SB 125
Department of Legislative Services
Maryland General Assembly
2020 Session
FISCAL AND POLICY NOTE
Third Reader
Senate Bill 125 (Senator Feldman)
Finance Economic Matters
Private Passenger Motor Vehicle Insurance - Prohibition on Cancellation Due to
Towing or Emergency Roadside Coverage Claims
This bill prohibits a private passenger motor vehicle insurer from canceling, refusing to
renew, or otherwise terminating coverage for a policy because of a claim under the towing
or emergency roadside service (ERS) coverage in the policy. However, the bill expressly
authorizes such an insurer to (1) remove the towing or ERS coverage from a policy when
it is renewed based on the number of towing or ERS claims and (2) increase the premium
of a policy as a result of a towing or ERS claim, as specified.
Fiscal Summary
State Effect: The bill does not materially affect State operations or finances.
Local Effect: The bill does not directly affect local governmental operations or finances.
Small Business Effect: Minimal.
Analysis
Current Law: The Insurance Article expressly prohibits certain insurer practices and
activities as unfair trade practices. For example, a private passenger motor vehicle insurer
is prohibited from taking specified adverse actions against a policy (such as canceling or
refusing to renew the policy) because of a traffic violation or accident that occurred more
than three years before the application for an insurance policy or policy renewal.
There are requirements and procedures that must be followed by a private passenger motor
vehicle insurer when it proposes to cancel, refuse to renew, reduce coverage for, or increase
the premium of a policy. For example, an insurer may not terminate a policy mid-term,
except in limited circumstances (e.g., nonpayment of a premium), and an insurer must send
notice to an insured in a specified manner when it proposes to reduce the coverage provided
by the policy.
Additionally, when proposing to increase the premium of a policy, an insurer must notify
the policyholder of certain information directly related to the premium increase, including
the policyholder’s rate classification and the factors that may cause or contribute to an
increase in the policy’s premiums.
Background: The Maryland Insurance Administration (MIA) advises that, for the
first time, in 2019 it received several consumer complaints where an insurer had notified a
policyholder that it would not be renewing a policy due to the policyholder’s use of towing
or ERS coverage. MIA advises that this insurer practice is problematic because (1) such
claims are often the result of a dead battery, keys locked in the vehicle, a flat tire, or other
innocuous events that have no bearing on an insured’s driving behavior and (2) a
nonrenewal of a motor vehicle liability insurance policy for any reason could cause
problems when the policyholder attempts to obtain replacement coverage, either in the
form of higher premiums or ineligibility for new coverage.
Additional Information
Prior Introductions: None.
Designated Cross File: HB 118 (Delegate Dumais) - Economic Matters.
Information Source(s): Maryland Insurance Administration; Department of Legislative
Services
Fiscal Note History: First Reader - January 22, 2020
mr/jc Third Reader - February 14, 2020
Analysis by: Richard L. Duncan Direct Inquiries to:
(410) 946-5510
(301) 970-5510
SB 125/ Page 2


Statutes affected:
Text - First - Private Passenger Motor Vehicle Insurance - Prohibition on Cancellation Due to Towing or Emergency Roadside Coverage Claims: 27-501 Insurance, 27-613 Insurance
Text - Third - Private Passenger Motor Vehicle Insurance - Prohibition on Cancellation Due to Towing or Emergency Roadside Coverage Claims: 27-501 Insurance, 27-613 Insurance