Do the Liability Limits of Foreign Motor Vehicle Insurance Policies “Deem Up” in Maryland?
August 5, 2020
Maryland’s Motor Vehicle Financial Responsibility Act provides for minimum limits of $15,000 for third-party property damage and $30,000 (per person)/$60,000 (per occurrence) for liability coverage. Maryland, Transportation Code, §17-103(b). These limits clearly apply when a policy is sold, issued, or delivered in Maryland. Maryland Code, Insurance, §19-504. However, the available minimum limits may be lower when a policy is issued, sold, and delivered in another state with lesser required security. Two factors will determine whether the lesser limits of a foreign policy will “deem up” to Maryland’s limits: the language of the foreign policy itself and whether the insurer is authorized to issue policies in Maryland as well as the foreign jurisdiction.
First, the policies issued by many carriers contain a provision that automatically increases the policy’s liability limits to those of the jurisdiction in which a covered vehicle is operated or where a covered loss occurs. Thus, if the policy contains such a provision, it is not necessary to consult Maryland’s statutes.
However, if the foreign policy is silent as to how the policy’s minimum limits are affected by a loss occurring in Maryland it is necessary to examine the interplay between the two statutes. Section 19-504 of the Insurance Article states that “[e]ach motor vehicle liability insurance policy issued, sold, or delivered in the State shall provide the minimum liability coverage specified in Title 17 of the Transportation Article,” and Section 17-103 of the Transportation Article provides that each “vehicle liability insurance policy written by an insurer authorized to write these policies in this State” must provide security of at least Maryland’s minimum limits.
If a carrier is not authorized to write motor vehicle liability policies in Maryland, it is not (by the terms of the statutes) required to increase the limits of coverage to comply with Maryland’s Motor Vehicle Financial Responsibility Act. In that case, the foreign insurer (consistent with its policy) may provide coverage with limits below Maryland’s minimum (for example, a policy issued in Virginia by a foreign carrier would only have coverage in the amount of $25,000/$50,000).
The most complicated scenario occurs when the carrier is authorized to issue policies in Maryland, but the policy itself was issued, sold and delivered in another state (for example, a Virginia policy with $25,000/$50,000 liability coverage). Section 19-504 of the Insurance Article notes that the security provided in Title 17 of the Transportation Article applies only to “policies issued, sold, or delivered” in Maryland, but Title 17 of the Transportation Article states that the required minimum security set forth in that statute applies to each motor vehicle liability policy “written by an insurer authorized to write” motor vehicle policies in Maryland. Thus, one statute states that the minimum limits are only applicable to Maryland policies and the implication of the second statute is that the minimum limits apply to all policies issued by insurers in Maryland (and not just those sold, issued, or delivered in Maryland).
It is unclear how Maryland’s appellate courts would address this seeming inconsistency. However (in the absence of corrective legislative action), any decision would likely incorporate two principles. First, the remedial purpose of the Motor Vehicle Financial Responsibility Act is “to ensure that those who own and operate motor vehicles registered in the State are financially able to pay compensation for damages resulting from motor vehicle accidents,” Matta v. GEICO, 119 Md.App. 334, 340, 705 A.2d 29 (1998). Second, statutes are to be construed, if possible, as not conflicting with each other. See Hardware Dealers Mutual Fire Insurance Company v. Springmann, 266 Md. 200, 204, 292 A.2d 96 (1972). If these principles are followed, it is likely that a court would opt for the more inclusive reading of the statutes and impose Maryland’s minimum limits on foreign policies issued by insurers authorized to issue policies in Maryland.