The Maryland Insurance Administration (MIA) has withdrawn a proposal opposed by insurers that would have expanded to commercial lines a provision requiring insurers to disclose if they consider claims history when canceling or refusing to renew coverage.
The notification requirement (§ 27-501(n)(2)) has applied only to private passenger motor vehicle and homeowners’ insurance since at least 2002. But last September, MIA called that interpretation of the law “unofficial” and “incorrect” and issued a bulletin proposing to expand it to apply to commercial lines policies as well. MIA stated at the time:
“The Administration is aware of an unofficial position interpreting § 27-501(n)(2) to apply only to private passenger motor vehicle insurance and homeowner’s insurance, which is an incorrect interpretation of the law. This Bulletin clarifies the Administration’s plain-language interpretation of the statute and its applicability to all property and casualty lines.”
MIA has now decided “after review and careful consideration,” that it will not adopt the proposed change. “The applicability of 27-501(n)(2) does not include commercial policies,” MIA stated in withdrawing the proposal.
Insurers had balked at the change and at the idea that the more limited application to only personal lines is “unofficial.” The American Property Casualty Insurance Association (APCIA) noted that in June 2002, the MIA issued a letter concluding that the General Assembly did not intend to require insurers to provide a “use of claims history” disclosure notice in commercial lines policies.
APCIA suggested there is no need to change that 23-year old interpretation. “This proposed reversal of the MIA’s longstanding position hardly seems like a clarification, as we do not believe that there has been any confusion among insurers over the applicability of this statute for the past 23 years,” APCIA wrote.
Regarding the substance of the bulletin, APCIA said that “use of claims history” notices are not needed for commercial insurers. “Commercial insureds know that insurers can and do use the policyholder’s claims history for the purposes of canceling or refusing to renew coverage,” Nancy J. Egan, APCIA vice president, stated in written commentary on the bulletin. “In fact, we would be quite surprised if there are any insurers that do not use claims history when evaluating cancellations or renewals. This requirement will therefore result in redundant notices that commercial policyholders will not read.”
Also, APCIA noted that Maryland law already requires carriers to provide commercial policyholders with the reason for the cancellation or nonrenewal. If the reason for either action is the policyholder’s claims history, the insured will be notified at the time of the cancellation or nonrenewal, according to the trade group.
Topics
Claims
Property Casualty
Maryland
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