Property and Casualty Insurance. State Law Supplement. Maryland

Transcription

1 Property and Casualty Insurance State Law Supplement Maryland

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3 Property and Casualty Insurance State Law Supplement Important: Check for Updates States sometimes revise their exam content outlines unexpectedly or on short notice. To see whether there is an update for this product because of an exam change, go to and check the Insurance Licensing Blog. If there is an update, it will be clearly noted in the blog entries for this state. Maryland Effective April 30, 2013

4 At press time, this edition contains the most complete and accurate information currently available. Owing to the nature of license examinations, however, information may have been added recently to the actual test that does not appear in this edition. Please contact the publisher to verify that you have the most current edition. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Maryland Property and Casualty Insurance Law Supplement, Effective April 30, Kaplan, Inc. The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher. If you find imperfections or incorrect information in this product, please visit and submit an errata report. Published in April 2013 by Kaplan Financial Education. Printed in the United States of America. ISBN: / PPN:

5 Maryland Law Supplement 1 INTRODUCTION This supplement focuses on statutes regarding Maryland insurance law. Key aspects of each statute are discussed to help the student pass the state law portion of the licensing examination. In order to understand the content of this supplement, the student should first study the national insurance License Exam Manual. Thorough preparation for the exam requires the complete study of both the national License Exam Manual and the supplement. I. MARYLAND LAWS and REGULATIONS PERTINENT TO PROPERTY AND CASUALTY INSURANCE Powers and duties of the commissioner [Secs , 104, 108, 201] The Maryland Insurance Commissioner has numerous powers and duties. According to Maryland state law, he shall administer and enforce all laws pertaining to the business of insurance. The Commissioner: revokes licenses of companies, producers, and adjusters for just cause; reports illegalities in the insurance business to the attorney general; the Commissioner has the power to revoke and suspend licenses, but the attorney general prosecutes when insurance laws are broken; regulates companies for solvency and regulates most insurance rates; collects fees and issues insurance licenses; delegates examining duties by appointing examiners or deputies; conducts hearings due to complaints; issues cease and desist orders for just cause; is appointed by the governor, with advice and consent of the Senate, for a term of four years; and prepares and delivers an annual report to the governor and the general assembly. 1. The main function of the Commissioner is to protect the public regarding the business of insurance. The Commissioner, subject to the approval of the governor, appoints a Deputy Insurance Commissioner, and during a vacancy in the office of the Commissioner or in the absence or disability of the Commissioner for any reason, the Deputy Commissioner will exercise all the powers and duties vested by law in the Commissioner. The Deputy Commissioner must be covered by a surety bond in accordance with Maryland law. The Commissioner or any deputy, examiner, assistant, or employee of the Commissioner must not be financially interested in any insurer, insurance agency, or insurance transaction except as a policyholder or claimant under a policy (conflict of interest). The Commissioner shall counsel and advise the governor on all matters assigned to the Administration. a. Administration [Sec ] There is a Maryland Insurance Administration. This Administration is an independent unit of the state government. It is headed up by the Maryland Insurance Commissioner. The Commissioner shall control and supervise the Administration.

6 2 Maryland Law Supplement b. Departmental divisions [Sec (a)] The Commissioner shall establish divisions or sections in the Administration, along the following lines of responsibility: Life insurance and health insurance property insurance and casualty insurance Audit and examination Insurance professions Consumer affairs Insurance fraud c. The Commissioner may: establish other areas of responsibility in the Administration; and reorganize or abolish areas of responsibility as necessary to fulfill effectively the duties of the Commissioner. 2. Examinations [Secs , 205, 207, 208] a. If the Commissioner finds it necessary to examine insurers, he may examine any accounts, records, documents, or transactions pertaining to these insurers. b. The Commissioner may also examine any producer, surplus lines broker, general agent, adjuster, public adjuster, or adviser. c. The expense incurred in any examination made pursuant to Maryland law will be paid for by the person or entity examined. d. The Commissioner must examine each domestic insurer and health maintenance organization at least once every five years. 3. Orders or notices [Sec ] An order or notice of the Commissioner must be in writing and signed by the Commissioner or an individual authorized by the Commissioner. The order of the Commissioner shall state the effective date, its purpose, the grounds on which it is based, and the action or proposed action that will be taken. An order or notice may be served to a person or mailed to the person s last known address. 4. Hearings [Secs , 211, 214, 215] The Commissioner will hold a hearing if required by any provision of Maryland law or upon written demand by a person aggrieved by any act of the Commissioner. These hearings must be held within 30 days after receipt of written demand by the Commissioner. Not less than 10 days in advance, the Commissioner will give notice of the time and place of any hearing called. Within 30 days after termination of the hearing, he will make his order based on the hearing and provide a copy of such an order to the persons who were given the notice of hearing. Any person who is a party to such a hearing or whose pecuniary interests are directly or immediately affected by any such an order or refusal and who is aggrieved thereby may, within 30 days after the order has been delivered to the person, file an appeal with the Commissioner. At a hearing, if any criminal violations are uncovered, the Commissioner must turn the case over to the attorney general for persecution.

7 Maryland Law Supplement 3 5. Rates [Sec ] The Commissioner is responsible for regulating insurance rates so that they are not excessive, inadequate, or unfairly discriminatory, and regulates rate-making among insurers. 6. Penalties [Sec ] Each willful violation of any provisions of this article of Maryland law, with respect to the violation a greater penalty is not provided by other applicable laws of this state, will, in addition to any administrative penalty otherwise applicable thereto, and upon conviction in a court of competent jurisdiction of this state, be punishable by a fine of not more than $100,000. DEFINITIONS 1. Domestic insurance company [Sec (m)] A domestic insurance company is a company incorporated, formed, or organized under the laws of Maryland and usually has its principal or home office located in this state. 2. Foreign insurance company [Sec (n)(1)] A foreign insurance company is a company incorporated or organized under the laws of another state but is licensed and permitted to conduct the business of insurance in the state of Maryland. For instance, Hanover Insurance Company of Worcester, Massachusetts is authorized to solicit insurance business in the state of Maryland. Therefore, in the state of Maryland, the Hanover Insurance Company is viewed as a foreign insurer. 3. Alien insurance company [Sec (c)] An alien insurance company is a company incorporated or organized outside the United States but licensed in the state of Maryland. For instance, Continental Reinsurance Company of London, England is incorporated in another country (England) but is licensed to conduct the business of insurance in this state. 4. Authorized insurance company [Sec (g)] An insurer that has received a certificate of authority from the state of Maryland and is licensed or authorized to conduct insurance business in this state is referred to as an authorized company. An authorized insurance company may also be referred to as an admitted company. 5. Unauthorized insurance company [Sec (rr)] An insurer that has not received a certificate of authority from the state of Maryland and is not licensed nor authorized to transact insurance business in this state may be referred to as an unauthorized company. An unauthorized insurance company may also be referred to as a nonadmitted company. 6. Transacting insurance [Sec ] The insurance business includes the transaction of all matters pertaining to a contract of insurance, both prior to and subsequent to the effectuation of such a contract, and all matters arising out of such a contract or any claim thereunder. a. Insurance business does not include the pooling together by public entities for the purpose of self-insuring casualty risks.

8 4 Maryland Law Supplement b. Transacting insurance involves making, negotiating, procuring, or proposing to make an insurance contract, taking an application, receiving or collecting premiums, issuing contracts, or any form of business considered insurance business. Other types of actions considered to be transacting insurance involve disseminating information as to coverages or rates, forwarding applications, delivering policies, inspecting risks, fixing rates, or investigating losses or claims. c. Premium tax [Sec ] In Maryland, the premium tax rate is 0% for annuity premiums and 2% for all other premiums. 7. Certificate of authority [Secs (j); 4-101, 102] No person may act as an insurer, and no insurer may engage in the insurance business in this state except as authorized unless a certificate of authority is issued to it by the Commissioner. a. No insurer may have or maintain in Maryland any office, representative, or other facilities for the solicitation or servicing of any kind of insurance in any other state unless it is then authorized to engage in the same kind of insurance business in this state. b. A certificate of authority may not be required of an insurer with respect to: transactions subsequent to issuance of a policy covering only subjects of insurance not resident, located, or expressly to be performed in Maryland at the time of issuance; transactions pursuant to surplus lines coverage lawfully written according to Maryland law; or reinsurance transactions, except as to domestic reinsurers. c. To engage in the insurance business in this state, an insurer must be in compliance with Maryland law and with its charter powers and must be an incorporated stock insurer, an incorporated mutual insurer, or a reciprocal insurer. No Lloyd s underwriters may be organized in this state, and no foreign or alien Lloyd s underwriters may be authorized to engage in any insurance business in this state. d. Company name [Sec ] No insurer may be authorized to engage in an insurance business in Maryland that has or uses a name so similar to that of any insurer already so authorized as to tend to cause uncertainty or confusion or that tends to deceive or mislead as to the type of organization of the insurer. 8. Producer [Secs (u)(1), (2); 1-101(q)] A producer is a person who for compensation in any manner solicits, procures, or negotiates insurance contracts or the renewal or continuance of the insurance contracts on behalf of insurers. a. A producer does not include: individuals employed and used by producers or insurers for the performance of clerical or similar office duties;

9 Maryland Law Supplement 5 any regular salaried officer or employee of an insurer rendering assistance to or on behalf of a qualified producer, provided that the salaried officer or employee receives no commission or other compensation directly dependent upon the amount of business obtained; or any person who secures and forwards information for the purpose of group insurance coverage or for enrolling individuals under group insurance coverages, when no commission is paid for these services. b. An independent producer is a producer who is not owned or controlled by any insurer or group of insurers. An independent producer s appointment does not prohibit the representation of more than one insurer or group of insurers. An independent producer s records shall remain the property of that producer, and he also retains the use and control of all expirations incurred while running the agency. In other words, the business solicited by an independent producer belongs to him. c. License [Sec (c)(1)] A person may not act as an insurance producer unless that person has obtained a license from the State of Maryland in the kind of insurance for which that person intends to act as a producer. In addition, that person must also have obtained an appointment or appointments from an insurer or insurers. However, a producer who does not have an appointment may: submit an informal inquiry to an insurer for any kind of insurance for which the insurance producer has a license; and solicit an application for any kind of insurance for which the producer has a license. A licensed insurance producer that has been appointed by an insurer shall maintain: documentation of the insurer s appointment; and a list of the insurers that have appointed the producer. d. License requirements [Sec ] To obtain a license to act as an insurance producer, a person must: file the appropriate application form with the Commissioner affirming that the individual is of good character and trustworthy; be at least 18 years old; meet the education, experience, and other qualification provisions of Maryland law; not have committed any act that would warrant denial of a license by the Commissioner; pass a written exam; and pay the appropriate and specified fee.

10 6 Maryland Law Supplement e. Applicant qualifications [Sec ] Individual applicants for producer licenses are required to comply with several requirements including the following. 1.) Education and experience requirement [Sec ] The applicant must: be at least 18 years old; successfully complete a program of study approved by the Commissioner; have been regularly employed as an employee of the insurance division or by an insurer or a producer for a period not less than one year (during the three years prior to the date of application) in responsible insurance duties in connection with the type of insurance for which he desires to be qualified; or have been regularly employed by an insurer or a producer for a period not less than one year during the three years next preceding the date of entrance into the services of the armed forces of the United States. 2.) Written examination [Sec ] The Commissioner requires license applicants to satisfactorily pass a written examination. The examination will be given by the Commissioner and must be graded within 30 days after the date of the examination. Any person who has taken and failed to pass an examination is not entitled to take any further examination until 14 days after the date of the last examination that person failed. 3.) Examination exceptions [Sec ] The Commissioner may waive examination and experience require ments for those who have the following advance designations (in the case of a life license): CLU TM (Chartered Life Underwriter TM ), FSA (Fellow of the Society of Actuaries), CEBS (Certified Employee Benefit Specialist), ChFC (Chartered Financial Consultant), CIC (Certified Insurance Counselor), CFP (CERTIFIED FINANCIAL PLANNER TM ), FLMI (Fellow, Life Management Institute), LUTCF (Life Underwriter Training Council Fellow); and (in the case of a health license) RHU (Registered Health Underwriter), CEBS (Certified Employee Benefit Specialist), REBC (Registered Employee Benefit Consultant), HIA (Health Insurance Associate). a.) Licensing exemptions [Sec ] The licensing requirements of this section do not apply to: an insurer; an officer, director, or employee of an insurer or of an insurance producer who does not receive any commission on policies written or sold to insure risks residing, located or to be performed in the state if: the activities of the officer, director, or employee are executive, administrative, managerial, clerical, or a combination of these, and are only indirectly related to the sale, solicitation, or negotiation of insurance,

11 Maryland Law Supplement 7 the function of the officer, director, or employee relates to underwriting, loss control, inspection, or the processing, adjusting, investigating, or settling of a claim on a contract of insurance, or the officer, director, or employee is acting in the capacity of a special agent or agency supervisor assisting insurance producers where the individual s activities are limited to providing technical advice and assistance to licensed insurance producers and do not include the sale, solicitation, or negotiation of insurance; and an individual who performs administrative services related to mass marketed property and casualty insurance, provided that no commission is paid to the individual for the services; an employer, association, the officers, directors, and employees of an employer or association, or the trustees of an employee trust plan if: the employer, association, officers, directors, and employees, or trustees are engaged in the administration or operation of a program of employee benefits for the employer s or association s own employees or the employees of its subsidiaries or affiliates, the program involves the use of insurance issued by an insurer, and the employer, association, officers, directors, and employees, or trustees are not in any manner compensated, directly or indirectly, by the insurer issuing the contracts; and an employee of an insurer or organization employed by an insurer who is: engaged in the inspection, rating, or classification of risks or in the supervision of the training of insurance producers, and not individually engaged in the sale, solicitation, or negotiation of insurance; and a person whose activities in the state are limited to advertising without the intent to solicit insurance in the state through communications in printed publications or other forms of electronic mass media if: the distribution of the printed publications or other forms of electronic mass media is not limited to residents of the state, and the person does not sell, solicit, or negotiate insurance that would insure risks residing, located, or to be performed in the state; and a person who is not a resident of the state who sells, solicits, or negotiates a contract of insurance for commercial property and casualty risks to an insured with risks located in more than one state insured under the contract if: the person is otherwise licensed as an insurance producer to sell, solicit, or negotiate that insurance in the state where the insured maintains its principal place of business, and

12 8 Maryland Law Supplement the contract insures risks located in that state, or a salaried, full-time employee who counsels or advises the employee s employer relative to the insurance interests of the employer or of the subsidiaries or business affiliates of the employer, provided that the employee does not sell or solicit insurance or receive a commission. 4.) Fees [Sec ] a.) Fees for certificates of qualification Application fee... $25 b.) Managing general agent certificate of qualification Fee for initial certificate... $30 Annual renewal fee... $30 c.) Surplus lines broker certificate of qualification Fee for initial certificate within one year of renewal... $100 Fee for initial certificate more than year from renewal... $100 Biennial renewal fee... $200 d.) Fee for temporary insurance producer licenses and appointments... $27 e.) Public adjuster license Fee for initial license within one year of renewal... $25 Fee for initial license more than one year from renewal... $50 Biennial renewal fee... $50 f.) Adviser license Fee for initial license within 1 year of renewal... $100 Fee for initial license over 1 year from renewal... $200 Biennial renewal fee... $200 g.) Insurance producer license Fee for initial license... $54 Biennial renewal fee... $54 Application fee... $25 h.) Fee for each insurance vending machine license, for each machine every second year... $50 f. A producer may conduct insurance business affairs as a partnership or a corporation provided that every individual who solicits, negotiates, or accepts insurance business from the public shall possess a license.

