Maryland Insurance Bad Faith Demand Letter

MARYLAND INSURANCE BAD FAITH DEMAND LETTER

SENT VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED

AND REGULAR U.S. MAIL

DATE: [__/__/____]

TO:
[________________________________]
[Insurance Company Name]
[________________________________]
[Street Address]
[________________________________]
[City, State, ZIP Code]

ATTENTION: Claims Manager / Bad Faith Claims Unit

FROM:
[________________________________]
[Attorney Name / Law Firm Name]
[________________________________]
[Street Address]
[________________________________]
[City, State, ZIP Code]
[________________________________]
[Telephone Number]
[________________________________]
[Email Address]

RE: FORMAL BAD FAITH DEMAND LETTER - FIRST-PARTY CLAIM

Insured: [________________________________]

Claimant: [________________________________]

Claim Number: [________________________________]

Policy Number: [________________________________]

Date of Loss: [__/__/____]

Type of Loss: [________________________________]

Policy Type: ☐ Homeowners ☐ Auto ☐ Commercial Property ☐ UM/UIM ☐ Other: [________________]

I. INTRODUCTION AND PURPOSE

This letter constitutes a formal demand for payment of all benefits owed under the above-referenced insurance policy, together with notice that your company has failed to act in good faith as required by Maryland law.

IMPORTANT NOTICE REGARDING MARYLAND LAW: Maryland has a statutory framework for first-party bad faith claims under Md. Code, Ins. § 27-1001 and Cts. & Jud. Proc. § 3-1701. Maryland does NOT recognize a common law tort action for bad faith failure to pay a first-party claim. Mesmer v. Maryland Auto Insurance Fund, 353 Md. 241 (1999).

However, Maryland's statutory framework provides meaningful remedies including recovery of attorney's fees, expenses, litigation costs, and interest when an insurer fails to act in good faith.

II. MARYLAND LEGAL FRAMEWORK FOR FIRST-PARTY BAD FAITH

A. Statutory Framework

Md. Code, Ins. § 27-303 prohibits insurers from "failing to act in good faith, as defined under § 27-1001 of this title, in settling a first-party claim under a policy of property and casualty insurance."

Md. Code, Ins. § 27-1001 defines "good faith" as "an informed judgment based on honesty and diligence supported by evidence the insurer knew or should have known at the time the insurer made a decision on a claim."

B. Administrative Exhaustion Required

Claims under Maryland's first-party bad faith statute require administrative exhaustion through the Maryland Insurance Administration (MIA) before a Circuit Court action may be commenced. The Circuit Court review is de novo, and the insured may elect a jury trial.

C. Rejection of "Fairly Debatable" Standard

In Cecilia Schwaber Trust Two v. Hartford Accident & Indemnity Co., 636 F. Supp. 2d 481 (D. Md. 2009), the court rejected the "fairly debatable" standard used in other states, holding that Maryland's statutory language requires evaluation of whether the insurer made "an informed judgment based on honesty and diligence supported by evidence the insurer knew or should have known."

The court stated: "The fairly debatable standard should not be glossed onto the standard explicitly created by the Maryland legislature."

D. Totality of Circumstances Test

Maryland uses a "totality of the circumstances" approach, considering:

1. Efforts or measures taken by the insurer to resolve the coverage dispute promptly
2. The substance of the coverage dispute or the weight of legal authority on the coverage issue
3. The insurer's diligence and thoroughness in investigating the facts pertinent to coverage

E. Available Remedies

Under Md. Code, Cts. & Jud. Proc. § 3-1701 and Ins. § 27-1001, if the MIA or court finds the insurer failed to act in good faith:

• Policy benefits owed (up to policy limits)
• Expenses and litigation costs
• Reasonable attorney's fees
• Interest on costs from date of filing

III. FACTUAL BACKGROUND

A. The Insured and Policy Information

Named Insured(s): [________________________________]

Policy Number: [________________________________]

Policy Period: [__/__/____] to [__/__/____]

Policy Type: [________________________________]

Coverage Limits:

