# COMAR Title 31 — Maryland Insurance Administration

## Subtitle 15 — Unfair Trade Practices

### Chapter 07 — Payment of Claims Under Property and Casualty and Title Insurance Policies

**Authority:** Insurance Article, §§1-301, 2-109, 2-205, 2-207, 4-113, 10-126, 10-410, 19-505, 19-506, 19-508, and 27-301—27-306, Annotated Code of Maryland

**Administrative History:** Effective date: July 23, 1990 (17:14 Md. R. 1758)

**Administrative History:** Regulation .04G adopted effective April 1, 1991 (18:6 Md. R. 685)

**Administrative History:** Regulation .04G repealed as an emergency provision effective April 6, 1991 (18:9 Md. R. 1004); emergency status expired August 6, 1991; repealed permanently effective August 19, 1991 (18:16 Md. R. 1811)

**Administrative History:** Chapter recodified from COMAR 09.30.75 to COMAR 31.15.07 effective September 7, 1998 (25:18 Md. R. 1439)

**Administrative History:** Regulation .02B amended effective January 14, 2010 (37:1 Md. R. 17); February 1, 2016 (43:2 Md. R. 129)

**Administrative History:** Regulation .03A, B amended effective January 26, 2009 (36:2 Md. R. 103)

**Administrative History:** Regulation .10 amended effective January 14, 2010 (37:1 Md. R. 17)

#### Regulation .01 Scope.

*COMAR 31.15.07.01*

This chapter is applicable to all property and casualty and title insurers, but does not include reinsurance, workers' compensation, or surety.

#### Regulation .02 Definitions.

*COMAR 31.15.07.02*

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Application” means an initial application for the issuance of an insurance policy.

  (2) “Claim” means a demand for payment or an inquiry regarding the possibility of payment for a loss incurred under one or more coverages provided by the policy.

  (3) “Claimant” means either a first-party claimant or a third-party claimant and may include, in a particular case, the claimant's designated legal representative or a member of the claimant's immediate family designated by the claimant.

  (4) “First-party claimant” means any person asserting a right to payment under an insurance policy pursuant to which the person is insured, which right arises out of the occurrence of a contingency or loss covered by the policy.

  (5) “Investigation” means all activities of an insurer directly or indirectly related to the determination of the insurer's liabilities under coverages afforded by an insurance policy.

  (6) “Licensed producer” means a person issued a license in accordance with the provisions of Insurance Article, Title 10, Subtitle 1, Annotated Code of Maryland.

  (7) “Notification of a claim” means notification by a claimant, in writing or by other means acceptable under the terms of the insurance policy, which reasonably apprises the insurer of the facts pertinent to the claim and which is made:

    (a) Directly to the insurer in the case of a title insurance policy;

    (b) Directly to the Maryland Automobile Insurance Fund in the case of a policy issued by the Fund; or

    (c) To an insurer or its producer who has an appointment from that insurer as defined in Insurance Article, §1-101(f), Annotated Code of Maryland, in all other cases.

  (8) “Policy” means an individual or group policy, contract, or certificate issued by an insurer.

  (9) “Producer” means any person authorized to represent an insurer with respect to a claim, or a licensed producer.

  (10) “Proof of loss” means the submission to an insurer of all factual information necessary for an insurer to determine the nature of the loss, the applicable coverage, and the amount due under that applicable coverage.

  (11) “Third-party claimant” means any person asserting a claim against a person insured under an insurance policy.

  (12) “Unreasonable delay” means, except with respect to claims for personal injury protection benefits made pursuant to Insurance Article, §19-505, Annotated Code of Maryland, the failure to make payment to claimants of amounts properly due them within 15 working days after receipt of a properly completed claim form or other proof of loss unless a longer period of time is provided for in the insurance contract or unless otherwise provided for by law, when there is no significant dispute as to coverage, liability, and amount of damages.

#### Regulation .03 Unfair Claim Settlement Practices.

*COMAR 31.15.07.03*

A. A prohibited unfair claim settlement practice occurs if an insurer commits one or more of the following acts:

  (1) Misrepresents pertinent facts or policy provisions relating to the claim at issue. For the purposes of this regulation, misrepresentation includes, but is not limited to, the following acts:

    (a) Providing incomplete or misleading disclosure of pertinent facts or policy provisions relating to the claim at issue;

    (b) Concealing from a first-party claimant benefits, coverages, or other provisions of a policy when these benefits, coverages, or other provisions are pertinent to the claim at issue;

    (c) Failing, upon written request, to disclose to a first-party claimant all benefits, coverages, or other provisions of an insurance policy under which a claim is presented;

    (d) Except when there is a time limit specified in the policy or provided by law, making oral or written statements to any claimant that:

      (i) There is a requirement that the claimant give written notice of loss or proof of loss within a specified time, and

      (ii) The company is relieved of its obligations under the policy if the time limit is not complied with;

    (e) Making oral or written statements to any claimant that there is a requirement that the claimant sign a release that extends beyond the subject matter that gave rise to the claim payment; or

    (f) Issuing a check or draft in partial settlement of a loss or claim under a specific coverage or coverages, which check or draft contains language releasing the insurer or its insured from their total liability.