13 Maryland Law Supplement 9 1.) Qualifications of business entity [Sec ] To qualify for a license as an insurance producer, a business entity must designate a licensed insurance producer to act as the business entity s principal contact with the Administration. The designated insurance producer shall: provide to the Administration at the time of designation the insurance producer s name, business address, business telephone number, business facsimile number, and business electronic mail address; notify the Insurance Administration in writing of any change in the information within 10 days after the change; compile and maintain, to the extent reasonably possible, a list of locations where records of the business entity are maintained; and on request, cooperate with any investigation conducted by the Administration unless the cooperation is subject to a legal privilege asserted by the designated insurance producer or the business entity. g. Name or address change [Sec ] Every producer is required to notify the Commissioner of a change in legal name or address within 30 days of the change. Every producer is required to file with the Commissioner the agency or trade names to be used, its business address, and the name and residence addresses of each individual possessing a license who does business under the agency or trade name. h. Appointment and termination of appointment [Sec , 118(b)(2)] Every insurer must maintain a producer register of appointed insurance producers who are authorized to sell, solicit, or negotiate insurance on its behalf. Within 30 days of appointing a producer, the insurer must record information about the appointment in the insurer s producer register and send documentation of the appointment to the producer. 1.) A licensed insurance producer who has been appointed by an insurer must maintain documentation of the insurer s appointment and a list of the insurers that have appointed the producer. This documentation is subject to inspection and examination by the Commissioner. 2.) An insurer may initially accept an insurance application from an insurance producer who is not appointed by the insurer and is not on the insurer s producer register if, within 30 days of accepting the application, the insurer rejects the application or appoints the producer and enters the required information in the insurer s producer register. 3.) All insurers doing business in this state must, within 30 days after the effective date of the termination of a producer, update the insurer s producer register by entering the effective date of the termination. The insurer must provide notice to the Commissioner of the termination and must mail a copy of the notice to the insurance producer within 15 days after notifying the Commissioner. Any disclosure to the Commissioner is considered a privileged communication and may not be used in any court action or proceeding other than an appeal from action of the Commissioner.

14 10 Maryland Law Supplement i. Nonresident insurance producers [Sec ] Waiver of require ments for nonresidents The Commissioner shall waive any license application requirements for an applicant who is not a resident of this state if: the applicant has a valid license from the home state of the applicant; and the home state of the applicant awards nonresident licenses to residents of this state on the same basis. 1.) Authority for nonresidents to obtain licenses Unless denied a license, a person who is not a resident of this state may obtain a nonresident license to act as an insurance producer if: the person currently is licensed as a resident insurance producer and in good standing in the person s home state; the person has submitted or transmitted to the Commissioner the applica tion for licensure that the person submitted to the person s home state or a completed uniform application; the person has paid the applicable fee; and the person s home state awards nonresident insurance producer licenses to residents of this state on the same basis. 2.) An individual who applies for an insurance producer license in this state who was previously licensed for the same lines of authority in another state need not comply with the education, experience, and examination requirements if: the person currently is licensed as an insurance producer in the home state of the person; the application is received by the Commissioner within 90 days after the cancellation of the applicant s previous license and the prior state issues a certification that, at the time of cancellation, the applicant was in good standing in that state; or the state s producer database records, maintained by the National Association of Insurance Commissioners, its affiliates, or its subsidiaries indicate that the producer is or was licensed in good standing for the line of authority requested. j. License renewal [Sec ] Producer licenses are renewed every two years on the last day of the producer s birth month, unless the license is revoked, suspended, or terminated by the Commissioner. At least one month before a license expires, the Commissioner will mail the holder of the license a renewal application form, a notice that states the date by which the Commissioner must receive the renewal application, and the amount of the renewal fee. Before a license expires, the holder of the license may renew it for an additional two-year term if the holder files a renewal application, completes the required continuing education, and pays the required renewal fee. If accepted, the Commissioner will issue a renewal license. The Commissioner may also refuse to renew the license and must give notice to the holder within five days.

15 Maryland Law Supplement 11 1.) Reinstatement [Sec ] For up to one year after the expiration date, a person whose license has expired may reinstate the expired license by: filing the appropriate reinstatement application with the Commissioner; paying the Commissioner the applicable renewal fee and a reinstatement fee of $100; and submitting proof of completion of the continuing education requirements. a.) A person whose license has expired is prohibited from conducting any insurance business until the effective date of the reinstatement. b.) If a person applies for reinstatement within 60 days after the license expired, the Commissioner will reinstate the license retroactively, with the reinstatement effective on the date the person s license expired. If a person applies for reinstatement more than 60 days after the license expired, the Commissioner will reinstate the per son s license prospectively, with the reinstatement effective on the date the license is reinstated. c.) A person who does not request reinstatement within one year after the expiration date must apply for a license and meet the requirements specified by the Commissioner. d.) The Commissioner may waive the reinstatement procedures for a producer who is unable to comply with the renewal and reinstatement requirements due to military service or other extenuating circumstances, including a long-term medical disability. k. Continuing education [Sec ] 1.) Producers must comply with the state s continuing education requirement as a condition of renewing their licenses. The Commissioner may review all continuing education courses submitted and approve or disapprove courses. 2.) Producers who are licensed in a major line of authority (i.e., propertycasualty, life, health) must complete 24 hours of continuing education per renewal period. 3.) Producers who have a title insurance license must complete 16 hours of continuing education per renewal period. 4.) Producers who have been licensed for 25 or more consecutive years as of October 1, 2008, only need to complete eight hours of continuing education per renewal period.

16 12 Maryland Law Supplement 5.) At least three of the required continuing education hours must be in courses related to ethics. 6.) Producers must complete continuing education courses in the line of authority for which the producer is licensed. 7.) Health insurance producers who sell long-term care insurance must complete two hours of continuing education related to long-term care insurance. 8.) Each insurance producer who possesses a license to sell health insurance and who markets the senior prescription drug assistance program or assists a Medicare beneficiary to enroll in the senior prescription drug assistance program shall receive continuing education that directly relates to the senior prescription drug assistance program. 9.) Property-casualty producers who sell flood insurance must complete two hours of continuing education related to flood insurance. 10.) The Commissioner may not require an insurance producer to receive more than 16 hours of continuing education in a renewal period if the insurance producer is also a licensed funeral director or licensed mortician who: sells only life insurance policies or annuity contracts that fund a preneed contract; and is not a viatical settlement broker. 11.) The Commissioner may waive the continuing education requirement for a producer for just cause. 12.) The following are exempt from the CE requirement: HMO employees who solicit membership in the HMO under a contract between the HMO and the Department of Health and Mental Hygiene Maryland attorneys who have a title insurance license Individuals who hold limited lines credit licenses or other limited lines licenses designated by the Commissioner as exempt Nonresident licensees whose state of residence has a continuing education reciprocity agreement with Maryland l. A person not residing in and not having a place of business in this state (nonresident licensee) may receive a license to act as a producer upon compliance with the provisions of Maryland law, provided that the state in which the person resides will allow the same privilege to a resident of this state (reciprocity). m. Denial, suspension, and revocation of licenses [Sec ] An original application for a license may be refused until the Commissioner is satis-

17 Maryland Law Supplement 13 fied that the applicant is not guilty of violating any provisions of Maryland law. A license duly issued may be suspended or revoked or the renewal refused by the Commissioner if he finds, after notice and hearing, that the applicant for, or holder of, the license (producer) has: willfully violated any provision of Maryland law; intentionally misrepresented or concealed any material fact in the application for the license; obtained his license by misrepresentation, concealment, or fraud; misappropriated or withheld monies belonging to an insurer, producer, beneficiary, or insured; willfully and materially misrepresented the provisions of an insurance policy; committed fraudulent or dishonest practices in the business of insurance; been convicted of a crime involving moral turpitude; knowingly participated in the writing or issuance of substantial overinsurance of any property insurance risks; failed to pass an examination required under Maryland law; willfully failed to comply with any order, rule, or regulation issued by the Commissioner; failed or refused to pay over any money in his hands belonging to an insurer, producer, or any other person entitled to receive the same; shown a lack of trustworthiness or lack of competence to act as a producer; not intended to carry on business in good faith and hold himself out to the public as a producer; been refused a license or had his license suspended or revoked in another state; intentionally or willfully made any statement materially misrepresenting or making incomplete comparisons regarding the terms or conditions of any policy contract issued by any authorized insurer for the purpose of inducing or attempting to induce the owner of a policy to lapse, surrender, or forfeit the policy (twisting); solicited or negotiated insurance contracts for an unauthorized insurer; knowingly employed or continued to employ an individual acting in a fiduciary capacity who has been convicted of a felony or crime of moral turpitude within the preceding 10 years; forged another s name to an application for insurance or to any document related to an insurance transaction; improperly used notes or any other reference material to complete an examination for a license; failed to pay income tax or related interest or penalty under an assessment that is final or an order of the tax court that is final and not subject to judicial review; made an inaccurate statement with actual malice when providing information regarding the termination of a producer s appointment with an insurer; or transacted insurance business that was directed to him by a person whose license to engage in the insurance business was suspended or revoked.

18 14 Maryland Law Supplement n. Penalties [Sec ] The Commissioner may impose a penalty of not less than $100 nor more than $500 from the producer whose license is subject to suspension or revocation under Maryland law. The Commissioner may require that restitution be made to any citizen who has suffered financial injury or damage as a result of the violation of any provisions of Maryland law. o. Name or address change [Sec ] Every producer is required to notify the Commissioner of a change in legal name or address within 30 days of the change. p. Criminal acts [Sec ] If an insurance producer is prosecuted for a crime in any jurisdiction, the producer shall report the prosecution to the Commissioner within 30 days after the producer s initial appearance before a court. The report shall include a copy of the charging document, any order issued by a court, and any other relevant legal documents. q. Temporary licenses [Sec ] Without regard to the education, experience, or examination requirements, the Commissioner may issue a temporary license to act as an insurance producer to an individual if the individual: is otherwise qualified; and is the surviving spouse, next of kin, personal representative, or appointee of the personal representative of a deceased insurance producer, the spouse, next of kin, employee, or legal guardian of a mentally or physically disabled insurance producer, or an employee of a firm, or an officer or employee of a corporation, of a deceased or disabled insurance producer. 1.) Qualifications of temporary insurance producers Before a person acts as a temporary insurance producer in the state, the person must obtain: a temporary license in the kind of insurance for which the person intends to act as an insurance producer; and if applicable, an appointment from an insurer. 2.) Applications for temporary license An applicant for a temporary license shall: file with the Commissioner an application on the form that the Commissioner provides; and pay to the Commissioner the applicable fee. 3.) Issuance or refusal of temporary license Within 30 days after the date an application is received, the Commissioner shall: issue a temporary license to the applicant; or refuse in writing to issue a temporary license, stating the reasons for the refusal. 4.) Term of temporary license A temporary license expires 15 months after its effective date.

