Maryland Insurers Now Required to Make Pre-Litigation Disclosures of Policy Limits Information to Certain Claimants Involved in Motor Vehicle Accidents
Last spring, Governor O’Malley signed into law new legislation that requires insurers to disclose policy limits information to claimants involved in motor vehicle accidents under certain circumstances prior to litigation being initiated. It is important to note that the new law only applies to claims involving motor vehicle accidents. The new law, which is codified in the Maryland Courts and Judicial Proceedings Article, §§10-1101 through 10-1105, took effect on October 1, 2011, but will only apply prospectively to claims filed with an insurer on or after the effective date of the new law. Now that the law is in effect, insurers need to be familiar with the new law and understand the circumstances under which they will be obligated to make pre-litigation disclosures.
Even before this new legislation was passed, it has been commonplace for plaintiffs to propound written discovery upon a defendant requesting information relating to the existence and contents of any insurance policy under which an insurer may be obligated to indemnify the defendant in the event of a judgment, including the applicable limits of liability under such policy. The Maryland Rules permit discovery of this insurance information in both Circuit Court and District Court proceedings. However, there was no law requiring an insurer or prospective defendant to provide insurance contents information to a claimant prior to a lawsuit being filed. Although a claimant was free to ask an insurer to divulge the applicable limits of liability under its policy, the insurers were under no duty to oblige the request and, in many cases, refused to disclose this information. The insurer controlled the issue prior to litigation, and if there was no perceived benefit to providing policy limits information to a claimant pre-litigation, the insurer would not do so.
The pre-litigation discovery law takes control away from the insurance company under certain circumstances when motor vehicle claims are presented. Specifically, under qualifying circumstances, a motor tort claimant will be entitled to obtain from an insurer “documentation of the applicable limits of coverage in any insurance agreement under which the insurer may be liable to: (1) satisfy all or part of the claim; or (2) indemnify or reimburse for payments made to satisfy the claim.” After receiving a valid request for the coverage limits documentation, the insurer must provide the information to the claimant in writing within thirty days, even if the insurer contests whether the claim is covered under the applicable insurance policy.
The law applies to property and casualty insurers, as well as self-insured entities. Further, the disclosure obligations are not limited to “liability” insurers, as an early draft of the legislation had dictated. Accordingly, first-party claimants, such as persons making a claim under the uninsured/underinsured motorists coverage in the policy, will also be able to take advantage of the pre-litigation discovery device to obtain coverage limits information.
Production of information and documentation under this Act cannot subject an insurer or its employees to criminal or civil liability. Further, the documentation disclosed is not admissible as evidence at a subsequent trial by reason of its disclosure, which is in line withMaryland’s law prohibiting insurance coverage information from being admitted into evidence in tort suits. Finally, the law expressly protects an insurer’s ability to reserve its rights under a policy of insurance when there is a dispute regarding whether the claim at issued is covered under a particular policy. Specifically, the law states that an insurer’s disclosure of information as required by the Act does not constitute and admission that the claim is subject to the policy at issue, nor does it constitute a waiver of any term or condition “or any right of the insurer, including any potential defense concerning coverage or liability.”
Not all motor vehicle accident claimants will be able to obtain insurance coverage limit information prior to litigation. The law places several prerequisites that must be met before a claimant may obtain the information. The claimant must first provide to the insurer, in writing: (1) the date of the accident; (2) the name and last known address of the alleged tortfeasor; (3) a copy of any available accident report; (4) the insurer’s claim number; (5) the claimant’s medical bills and documentation relating to lost income resulting from the accident; and (6) the claimant’s medical records relating to the accident. It is only if the claimant’s documented damages, i.e., medical bills and loss of income, totals at least $12,500.00, that the insurer must disclose the coverage limits as described above.
When an individual has died as a result of a motor vehicle accident, a “claimant” may be the Personal Representative of the Estate of the deceased individual or beneficiaries to a wrongful death suit. However, the law places additional requirements upon claimants in death claims in order to require the insurer to disclose coverage information. In addition to the requirements outlined in the preceding paragraph, the claimant must provide the insurer with (1) a copy of the decedent’s death certificate; (2) copies of the letters of administration issued to appoint the personal representative of the decedent’s estate; (3) the name of each beneficiary of the decedent, if known, and their relationship to the decedent; and (4) the amount of economic damages if any, that each beneficiary claims, including claims based upon the decedent’s future loss of earnings.
Now that the law has taken effect, the logical question to ask is whether the new law will provide claimants with any compelling tangible advantage in motor vehicle accident claims. Notwithstanding the fact that insurers will now be required to sometimes provide coverage limits information far earlier than they would have previously had to do, it is unlikely that claimants will gain any meaningful strategic advantage in the claims process. There are two primary reasons to believe that no significant advantage will be obtained: (1) the $12,500.00 minimum economic damages requirement, which will cause the law to be utilized infrequently in smaller claims that would likely be filed in the District Court; and (2) the overall amount of prerequisite information that a claimant must provide to an insurer prior to being entitled to the coverage limits information. In effect, the law has ensured that the insurer will get some benefit from having to reveal the coverage limits information, which is that claimants will have to present in a coherent fashion, their medical records, medical bills, and loss of income information. If a claimant wants to avail himself or herself to the discovery procedure available under the new law, some of their cards must also be put on the table earlier than they may otherwise have desired. It is legitimate for an insurer to be concerned that a claimant may change his or her settlement value of a case if it receives coverage limits information prior to filing suit when the limits are not far in excess of the settlement or verdict value in the case. In that event, a claimant may make a higher than normal settlement demand using the coverage limits and the possibility of an excess verdict as leverage. However, such a tactic may occur far less than one may anticipate. If a claimant or, more likely, the claimant’s attorney familiarizes himself or herself with the statute, undertakes the work necessary to obtain all of the prerequisite information, and provides all of their economic damages information to an insurer just so the claimant can obtain policy limits information, it is likely that, in the absence of this statute, that same claimant would have been inclined to file suit before considering a settlement offer without knowing the applicable policy limits. Accordingly, while insurers may not embrace the new statute, it is unlikely to cause any significant burden or disadvantage moving forward.