Maryland fines insurers over total loss taxes, fees

BALTIMORE —The Maryland Insurance Administration (MIA) completed a year-long industry survey of 119 insurance companies regarding the mishandling of vehicle insurance claims following changes to the taxes and fees associated with the total loss of a vehicle. Of the 119 companies, 67 were found to be in violation of Maryland regulations.

The investigation resulted in nearly a quarter million dollars in administrative penalties and about half a million dollars paid in restitution to more than 4,000 Maryland residents, according to Maryland Insurance Commissioner Ralph S. Tyler.

“The industry as a whole seemed to miss the implication of these legislative changes,” says Tyler. “We found widespread violations.”

As of January 2008, the increase in sales tax, as well as an increase in Motor Vehicle Administration fees (including title fees), resulted in a greater cost when declaring a vehicle a total loss following an accident.

These additional costs are required to be added to the actual cash value of the vehicle when determining an appropriate settlement. The MIA discovered that insurance companies had not updated their method of calculating the vehicles value in light of the new sales tax and title fees and had been under-compensating policyholders/claimants. It was subsequently revealed that many companies also had been failing to pay the costs associated with tag transfer as required by Maryland law.

“To date, the MIA has fined the offending companies $235,000 and has instructed them to pay a total of $442,590.38 in restitution to 4,120 Maryland citizens,” Tyler says. “We are still in the process of examining seven companies, but we are committed to getting vehicle owners what they are guaranteed under the law.”

The survey and investigation, which began last June, is in its final stages and should be completed in the coming months. On average, insurance companies underpaid claims by approximately $100. All policy holders/claimants affected by the changes have been contacted and have received their restitution money, he said.