19 Maryland Law Supplement 15 r. Other producer s requirements 1.) Complaints Every producer and insurer is required to keep a copy of any complaints. The Commissioner can request to view them. 2.) Unlicensed insurance producers or adjusters [Sec ] It is a fraudulent insurance act for a person to act as or represent to the public that the person is an insurance producer or a public adjuster in the state if the person has not received the appropriate license. a.) Acts of insurance producer It is a fraudulent insurance act for an insurance producer to: solicit or take application for, procure, or place for others insurance for which the insurance producer has not obtained an appropriate license; knowingly violate law; or intentionally fail to report to an insurer the exact amount of consideration charged as a premium for an insurance contract, if different from the policy premium, and to fail to maintain records that show that information. 3.) Doing business with unlicensed persons [Sec ] It is a fraudulent insurance act for an insurer doing business in the state to knowingly write or place a policy or insurance contract in the state through, or pay a commission or other consideration to, a person that is required to have a certificate of qualification under this article but does not have a certificate of qualification. 9. Public adjusters [Sec , 403 to 406] A public adjuster includes every person who solicits business or holds himself out to the public as an adjuster of claims for losses or damages arising out of policies that insure real or personal property or both or who receives any compensation for giving advice or assistance to the insured in the adjustment of claims for these losses. In addition, a public adjuster may also include all persons who, for compensation, solicit business, investigate or adjust losses, or advise the insured with reference to claims for these losses on behalf of any other person engaged in the business of adjusting losses. a. No person may, directly or indirectly, act as a public adjuster or receive for or because of services rendered in the adjustment of any claim any money or commission or other thing of value, without first procuring a certificate of qualification (license) to act as a public adjuster. b. The Commissioner issues public adjuster licenses to individuals and business entities whom he deems to be trustworthy and competent to transact business as public adjusters in such a manner as to safeguard the interest of the public. 1.) In addition, an individual applicant must have been employed regularly by the administration as an employee or by an insurer, adjuster, producer,

20 16 Maryland Law Supplement or public adjuster for at least one year during the five years preceding the date of application. Individuals also must pass a written examination and pay the application fee. 2.) A business entity applicant must employ one or more individual licensed public adjusters and must pay the applicable fee. c. Every public adjuster certificate of qualification (license) shall expire at the end of every other June 30 unless renewed for a two year period. Before any public adjuster license shall be issued by the Commissioner, a written application must be completed by the applicant. 1.) The application must include: the name and address of the applicant; whether any other insurance license has been issued to the applicant; the business in which the applicant has been engaged during the five years before the application date (and the name and address of each employer); and any other information that the Commissioner deems important as to enable him to determine the trustworthiness and competency of the applicant. 2.) Business entity applicants also must list the name of the individual licensed public adjuster who is designated to act as their principal contact with the administration as well as the name and address of each licensed public adjuster employed by the business entity, each individual having direct control over its fiscal management, each owner, partner, member, or manager of the entity, and each director that is a corporation. d. To determine the competency of applicants for a license to act as a public adjuster, the Commissioner requires applicants to submit to a written examination and pay the required fee. An application for a public adjuster s license must be signed and verified by the applicant and, if made by a partnership or association, by each member thereof, and if made by a corporation, by each officer and director thereof who is to be authorized to act as a public adjuster. e. Any person licensed as a public adjuster in accordance with the provisions of Maryland law may be known as a certified public adjuster. No public adjuster license may be issued by the Commissioner to any applicant who has not been a bona fide resident of the state of Maryland continuously for at least one year preceding the date of filing of any application under the provisions of Maryland law. 10. Surplus lines broker and unauthorized insurers [Secs ; 3-302, 306 to 308, 310, 311, 313, 315 to 317, 319, 322, 324, 325] The purpose of a surplus lines law is to promote public welfare and to protect the public interest by regulating, taxing, supervising, and controlling unlicensed (unauthorized) insurers in Maryland. This law was also created to regulate the persons through whom the insurance (surplus lines brokers) is placed and to protect licensed insurers from unfair competition.

21 Maryland Law Supplement 17 a. Surplus lines insurance involves the full amount of a policy of insurance required to protect the interest of an insured who cannot obtain coverage in the normal market from insurers authorized to do business in Maryland. Once an insured attempts to secure coverage from three or more insurers who are authorized in Maryland and is unable to do so, coverage may be secured from a surplus lines insurer through a surplus lines broker. b. Surplus lines coverage may be procured from unauthorized insurers subject to the following conditions: if procured through a broker, the insurance must be procured through a licensed surplus lines broker licensed in the state of Maryland; and the insurance must be eligible as surplus lines insurance in accordance with the provisions of Maryland law. c. A diligent search and effort must be made among the insurers who are authorized to transact or are actually writing the particular kind and class of insurance in Maryland. d. Surplus lines insurance may not be procured for the sole purpose of securing advantages either for a lower premium rate than would be accepted by an authorized insurer or because of the terms of the insurance contract. e. At the time of placing any insurance, an affidavit setting forth the facts regarding these transactions must be personally executed by the surplus lines broker or by the originating producer. The affidavit must be filed with the Commissioner on or before the 45th day after the last day of the month in which the insurance was placed. f. Every insurance contract or confirmation procured and delivered as a surplus lines coverage must be endorsed or stamped conspicuously and in boldface type on the first page of the contract or confirmation as follows: This insurance is issued by a nonadmitted insurer not under the jurisdiction of the Maryland Insurance Commissioner. g. Any person who is qualified to be a surplus lines broker regarding property and casualty and surety insurance and who is deemed by the Commissioner to be competent and trustworthy may be qualified as a surplus lines broker if he: fills out and submits the appropriate application to the Commissioner; pays the fee as prescribed by Maryland law; and files with the Commissioner a bond in the penal sum of $10,000. Each certificate of qualification (license) issued pursuant to Maryland law expires at the end of every other June 30 unless it is renewed for a two-year term. h. A surplus lines broker possessing a license may accept and place surplus lines business from any insurance producer possessing a license in Maryland for the kind of insurance involved and may compensate the producer. i. Upon placing surplus lines coverage, the broker must promptly deliver to the insured evidence of the insurance consisting either of the policy as issued by the

22 18 Maryland Law Supplement insurance company or, if the policy is not available, a binder or cover note that shows the subject, coverage, conditions, terms of the insurance, and the name and address of the insurer. j. Each surplus lines broker must keep a separate record and account of all business transacted under his license, including a copy of each daily report, if any, and of each binder or cover note delivered by him. 1.) The records must be available for examination by the Commissioner at any reasonable time within three years after the issuance of coverage to which it relates. 2.) Within 60 days following December 31 and June 30 of each year, the broker must file with the Commissioner a semiannual statement that will be open to public inspection and that reports: the gross amount of each kind of insurance business transacted and the aggregate gross premiums charged; the aggregate of returned premiums on taxes paid to insureds; the aggregate of net premiums; and additional information as required by the Commissioner. k. The premiums charged for surplus lines coverage are subject to a premium receipts tax of 3% on all gross premiums less any return premiums charged for the insurance. The surplus lines broker will charge the insured the amount of the tax at the time of delivery of the policy, binder, or cover note. l. The Commissioner may revoke or suspend any surplus lines broker license: if the broker fails to file his semiannual statement or to remit tax as required by law; if the broker fails to keep the records or to allow the Commissioner to examine his records, as required by law; if the broker fails to file or falsifies the affidavit required by Maryland law; or for any of the causes for which an insurance producer s license may be revoked or suspended by the Commissioner. A producer whose license has been so revoked or suspended may not again be certified until all penalties and delinquent taxes owed by him have been paid. m. The provisions of Maryland surplus lines insurance law with regard to placing insurance with unauthorized insurers will not apply to: life and health insurance and annuities; reinsurance; wet marine and transportation insurance; insurance on subjects located, resident, or to be performed outside of Maryland; insurance on property or operations of railroads engaged in interstate commerce; or insurance of aircraft or workers compensation.

23 Maryland Law Supplement 19 n. A surplus lines broker may not place surplus lines insurance with an unauthorized insurer that: has not been approved by the Commissioner as a surplus lines insurer; has been determined by the Commissioner to be insolvent or financially unsafe; or has been determined by the Commissioner to have refused to pay just claims. 11. Insurance adviser [Sec , 204, 206, 211] No person may act as an insurance adviser, as defined under Maryland law, unless so authorized by virtue of a license issued or renewed pursuant to the provisions of Maryland law. a. The term insurance adviser means any person who for money, a fee, commis sion, or any other thing of value offers to examine any policy of insurance for the purpose of giving any advice, counsel, recommendation, or information with respect to coverages and benefits provided by the contract. 1.) Any person who gives advice for a fee and uses the title of insurance adviser, insurance specialist, insurance counselor, insurance analyst, policyholders adviser, policyholders counselor, refund company, or any other similar title indicating that he is engaged in the business of giving advice or counsel shall be deemed an insurance adviser. b. A license as an insurance adviser will not authorize adjusting of losses nor receipt of compensation from insurers or producers for the sale or placement of insurance. c. Maryland law regarding advisers will not apply to: any officer, employee, producer, or other representative of any authorized insurer while acting for an insurer; any producer possessing a license who acts on behalf of his client; any attorney-at-law in Maryland acting within the course or scope of his profession; nor any licensed public adjuster acting within the scope of his license. d. The Commissioner of Insurance may issue an insurance adviser s license to: any person who is a resident of Maryland or who is a nonresident licensed as an insurance adviser in the state of his residence; a person who is a member of either the Society of Actuaries, the Casualty Actuarial Society, or of the Conference of Actuaries in Public Practice; a person who has been conferred the Chartered Property Casualty Underwriter (CPCU ) designation; a person who has been conferred the Chartered Life Underwriter (CLU ) designation; a person who has been conferred the Certified Employee Benefits Specialist (CEBS) designation; or any person who has successfully completed a course of study equivalent to any course of study required for membership in good standing in any of the aforementioned societies or organizations as approved by the Commissioner.

24 20 Maryland Law Supplement e. The Commissioner may issue a limited insurance advisers license restricting the authority of the licensee to an extent agreed upon with said licensee. These limitations will be set forth in the license. In all other respects, the granting of limited insurance advisers licenses shall be governed by the provisions previ ously mentioned regarding insurance advisers. f. No license to act as an insurance adviser may be issued to anyone other than an individual. Licensees may conduct their insurance advisory business as a sole proprietorship, partnership, association, or corporation, provided that every individual who acts as an insurance adviser shall be licensed in accordance with the provisions of Maryland law, provided the trade name is registered with the Insurance Commissioner. g. Every insurance advisers certificate of qualification (license) issued pursuant to Maryland law expires at the end of every other June 30 unless it is renewed for a two-year term. h. No license or renewal license may be issued to any applicant unless a bond in the penal sum of $1,000 is on file with the Commissioner. These bonds may be made to the State of Maryland and shall specifically authorize recovery by the state of the penal sum provided in case the insurance adviser shall have been guilty of fraudulent or dishonest practices in connection with transactions of its business as an insurance adviser. i. The Commissioner may at any time require information that he deems necessary with respect to the business methods, policies, contracts, and transactions of a person, firm, association, or corporation licensed as an adviser. This information shall be furnished within 10 days after receiving written request and on forms as required by the Commissioner. j. No contract or agreement between an insurance adviser and any other person shall be enforceable by or on behalf of an insurance adviser unless it is in writing and executed personally in duplicate by the person to be charged or by his legal representative. k. No person whose license has been revoked shall be entitled to any license or renewal license for a period of one year after the revocation. l. If an application for a license under Maryland law is refused, or if any license is suspended or revoked by the Commissioner, notice shall be supplied to the applicant or to the licensee by registered or certified mail addressed to his last known address on record with the Commissioner. 12. Commissions [Sec ] A commission, fee, reward, rebate, or other consideration for selling, soliciting, or negotiating insurance may not be paid, directly or indirectly, to a person other than a licensed insurance producer.

25 Maryland Law Supplement Record retention [Comm. Law Sec ] If a law requires that a record be retained, the requirement is satisfied by retaining an electronic record of the information in the record which: accurately reflects the information set forth in the record at the time it was first generated in its final form as an electronic record or otherwise; and remains accessible for later reference. MARKETING PRACTICES 1. Unfair trade practice law The purpose of state regulation regarding marketing or trade practices is to protect the public by defining, or providing for determination of, all practices in Maryland that constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined. a. Defamation [Sec ] Making, publishing, disseminating or circulating directly or indirectly, or aiding, abetting, or encouraging any oral or written statement or any pamphlet, circular, article, or literature that is false or maliciously critical of, or derogatory to, the financial condition of any person and that is calculated to injure any person engaged in the business of insurance is known as defamation and is an illegal practice. b. Rebating [Sec ] No company, officer, or producer will pay, allow, or give or offer to pay as an inducement to the purchase of insurance: a rebate of premiums; a special favor or advantage in dividends or other benefits under the contract; paid employment or a contract for services; or any valuable consideration or inducement not specified in the contract. 1.) The most common form of rebating involves a producer offering to share commissions with a prospective insured in return for that insured purchasing a policy; or an insurer or producer offering securities, stocks, or bonds in return for the purchase of policies. 2.) It is not considered rebating for an insurer or producer to give applicants educational materials, promotional materials, or articles of merchandise that cost less than $25, regardless of whether a policy is purchased. c. Misrepresentation [Secs , 213] No company, officer, or producer may make, issue, circulate, or use any written or oral statement misrepresenting the terms of any policy or contract of insurance, the benefits or advantages, or the dividends or share of surplus to be received on the policy. It is also considered misrepresentation to: make a false or misleading statement about the dividends or share of surplus previously paid on similar policies;

26 22 Maryland Law Supplement make a misleading representation about the financial condition of an insurer or the legal reserve system on which it operates; or to use a name or title of a policy that misrepresents the true nature of the policy or class of policies. 1.) Twisting [Sec ] These parties may not misrepresent the terms of a contract to induce a person to lapse, forfeit, or surrender the policy issued to him or to alter or convert it for any other policy or contract. This type of misrepresentation is also known as twisting. 2.) Twisting is the most common form of misrepresentation. d. Illegal dealings in premiums [Sec ] No producer may assess an insured or any member of the public any additional fees or charges for services rendered, unless these charges are stipulated in the contract. This action on the part of a producer is an unfair trade practice or act under Maryland law. Violation of this Maryland law may result in a fine, prison sentence, or both. Increasing the charge or fee for an insurance policy for any amount and payment for the added amount or increase to anyone may be considered an illegal dealing in premium or inducement. e. Discrimination [Sec ] No insurer or producer may cancel or refuse to underwrite or renew a particular insurance risk or class of risk for any reason based on whole or in part upon race, color, creed, sex, or blindness of an applicant or policyholder or for any arbitrary or unfairly discriminatory reason. 1.) No insurer or producer may cancel or refuse to underwrite or renew a particular insurance risk or class of risk except by the application of standards that are reasonably related to the insurers economic and business purposes. 2.) With respect to auto liability insurance, an insurer may not cancel, refuse to renew, or otherwise terminate coverage for any automobile risk because of the existence of a traffic violation or accident more than three years old on the date the policy or renewal is effective; or refuse to underwrite any auto insurance risk because of a traffic violation or accident more than five years old as of the date of application. 3.) An insurer may not require a particular payment plan for an insured for coverage under a private passenger or homeowners insurance policy based on the credit history of the insured. a.) Credit history is any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer s creditworthiness, credit standing, or credit capacity that is used or expected to be used, or collected in whole or in part, for the purpose of determining personal lines insurance premiums or eligibility for coverage. With respect to private passenger motor vehicle insurance, an in-

