insurer. Section 19-511(c)(2).
         
         NOTE: By implication, therefore, a UM insurer that does not comply with the statutory procedures may lose its subrogation rights. Although this precise question was not before the Court in Keeney v. Allstate, 130 Md.App. 396, 746 A.2d 947 (2000), dicta in that decision suggests that the Maryland courts will take this view.
         
         
         1. May a UM insurer who advances the tortfeasor's policy limits pursuant to the statute recoup all or part of the monies advanced when a jury returns a verdict in an amount less than the policy limits advanced? No. Ohio Casualty Ins. Co. v. Chamberlin, 172 Md. App. 229, 914 A.2d 160 (2007);
            
            
         2. UM insurer that consents to insured's settlement with tortfeasor may not contest tort liability and raise insured's contributory negligence or assumption of risk as defenses. Maurer v. Pennsylvania National Mutual Casualty Insurance Co., 404 Md. 60, 945 A.2d 629 (2007).
            
            
2. Miscellaneous Insurance Issues:
   
   
   1. Damages Recoverable by Insured in Action Against Insurer for Breach of Duty to Defend: Under Maryland law an action for the breach of a duty to defend is a contract action and the recoverable damages are contract damages. An insured's recovery in such an action is therefore limited to (a) the insured's defense expenses including attorney's fees; (b) the amount of the underlying tort judgment up to the policy limits, and (c) the insured's expenses and fees incurred in an action seeking the establishment of the duty to defend. Mesmer v. MAIF, 353 Md. 241, 725 A.2d 1053 (1999).
      
      
   2. Damages Recoverable by Insured in Action Against Insurer for the Bad Faith Failure to Settle a Claim Within Policy Limits: Under Maryland law such an action is a tort action and the recoverable damages are tort damages. An insured's recovery in such an action is limited to the amount by which the judgment in the underlying tort suit exceeds the policy limits. This tort action can only arise if the insurer undertakes to provide a defense against the claim. Mesmer v. MAIF, 353 Md. 241, 725 A.2d 1053 (1999).
      
      
   3. First Party Bad Faith: Md. Insurance Code §27-1001 provides that, in a first-party claim under property and casualty insurance policies (including homeowner's, motor vehicle, and commercial policies), an insured who proves that an insurer did not act in good faith may recover expenses and litigation costs, including reasonable attorney's fees not exceeding one-third of the actual damages recovered, in addition to actual damages not exceeding the policy limits and interest.
      
      "Good faith" is defined as an informed judgment based on honesty and diligence supported by evidence the insurer knew or should have known at the time the insurer made a decision on a claim. The statute specifies that an insurer may not be found to have failed to act in good faith solely on the basis of delay, if the insurer acted within the time period specified by statute or regulation for investigation of a claim.
      
      Under the statute, generally a party may not file such an action in a court until the date of a final decision by MIA on the party's claim, if expenses and litigation costs are sought. A case may be filed initially in court, however, if the case is within the small claims jurisdiction of the District Court, the parties agree, or the claim is under a commercial insurance policy with a limit of liability exceeding $1 million. If a complaint is filed with MIA, the law (1) requires prompt submission of specified claims documents by the parties, except for good cause shown (e.g., refusal to submit a document that would not be subject to discovery under the Maryland Rules); (2) requires MIA to promptly make its determinations and issue a decision within 90 days from the date of filing; and (3) allows any party within 30 days after an adverse decision from MIA to request a hearing by the Office of Administrative Hearings or to appeal to a circuit court. A party who receives an adverse decision at an administrative hearing may appeal to a circuit court.
      
      §27-1001 also establishes that a single instance of a failure to act in good faith in settling a first party claim is also an unfair claim settlement practice for which MIA may institute an administrative enforcement action that may result in the Insurance Commissioner imposing a fine of up to $125,000.
      
