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Posts from the ‘Insurance Law’ Category

FIO Report Sets the Stage for an Active Year in Insurance Regulation

The December 12, 2013 Federal Insurance Office (FIO) report titled, "How to Modernize and Improve the System of Insurance Regulation in the United States,” with its proposed increased federal role in insurance regulation has been met with strong opposition from state regulators. Issues raised with direct federal involvement in regulation include greater engagement in supervisory colleges to monitor financial stability of insurers and reinsurance collateral requirements, among others.

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Maryland Court of Appeals Agrees to Reconsider Maryland Common Law on Construing Insurance Contracts

On January 24, 2014, the Maryland Court of Appeals granted a petition for writ of certiorari filed by People’s Insurance Counsel Division and in doing so agreed to reexamine Maryland common law on construing insurance contracts. The underlying conflict arose from the collapse of an unenclosed carport owned by the Taylors under the weight of accumulated snow.  The Taylors filed a claim with their insurer, State Farm Fire and Casualty Insurance Company and received partial coverage for their claim.  However, State Farm denied the Taylors’ claim for the collapse of their carport upon the basis that the additional coverage for collapse expressly applied to the collapse of a building or part of a building, and a carport was not a building.  The Taylors filed a complaint to the Maryland Insurance Administration, where the People’s Insurance Counsel Division intervened on their behalf.  The MIA found that State Farm’s denial was not in violation of the Insurance Article where the claim was adjusted in good faith and the denial was based upon the ordinary and reasonable meaning of the policy language.  The Circuit Court for Baltimore City affirmed this decision upon judicial review and the Court of Special Appeals similarly affirmed the MIA’s decision below.

Now, in a surprising move, the Court of Appeals has accepted PICD’s invitation to revisit Maryland common law on how to construe alleged ambiguity in a policy of insurance.  Maryland is now in the minority of states that defers to an insurer’s interpretation of policy terms as long as the insurer acts in good faith and the definitions reflect the ordinary and reasonable meaning of the words.  The majority of states have adopted an alternative view that language in an insurance contract should be construed in favor of the consumer, who enters the contract with less power as the non-drafting party.  The court is expected to hear argument on this case later this year, and a decision is expected by August 31, 2015.

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MIA Warns Against Improper Property & Casualty Insurance Claims Handling Practices

On August 3, 2012, the Maryland Insurance Administration issued Bulletin 12-14, asserting that Property and Casualty carriers have recently been developing a habit of violating various regulations concerning claims-handling.  The Bulletin is primarily targeted at auto insurers, and highlights a number of supposed patterns of violation.  In particular, the Bulletin takes issues with what the Administration views as a lack of sufficient investigation into claims, resulting in non-renewals or increased premiums.

Of particular import to Surplus Lines carriers, however, is that the Administration states in the Bulletin that its purpose is to “remind all Property and Casualty insurers” of “applicable” laws and regulations.  The Administration asserts that failure to comply may result in “administrative action.”  Based on these assertions, as well as the Administration’s ongoing treatment of Surplus Lines carriers, it appears that this Bulletin is also targeted at such insurers.  Of course, under current Maryland law, the Administration would appear to have no jurisdiction over such insurers.  We will continue to monitor the situation, as any attempt to take “administrative action” against a Surplus Lines carrier would appear to be outside the scope of the Administration’s authority.