27 Maryland Law Supplement 23 surer that rates a new policy based, in whole or in part, on the credit history of the applicant: may not use a factor on the credit history of the applicant that occurred more than five years prior to the issuance of the new policy; and shall advise an applicant at the time of application that credit history is used. b.) With respect to homeowners insurance, an insurer may not cancel or refuse to renew coverage for homeowners insurance based on the claims history of an insured for weather-related claims, unless there were three or more weather-related claims within the preceding three-year period. An insurer may consider claims for weather-related events for the purpose of canceling or refusing to renew coverage if the insurer provided written notice to the insured for reasonable or customary repairs or replacement specific to the insured s premises or dwelling that the insured failed to make and that, if made, would have prevented the loss for which a claim was made. f. Commissions [Sec ] A commission, fee, reward, rebate, or other consideration for selling, soliciting, or negotiating insurance may not be paid to a person other than a licensed insurance producer. An insurer or producer may pay or assign commissions, service fees, or other valuable consideration to an insurance agency or to persons who do not sell insurance in the state. g. False advertising [Sec ] A person may not make, publish, disseminate, circulate, place before the public, or cause directly or indirectly to be made, published, disseminated, circulated, or placed before the public in a newspaper, magazine, or other publication, in the form of a notice, circular, pamphlet, letter, or poster, over a radio or television station, or in any other way, an advertisement, announcement, or statement that contains an assertion, representation, or statement about the business of insurance or about a person in the conduct of the person s insurance business that is untrue, deceptive, or misleading. h. False financial statements [Sec ] A person may not knowingly file with a supervisory or other public official, make, publish, disseminate, circulate, deliver to another person, place before the public, or cause directly or indirectly to be made, published, disseminated, circulated, delivered to another person, or placed before the public a false statement of the financial condition of an insurer. 1.) A person may not make a false entry in a book, report, or statement of an insurer with intent to deceive an agent or examiner lawfully appointed to examine the condition or affairs of the insurer or a public official to whom the insurer is required by law to report or who has authority by law to examine the condition or affairs of the insurer; or

28 24 Maryland Law Supplement with intent to deceive, willfully omit to make a true entry of a material fact about the business of the insurer in a book, report, or statement of the insurer. i. Boycott, coercion, or intimidation [Sec ] A person may not enter into an agreement to commit, or by concerted action commit, an act of boycott, coercion, or intimidation that results in or tends to result in unreasonable restraint of or monopoly in the business of insurance. j. Penalties [Sec ] 1.) Each willful violation of the unfair trade practices law is subject to a fine of not more than $100,000 in addition to any other applicable administrative penalty. 2.) Violators of commission rules are guilty of a misdemeanor and subject to a fine not exceeding $500, imprisonment not exceeding six months, or both, for each violation. Fiduciary responsibilities [COMAR ] Each insurance producer who does not have the express consent of his principals (insurer or insurers) to mingle premium monies with his personal funds must hold premium monies separate from other funds in accordance with all of the following provisions. 1. Producers who do not make prompt remittance to principals (insureds) must deposit funds in an account from which withdrawals may not be made (premium account) except to pay the principals or insureds. 2. A producer who makes prompt remittance no later than five business days following receipt of the funds does not need to maintain a premium account. 3. Deposits in a premium trust account in excess of aggregate net premiums, return premiums, and deposits received but not remitted may be made to maintain a minimum balance or to pay premiums due but uncollected. 4. With regard to withdrawals, these may not be made from a premium trust account other than for: payment of premium to principals; transfer to another account if consent of principal is provided; withdrawal of voluntary deposits; transfer to another account of commissions; or payment of return deposits to insureds. 5. Deposit of a premium in a premium trust account may not be construed as commingling of the net premium and of the commission portion of the premium.

29 Maryland Law Supplement 25 E. MARYLAND PROPERTY/CASUALTY INSURANCE GUARANTY CORPORATION [Secs to 306, 312, 313] The purpose of the Corporation is to provide a mechanism for the prompt payment of covered claims under certain insurance policies and to avoid financial loss to residents of Maryland who are claimants or policyholders of an insurer that has become insolvent. In addition, the Corporation will also provide for the assessment of the cost of payments and protection among insurers. 1. Board of directors The board of directors of the Corporation consists of not less than five nor more than nine persons serving terms as established in the plan of operation. The members of the board will be elected from member insurers. 2. Member insurers All licensed insurers soliciting property and casualty insurance in Maryland are required to participate in the Corporation. 3. Powers and duties/assessments The Corporation shall be obligated to the extent of the covered claims existing prior to the determination of insolvency and arising within 30 days after the determination of insolvency or before the policy expiration date if less than 30 days after the determination. The obligation will include only that amount of each covered claim which is in excess of $100 and less than $300,000. However, the Corporation will pay the full amount of any covered claim arising out of a workers compensation policy. In no event will the Corporation be obligated to a policyholder or claimant in an amount in excess of the obligation of the insolvent insurer under the policy from which the claim arises. a. The Corporation may: employ or retain persons necessary to handle claims and perform other duties of the Corporation; borrow funds necessary to effect the purposes of Maryland law with regard to this Corporation s operation; sue or be sued; and perform any other acts as deemed necessary to effectuate the purposes of the Corporation, such as assessing member insurers when necessary. b. The total of all assessments upon a member insurer during any one calendar year shall not exceed 2% of the insurer s premiums on policies covered by the account. 4. The Corporation will be exempt from payment of all fees and all taxes levied by Maryland or any of its subdivisions except taxes levied on real or personal property. 5. Rates and premiums The rate and premiums charged for insurance policies and surety bonds to which Maryland law applies will include amounts sufficient to recoup over a reasonable length of time not less than three years, a sum equal to the amounts paid to the Corporation by the member insurer less any amounts returned to the member insurer by the Corporation. These rates will not be deemed excessive because they contain an amount reasonably calculated to recoup assessments paid by the member insurer.

30 26 Maryland Law Supplement F. INSURANCE INFORMATION AND PRIVACY PROTECTION [COMAR ] 1. Purpose and scope of rules The Maryland privacy protection rules require insurers and producers to provide notice to individuals about their privacy policies and practices. They describe the situations when a licensee may disclose nonpublic personal health information and nonpublic personal financial information about individuals to affiliates and nonaffiliated third parties. They also provide methods for individuals to prevent licensees from disclosing nonpublic personal financial information and nonpublic personal health information. 2. Initial and annual privacy notices Generally, licensees who are subject to the privacy rules must provide a notice reflecting their privacy practices for nonpublic financial information to customers when a customer relationship is initially estab lished and at least once a year afterwards. The notices must explain how the con sumer can opt out of the disclosure of nonpublic personal financial information. 3. Opt out notice requirements A licensee who is required to provide an opt out notice under the privacy rules must provide a clear and conspicuous notice to each of the licensee s consumers that accurately explains the right to opt out. A right to opt out notice must state: that the licensee discloses or reserves the right to disclose nonpublic personal financial information about its consumer to a nonaffiliated third party; that the consumer has the right to opt out of that disclosure; and a reasonable means by which the consumer may exercise the opt out right. 4. Disclosure of nonpublic personal health information A licensee may not disclose nonpublic personal health information about a consumer or customer unless the consumer or customer authorizes the disclosure. However, an authorization is not required before making disclosures in connection with certain insurance functions, such as: claims adjustment and management; detecting or reporting fraud or criminal activity; underwriting; case management and utilization review; policyholder service functions; or administration of customer disputes and inquiries. 5. Nondiscrimination A licensee may not unfairly discriminate against any con sumer or customer for opting out from the disclosure of her nonpublic personal financial information or refusing to authorize the disclosure of her nonpublic personal health information.

31 Maryland Law Supplement 27 G. ADDITIONAL STATUTES, RULES, AND REGULATIONS PERTINENT TO PROPERTY AND CASUALTY INSURANCE ONLY 1. Rates and forms [Secs , 303, 306 to 312, 317] Maryland law regarding rates and filings applies to property insurance, casualty insurance, and inland marine-type coverage. It does not apply to reinsurance, ocean marine risks, insurance against loss of or damage to aircraft, title insurance, surety insurance, and so forth. a. In the making and filing of rates, due consideration must be given to: past and prospective loss experience within and outside Maryland; catastrophic hazards; past and prospective expenses both countrywide and those applicable to Maryland; underwriting profit; contingencies; investment income from unearned premium reserve and reserve losses; dividends, savings, or unabsorbed premium deposits allowed overturned by insurers to their policyholders; and all other relevant factors. b. Rates must not be excessive, inadequate, or unfairly discriminatory. c. Risks may be grouped by classifications for the establishment of rates and minimum premiums. Classification rates may be modified to produce rates for individual risks in accordance with rating plans which establish standards for measuring variations and hazards, expense provisions, or both. No rate may be based partially or entirely on geographic area itself (redlining) as opposed to risk considerations even though expressed in geographic terms. d. Any insurer providing a private passenger automobile insurance policy must provide the policyholder at the time of issuance or renewal a statement defining his rate classifications. The statement must be sufficiently clear and specific so that a person of average intelligence can identify the classifications without making further inquiry. e. Unless the filer demonstrates that the proposed rate is not excessive nor inadequate nor unfairly discriminatory, the Commissioner may disapprove the filing. f. Every insurer must file with the Commissioner every manual, policy form, endorsement, minimum rate, class rate, rating schedule, or rating plan that he proposes to use. Every filing must state the proposed effective date thereof and shall indicate the character and extent of the coverage contemplated. g. When a filing is not accompanied by the information upon which the insurer supports the filing and the Commissioner does not have sufficient information to determine whether the filing meets the requirements of Maryland law, the Commissioner will require the insurer furnish the supporting information within 60 days. In this event the waiting period will commence as of the date the information is furnished.

32 28 Maryland Law Supplement h. Information furnished in support of a filing includes the judgment of the filer, its interpretation of any statistical data it relies upon, the experience of other filers, and any other relevant information. i. Each filing must include the experience of the filer. A filing and any supporting information will be open to public inspection upon the date of filing. j. The Commissioner will review filings as soon as reasonably possible after they have been made to determine whether they meet the requirements of the filing law. Each filing will be on file for a waiting period of 30 working days before it becomes effective. k. The filings will be approved unless disapproved by the Commissioner within the waiting period or any extension thereof. A filing may be withdrawn or amended by the filer at any time prior to approval. l. Inland marine risks not written according to manual rates or rating plans need not be filed. In the case of fire insurance rates, consideration will be given to the experience of the filer. m. An insurer may reduce his rates by filing the reduction within 30 days of their effective date. The Commissioner may revoke any reduction of rates made in accordance with Maryland law upon finding after notice and hearing that the rates produced are in violation of Maryland law. n. Written notice of disapproval stating that the filing will not become effective will be sent if requirements of the law have not been met within the waiting period or any extension thereof. o. Any person or organization aggrieved with respect to any filing that is in effect or that has been filed and has not yet become effective may make written application to the Commissioner for a hearing within 30 days. p. Private passenger automobile rate discount [Sec ] An insurer that issues or renews a private passenger motor vehicle insurance policy must give an actuarially justified discount in rate to each individual who, during the preceding three years of continuous coverage with that insurer, has not had a moving traffic violation, has not received more than one point, and has had no chargeable traffic accidents. q. Title insurance [Secs , 402] With regard to title insurance, all rates must be reasonable and adequate for the class of risks to which they apply; all rates must not discriminate unfairly between risks involving essentially the same hazards and expense elements; due consideration will be given to past and prospective loss experience within and outside the state; and guarantees may be grouped by classification for the establishment of rates and minimum premiums. Maryland law with regard to title insurance applies to all kinds and classes of insurance that insure or guarantee titles to real or leasehold property or any estate therein or against loss by reason of defects, encumbrances, liens, or charges on real or leasehold property or any estate.

33 Maryland Law Supplement Premium finance agreements [Secs , 207, 301, 302, 305, 308, 402, 403, 406, 503, 504, 506] A premium finance agreement is any agreement by which an insured or prospective insured promises or agrees to pay to or to the order of another person or company an amount advanced or to be advanced under the agreement to the insurer or producer in payment of premiums on insurance contracts. It contains an assignment of or is otherwise secured by the unearned premium or refund obtainable from the insurer upon cancellation of the insurance contract. a. A premium finance company is any person who engages in the business of entering into or accepting premium finance agreements. b. Every premium finance company must register as such with the Commissioner prior to engaging in this business in the state of Maryland and must also file a bond in the sum of $50,000 with the Commissioner. 1.) Every premium finance company must maintain records of its premium finance transactions for at least three years, and the records will be open to examination by the Commissioner. 2.) Any insurers or producers who engage in the business of financing insurance premiums must register with the Commissioner. 3.) A copy of each premium finance agreement or other notice thereof describing the policy or policies involved must be given to the agency issuing the policy or policies of the insurers involved. c. A premium finance agreement must be dated and signed by or on behalf of the insured, and the printed portion must be in at least eight-point type. The agreement must contain the name and place of business of the insurance producer negotiating the related insurance contract. It must also set forth the following items where applicable: the total amount of the premium; the amount of the down payment; the principal balance; the amount of the finance charge; the balance payable by the insured; the number of installments required; the amount of each installment expressed in dollars and the due date or period thereof; an itemized list that includes the application prefix and number, the effective date of the contract and coverage, and the name of the insurer; and the electronic payment fee. Any other charge included not specified above shall be deemed to be an illegal premium finance charge.

