First Party Bad Faith – Much Ado About Nothing by Robert J. Zarbin and James K. MacAlister
As trial lawyers, who but our mem-
bership is better acquainted with the rubric that the Plaintiff has the burden of proving his or her case? This means, day in and day out, putting witnesses on the stand to show that an event hap- pened as the client says it did. A witness is someone with “personal knowledge of the matter.” Md. Rule 5-602. But what happens when one must prove the non-happening of an event? Seinfeld’s writers could get a lot of mileage musing about just how much personal knowl- edge of “nothing” a witness must have before he or she can testify that nothing happened. All kidding aside, at least for now,
does anyone recall the parade of horrible that the defense industry warned would attend the adoption of first party bad faith? “The Maryland Insurance Ad- ministration would be smitten with an apocalyptic flood of claims, there would be an exodus of carriers from the state, and for those Marylanders lucky enough to find coverage, there would be a pox on their house of skyrocketing premiums.” Not since Y2K, did we hear such dire predictions that, on Oct. 1, 2007, when first party bad faith took effect, the sky would fall.
Months Later – Floodgates Open, but Where is The Flood?
2007 saw the filing of 12 claims, with
another 12 filed in the first quarter of 2008. A sampling of seven of the MIA decisions, which are public records, reveals claims against six carriers: State Farm Mutual Insurance Company, Markel American Insurance Company, Brethren Mutual Insurance Company, Progressive Northern Insurance Com- pany, Nationwide Insurance Company
Summer 2008
of America (2) and Esurance Insurance Company. Of these seven decisions, one deemed denial of coverage improper, but without bad faith, while two others
on all actual damages incurred by the insured,” Md. Ins. Code §27-1001(e) (2)(i)(2), even if it determines that the carrier acted in good faith.
To Commissioner Tyler, the MIA is a “good place to be” with a first-party claim, because insured and insurer are offered dispute resolution with “relatively low cost and friction.”
found a lack of good faith in the han- dling of UIM claims, with attorney’s fees and costs assessed. Maryland Insurance Commissioner,
Ralph Tyler, took office in September 2007, bravely assuming command of the agency in the projected floodplain of a forecasted bad tsunami. But, when re- cently asked about how he’s holding up, it is “not true” he says, that the MIA has been seen as anything remotely resem- bling a “tidal wave” of claims.” In fact, he “has no such concerns today” that a deluge is coming. What has rendered the Administration “more than able” to handle the “manageable” volume of complaints is the use of two retired judges to review and decide the claims. These retired jurists, hired on a contract basis, have been able to “keep up with the pace” in incoming filings. To Commissioner Tyler, the MIA is
a “good place to be” with a first-party claim, because insured and insurer are offered dispute resolution with “rela- tively low cost and friction.” Bear in mind that the Act empowers the MIA to determine if “coverage exists,” or the “extent to which the insured is entitled to receive payment from the insurer.” Md. Cts. & Jud. Proc. Art. §3-1701(c); Md. Ins. Art. §27-1001(e). And it can make these findings, and award “interest
Trial Reporter
How the New Law Works To perfect a claim under the new law,
bear in mind the following: 1. Filing: A claim can be filed online, or in writing. Forms are available from the MIA Website at http://
www.mdinsurance.state.md.us/sa/ jsp/Mia.jsp . If there are any ques- tions regarding filing, the MIA clerk assigned to processing the claims can be reached by telephone at 410-468-2018.
2. Documentation: The Commission- er stresses that the claim “document all interactions” with the insurer. “Good faith,” the statutory bench- mark by which the carrier’s actions are judged “means an informed judgment based on honesty and diligence supported by evidence the insurer knew or should have known at the time the insurer made a de- cision on a claim.” Md. Cts. & Jud. Proc. Art. §3-1701(c)(4); Md. Ins. Art. §27-1001(1). This standard, Commissioner Tyler cautions, is a “high one,” and a well-documented sequence of events offers the MIA insight into whether the carrier “fairly and accurately considered” the claim.
3. Insurer’s Response: The MIA is re- 27
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