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What Is The Time for Responding to a Defense Tender?

Insurers must acknowledge a claim within 15 working days of receipt.  Md. Code Regs.

Insurers must affirm or deny coverage within 15 working days after receiving a properly completed claim form.  Md. Code Ins. § 27-303 (12).

Does Reserving Rights Create a Conflict of Interest?

Maryland courts have not directly addressed this issue.  A conflict of interest arises when covered and uncovered claims are identified in an underlying tort action.  Nationwide Ins. Co. v. Webb,  436 A.2d 465, 476-477 (Md. 1995).

Does a Reservation of Rights Create Additional Duties?

No cases found.

What Must Be Done If A Conflict of Interest Exists?

When a conflict of interest arises, the insured must be informed and be allowed to either accept independent counsel selected by the insurer or select an attorney himself to conduct the defense. Roussos v. Allstate Ins. Co., 655 A.2d 40, 47 (Md. 1995).

Who Is Responsible for Fees of Independent Counsel?

If a insured elects to choose its own attorney, the insurer must assume the reasonable costs of the defense provided.  Roussos v. Allstate Ins. Co., 655 A.2d 40, 48 (Md. 1995).

What Are Independent Counsel’s Obligations?

No cases found.

What Settlement Duties Exist?

An insurer does not have an absolute duty to settle a claim within policy limits, although it may refuse to do so in bad faith. Allstate Insurance Company v. Campbell, 639 A.2d 652, 659 (Md. 1994).

What Actions May Result in a Claim for Bad Faith?

Maryland does not recognize a first-party tort of bad faith. Johnson v. Federal Kemper Ins. Co., 536 A.2d 1211, 1213 (Md. Ct. App. 1988).

A tort cause of action may arise for an insured for a bad faith failure to settle with a third party. State Farm Mut. Auto. Ins. Co. v. White, 236 A.2d 269, 273 (Md. 1967).

Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?

Attorney’s fees may be recoverable in third-party actions, but not in first-party insurance coverage disputes.  Bausch & Lomb, Inc. v. Utica Mut. Ins. Co., 735 A.2d 1081, 1095 (1999).

Are Punitive Damages Recoverable in Insurer-Insured Dispute?

Punitive damages are not allowed in a breach of contract action. Johnson v. Federal Kemper Ins. Co., 536 A.2d 1211 (Md. Ct. Spec. App. 1988).

Alternative Coverage Options

In the case where an insured demands a defense, an insurer may (1) refuse to defend and disclaim liability; (2) defend the action against the insured under a nonwaiver agreement; or (3) institute a declaratory judgment action to resolve the issue of coverage. Glen Falls Ins. Co. v. American Oil Co., 254 A.2d 658, 666-667 (1969).

A declaratory judgment action cannot proceed where the dispositive issue is one that will be addressed or resolved in the underlying tort proceeding.  Brohawn v. Transamerica Ins. Co., 347 A.2d 842, 854 (Md. 1975).

Relevant Statutes

Declaratory Judgment – Md. Code Ann. Cts. & Jud. Proc. § 3-403(a).

“Except for the District Court, a court of record within its jurisdiction may declare rights, status, and other legal relations whether or not further relief is or could be claimed.  An action or proceeding is not open to objection on the ground that a declaratory judgment or decree is prayed for.”

Consumer Protection Act  – Md. Code Com. Law  § 13-101.

Unfair Claims Settlement Practices  – Md. Code Ins. § 27-301, et seq. No private right of action exists under this statute.  Gottlieb v. Lincoln National Life Insurance Co., 388 F.Supp.2d 574, 581 (D.Md. 2005).

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