34 30 Maryland Law Supplement d. No person may, unless otherwise authorized by law, charge, take, receive from, reserve, or impose on an insured or prospective insured any greater charges than are permitted by Maryland law. The maximum rates or charges set forth by Maryland law will be inclusive of all interest, fees, and charges incident to the premium finance agreement and for the extension of credit provided thereby. However, delinquency or other types of collection charges (including cancellation or reinstatement charges) may be in accordance with the limitations of Maryland law. e. Insurance premium finance companies may charge an initial service fee for actual expenses not to exceed $20 which may not be refunded upon cancellation or repayment. No premium finance company may induce an insured to become obligated under more than one premium finance agreement for the purpose of obtaining more than one initial service charge. f. A premium finance agreement may provide for the payment by the insured of a delinquency or collection charge on each installment in default for a period not less than five days in an amount of $1 to a maximum not to exceed 5% of the installment or $8 (with respect to private passenger automobile, personal fire or liability insurance) or $100 (with respect to commercial automobile, fire, or liability insurance), whichever is less, provided that only one delinquency and collection charge may be collected on any installment regardless of the period during which it remains in default. A premium finance company may charge a bad check fee not to exceed $25 for actual expenses incurred in the processing of a dishonored check. g. An insurance contract may not be cancelled by the premium finance company unless 10 days written notice of cancellation is mailed to the insured stating the intent of the premium finance company to cancel the insurance contract unless the defaulted installment payment is received within the 10-day period. After the expiration of this 10-day period, the premium finance company may cancel by mailing to the insurer a notice of cancellation, specifying the effective date of the cancellation, and the premium finance company will also mail a copy of the cancellation notice to the insured at his last known address. h. Any premium finance company or insurer or producer who willfully and knowingly violates the provisions of Maryland law with regard to premium financing shall be guilty of a misdemeanor and shall also be subject to a fine of not more than $1,000, imprisonment not to exceed one year, or both. i. Limitation on collection of amounts due after cancellation Whenever an insurance contract is canceled under a premium finance agreement, the premium finance company may not collect from an insured an amount due that is less than $5. 3. Oral and written binders [Sec ] Binders or other contracts for temporary insurance may be made orally or in writing and must include all the usual terms of the policy as to which the binder was given together with the applicable endorsements

35 Maryland Law Supplement 31 designated in the binder, except as superseded by the clear and express terms of the binder. a. No binder will be valid beyond the issuance of the policy with respect to which it was given. b. An insurer, within 45 days of the date a binder was issued, must either issue a policy or cancel the binder. c. A notice of cancellation shall: be in writing; have an effective date not less than 15 days after mailing; state clearly and specifically the insurer s actual reason for the cancellation; and be sent by certificate of mail to the named insured s last known address. d. A notice of cancellation for nonpayment of premium shall: be in writing; have an effective date of not less than 10 days after mailing; state the insurer s intent to cancel for nonpayment of premium; and be sent by certificate of mail to the named insured s last known address. e. Material risk factor means a risk factor that: was incorrectly recorded or not disclosed by the insured in an application for insurance; was in existence on the date of the application; and modifies the premium charged on the policy or binder in accordance with the rates and supplementary rating information filed by the insurer. 4. Unfairness or discrimination in underwriting [Secs ; (a) (1), (d)(1), (e-2)(4)(i), (i)(1); ] a. No insurer or producer may cancel or refuse to underwrite or renew a particular insurance risk for any reason based in whole or in part upon race, color, creed, sex, or blindness of an applicant. No insurer or producer may cancel or refuse to underwrite or renew a particular insurance risk because of the geographic location of risks as well. b. A motor vehicle insurance policy may not be cancelled or nonrenewed solely because of the policyholder s age, physical handicap, or disability. In addition, the premium for a motor vehicle insurance policy may not be increased solely because the insured is older than 65 years of age or the policyholder has a physical handicap or disability, unless there is actuarial justification for the increase. c. An insurer may not refuse to issue or renew a motor vehicle insurance contract or a property or casualty insurance contract solely because the subject of the risk or the applicant s or insured s address is located in a certain geographic area of

36 32 Maryland Law Supplement the state unless, at least 60 days before the refusal, the insured has filed a written statement designating the geographic area with the Commissioner, and the designation has an objective basis and is not arbitrary or unreasonable. d. With respect to automobile liability insurance, an insurer may not: cancel, refuse to renew, or otherwise terminate coverage for an automobile insurance risk because of a claim, traffic violation, or traffic accident that occurred more than three years before the effective date of the policy or renewal; or refuse to underwrite an automobile insurance risk because of a claim, traffic violation, or traffic accident that occurred more than three years before the date of application. e. With respect to homeowner s insurance, an insurer may not: cancel, refuse to renew, or otherwise terminate coverage for a homeowner s insurance risk because of a claim that occurred more than three years before the effective date of the policy or renewal; or refuse to underwrite a homeowner s insurance risk because of a claim that occurred more than three years before the date of application. A refusal may apply in claims involving conviction of the insured or applicant for fraud or arson. 5. Prohibited inducements and discrimination [Sec ] a. A property, casualty or surety insurer may not unfairly discriminate between insureds or properties having like insuring or risk characteristics in: the premium or rates charged for insurance; the dividends or other benefits payable on the insurance; or any of the other terms or conditions of the insurance. b. An insurer may not make or allow a differential in ratings, premium payments, or dividends for a reason based on the sex, physical handicap, or disability of an applicant or policyholder unless there is actuarial justification for the differential. c. This section does not prohibit an insurer from: paying commissions or other compensation to licensed insurance producers; or allowing or returning to its participating policyholders, members, or subscribers lawful dividends, savings, or unabsorbed premium deposits. 6. Cancellation of agreement with producer [Sec ] No insurer may cancel a written agreement with a producer with respect to insurance or refuse to accept insurance business from the producer unless it complies with Maryland law. If an insurer intends to cancel a written agreement with a producer or intends to refuse any class or renewal business from the producer, the insurer shall give the producer no less than 90 days written notice. a. No insurer may cancel or refuse to renew the policy of the insured because of the termination of the producer s contract.

37 Maryland Law Supplement 33 b. An insurer may not cancel a written agreement with a producer with respect to property or casualty insurance because of an adverse loss ratio experience on the producer s book of business. If the insurer requires the producer to submit the application for underwriting approval, and all material information on the application was fully completed (and the producer has not omitted nor altered any information provided by the applicant); or the insurer accepted, without prior approval, policies issued by the producer, if all material information on the application or on the insurer s copy of any policy issued by the producer was fully completed (and the producer has not omitted nor altered any information provided by the applicant). 7. Countersigning policies [Sec ] A resident producer does not have to sign or countersign a policy unless the state of the nonresident producer requires such when a nonresident producer writes coverage in their state. A policy is not invalid because of an absence of a required signature or countersignature. Only a qualified producer who is a resident of Maryland, who is compensated by commissions on these policies, and who is not an employee or officer of the insurer is granted the power to sign or countersign policies or endorsements subject to Maryland law. Countersignature laws do not apply to: reinsurance; life and health insurance or annuities; insurance of the rolling stock, vessels, or aircraft of any common carrier in interstate or foreign commerce; insurance of property in the course of transportation; insurance of wet marine and transportation risks; bid bonds; or insurance written through the Maryland auto insurance plan or the Maryland property insurance availability program. 8. Nationwide Definition [COMAR Sec ] Maryland has adopted the NAIC model law for the Nationwide Definition, which lists the types of property that may be covered under ocean marine, commercial inland marine, and personal inland marine policies. The Nationwide Definition is discussed in detail in your National License Exam Manual. 9. Unfair claim settlement practices [Secs to 305, COMAR (B)] a. Some actions performed by an insurer are considered unfair claim settlement practices and are subject to a fine of up to $2,500 for each violation. The insurer may also be required to pay restitution to a claimant who has suffered actual economic damage as a result of the violation. Those actions include: misrepresenting pertinent facts or policy provisions; refusing to pay a claim for an arbitrary or capricious reason; attempting to settle a claim based on an altered application; failing to include a statement with a claim setting forth the coverage under which payment is made;

38 34 Maryland Law Supplement failing to settle promptly when liability is reasonably clear to influence settlements under other parts of the policy; failing to provide a reasonable explanation for a denial; and failing to act in good faith in settling a first-party property-casualty claim. b. It is also an unfair claim settlement practice for an insurer, when committed with the frequency to indicate a general business practice, to: misrepresent pertinent facts or policy provisions that relate to the claim or coverage at issue; fail to acknowledge and act with reasonable promptness on communications about claims that arise under policies; fail to adopt and implement reasonable standards for the prompt investigation of claims that arise under policies; refuse to pay a claim without conducting a reasonable investigation based on all available information; fail to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed; fail to make a prompt, fair, and equitable good faith attempt to settle claims for which liability has become reasonably clear; compel insureds to institute litigation to recover amounts due under policies by offering substantially less than the amounts ultimately recovered in actions brought by the insureds; attempt to settle a claim for less than the amount to which a reasonable person would expect to be entitled after studying written or printed advertising material accompanying, or made part of, an application; attempt to settle a claim based on an application that is altered without notice to, or the knowledge or consent of, the insured; fail to include with each claim paid to an insured or beneficiary a statement of the coverage under which the payment is being made; make known to insureds or claimants a policy of appealing from arbitration awards to compel insureds or claimants to accept a settlement or compromise less than the amount awarded in arbitration; delay an investigation or payment of a claim by requiring a claimant or a claimant s licensed health care provider to submit a preliminary claim report and subsequently to submit formal proof of loss forms that contain substantially the same information; fail to settle a claim promptly whenever liability is reasonably clear under one part of a policy to influence settlements under other parts of the policy; fail to provide promptly a reasonable explanation of the basis for denial of a claim or the offer of a compromise settlement; refuse to pay a claim for an arbitrary or capricious reason based on all available information; and fail to act in good faith in settling a first-party property-casualty claim. c. Standards for prompt investigation of claims A first party claim is one filed by an insured for payment under the insured s policy. If an insurer has

39 Maryland Law Supplement 35 not completed its investigation of a first-party claim within 45 days after being notified of the claim, it must promptly provide written notice to the insured of the reason that additional time is necessary to complete the investigation. Notice must be sent after each additional 45-day period until the insurer either affirms or denies coverage and damages. Insurers shall, for at least three years, make available for inspection by the Maryland Insurance Administration, records of denials of claims and supporting documentation. 10. Penalties for first party claim violations [Sec ] An insurer that fails to act in good faith when settling first party property-casualty claims may be fined up to $125,000 for each violation and be ordered to pay the following restitution to the insured: Actual damages, which may not exceed the limits of any applicable policy Expenses and litigation costs incurred by the insured in pursuing an administrative complaint under the state s unfair claims settlement practices act, including reasonable attorney s fees Interest on all actual damages, expenses, and litigation costs incurred by the insured at a rate of 10% per year (interest accrues from the date the claim would have been paid if the insurer had acted in good faith) The amount of attorney s fees recovered may not exceed one-third of the actual damages. 11. Fraudulent insurance acts [Sec , 408] The following actions are considered fraudulent insurance acts and are subject to a fine for each violation, the maximum of which will not exceed three times the value of the claim that is the subject of fraud or $10,000, whichever is greater; the minimum fine is $500: failure to knowingly return premiums when insurance coverage is not ultimately provided; knowingly presenting to an insurer false written documentation or statements concerning a claim; willfully collecting amounts as premiums that are actually in excess of the applicable premium for the insurance under approved classifications and rates; misappropriate or unreasonably withhold funds received that represent premiums or return premiums; and misappropriate benefits under an insurance policy. 12. Bail bond [Secs ; COMAR ,.03,.04,.05,.07,.08,.10,.11] Insurers may only pay commission or other compensation for procurement of a bail bond to a surety agent (one who holds a valid license issued by the Commissioner for the sale of surety insurance and is appointed by an insurer). A surety agent may be an individual, a partnership, or a corporation. a. A bail bondsman, before conducting business, must be appointed by an insurer and file a power of attorney executed by a surety insurer with the Commissioner and the chief clerk of the District Court of Maryland that evidences the authorization of the surety producer to conduct business.

40 36 Maryland Law Supplement b. A bail bondsman may not execute a bail bond without charging a specific premium for the transaction. c. A surety agent must maintain records of all bail bond transactions for at least one year. Records are subject to inspection by the Commissioner. d. A surety agent must describe, in an affidavit, any collateral received in connection with a bail bond transaction. Immediately upon the discharge of the bond, the surety agent must return any collateral held. Any unpaid premiums may be deducted from any collateral being returned. e. A bail bondsman must comply with any continuing education requirements that the Commissioner approves. 13. Requests for change of agent or broker of record [Sec ] a. An authorized insurer must honor a policyholder s request for a change of insurance producer of record within 30 working days after receipt of the request unless the policyholder withdraws the request in writing. b. The new insurance producer of record must have a current appointment and contract with the authorized insurer before the change of insurance producer of record will be effective. c. The new insurance producer of record must be paid all commissions payable on the policy effective not later than the next anniversary date of the policy following the effective date of change. 14. Illegally employed minors [Sec ] When a workers compensation insurance policy is renewed, the insurer must give the employer a conspicuous written notice that the employer must have a work permit for each minor employee as required by law. 15. Duties of insurer following determination of total loss of motor vehicle [COMAR ] Within 10 business days after determining that a motor vehicle of a first-party claimant is a total loss, the insurer must: make an offer of a cash settlement; or if authorized by the policy, replace the motor vehicle. 16. Cancellation and nonrenewal of personal lines policies [Secs (c)(2), 602] a. This section applies to personal lines property-casualty insurance policies issued in Maryland. Personal insurance does not include: private passenger motor vehicle liability insurance; policies issued by the Maryland Automobile Insurance Fund; policies issued by the Joint Insurance Association; or surety insurance.