      
   4. Duty to defend: Maryland applies the so-called "potentiality rule" which states that if any of the claims made in a complaint potentially come within the liability policy coverage, the insurer is obligated to defend all claims notwithstanding alternative allegations outside the policy's coverage. Moscarillo v. Professional Risk Management Services, Inc., 398 Md. 529, 921 A.2d 245 (2007); Walk v. Hartford Casualty Insurance Co., 382 Md. 1, 852 A.2d 98 (2004) (doubts as to whether an allegation indicates the possibility of liability coverage should be resolved in favor of the insured).
      
      
   5. Rental Units/Primary Coverage: Title 18 of the Maryland Transportation Code Annotated includes a number of specific provisions directed to "for-rent vehicles." Included within that title is § 18-102 which, among other things, provides that all rental vehicles registered in the state of Maryland must be covered by the minimum insurance coverage limit set forth in Title 17 which are $20,000/$40,000. Pursuant to Subsection (b) of § 18-102, this minimum coverage must "cover the owner of the vehicle and each person driving or using the vehicle with the permission of the owner or lessee." Any provision of the rental agreement between the rental company and the lessee to the contrary is void.
      
      Regulations promulgated by the Maryland Motor Vehicle Administration have mandated that this statutorily compelled coverage shall be primary. Travelers Indemnity Company v. Insurance Company of North America, 69 Md.App. 664, 519 A.2d 760 (1987) (regulations promulgated under the Maryland Transportation Code Annotated § 18-102 "generally require that the insurer of an owner/lessor of a vehicle must provide coverage for anyone using the vehicle with the lessee's permission."). These regulations may not be negated by contract. See Rentals Unlimited, Inc. v. Aetna Casualty & Surety Company, 101 Md.App. 652, 647 A.2d 1278 (1994) (rental company must provide primary coverage despite provisions in rental agreement to the contrary). There is an exception to this rule which applies when the vehicle is leased for commercial purposes in which case the lessor may require the lessee to provide the primary coverage. MD. ADIM. CODE 11.18.01.03 (B).
      
      
   6. Insurer's Obligation to Provide Last Known Address for Insured: Under Maryland law, when requested to do so, an insurer is obligated to provide a plaintiff's attorney with a last known address for its insured. Courts & Judicial Proceedings Code Ann. §6-311 provides as follows:
      
      Plaintiff or other party to a lawsuit experiencing difficulty in serving a defendant may, upon written request to the insurer, compel that insurer to provide the party with the defendant's last known home address if known. Before the plaintiff or other party may compel the production of such information, it must file a certification with the court in which the case is pending which includes: (1) a statement that the identified defendant had applicable insurance coverage at the time of the occurrence; (2) a statement of reasonable efforts made in good faith to locate the defendant; and (3) an assertion that the defendant is evading service of process and his whereabouts are unknown. The plaintiff who files this certification with the court and serves the certification on the insurer as provided by the Maryland rules may then request the information which must be provided by the insurer. NOTE: This new enactment specifically provides that an insurer and its employees and agents may not be civilly or criminally liable for the disclosure of the information required under this subsection.
      
      
   7. Reach of Maryland law to vehicles registered in state: Maryland statutory provisions and the public policies sought to be enforced through such provisions apply not only to all insurance policies issued in Maryland but also to all vehicles registered in the state. Ward v. Nationwide, 328 Md. 240, 247, 614 A.2d 85, 88 (1992).
      
      
   8. Identity of UM carrier must be disclosed to jury in contract action for first-party benefits: It was reversible error for trial court to prohibit parties from identifying defendant UIM carrier and to permit the insurer to defend the UIM claim anonymously. King v. State Farm, 157 Md. App. 287, 850 A.2d 428 (2004).
      
      
   9. Measure of Damages in UM claim governed by law of jurisdiction in which motor vehicle accident occurred. Erie Insurance Exchange v. Heffernan, 399 Md. 598, 924 A.2d 636 (2007);