Maryland Business Litigation Lawyer Blog

In its early years, malpractice insurance coverage was often provided through “occurrence”-based policies that provide coverage for specific events, or “occurrences,” that happened during the policy’s effective period. When a professional malpractice claim was made under one of these policies, however, it was often difficult to define the boundaries of the “occurrence” of the negligent act, particularly when services were provided to the client long in the past or were part of a years-long relationship. If the “occurrence” extended over multiple policy periods, then multiple insurers were arguably responsible for covering the occurrence, unless a single insurer was unlucky enough to have issued multiple policies whose separate limits were arguably triggered by the single, years-long, occurrence. In order to minimize their exposure, exercise greater control over their exposure, and for other reasons, malpractice insurers have more recently begun issuing more “claims made” policies.
In contrast to “occurrence”-based policies, which typically cover insureds for any occurrence which takes place during the effective period regardless of when the claim is filed, “claims made” coverage protects the insured from claims made against it only during the effective period of the contract; in effect, the filing of the claim during the policy period is itself the coverage trigger.
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Maryland law requires that property and casualty insurers who are investigating an insurance claim must send the insureds a written update on the status of the claim every forty-five (45) days. COMAR 31.15.07.04. Specifically, the Maryland regulation provides that if an insurer has not completed its investigation of a first-party claim (this generally means that you made the claim under your own policy) within 45 days of notification, the insurer must promptly notify the first-party claimant, in writing, of the actual reason that additional time is necessary to complete the investigation.

Notice must also be sent to the first-party claimant after each additional 45-day period until the insurer either affirms or denies coverage and damages.
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When the relationship between an insurance company and a managing general agent terminates in Maryland, it is typically the agent that owns the “expirations” (or “book of business”) – i.e., the policyholders’ contact information that may be used to solicit further business upon expiration of those policies. Maryland’s rule is consistent with the general weight of authority in the country that under the “American agency system,” the agent is the owner of expirations upon termination of the insurance agency relationship, particularly when such ownership is provided for by contract.

As for Maryland, Md. Code, Ins. Art. § 27-503 prevents insurance purchasers from losing their insurance when their agency relationship is terminated between their agents and the insurers. Upon the termination of that relationship, the statute grants ownership of expirations to the insurer, but requires the insurer to renew the agent’s policies through the agent for at least two years or until the policies are placed elsewhere. See Md. Code, Ins. Art. (“IN”) §27-503(b)(3). This is known as the “renewal rule.”
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Most insurance policies provide for “subrogation.” Subrogation is triggered whenever an insurance company pays out an amount to a policyholder for harm caused to the policyholder by a third party. If the insurer can prove that the third party was at fault, the insurance company can typically file a “subrogation” lawsuit against the third party to recover the money it paid out to the policyholder. To use a simple example, if a third party sets fire to a business’s office, and the business’s insurance company pays the business the amount of its fire loss, then the insurance company can typically sue the arsonist in a “subrogation” action to recover the amount that it paid to the business.
“Subrogation” is defined by everyone’s favorite legal dictionary as “the substitution of one person in the place of another with reference to a lawful claim, demand or right, so that he who is substituted succeeds to the rights of the other in relation to the debt or claim.” Black’s Law Dictionary 1467 (8th ed.2004).
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There is a critical federal statute that all insurance litigators should be aware of when their case is “removed” from a State trial court to a federal court. Insurance companies often remove State court cases to the federal system to take advantage of what they apparently believe is a strategic advantage. Although this perceived advantage may or may not exist, all aggressive insurance attorneys should know how to fight back.

First, you should know that there is a presumption against federal court jurisdiction. By statute, a federal district court must send any case that lacks subject-matter jurisdiction back to State court. 28 U.S.C. §1447(c). And although a plaintiff usually has only thirty days to object to a defendant’s “removal” of a State case to federal court, an objection based on the federal Court’s lack of subject matter jurisdiction can be raised at any time before final judgment, even in the middle of a trial. 28 U.S.C. §1447(c). Federal courts routinely make thorough examinations of subject matter jurisdiction early in a case in order to avoid wasting resources on a case that ultimately needs to be sent back to State court.
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