41 Maryland Law Supplement 37 b. An insurer must provide at least 10 days notice of cancellation if a policy is being cancelled for nonpayment of premium and at least 45 days notice if the policy is being cancelled or nonrenewed for another reason. The notice must be written and sent to the insured via certified mail. Notice given by an insurance producer on behalf of the insurer is deemed to have been given by the insurer. Notice is not required if the insured has replaced the insurance. c. If a personal lines policy is being nonrenewed or cancelled for a reason other than nonpayment of premium, the insurer must also provide written notice that the insured may be able to obtain replacement coverage through the Maryland Property Insurance Availability Act. The notice must contain the current address and telephone number of the offices of the appropriate plan. d. An insurer may only cancel a policy midterm for the following reasons: Material misrepresentation or fraud in connection with the application, policy, or presentation of a claim A matter or issue related to the risk that constitutes a threat to public safety Change in the condition of the risk that results in an increase in the hazard insured against Nonpayment of premium For homeowner s insurance, conviction of arson e. If an insurer cancels or refuses to renew a policy for a reason other than nonpayment of premium, it must provide a written statement of the actual reason for cancellation or nonrenewal. The reason given must be clear and specific and must include an offer by the insurer to provide additional information in support of the proposed action. 17. Cancellation and nonrenewal of private passenger motor vehicle insurance [Sec ] a. A policy of private passenger motor vehicle liability insurance or a binder of private passenger motor vehicle liability insurance, if the binder has been in effect for at least 45 days, issued in the state to any resident of the household of the named insured, an insurer may: cancel or fail to renew the policy or binder; or reduce coverage under the policy. b. An insurer must provide at least 10 days notice of cancellation if a policy is being cancelled for nonpayment of premium and at least 45 days notice if the policy is being cancelled or nonrenewed for another reason. The notice must be written and sent to the insured via certified mail. Notice given by an insurance producer on behalf of the insurer is deemed to have been given by the insurer. Notice is not required if the insured has replaced the insurance. c. If an insurer cancels or refuses to renew a policy for a reason other than nonpayment of premium, it must provide a written statement of the actual rea-

42 38 Maryland Law Supplement son for cancellation or nonrenewal. The insured can file a protest with the Commissioner within 30 days of receiving the notice. The Commissioner could hold a hearing, giving the insured at least 10 days of notice before the hearing. Within 30 days of the hearing, the Commissioner shall issue an order of the conclusion of the hearing. 18. Premium renewal notices [Sec , 610] a. This section applies only to policies of personal insurance and private passenger motor vehicle liability insurance policies. b. At least 45 days prior to the renewal date, the insurer must send a notice to the named insured and the insurance producer, if any, that indicates both the amount of the renewal policy premium and the amount of the expiring policy premium. A licensed producer may provide this notice on behalf of the insurer. c. If an insurer fails to provide notice of renewal premium due, and subsequently the policyholder fails to make timely payment of the renewal premium, the insurer must: provide coverage for each claim that would have been covered under the policy and that arises within 45 days after the date the insured discovers or should have discovered that the policy was not renewed; and renew the policy if the premium is paid within 30 days after the policyholder discovers or should have discovered that the policy was not renewed. 19. Cancellation and nonrenewal of commercial lines policies [Sec , 603, 605] a. This section applies only to commercial lines property-casualty insurance policies issued in Maryland. Commercial insurance does not include: policies issued by the Maryland Automobile Insurance Fund; policies issued by the joint insurance association; workers compensation insurance; or title insurance. b. An insurer must provide at least 10 days notice of cancellation if a policy is being cancelled for nonpayment of premium and at least 45 days notice if the policy is being cancelled or nonrenewed for another reason. c. If an insurer cancels or refuses to renew a policy for a reason other than nonpayment of premium, it must provide a written statement of the actual reason for cancellation or nonrenewal. The reason given must be clear and specific and must include an offer by the insurer to provide additional information in support of the proposed action if requested in writing within 30 days by the insured. If the insured makes this request, the insurer must respond in writing within 15 days.

43 Maryland Law Supplement Nonrenewal for age, disability, or physical handicap [Sec ] No policy or contract of motor vehicle insurance shall be cancelled or nonrenewed exclusively for the reason of age of the holder of the policy or contract, nor shall any premium therefore be increased exclusively for the reason of age beyond 65 years of an insured under the policy or contract. 21. Change of interest on death [Sec ] A change of interest on the death of the insured does not void property insurance, and the property insurance passes to the person taking the interest in the property. 22. Fraud and false statements a. Under the Violent Crime Control Law Enforcement Act, a person who has been convicted of a felony involving breach of trust, dishonesty, or insurance crimes, as defined in 18 U.S. 1033, is prohibited from engaging in insurance activities unless written consent is granted by the Commissioner. Any individual who has been convicted of a felony, as described, and who desires a license to engage in insurance transactions may seek an exemption from the federal prohibition of engaging in insurance activities by filing an application for licensure with the Commissioner. b. It is a crime for a person who transacts insurance in interstate commerce (within the states and territories of the United States) to make false material statements in connection with financial reports or documents presented to insurance regulators or their deputies appointed to investigate the person with the intent to influence the actions of these officials. 1.) Violation of this act is subject to: a fine; imprisonment for up to 10 years; or both. 2.) Imprisonment can be ordered for up to 15 years if the false statements jeopardized the safety and soundness of an insurer and were a significant cause of the insurer being placed in conservation, rehabilitation, or liquidation by the courts. 3.) Officers, directors, agents, and employees of an insurance company who willfully embezzle or misappropriate funds are subject to the same consequences described previously. 4.) The attorney general may also prosecute such offenders. Upon conviction, they are subject to a penalty of up to $50,000 for each violation or the amount of compensation that the person received or offered for the prohibited conduct, whichever is greater. 23. Fair credit reporting act [Sec ] Credit history means any written, oral, or other communication of any information by a consumer reporting agency bear-

44 40 Maryland Law Supplement ing on a consumer s creditworthiness, credit standing, or credit capacity that is used or expected to be used, or collected in whole or in part, for the purpose of determining personal lines insurance premiums or eligibility for coverage. a. With respect to homeowners insurance, an insurer may not: refuse to underwrite, cancel, or refuse to renew a risk based, in whole or in part, on the credit history of an applicant or insured; rate a risk based, in whole or in part, on the credit history of an applicant or insured in any manner, including the provision or removal of a discount, assigning the insured or applicant to a rating tier, or placing an insured or applicant with an affiliated company; or require a particular payment plan based, in whole or in part, on the credit history of the insured or applicant. b. With respect to private passenger motor vehicle insurance, an insurer may not: refuse to underwrite, cancel, refuse to renew, or increase the renewal premium based, in whole or in part, on the credit history of the insured or applicant; or require a particular payment plan based, in whole or in part, on the credit history of the insured or applicant. c. An insurer may use the credit history of an applicant to rate a new policy of private passenger motor vehicle insurance. Rating includes: the provision or removal of a discount; assigning the applicant to a rating tier; or placing an applicant with an affiliated company. d. With respect to private passenger motor vehicle insurance, an insurer that rates a new policy based, in whole or in part, on the credit history of the applicant: may not use a factor on the credit history of the applicant that occurred more than five years prior to the issuance of the new policy; shall advise an applicant at the time of application that credit history is used; and shall, on request of the applicant, provide a premium quotation that separately identifies the portion of the premium attributable to the applicant s credit history. e. An insurer may not use the following factors in rating the policy: The absence of credit history or the inability to determine the applicant s credit history The number of credit inquiries about an applicant s credit history f. The insurer shall review the credit history of an insured who was adversely impacted by the use of the insured s credit history at the initial rating of the policy every two years or on request of the insured and shall adjust the premium

45 Maryland Law Supplement 41 of an insured whose credit history was reviewed under this subparagraph to reflect any improvement in the insured s credit history or shall disclose to the applicant at the time of the issuance of a policy that the insurer is required to: review the credit history of an insured who was adversely impacted by the use of the insured s credit history at the initial rating or underwriting of the policy every two years, or on request of the insured; and adjust the premium of an insured whose credit history was reviewed to reflect any improvement in the insured s credit history. g. With respect to private passenger motor vehicle insurance, an insurer that rates a new policy based, in whole or in part, on the credit history of the applicant may, if actuarially justified, provide a discount of up to 40% or impose a surcharge of up to 40%. II. MARYLAND LAWS, RULES, and REGULATIONS PERTINENT TO PROPERTY INSURANCE ONLY FAIR PLAN [Secs , 403, 405, 406] The FAIR Plan was created by the Maryland Property Insurance Availability Act. The FAIR Plan in Maryland is also referred to as the Joint Insurance Association. The Association consists of all insurer that are licensed to write property insurance in this state. An insurer must be and remain an Association member to transact essential property insurance. 1. A person with an insurable interest in real or tangible personal property at a fixed location may apply to the Association for essential property insurance or homeowner s insurance if the person has been: unable to obtain essential property insurance or homeowner s insurance; able to obtain essential property insurance or homeowner s insurance only after application; or able to obtain only partial coverage for the value of the property. 2. The FAIR Plan is intended to: make essential property insurance and certain homeowners insurance available to all qualified applicants, with the least possible administrative detail and expense, subject to Maryland law; encourage the improvement of the condition of properties located in urban areas of Maryland and to further orderly community development generally; encourage the delivery of essential property insurance at the most reasonable cost possible, provided the pricing of essential property insurance in the Maryland Joint Insurance Association may not actively compete with the pricing of property insurance in the voluntary insurance market; and use fully the voluntary insurance market as a source of essential property and homeowners insurance.

46 42 Maryland Law Supplement 3. Insurance companies share in the expenses and losses in proportion to the standard premium they write in Maryland. Coverage written under the FAIR Plan is provided for owner/occupants of one to four family dwellings. Again, the basic purpose of the FAIR Plan is to provide property coverage available to those who are unable to obtain it in the normal or standard market and to improve property conditions in urban areas. Dwelling and HOMEOWNERS Provisions 1. Water damage from sewers and drains [Sec ] Insurers that sell homeowners policies in Maryland must provide a written offer of coverage for loss caused by water that backs up through sewers or drains that is not caused by the insured s negligence. This offer must be made at the time of application and renewal. Within seven calendar days after the date of application or at the renewal date, this coverage can be obtained by either telephone or internet contact. 2. Anti-arson coverage [Secs ] To promote the public welfare by reducing fire damage to property and loss of life that is caused by arson, insurers are required to secure anti-arson applications that contain information to control the incidence of arson fraud from applicants for new policies of property insurance. a. If an anti-arson application is required, an insurer may not insure the building against the peril of fire unless it first receives an anti-arson application signed and affirmed by the insured. The designation of any geographic area of the state by the Commissioner is not a valid reason for an insurer to refuse to issue or renew or to terminate a policy or contract. b. An insurer may terminate a policy for which an anti-arson application is required at any time within 90 days after the insurer accepts the anti-arson application. The insurer must state the specific reasons for terminating the policy in the notice to the insured. 3. Disclaimer of coverage [Sec ] An insurer may disclaim coverage on a liability insurance policy if the insured or a person claiming benefits has breached the policy by failing to cooperate with the insurer or by not giving the insurer required notice only if the insurer establishes by a preponderance of the evidence that the lack of cooperation or notice has resulted in prejudice to the insurer. 4. Flood disclosure requirement [Sec ] a. An insurer that transacts homeowners insurance in Maryland must, at the time a policy of homeowners insurance is initially purchased, provide an applicant with a written notice that states that a standard homeowners insurance policy does not cover losses due to flood. b. The notice must: state that flood insurance may be available through the National Flood Insurance Program (NFIP) or other sources; provide the applicant with the contact information for the NFIP;

47 Maryland Law Supplement 43 advise the applicant to confirm the need for flood insurance with the NFIP or the applicant s mortgage lender; advise the applicant to contact the NFIP, the applicant s insurer, or the applicant s insurance producer for information about flood insurance; advise the applicant that flood insurance may be available for covered structures and their contents; advise the applicant that a claim under a flood insurance policy may be adjusted and paid on a different basis than a claim under a homeowners insurance policy; and advise the applicant that a separate application must be completed to purchase flood insurance. c. If an application is made by telephone, the insurer is deemed to be in compliance if, within seven calendar days after the date of application, the insurer sends by certificate of mailing the notice to the applicant or insured. d. If an application is made using the Internet, the insurer is deemed to be in compliance if the insurer provides the notice to the applicant prior to the submission of the application. 5. Lead hazard coverage [Sec ] As used below, affected property means any residential rental property constructed before 1950, or for which the owner makes an election under the Maryland Environmental Article. a. Whenever an authorized insurer issues or renews a policy for an affected property, the insurer may include in the policy a lead hazard coverage exclusion. b. If a policy contains a lead hazard coverage exclusion, the insurer must waive the exclusion to the extent of a qualified offer made under the Environment Article if: the owner of the affected property complies with Title 6, Subtitle 8, Part III of the Environment Article; the affected property passes the test for lead-contaminated dust, or has undergone the lead hazard reduction treatments and complies with the risk reduction standard under the Environment Article; and the insured submits a current verified report completed by an accredited inspector certifying that the property complies with the standards set forth under this statute. c. Instead of waiving a lead hazard coverage exclusion, an authorized insurer may offer an alternative form of coverage for a qualified offer made under the Environment Article. d. An authorized insurer may exclude lead hazard coverage for an affected property in excess of the amount of a qualified offer made under the Environment Article.