• Coverage A (Dwelling/Property): $[________________________________]
• Coverage B (Other Structures): $[________________________________]
• Coverage C (Personal Property): $[________________________________]
• Coverage D (Loss of Use): $[________________________________]
• Liability Coverage: $[________________________________]
• Medical Payments: $[________________________________]
• Uninsured/Underinsured Motorist: $[________________________________]
• Other Applicable Coverage: $[________________________________]

Deductible: $[________________________________]

Premium Paid: $[________________________________]

B. The Loss Event

Date of Loss: [__/__/____]

Time of Loss: [________________________________]

Location of Loss: [________________________________]

Description of Loss Event:

[________________________________]
[________________________________]
[________________________________]
[________________________________]
[________________________________]
[________________________________]

C. Claim Submission and Response

Date Claim Reported: [__/__/____]

Method of Reporting: ☐ Telephone ☐ Online ☐ Written ☐ Agent

Claim Number Assigned: [________________________________]

Initial Adjuster Assigned: [________________________________]

Date Adjuster Contacted Insured: [__/__/____]

Date of Initial Inspection: [__/__/____]

D. Documentation Submitted

The following documentation was timely provided to support this claim:

☐ Completed proof of loss form, dated [__/__/____]
☐ Police report / Fire report / Incident report, dated [__/__/____]
☐ Photographs and/or video documentation
☐ Repair estimates from licensed contractors
☐ Medical records and bills
☐ Receipts and invoices for damaged property
☐ Inventory of damaged/destroyed items
☐ Examination under oath transcript, dated [__/__/____]
☐ Expert reports (specify): [________________________________]
☐ Other documents: [________________________________]

E. Timeline of Claim Handling

IV. COVERAGE ANALYSIS

A. Applicable Policy Provisions

The policy at issue provides coverage for the type of loss that occurred. Specifically:

Insuring Agreement: [________________________________]
[________________________________]
[________________________________]

Relevant Coverage Provisions:
[________________________________]
[________________________________]
[________________________________]

B. Coverage Clearly Applies

Based on the policy language and the facts of this loss:

1. The loss occurred during the policy period
2. The loss was caused by a covered peril
3. The property/person is a covered interest under the policy
4. The insured complied with all policy conditions
5. No exclusions apply to bar coverage
6. The damages claimed are within policy limits

C. Exclusions Do Not Apply

Your company has cited the following exclusion(s) as a basis for denial:

Cited Exclusion: [________________________________]

Why This Exclusion Does Not Apply:
[________________________________]
[________________________________]
[________________________________]

V. FAILURE TO ACT IN GOOD FAITH

A. The Good Faith Standard

Under Md. Code, Ins. § 27-1001, "good faith" means "an informed judgment based on honesty and diligence supported by evidence the insurer knew or should have known at the time the insurer made a decision on a claim."

B. Your Company Failed to Make an Informed Judgment

Your company's decision on this claim was not an "informed judgment based on honesty and diligence" because:

☐ Failure to Obtain Relevant Information:
Your company failed to obtain or consider relevant information:
[________________________________]
[________________________________]

☐ Failure to Accurately Assess Information:
Your company failed to accurately assess available information:
[________________________________]
[________________________________]

☐ Unsupported Coverage Conclusion:
Your company's coverage decision is not supported by the evidence:
[________________________________]
[________________________________]

☐ Inadequate Investigation:
Your company failed to conduct a diligent investigation:
[________________________________]
[________________________________]

☐ Dishonest Evaluation:
Your company did not honestly evaluate the claim:
[________________________________]
[________________________________]

C. Violations of Md. Code, Ins. § 27-303 (Unfair Claim Settlement Practices)

Your company has violated Maryland's Unfair Claim Settlement Practices statute:

☐ Misrepresenting Policy Provisions (§ 27-303(1))
[________________________________]

☐ Failing to Acknowledge Communications Within 15 Working Days (§ 27-303(2))
[________________________________]

☐ Failing to Affirm or Deny Coverage Within Reasonable Time (§ 27-303(4))
[________________________________]

☐ Failing to Attempt Good Faith Settlement When Liability is Clear (§ 27-303(5))
[________________________________]

☐ Compelling Litigation by Offering Substantially Less Than Amounts Recovered (§ 27-303(6))
[________________________________]

