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In 1975, Maryland, recognizing the importance of protecting victims of uninsured or underinsured motorists, began requiring that every private automobile insurance policy issued, sold or delivered in Maryland contain uninsured motorist coverage (“UM Coverage”). Since then, Maryland has steadily increased the scope of this requirement. In a recent expansion of this coverage, the General Assembly passed Senate Bill 403 in April of 2017, authorizing a new “enhanced underinsured motorist” coverage (“Enhanced UM Coverage”). The new statute, codified as Md. Code, Ins. § 19-509.1 (West 2017), redefines an “Underinsured Motor Vehicle” to include a vehicle “that has liability coverage in amount less than, more than or equal to the uninsured motorist coverage provided under the insured party’s” policy. Md. Code, Ins. § 19-509.1(A). As such, the new statute, effective on October 1, 2017, will have a significant impact on consumers, producers, and insurance companies.
For consumers, the optional Enhanced UM Coverage will provide greater protections if an insured is a victim of an accident involving a negligent uninsured driver and/or an underinsured driver. Although the statute does not change Maryland’s minimum insurance requirements of at least $30,000/$60,000, it will change how uninsured motorist protections are applied. Under the standard UM Coverage, injured parties could only recover the total of their own UM coverage less the amount of liability coverage carried by the negligent driver. For example, a driver with $100,000 in UM Coverage who is injured by a negligent driver with $30,000 in liability insurance can only recover $70,000 from their own UM policy and $30,000 from the negligent driver—totaling $100,000. However, under the new “Enhanced UM Coverage” provision both drivers’ coverages will be “stacked”—amounting to more protection. Taking our previous example, a driver with $100,000 in Enhanced UM Coverage who is injured by a negligent driver with $30,000 in liability insurance can recover a total of $130,000 – $30,000 from the negligent driver’s insurance and $100,000 from their own Enhanced UM Coverage. Of course, eligibility for these benefits will remain dependent on the injured party’s damages.
For producers and insurance companies, the new Enhanced UM Coverage statute requires that optional Enhanced UM Coverage be offered to a consumer “at the time of purchase of a private passenger motion vehicle liability insurance policy.” Md. Code § 19-509.1(c). Moreover, to be compliant, producers and insurance companies are required to utilize a form approved by the Maryland Insurance Administration (“MIA”) when offering the Enhanced UM Coverage. The MIA has already completed the required form, and it can be found on the MIA’s website. Notably, this particular aspect of the statute is effective for policies that are issued, sold, or delivered after July 1, 2018.
The Enhanced UM Coverage statute includes other notable requirements for producers and insurance companies, including that the Enhanced UM Coverage limits shall equal the amount of liability coverage provided under the policy. Producers and Insurers should review the statute and the MIA website for more information regarding the requirements.