48 44 Maryland Law Supplement e. An authorized insurer may cancel or nonrenew lead hazard coverage or reimpose a lead hazard coverage exclusion in a policy for an affected property only if: the insured fails to pay the applicable premium, provide the authorized insurer or the authorized insurer s designee reasonable access to the affected property to inspect for the presence or condition of lead, comply with the terms or conditions of the policy, or perform lead hazard reduction treatments; or the affected property fails to comply or maintain compliance with the risk reduction standard under 6-815(a)(2) of the Environment Article. f. Before terminating lead hazard coverage, the authorized insurer must: mail written notice to the insured that the insurer intends to cancel or nonrenew the coverage or to reimpose the exclusion; and provide an opportunity to the insured to correct the violation within 30 days after the notice is mailed. g. Coverage is automatically reinstated if the violation is corrected within 30 days after the notice is mailed. h. Within 45 days after mailing a notice of cancellation or nonrenewal of coverage or reimposition of an exclusion under this paragraph, the authorized insurer must send a copy of the notice to the Secretary of the Environment and include the results of any inspection of the affected property. i. Triggering claim [Sec ] The notice provided to an insured that a person at risk has an elevated blood lead level will be deemed a claim against the insured for the purpose of triggering the authorized insurer s duty to respond on behalf of the insured in accordance with the Environment Article. 6. Special provisions endorsement dwelling policy The special provisions endorsement is mandatory for all dwelling policies in Maryland. Provisions include: a. Notice to the mortgagee of policy cancellation or nonrenewal is changed from 10 to 15 days for new policies in effect for fewer than 45 days. b. The cancellation provisions are amended to conform to state law 7. Homeowners endorsements a. Special computer coverage Adds coverage for computers, peripherals, data and software. Exclusions include the following: Freezing Theft to a building under construction Mold

49 Maryland Law Supplement 45 V&MM Acts and decisions Renovations Collision Birds, animals or insects Equipment breakdown Industrial smoke/smog Wear and tear b. Special provisions The special provisions endorsement is mandatory for all Homeowners policies in Maryland. Provisions include the following: Notice to the mortgagee of policy cancellation or nonrenewal is changed from 10 to 15 days for new policies in effect for fewer than 45 days The cancellation provisions are amended to conform to state law III. MARYLAND LAWS, RULES, and REGULATIONS PERTINENT TO CASUALTY INSURANCE ONLY Cancellation and nonrenewal of private passenger motor vehicle liability insurance [Sec ] 1. This section applies only to private passenger motor vehicle liability insurance. It does not apply to the Maryland Automobile Insurance Fund. 2. An insurer must provide at least 10 days notice of cancellation if a policy is being cancelled for nonpayment of premium and at least 45 days notice if the policy is being cancelled or nonrenewed for another reason. The notice must be sent to the insured via certified mail. 3. The notice must be in writing and provide a clear and specific statement of the actual reason for cancellation or nonrenewal and the effective date. The notice must also include information about the insured s right to replace the insurance through the Maryland Automobile Insurance Fund and the current address and telephone number of the Fund. 4. The insured has 30 days to protest the insurer s decision to cancel or nonrenew and request a hearing on the matter with the Commissioner. The insurer must keep coverage in force until the hearing is completed. If the Commissioner finds that the insurer acted illegally or in bad faith, she may order the insurer to pay the insured s attorney fees. 5. An insurer may not cancel a policy midterm except for the following reasons: Material misrepresentation or fraud in connection with the application, policy, or presentation of a claim

50 46 Maryland Law Supplement A matter or issue related to the risk that constitutes a threat to public safety Change in the condition of the risk that results in an increase in the hazard insured against Nonpayment of premium Revocation or suspension of a named insured s or covered driver s driver s license or motor vehicle registration for reasons related to driving record 6. Exclusion of named driver [Sec ] a. If an insurer is authorized to cancel, nonrenew, or increase the premiums on a private passenger motor vehicle liability policy because of the claim experience or driving record of an individual insured under the policy, the insurer must offer to continue or renew the insurance with coverage excluded for this particular driver. An insurer may also exclude such a driver when issuing a policy. b. The premiums charged on any policy excluding a named driver must not reflect the claims experience or driving record of the excluded named driver. 7. Warranty for aftermarket parts [Sec ] An insurer that delivers a policy of motor vehicle liability insurance that provides physical damage coverage must provide, on request of the insured, a copy of the warranty for aftermarket crash parts, if available. 8. Disabled persons: rental vehicle reimbursement [Sec ] If an auto policy issued to a disabled person provides for reimbursement of the costs of a rental car, the insurer must provide a reimbursement rate of up to $100 per day, with a maximum of $1,500 per policy period. 9. Personal auto insurance information a. Required limits [Trans. Sec ] Auto liability insurance is compulsory for all vehicles registered in Maryland except farm vehicles and mopeds. The minimum financial responsibility limits in the state of Maryland are 30/60/15: $30,000 per person per accident for bodily injury or death $60,000 per accident for bodily injury or death $15,000 per accident for property damage b. Family day care providers [Sec ] An insurer that issues or delivers a policy or contract of motor vehicle liability insurance in Maryland to a policyholder who is registered as a family day care provider must offer minimum financial responsibility limits for liability that results from bodily injury: to a family day care child while the child is a passenger in an automobile; and that arises out of an insured s activities as a family day care provider. c. Family members [Sec ] The form must clearly and concisely explain in 10 point boldface type that an insurer may not refuse to underwrite a first named insured because the first named insured requests or elects the liability

51 Maryland Law Supplement 47 coverage for claims made by family members in an amount equal to the coverage provided for claims made by nonfamily members. d. Uninsured motorist coverage [Sec ] Uninsured motorist coverage is mandatory in Maryland as well and includes underinsured motorist coverage. An insured may elect coverage up to the bodily injury liability limits provided by the policy. 1.) Coverage required In addition to any other coverage required, each motor vehicle liability insurance policy issued, sold, or delivered in the state shall contain coverage for damages, subject to the policy limits, that: the insured is entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injuries sustained in a motor vehicle accident arising out of the ownership, maintenance, or use of the uninsured motor vehicle; and a surviving relative of the insured is entitled to recover from the owner or operator of an uninsured motor vehicle because the insured died as the result of a motor vehicle accident arising out of the ownership, maintenance, or use of the uninsured motor vehicle. Minimum coverage is 30/60. e. Personal injury protection [Secs to 507] No-fault benefits are provided under auto insurance in Maryland. No policy of motor vehicle liability insurance may be issued in Maryland unless the policy also affords the minimum medical, hospital, and disability benefits set forth by Maryland law. The minimum for these benefits includes an amount up to $2,500 for payment of all reasonable expenses arising from the accident and incurred within three years from the date of the accident for necessary medical, surgical, X-ray, and dental services, prosthetic devices, and other necessary ambulance, hospital, professional nursing, and funeral service benefits. 1.) Medical expenses will be paid by the insurer without regard to fault of the insured and without regard for collateral sources benefits, subrogation, nonduplication of coverage, and coordination of policies. 2.) Benefits are also paid for 85% of income lost within three years after a motor vehicle accident by an injured individual who was earning income at the time of accident. Benefits are payable to reimburse expenses incurred for essential services ordinarily performed for the care and maintenance of the injured individual s family or household (if the injured individual was not earning income when the accident occurred). 3.) If the insured elects to coordinate coverage from policies that provide the same benefits, he must indicate in writing which policy is to become primary. Full PIP provides benefits for the insured, any member of the insured s family, and any nonfamily occupant of the insured s vehicle. An insured may also choose limited PIP, which excludes benefits for the insured and members of the insured s family age 16 and over. This alternative costs less and should be considered if the insured already has medical and hospitalization insurance.

52 48 Maryland Law Supplement 4.) The insurer may require the insured to furnish reasonable medical proof of his injury causing any loss of income. If the person injured was not an income or wage producer at the time of the accident, benefits will be paid in the form of reimbursement for the necessary and reasonable expenses incurred for essential services ordinarily performed by the injured person for the care and maintenance of the family or family household. 5.) An injured person s right to sue for damages or losses sustained as a result of an auto accident is not affected. 6.) Time for filing claim; payments of claims [Sec , COMAR ] An insurer may impose a deadline for submitting an original claim for benefits after an accident. This deadline may not be less than 12 months after the accident, and the insured must be given written notice of this date when the accident report is submitted. a.) The insurer must pay covered claims within 30 days after receiving satisfactory proof of claim. 7.) Exclusions Some of the more common exclusions involve any person insured under a policy who: intentionally causes the accident resulting in injury; is injured while operating or voluntarily riding in a vehicle known by him to be stolen; is injured while in the commission of a felony or while in violation of other statutes of Maryland law; or is a pedestrian injured in an accident outside of Maryland and is not a resident of Maryland. 8.) In the case of motorcycles, mopeds, or motor scooters, an insurer may exclude the economic loss benefits described in this section; or offer the economic loss benefits with deductibles, options, or specific exclusions. f. Collision coverage; rental cars [Sec ] Each insurer that issues, sells, or delivers a motor vehicle insurance policy in Maryland must offer collision coverage for damage to insured motor vehicles subject to deductibles of $50 to $250 in $50 increments. 1.) If a private passenger motor vehicle insurance policy includes collision coverage under this section, the motor vehicles insured under that coverage must include any passenger car that is rented by an insured for a period of 30 days or less. 2.) If a private passenger motor vehicle insurance policy includes comprehensive coverage, the motor vehicles insured under that coverage must include any replacement vehicle.

53 Maryland Law Supplement 49 3.) Each insurer that provides a private passenger motor vehicle insurance policy that includes collision coverage must give notice that the insured does not need a collision damage waiver or any additional collision coverage when renting a passenger car for a period of 30 days or less during the term of the policy. 4.) An insurer may not deny coverage to an insured for collision damage to a rental passenger car because: the motor vehicle accident involved an uninsured motorist; or the identity of the motor vehicle causing the damage cannot be ascertained. 5.) An insurer may offer to provide to the insured coverage for damages incurred by the insured as a result of the loss of use of a rental vehicle that sustains collision damage while rented by the insured. g. Measurement of time periods [COMAR ] The time period within which a certain number of claims or occurrences have occurred is measured from the effective date of the coverage or renewal. h. Determination of fault [COMAR ] Private passenger uninsured motorist and comprehensive coverage claims are presumed to be notat-fault. This presumption may be overcome if the carrier demonstrates that the claim was an at-fault claim. In a consumer complaint proceeding for cancellation or refusal to renew coverage, based wholly or partly on an accident, the Insurance Administration may: review the insurer s determination of fault for the accident; and decide whether the insurer s determination of fault was arbitrary or capricious. Payment of a settlement by an insurer for an accident is evidence of the insured s fault for the accident but is not conclusive proof of fault. MARYLAND AUTO INSURANCE FUND 1. Purpose [Sec , 301] a. The purpose of the Maryland Auto Insurance Fund (MAIF) is to provide automobile liability insurance to those applicants who are unable to secure coverage in the normal or standard market. b. The fund is authorized to sell, issue, and deliver, upon payment of the premium set by the fund, a policy of auto liability insurance to any Maryland resident who owns an automobile validly registered in Maryland and who does not owe to the fund any unpaid insurance premiums with respect to a prior expired or cancelled policy. c. The Maryland Automobile Insurance Fund is a member of the Property and Casualty Insurance Guaranty Corporation.

54 50 Maryland Law Supplement 2. Eligibility [Sec , 502] a. An individual who is a resident of Maryland is eligible for coverage under the MAIF if the applicant has, in good faith, attempted to obtain a policy of auto liability insurance from at least two private insurers authorized to write these contracts in Maryland and has been rejected or refused coverage based on reason other than nonpayment of premiums. b. In addition, an applicant will also be eligible for coverage under the MAIF if he has had a policy of automobile liability insurance cancelled or nonrenewed by a private insurer for any reason other than nonpayment of premiums. c. Definition of covered vehicle A covered vehicle may be an automobile, truck, van, and trailer. It may not be a motorcycle, low speed vehicle, or motorbike. 3. Coverages [Secs , 509, 516, 517, 520] A policy issued by the fund shall contain the minimum insurance coverage required by the State of Maryland. a. The fund may cancel a policy or reject an application at any time for nonpayment of premiums or a license suspension or revocation; the insured/ applicant may appeal the cancellation/rejection within 10 days after receipt of the notification. b. The fund is liable for coverage on the date bound by a producer; however, upon review of the application, the fund may within 60 days from the effective date cancel and refuse to issue a policy if the applicant is not qualified for insurance with the fund, the appropriate premium was not paid, or the fund is authorized to cancel due to nonpayment of premiums or a license suspension. c. It is permissible for an insurer to assume coverage of an insured covered by the fund if the insured agrees and notice of at least 60 days prior to termination is given to the fund. d. An insurer may not refuse to issue an auto insurance policy, at the same rate charged a person who had not been previously insured by the fund, to any person who has completed a three-year period of coverage with the fund, had no moving traffic violations, and has not had any chargeable traffic accidents. 4. Producers responsibilities [Secs to 513] Every producer is a fiduciary as to all premiums, return premiums, or other monies received. a. On the application to the fund to be appointed as a producer, the applicant must file a bond in the amount of $10,000, and it must be continuously maintained while the producer has authority to write business with the fund. b. A producer s commission is not to exceed 10% of the total policy premium.

55 Maryland Law Supplement 51 c. Any producer licensed in Maryland may bind the minimum required coverage for an applicant in the fund upon the application being submitted to the producer and payment of the appropriate premiums. d. The fund shall make available to producers rules and regulations relating to binding authority. e. The fund may refuse applications from a producer who is in violation of the rules and regulations of the Fund. WORKERS COMPENSATION [Secs , 209, 210, 219, 227, 403] The purpose of workers compensation coverage is to impose upon an employer the duty to provide cash and medical benefits for employees who suffer injuries (or diseases) arising out of their employment. 1. Coverage Coverage must be provided for all employment regardless of age or whether lawfully or unlawfully employed in the service of an employer under any contract of hire or apprenticeship. Coverage is elective regarding sole proprietors and partners. a. Covered employees also include domestic workers who earn at least $1,000 in a calendar quarter from a single household and seasonal migratory farm laborers employed by a farmer with at least three employees or an annual payroll of at least $15,000 for full-time employees. b. Coverage must be provided by an insurance policy except that self-insurance is permitted for employers and government groups. 2. Illegally employed minors [Sec ] When a workers compensation insurance policy is renewed, the insurer must give the employer a conspicuous written notice that the employer must have a work permit for each minor employee as required by law. If the employer does not have a work permit for a minor employee: the State Workers Compensation Commission may award twice the compensation and death benefits otherwise allowed under the Labor and Employment Article in a claim by that employee or that employee s dependent; and the employer is solely liable for any increase in compensation or death benefits in a claim by that employee or that employee s dependent. 3. Required benefits Benefits provided by workers compensation coverage include unlimited medical expenses, disability benefits, survivorship benefits, and funeral expenses. a. Permanent total disability [Sec ] Total disability benefits include two-thirds of the employee s average weekly wage subject to a maximum dollar amount equal to the state s average weekly wage but not less than $25. Payments are made for the length of the disability. b. Permanent partial disability [Sec ] Employees who receive injuries permanent but partial in nature are entitled to receive a minimum weekly compensation of $50. If the employee s average weekly wage is less than $50 at

56 52 Maryland Law Supplement the time of injury, the employee will receive minimum compensation that equals his average weekly wage. c. Temporary partial disability [Sec ] 1.) If an employee s wage earning capacity is less while temporarily partially disabled, the employer or its insurer must pay compensation that equals 50% of the difference between the employee s average weekly wage and the wage-earning capacity of the covered employee in the same or other employment while temporarily partially disabled. 2.) The state of Maryland requires a three-day waiting period before benefits begin, if the temporary total disability lasts for 14 days or less. If a temporary total disability lasts for more than 14 days, compensation is paid retroactively from the day of disability. d. Temporary total disability [Sec ] In cases of temporary total disability, the employer or its insurer must pay compensation that equals two-thirds of the average weekly wage of the covered employee but that is not more than the average weekly wage of the state and is not less than $50. e. Funeral expenses [Sec ] An employer or its insurer must pay reasonable funeral expenses of up to $5,000 if the employee died as a result of an accidental personal injury within seven years of the injury or an occupational disease. f. Survivorship benefits [Sec ] Survivorship benefits equal two-thirds of the deceased employee s average weekly wage but may not exceed the state s average weekly wage or be less than $ Policy requirements and approval a. Prior approval [Sec ] Before an insurer may issue a workers compensation insurance policy, the State Workers Compensation Commission must approve the form of the policy. Insurers who fail to comply with this requirement are guilty of a misdemeanor, subject to a fine of up to $1,000, and may have their certificates of authority revoked. b. Rates [Sec ] The Commissioner determines whether an insurer s premium rates adequately cover the risks applicable to a workers compensation insurance policy and requires insurers to set premium rates that are adequate to cover those risks. Insurers who do not comply with this requirement are guilty of a misdemeanor, subject to a fine of up to $1,000, and may have their certificates of authority revoked. c. Deductibles [Sec ] When a claim is payable under a workers compensation insurance policy with deductibles: the insurer must pay the claim including any applicable deductible; and the employer must reimburse the insurer for any amount paid up to the limit of any applicable deductible.

