Maryland’s New Automobile Insurance Provisions

The Maryland legislature enacted a significant change in the realm of private passenger automobile insurance recently. This change culminated from the passage of Senate Bill 0403 and House Bill 0005 and went into effect in October 2017, applying to all new auto insurance policies entered into as of July 2018. When an insurer sells a private automobile policy, there is the option of Enhanced Underinsured Motorist Coverage (EUIM). This is not to be confused with the traditional Uninsured Motorist (UM) coverage that is offered.

UM coverage was designed to compensate motorists who incur injuries and property damage from accidents where the at-fault driver either does not have the required liability insurance coverage, or in cases where the at-fault driver flees the scene and is unable to be identified. EUIM coverage is a solution for better protecting motorists from “gaps” in compensation that can occur in accidents involving uninsured (or underinsured) motorists.

Problem With Current Insurance Provisions

The current mandated minimum levels of automobile liability insurance in the state are $30,000 per person and $60,000 per accident for bodily injuries, and $15,000 specifically for property damage. In addition, the law requires purchasing uninsured motorists coverage at a level that is equal to the minimums for liability coverage. In accidents of moderate severity, often these minimum amounts are insufficient to compensate motorists for the actual damages incurred that leaves a “gap” in coverage.

The existing law only allowed a driver to receive UM coverage equivalent to the difference between the at-fault drivers’ liability limit and their own UM coverage limit. The gap in coverage is illustrated as follows:

• Total damage incurred: $120,000
• At-fault motorist liability coverage: $30,000
• Available UM coverage: $100,000-$30,000= $70,000
• Gap left uncovered: $20,000

New Stacking Provision

EUIM coverage extends to cover potential gaps in coverage that occur in scenarios such as the one illustrated above. The new scenario would be as follows:

• Total damage incurred: $120,000
• At-fault motorist liability coverage: $30,000
• Available EUIM coverage: $100,000 (without any deduction for at-fault motorist liability coverage amount)
• Gap left uncovered: $0

The EUIM coverage corrects the shortcoming that allows for potentially uninsured gaps in coverage for those involved in accidents with drivers that maintain low levels of liability insurance.

Standardized Statewide Form

In efforts to maintain clarity and uniformity, the Maryland Insurance Administration developed a standard form that will exclusively be used in specifying policy terms. They initially created a “draft” of the form and invited comments and feedback to consider as they created the final revision. It is critical to note that the language of the policy form may not be modified.

Other Provisions & Details

• EUIM coverage does not affect the requirements associated with liability coverage
• All insurers must offer EUIM coverage as an option on new policies
• When an existing automobile insurance policy is renewed, the EUIM coverage remains unchanged unless the insured initiates a change in writing
• This change does not apply to commercial automobile insurance policies
• Motorcycle insurance is also considered to be private passenger automobile insurance
• Those electing EUIM can expect that their insurance premium pricing will reflect this additional policy coverage