During Maryland’s 2017 legislative session, a significant amendment to the Insurance Article and Maryland’s uninsured (“UM”) and underinsured (“UIM”) law was enacted, which came into force in October 2017 and is applicable to private passenger automobile polices sold on or after July 1, 2018. While this is an important change in the law, it is worth noting that Enhanced UIM (“EUIM”) is not mandatory and simply must be offered to an insured motorist buying a new policy, who has the option to pay for EUIM coverage. Existing Maryland UM and UIM laws remain in full force and effect where EUIM is ultimately declined. The new law only applies to new policies “at the time of purchase” and so EUIM is not required to be offered on a policy renewal. EUIM also only applies to insurance of private passenger motor vehicles, thus does need to be offered when a new commercial policy is purchased by an insured.
Under the prior law, the UM/UIM insurer gets a credit for the liability limits paid by the insurer of the underlying tortfeasor. So, for example, if the underlying tortfeasor has Maryland’s minimum per person liability limit of $30,000, and the injured insured has UIM limits of $100,000, the UIM insurer’s maximum exposure would be $70,000 under existing traditional UIM law. The new law effectively allows for “stacking” of UIM coverage over and above the liability limits of an underlying tortfeasor. For example, the EUIM insurer could be liable for the full $100,000 EUIM limits and the injured insured could recover $130,000 total from available insurance where, under the old existing law, the maximum recovery would be $100,000.
The enhancement was effected by defining “underinsured motor vehicle” to mean “a motor vehicle that has liability coverage in an amount less than, more than, or equal to the uninsured motorist coverage provided under the insured party’s motor vehicle liability insurance policy.” So, flipping our example above, if the underlying tortfeasor had a $100,000 liability limit and the injured insured had a minimum limits policy with $30,000 EUIM limits, she or he could still potentially recover $130,000. Under the prior law, where the underlying tortfeasor’s liability limit was equal to or more than the UIM limit of the injured insured there was, by definition, no UIM and, therefore, no viable claim. Even though the new law is based on a new definition of “underinsured,” a true uninsured situation is also covered, because non-existent insurance by the underlying tortfeasor is technically “liability coverage in amount less than” any EUIM limit
Some significant differences to note between the old existing law and the new law, include:
- An insured individual cannot completely waive UM/UIM,but can elect to reduce limits to be no less than minimum Maryland liability limits; EUIM cannot be waived or reduced in any way and MUST be equal to the liability limits of the policy.
- EUIM is not required on commercial auto policies, the law only applying to private passenger motor vehicle policies, even if a commercial policy covers private passenger type vehicles.
- Traditional UM/UIM gets a credit for workers’ compensation paid and not reimbursed. EUIM has no such similar provision.