CLIENT ADVISORY: Maryland Insurance Administration Says UMPD Covers Diminution of Value

The Maryland Insurance Administration (“MIA”) has updated its enforcement position on uninsured/underinsured motorist (“UM/UIM”) coverage for diminution of value claims.  By way of background, UM/UIM coverage is a statutorily required insurance coverage that applies when an insured involved in an accident is unable to recover, in whole or in part, from an uninsured or underinsured at-fault driver, or an at-fault driver who cannot be identified.  UM/UIM coverage for property damage is referred to as UMPD.  Diminution of value refers to the difference between a vehicle’s pre-accident market value and its post-damage, post-repair market value.

In the past, some carriers have not considered diminution of value to be covered by UMPD provisions.  In determining that UMPD coverage includes coverage for diminution of value, the MIA looked to comments from Maryland’s legislature, which recently clarified that UMPD is required to compensate the policyholder “for damages . . . that . . . the insured is entitled to recover . . . because of property damage . . . .”  Relying on those comments, the MIA reasoned that diminution of value is a category of damages that an insured is entitled by law to recover from a tortfeasor.  The MIA has issued this Bulletin notifying insurers of its position, and prohibiting insurers from excluding, altering or limiting coverage for diminution of value damages under UMPD.

Thomas, Thomas & Hafer, LLP (“TT&H”) is a law firm with over 90 lawyers with 12 offices throughout the Mid-Atlantic region.  TT&H has served the insurance industry since 1977.  Questions regarding this advisory can be directed to Nicholas Schaufelberger, an associate in TT&H’s Washington, DC office, at (202) 945-9502 or nschaufelberger@tthlaw.com.