57 Maryland Law Supplement 53 d. Policy cancellation [Secs , ] Maryland s cancellation notice requirements for commercial policies do not apply to workers compensation insurance. An insurer may not cancel a workers compensation policy before its expiration unless it gives at least 30 days written notice to the employer and files a copy of the notice with the State Workers Compensation Commission. The notice must state the date the cancellation takes effect. e. Self-insurance [Sec ] Two or more employers may be organized as a workers compensation self-insurance group. f. Other required provisions 1.) Bankruptcy The bankruptcy or insolvency of an employer does not relieve the insurer from payment of compensation for injury or death of a covered employee occurring during the life of the policy. 2.) Contract between the employee and the insurer If the employer receives notice or has knowledge of the occurrence of an accidental injury, occupational disease, hernia, or hearing loss, the insurer is deemed also to have received the notice or have the knowledge. 3.) Each award, decision, finding, or order against the employer for payment of compensation under the Labor and Employment Article also is binding on the insurer. 4.) Insurers who do not comply with this requirement of coverage of workers compensation are guilty of a misdemeanor, subject to a fine of up to $1,000, and may have their certificates of authority revoked. 5. The Injured Workers Insurance Fund [Sec ] This fund insures employers against liability due to workers compensation claims. It may also issue employers liability insurance. The fund will also, on behalf of a policyholder, pay benefits equal to benefits allowed under a compensation law of another state or a federal compensation law. 6. Subsequent (second) Injury Fund [Secs to 219] The purpose of the Subsequent Injury Fund is to encourage the hiring of a physically handicapped employee who has previously been impaired. This fund provides additional compensation that may be required because of an aggravation of or combined injuries to the previously impaired employee. The subsequent employer (following the employment where the original injury occurred) will be responsible for providing compensation only for the second injury. 7. All occupational diseases are covered with the same compensation benefits. The time limit for filing a claim is within two years after the disablement or knowledge that it was related to employment. 8. Employers liability coverage is discussed in your National License Exam manual.

58 54 Maryland Law Supplement Maryland LAW supplement PRACTICE FINAL Student instructions: Following your thorough study of this supplement, take this 50-question sample examination. Grade your performance utilizing the answer key provided. Carefully review the topics pertaining to those questions answered incorrectly. I. General Insurance 1. An applicant for insurance who knowingly shares a producer s commission in return for purchasing a policy is guilty of rebating twisting coercion collusion 2. Which of the following is NOT a power and duty of the Commissioner of Insurance? Appoints examiners and deputies Revokes and suspends producers licenses Issues cease and desist orders for just cause Prosecutes producers who violate state insurance laws 3. An insurance company chartered and formed under the laws of the state of Maryland is known, in this state, as an alien company a foreign company a nonadmitted company a domestic company 4. An individual who misrepresents the terms of an insurance contract to illegally induce a prospective insured to lapse or surrender his current plan of insurance, has engaged in rebating twisting defamation larceny 5. Statements made by a producer that are false and derogatory with regard to the financial condition of another producer would be considered which of the following? Coercion Intimidation Unfair discrimination Defamation 6. An insurance company incorporated or formed under the laws of another state but authorized to solicit insurance in the state of Maryland best describes which of the following? Domestic company Alien company Stock company Foreign company 7. An insurance company that receives a certificate of authority from the state of Maryland and is licensed to conduct property and casualty business in this state, best describes a nonadmitted company an authorized company a government insurer an unauthorized insurance company 8. An insurer s license to transact business in Maryland is called a limited license a certificate of issuance a certificate of authority an authorized certificate 9. An insurer formed under the laws of another country but licensed to solicit insurance business in the state of Maryland, best describes an alien company a domestic company a mutual company a foreign company

59 Maryland Law Supplement An insurer owned by its policyholders that provides the potential for these policyholders to share in the company s profits in the form of dividends best describes a stock company a mutual company a foreign company an unauthorized company 11. An individual licensed by the state of Maryland to place insurance business with an unauthorized insurance company best describes which of the following? Nonresident producer Producer Surplus lines broker Public adjuster 12. For a producer to qualify for licensure under Maryland law, she must file with the Commissioner a bond in the sum of $2,000 $5,000 $0; no bond is required $0; a bond is only required at renewal 13. Which of the following statements about producer licensing is NOT correct? Applicants must be appointed by at least one insurer. Applicants must file an application form affirming that they are of good character and trustworthy. Applicants must be at least 21 years old. Applicants must pass a written exam. 14. Licenses issued to producers are renewed on January 1 of every even-numbered year every two years on the last day of the producer s birth month on July 1 of every odd-numbered year every two years on the first day of the producer s birth month 15. A property-casualty producer who has been licensed less than 25 years must earn how many hours of continuing education credits during a renewal period? For personal lines and private passenger auto liability policies, a notice of renewal premium due must be provided to each policyholder at least how many days prior to the due date? Which of the following statements is NOT correct with regard to binders issued in the state of Maryland? Binders are deemed to include all usual terms of the policy for which they are given. Binders may be written only. Binders are not valid beyond the issuance of the policy for which they were given. Within 30 days of the date a binder is issued, an insurer must either issue a policy or cancel the binder. 18. Which of the following statements about public adjuster licenses is CORRECT? Applicants must have lived in Maryland for at least 5 years before they are eligible for a license. Individuals licensed as public adjusters may not use the certified public adjuster title. Public adjuster licenses expire at the end of every other June 30 unless renewed for a 2-year period. Applicants for adjuster licenses are not required to take a written exam.

60 56 Maryland Law Supplement 19. In Maryland, an individual who, for compensation, examines insurance policies and makes recommendations about coverages must be licensed as a third-party administrator a broker an adviser a surplus lines broker 20. Which of the following is a responsibility and requirement of a surplus lines broker? A broker must file an affidavit with the Commissioner within 45 days after the last day of the month in which surplus lines insurance was placed. A broker must file a $25,000 bond with the Commissioner. A broker is not required to be licensed. A broker must keep records of all business transacted for at least 7 years. 21. Each of the following statements about producer licensing is correct EXCEPT producer s licenses expire every 2 years the Commissioner may revoke or suspend a license of a producer for just cause producers licenses are issued for a period of 1 year a producer may terminate a license at any time with written notice to the Commissioner 22. Which one of the following is NOT an unfair claim settlement practice? Paying a claim after proof of loss statements were submitted Attempting to settle a claim for less than previously advertised benefits Refusing to pay claims without conducting a reasonable investigation Failing to let the claimant know why a claim was denied 23. An insurer who refuses to write insurance coverage on property because of its location in an urban area and because of the ethnic, religious, or racial persuasion of its owner may be referred to as discrimination blacklisting coercion boycotting 24. An insurer, as part of a new advertising campaign, may offer prospective purchasers of insurance insurance company stock an attractive calendar corporate securities corporate bonds 25. Which of the following statements is CORRECT with regard to countersigning policies in the state of Maryland? A resident producer does not have to sign or countersign a policy unless the state of a nonresident producer requires such when a nonresident producer writes coverage in their state. A policy will be deemed invalid because of an absence of a required countersignature. Residents and nonresidents can countersign policies. The countersigning rules apply to property and casualty insurance as well as to life and health insurance. 26. Which of the following must demonstrate total premiums, down payments, the balance financed, finance charges, and the number of installment payments? An offer and acceptance agreement A contractual liability agreement A premium finance agreement A surplus lines agreement 27. Which of the following statements about rates and filings is NOT correct? Rates may not be excessive, inadequate, or unfairly discriminatory. Each filing shall be on file for a waiting period of 90 working days before it becomes effective. Rates may not be based partially or entirely on geographic area. In making rates, consideration is given to past loss experience within and outside the state. 28. Which of the following individuals must post a bond in the sum of $10,000 with the state of Maryland? A licensed producer A surplus lines broker A public adjuster An adviser

61 Maryland Law Supplement A homeowners insurer must provide the insured with how many days written notice when cancelling a policy of insurance for nonpayment of premium? Insureds of an insolvent insurer who sustain a loss in Maryland may have their claim paid by the Assigned Risk Plan the Maryland Property and Casualty Insurance Guaranty Corporation the Insurance Commissioner their claim would not be paid 31. Which of the following describes the basic purpose of the Maryland Insurance Guaranty Fund? Provides coverage for employees who are injured on the job Assists in the detection and prevention of insurer insolvencies Settles accounts promptly and prevents a producer from commingling personal and company funds Prevents insurers from underwriting property risks based on geographic area alone 32. When a producer collects money from a prospective insured, where should the money be placed? In his own bank account In a joint agency account In a premium account In a money market account 33. Which of the following statements is NOT correct with regard to a public adjuster in the state of Maryland? Any person licensed as a public adjuster may also be known as a certified insurance counselor. An applicant must take and pass a written examination. An applicant must pay an examination fee. Individuals, partnerships, and corporations may be licensed as public adjusters. II. Property Insurance 34. Which of the following statements about coverage provided by a homeowners insurance policy delivered or issued for delivery in the state of Maryland is CORRECT? Loss caused by water that backs up through sewers or drains may be covered, at the insured s option. Loss resulting from water where backup is caused by the negligence of an insured is always covered. Loss caused by water that backs up through sewers or drains is never covered. Coverage of any loss caused by water that backs up through sewers or drains is mandatory in a homeowners policy. 35. Which of the following best describes the purpose of the Maryland Property Insurance Availability Act (FAIR Plan)? To provide property insurance at a rate no more than 60% above standard rates To establish the Maryland Joint Insurance Association, which provides coverage for ineligible risks To encourage the improvement of property conditions in urban areas To enable insurers to be eligible for private reinsurance 36. Which of the following statements is CORRECT with regard to the cancellation of a fire policy in the state of Maryland? Notice of eligibility under the Maryland Property Insurance Availability Plan must be provided when coverage is cancelled. An insurer must provide 60 days written notice of cancellation to an insured. An insurer is not required to provide written notice of cancellation in the event of nonpayment. An insured may not cancel a fire policy in this state until the renewal date of the contract.

62 58 Maryland Law Supplement 37. Rate regulation applies to which of the following lines of insurance? Property Reinsurance Ocean marine Surety III. Casualty Insurance 38. A person who has been unable to obtain a motor vehicle liability insurance policy through normal markets may obtain a policy through which of the following? Maryland Automobile Insurance Plan Maryland Assigned Risk Plan Maryland Auto Insurance Fund Maryland Insolvency Insurer Fund 39. The funeral expense allowance provided by workers compensation in the state of Maryland is $1,000 $2,000 $3,000 $5, If an insurer fails to send proper notice of nonrenewal to a policyholder insured under an automobile policy, the insurer must provide coverage for any claim that arises how many days after the insured discovered that his policy was not renewed? The minimum limits of automobile liability insurance required by the State of Maryland are 20/40/5 30/60/15 25/40/10 10/20/5 42. A mandatory automobile insurance coverage whose limits may equal those of bodily injury liability under an insurance contract in this state is best described as uninsured motorist collision coverage comprehensive coverage transportation expenses 43. Each of the following statements is correct with regard to the Maryland Automobile Insurance Fund EXCEPT all residents of Maryland are eligible for coverage producers are permitted to bind coverage policies issued by the fund will contain the minimum coverage required by Maryland law producers may be limited from placing business with the fund if they consistently bind coverage not allowed by the fund s rules and regulations 44. In an auto insurance policy delivered or issued for delivery in the state of Maryland, the minimum amount of medical, hospital, and disability benefits provided shall be an amount up to $500 $1,000 $2,500 $5, The waiting period that must be satisfied in the state of Maryland before workers compensation benefits for a temporary total disability of 14 days or less begin is 1 day 3 days 5 days 14 days 46. Which of the following is NOT a covered benefit under personal injury protection insurance? Lost wages Up to $5,000 in benefits for necessary medical treatment Hospital benefits Dental expenses

63 Maryland Law Supplement Premiums charged on any auto insurance policy excluding a named driver may not reflect the claims experience or driving record of the named insured the spouse of the insured operator the excluded named driver the dependents of the named insured 48. An automobile insurance policy s premium may not be increased solely because the insured has attained what age? An insurer may not cancel a workers compensation policy before its expiration unless it gives at least how many days written notice to the employer? The retroactive period that must be satisfied under Maryland workers compensation law is 2 days 3 days 14 days 20 days

64 60 Maryland Law Supplement ANSWERS TO Maryland LAW PRACTICE FINAL 1. A 11. C 21. C 31. B 41. B 2. D 12. C 22. A 32. C 42. A 3. D 13. C 23. A 33. A 43. A 4. B 14. B 24. B 34. A 44. C 5. D 15. D 25. A 35. C 45. B 6. D 16. D 26. C 36. A 46. B 7. B 17. B 27. B 37. A 47. C 8. C 18. C 28. B 38. C 48. D 9. A 19. C 29. A 39. D 49. A 10. B 20. A 30. B 40. C 50. C