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Unfair Claim Settlement Practices

Unfair Claim Settlement Practices

The Maryland Insurance Administration (“the MIA”) has jurisdiction over claims that an insurance carrier has violated Md. Code, Ins. Article, § 27-303, which prohibits unfair claim settlement practices by refusing to pay claims for an “arbitrary or capricious reason” or “failure to act in good faith” in settling their claim. Consumer claims filed with the MIA are evaluated by the People’s Insurance Counsel Division, which is a unit within the Office of the Attorney General. When a dispute cannot be resolved, the parties proceed to a hearing before an associate deputy commissioner with the MIA. A party aggrieved by the MIA decision can then petition the Circuit Court for a judicial review and, ultimately, appeal to the Maryland Court of Special Appeals.

Example of Unfair Claim Settlement Practices in Maryland

In People’s Insurance Counsel Division v. State Farm Fire & Casualty Ins. Co., 2013 Md. App. LEXIS 135, the Maryland Court of Special Appeals considered the denial of property damage benefits when an insured’s carport collapsed during the blizzard of 2010. At issue was the definition of the term “building” versus an “other structure” under the insurance company’s policy. Citing well-established standard of review for agency decisions, the Court observed that “we review the record in the light most favorable to the agency and defer to [its] fact-finding and drawing of inferences if supported by any evidence in the record.” (citations omitted). Applying the “substantial evidence” test, the Court approved the MIA’s conclusion that the destruction of a free-standing carport did not fall within the policy definition of a “building.” In doing so, the Court not only considered the expert testimony presented during the hearing by both parties, but it relied upon traditional principles of statutory construction which looks at the “customary, ordinary, and accepting meaning” of words. Id. Ultimately, the Court concluded that because a “building” was defined by Webster’s Dictionary as meaning “a constructed edifice designed to stand more or less permanently … usually covered by a roof and more or less completely enclosed by walls and serving as a dwelling,” the carport in this case was not a “building” but, rather, an “other structure.” Once the Court made that determination, the subject policy did not provide coverage for the collapse of “other structures” under the policy, hence it found the insurer acted appropriately when coverage was denied.

Legal Counsel for Unfair Claims

Insurance coverage claims and unfair claim settlement practice claims involve a mix of administrative and judicial recourse. For more information and guidance on such insurance matters, please contact the attorneys at Walker, Murphy & Nelson, LLP.

Disclaimer: This article is for general informational purposes only. Nothing contained herein constitutes legal advice, nor does it create an attorney-client relationship. All persons reviewing this should consult counsel for advice regarding any specific legal questions and any unauthorized use of this information is expressly prohibited.