Court Decides on Section 27-501
On January 25, 2012, the Court of Appeals issued a decision in the case of People’s Insurance Counsel Division v. Allstate Insurance Company, CA No. 60, September Term, 2011 holding that Section 27-501 of the Insurance Article prohibiting discrimination in underwriting applies to cases in which an insurer wishes to cease writing new policies in a certain area of the State.
In 2006, Allstate made a business decision to stop writing property policies for homes located within certain hurricane bands. Following various procedural maneuvers, the Insurance Commissioner held hearings concerning Allstate’s decision, and determined that, in its opinion, Allstate was required to comply with Section 27-501’s prohibitions on underwriting discrimination, and had the burden of establishing. The Commissioner ultimately determined that Allstate met its burden. The People’s Insurance Counsel Division disagreed. Allstate asserted that Section 27-501 was not applicable, but if it were, it met its burden. The case ultimately made its way to the Court of Appeals, which held that that Section 27-501 does apply to decisions such as Allstate’s, and that the Commissioner properly found that Allstate met its burden thereunder. Justice Harrell issued a rather amusing concurring and dissenting opinion, which agreed that Section 27-501 is applicable to such situations, but disagreed that Allstate met its burden.
Based on this decision and the Insurance Commissioner’s subsequent comments, it is clear that all similar Underwriting decisions will be subject to the prohibition against discrimination in underwriting, and that the insurer will have the burden of proving non-discrimination. Carriers should take this into account when considering expanding or reducing their presence in Maryland.