  (2) Attempts to settle a claim on the basis of an application which has been altered without notice to, or the knowledge or consent of, the insured. An insurer may not be found to have violated this regulation unless the:

    (a) Insurer knew or had reason to know of the alteration; and

    (b) Alteration is material to settlement of the claim at issue.

  (3) Refuses to pay a claim for an arbitrary or capricious reason based on all available information.

  (4) Fails to include, in any claim paid to an insured or beneficiary, a statement or other identification setting forth the specific policy coverage under which the payment is made.

  (5) Fails to make a good faith attempt to settle a claim promptly under one portion of a policy, whenever liability is reasonably clear, in order to influence settlements under other portions of the policy.

  (6) Fails to promptly provide a reasonable explanation of the basis for denial of a claim when requested to do so.

  (7) Fails to act in good faith in settling a first party claim under a policy of property and casualty insurance.

B. A prohibited unfair claim settlement practice occurs if an insurer commits one or more of the following acts with such frequency as to indicate a general business practice:

  (1) Misrepresents pertinent facts or policy provisions relating to the coverages at issue. For the purposes of this regulation, misrepresentation includes, but is not limited to, the following acts:

    (a) Providing incomplete or misleading disclosure of pertinent facts or policy provisions related to the coverages at issue;

    (b) Concealing from a first-party claimant benefits, coverages, or other provisions of a policy when these benefits, coverages, or other provisions are pertinent to the claim at issue;

    (c) Failing, upon written request, to disclose to a first-party claimant all benefits, coverages, or other provisions of an insurance policy under which a claim is presented;

    (d) Except when there is a time limit specified in the policy or provided by law, making oral or written statements to any claimant that:

      (i) There is a requirement that the claimant give written notice of loss or proof of loss within a specified time, and

      (ii) The company is relieved of its obligations under the policy if the time limit is not complied with;

    (e) Making oral or written statements by any claimant that there is a requirement that the claimant sign a release that extends beyond the subject matter that gave rise to the claim payment; or

    (f) Issuing a check or draft in partial settlement of a loss or claim under a specific coverage or coverages, which check or draft contains language releasing the insurer or its insured from total liability.

  (2) Fails to include, in claims paid to insureds or beneficiaries, statements or other identification setting forth the specific policy coverage under which the payments are made.

  (3) Fails to promptly provide to any claimants reasonable explanations of the basis for denial of claims or the offer of compromise settlements.

  (4) Fails to adopt and implement reasonable standards for the prompt investigation of claims arising under policies.

  (5) Refuses to pay claims without conducting reasonable investigations based on all available information.

  (6) Fails to make good faith attempts to settle claims promptly, fairly, or equitably once liability has become reasonably clear.

  (7) Compels insureds to institute litigation to recover amounts due them under policies by offering substantially less than the amounts ultimately recovered in actions brought by the insureds.

  (8) Attempts to settle claims on the basis of applications which have been altered without notice to, or the knowledge or consent of, insureds. An insurer may not be found to have violated this regulation unless the:

    (a) Insurer knew or had reason to know of the alterations; and

    (b) Alterations are material to settlement of the claims at issue.

  (9) Fails to make good faith attempts to settle claims promptly under one portion of a policy, whenever liability is reasonably clear, in order to influence settlements under other portions of the policy.

  (10) Fails, upon receipt of notification of claims, to acknowledge receipt of the notification within 15 working days, unless payment is made within that period of time.

  (11) Fails, upon receipt of inquiries from the Maryland Insurance Administration regarding claims, to furnish the Maryland Insurance Administration with adequate responses to the inquiries within 15 working days or within the time period specified by the Maryland Insurance Administration in correspondence to the insurer, whichever is greater.

  (12) Fails to affirm or deny coverage of claims within 15 working days after receiving properly completed claim forms or other proofs of loss, unless the provisions of Regulation .04B of this chapter apply or unless there is a time limit specified in the policy.

  (13) Refuses to fully satisfy claims for arbitrary or capricious reasons.

  (14) Refuses or unreasonably delays payment to claimants of amounts due them when coverage, liability, and amount of damages are reasonably clear.

  (15) Fails to provide appropriate replies to claimants or their representatives within 15 working days of receiving written communications from claimants or their representatives which suggest that a response is expected.

  (16) Fails to act in good faith in settling a first party claim under a policy of property and casualty insurance.

C. The provision of any claim forms required by the insurer, instructions, and reasonable assistance, in order that first-party claimants can comply with policy conditions and the insurer's reasonable requirements for filing claims, shall satisfy the requirement that insurers acknowledge receipt of notification of claims within 15 working days.

