For UIM Claims, Maryland Insurance Code § 19-511 is Critical

By Cory Bilton

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In the last two months, appellate courts in Maryland issued three opinions arising out of Maryland Insurance Code § 19-511.  This statute, enacted nearly 20 years ago, lays out a procedure for allowing an injured person to receive the proceeds from a settlement with an automobile liability insurer while still reserving the right to make a uninsured motorist insurance (UIM) claim against her own insurer.  The legal interplay between making a liability insurance claim and making a UIM claim can be very tricky.  But the procedure in § 19-511 contains minimal legalese and is relatively straightforward to follow.  The overwhelming message for lawyers from these recent appellate decisions is to become very familiar with the process laid out in § 19-511.  Follow its language and you and your client may safely pursue the UIM claim.  Deviate from its instruction, and you and your client will suffer serious consequences.

Failing to Follow § 19-511 Forfeits UIM Coverage

Released just this week, in Morse v. Erie Ins. the Maryland Court of Special Appeals held that failing to follow the procedure laid out in § 19-511 allows a UIM insurer to deny coverage even when there is no showing that the failure caused actual prejudice.  This dispute arose over a collision that occurred in New Castle, Deleware, with an Erie Insurance UIM policy that was issued in Maryland.  After receiving a policy limits offer from the liability insurer, Morse’s attorney notified Erie by telephone and then by regular mail (§ 19-511 requires notice by certified mail), and then accepted the liability settlement and signed a release within a few weeks (§19-511 gives the UIM insurer 60 days to give its consent for the settlement).  In arguing against Erie’s right to deny UIM coverage for failure to follow the § 19-511 procedure, Morse argues that Erie should be required to show actual prejudice by Morse’s actions.  The court says that “Erie was entitled to disclaim liability on the basis of that noncompliance, with or without prejudice.”  Morse’s failure forfeited her UIM coverage.

A UIM Insurer May Waive the § 19-511 Requirements

Woznicki v. GEICO, also released by the Maryland Court of Special Appeals this week, covers some of the same ground as Morse.  The appeal is also based on an injured person’s failure to follow the § 19-511 procedure.  As in Morse, the court holds that the UIM insurer is under no obligation to show actual prejudice to the insured’s failure to follow § 19-511.  But in this case, Woznicki also argues that GEICO actively consented to her settlement with the liability insurer, thus GEICO waived strict compliance with § 19-511.  In analyzing the statute, the court notes that when the Maryland General Assembly wants to make a provision non-waivable, it does so explicitly.  When combined with § 19-511’s purpose of benefitting an insured by encouraging settlements, Woznicki holds that compliance may be waived by the UIM insurer.  However, waiver only occurs when the UIM insurer intentionally relinquishes its rights to have the insured comply with § 19-511. Waiver may also be implied if the UIM insurer acted in a manner inconsistent with its intent to insist on enforcing the statute.  However, the vague testimony provided by Woznicki’s attorney’s memory of an undocumented phone call to an unnamed GEICO employee did not provide probative evidence that GEICO made such waiver.  The takeaway is that waiver of compliance with § 19-511 must be convincingly clear.

After Following the § 19-511 Procedure, A General Release Does Not Release the UIM Insurer

The third recent decision is Brethren Ins. v. Buckley, where the Maryland Court of Appeals held that a general release signed by the injured insured after following the § 19-511 procedure does not release the UIM insurer.  In this case, Buckley followed all of the requirements of § 19-511 after the liability insurer offered its policy limits.  The UIM insurer, Brethren, waived its subrogation rights against the tortfeasor in writing.  After receiving this writing, Buckley signed a general release given to her by the liability insurer and accepted the liability policy limits.  When she pursued a UIM claim, Brethren denied coverage arguing that the release Buckley signed also released the UIM insurer.  The Maryland Court of Appeals said “nope.”  Buckley held that § 19-511 must be read into any release signed after following its procedure.  The court reasons that since § 19-511(e) says that a release may be executed “without prejudice to any claim the injured person may have against the uninsured motorist insurer,” which statutorily limits the release that the injured person signs after following the statute’s procedure.  Section 19-511 limits the all-inclusive language of the release to just the tortfeasor and the liability insurer.

Conclusion: Adherence to the § 19-511 Procedure is Critical for UIM Claims in Maryland    

The fact that three Maryland appellate opinions have appeared involving disputes over § 19-511 in the last two months is an indicator of the complexity of disputes involving UIM claims in Maryland.  Fortunately, the procedure required by § 19-511 is relatively straightforward.  As demonstrated by these recent decisions though, the pitfalls and consequences surrounding settlements with liability insurers prior to a Maryland UIM claim are steep.  The path provided by § 19-511 is narrow, but it is safe if you stay on it.

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