#### Regulation .04 Standards for Prompt Investigation of Claims.

*COMAR 31.15.07.04*

A. Insurers shall, for at least 3 years, make available for inspection by the Maryland Insurance Administration records of denials of claims and supporting documentation.

B. If an insurer has not completed its investigation of a first party claim within 45 days of notification, the insurer shall promptly notify the first-party claimant, in writing, of the actual reason that additional time is necessary to complete the investigation. Notice shall be sent to the first-party claimant after each additional 45-day period until the insurer either affirms or denies coverage and damages.

C. In any case in which a first-party claimant is neither an attorney nor represented by an attorney, the insurer shall, upon receipt of a written claim, inform that claimant in writing that there may be an applicable statute of limitations which may bar that claimant's rights in the future.

D. An insurer that denies a claim on the grounds of a specific policy provision, condition, or exclusion shall advise the claimant as to the provision, condition, or exclusion on which the denial is based.

E. When there is a reasonable basis, supported by specific information available for review by the Commissioner, that the first-party claimant has fraudulently caused or contributed to the loss, the insurer is relieved of the requirement contained in §§B and C of this regulation that the insurer state the reason that more time is required.

F. If a claim is denied for reasons other than those described in §D or E of this regulation, an appropriate notation shall be made in the claim file of the insurer.

#### Regulation .05 Time for Filing Claim for Personal Injury Protection Benefits.

*COMAR 31.15.07.05*

Upon receipt of written notice from an insured of the occurrence of an accident, each insurer providing benefits required under Insurance Article, §19-505, Annotated Code of Maryland, shall notify the insured of the latest date on which an original claim for benefits may be presented to the insurer, as provided in Insurance Article, §19-508(a), Annotated Code of Maryland.

#### Regulation .06 Payment of Interest on Personal Injury Protection Benefits.

*COMAR 31.15.07.06*

Whenever a claim for benefits under Insurance Article, §19-505, Annotated Code of Maryland, is paid more than 30 days after receipt of a properly completed claim form or other proof of loss and satisfactory proof verifying the claim, the insurer shall:

A. Make a notation in the insurer's claim file stating the reason for the delay; and

B. Add to the amount otherwise payable 1-1/2 percent simple interest per month for those days in excess of the 30 days.

#### Regulation .07 Computation of Time.

*COMAR 31.15.07.07*

If an insurer requires additional information in order to properly consider a claim, the number of days which elapse between the date the insurer requests additional information and the date the insurer receives a response to the request may not be counted whenever these regulations require action by an insurer within a stated period of time.

#### Regulation .08 Claims Registers.

*COMAR 31.15.07.08*

A. Each insurer shall maintain claims registers separately for:

  (1) Private passenger automobile insurance;

  (2) All other liability insurance;

  (3) Homeowner's insurance;

  (4) All other property insurance; and

  (5) Title insurance.

B. Claims registers may be maintained manually or on computer-generated tapes from which hard copy can be supplied.

C. Claims registers shall list chronologically, by date of report, each claim received, if a Maryland-domiciled insurer, and each claim received from a Maryland resident, if a foreign insurer doing business in Maryland, showing the:

  (1) Date of loss;

  (2) Policy or contract number;

  (3) Name of the insured; and

  (4) General nature of the claim.

D. Claims registers shall be available for inspection by the Insurance Commissioner or by persons designated by the Commissioner for a period of at least 3 years following the date of the filing of the claim.

E. Insurers shall have 6 months from the effective date of this chapter to establish the claims registers required by this regulation.

#### Regulation .09 General Business Practices.

*COMAR 31.15.07.09*

A. The methodology of §B of this regulation shall be used to determine whether an insurer has engaged in unfair claim settlement practices with such frequency as to constitute a general business practice within the meaning of Insurance Article, §27-304, Annotated Code of Maryland.

B. It shall be considered prima facie evidence of a general business practice of committing unfair claim settlement practices if, in any 12-month period, it is found that the number of unfair claim settlement practices with respect to claims handling by foreign insurers of claims of Maryland residents, or by domestic insurers of all claims of the insurer, equals or exceeds the following, if the total number of claims during any 12-month period is:

  (1) Less than 10,000, three claims with the same unfair claim settlement practice out of a random sampling of 50 claims; or

  (2) Ten thousand or more, six claims with the same unfair claim settlement practice out of a random sampling of 100 claims.

C. An insurer may overcome the presumption that a general business practice violation has occurred by presenting evidence to the Commissioner relating to the harm to claimants caused by the violation, the nature of the violation, the insurer's intent, and other relevant factors.

#### Regulation .10 Penalties.

*COMAR 31.15.07.10*

Penalties for violations of these regulations shall be assessed in accordance with Insurance Article, §§4-113, 27-301, 27-305, and 27-306, Annotated Code of Maryland.