☐ Failing to Provide Reasonable Explanation for Denial (§ 27-303(14))
[________________________________]

☐ Other Violations:
[________________________________]

D. Application of Totality of Circumstances Factors

Factor 1 - Efforts to Resolve Dispute Promptly:
Your company failed to take adequate measures to resolve this dispute:
[________________________________]
[________________________________]

Factor 2 - Substance of Coverage Dispute:
There is no legitimate coverage dispute or the weight of authority supports coverage:
[________________________________]
[________________________________]

Factor 3 - Diligence and Thoroughness of Investigation:
Your company's investigation was inadequate:
[________________________________]
[________________________________]

VI. DAMAGES

A. Contract Damages - Policy Benefits Owed

Coverage A - Property Damage:

• Replacement Cost / Actual Cash Value: $[________________________________]
• Less Depreciation (if ACV): $[________________________________]
• Less Deductible: $[________________________________]
• Net Amount Due: $[________________________________]

Coverage D - Loss of Use:

• Amount Incurred: $[________________________________]
• Amount Due: $[________________________________]

Medical Expenses:

• Past Medical Expenses: $[________________________________]
• Future Medical Expenses: $[________________________________]
• Total Medical: $[________________________________]

Lost Wages / Income:

• Past Lost Wages: $[________________________________]
• Future Lost Wages: $[________________________________]
• Total Lost Wages: $[________________________________]

Other Contract Damages:

TOTAL CONTRACT DAMAGES: $[________________________________]

B. Statutory Damages Under § 27-1001

If the insurer is found to have failed to act in good faith:

Expenses and Litigation Costs: $[________________________________]

Attorney's Fees: $[________________________________]

Interest on Costs (from date of filing): $[________________________________]

C. Consequential Damages

☐ Additional living expenses beyond policy coverage: $[________________________________]
☐ Storage costs: $[________________________________]
☐ Rental expenses: $[________________________________]
☐ Credit damage and related costs: $[________________________________]
☐ Other consequential damages: [________________________________]: $[________________________________]

TOTAL CONSEQUENTIAL DAMAGES: $[________________________________]

D. Punitive Damages (Limited Availability)

Under Maryland law, punitive damages require proof of "actual malice." Punitive damages may be available in egregious cases but are difficult to obtain.

Basis for Punitive Damages (if applicable):
[________________________________]
[________________________________]

E. Summary of Damages

VII. SETTLEMENT DEMAND

A. Time-Limited Demand

This constitutes a TIME-LIMITED SETTLEMENT DEMAND pursuant to Maryland law.

DEMAND AMOUNT: $[________________________________]

This demand includes:

• Policy benefits owed: $[________________________________]
• Consequential damages: $[________________________________]
• Interest to date: $[________________________________]
• TOTAL DEMAND: $[________________________________]

B. Deadline for Response

THIS DEMAND EXPIRES ON: [__/__/____] at 5:00 PM Eastern Time

You have [____] days from the date of this letter to:

1. Tender payment in the full amount demanded; OR
2. Provide a written, substantive response with a reasonable counteroffer supported by specific policy language and factual basis.

C. Terms of Settlement

Upon receipt of the demanded amount, our client agrees to:

☐ Execute a full release of all claims arising from this loss
☐ Not pursue statutory attorney's fees
☐ Not file a complaint with the Maryland Insurance Administration
☐ Maintain confidentiality regarding settlement terms
☐ Other terms: [________________________________]

D. Reservation of Rights

If this demand is not accepted within the time specified:

1. This offer is withdrawn and may not be accepted thereafter
2. A complaint will be filed with the Maryland Insurance Administration
3. Attorney's fees and costs will be sought under § 27-1001
4. All available legal remedies will be pursued

VIII. CONSEQUENCES OF NON-COMPLIANCE

A. Administrative Complaint

If your company fails to resolve this matter, our client will file a complaint with the Maryland Insurance Administration (MIA) pursuant to Md. Code, Cts. & Jud. Proc. § 3-1701.

Contact Information:
Maryland Insurance Administration
200 St. Paul Place, Suite 2700
Baltimore, MD 21202

B. Circuit Court Action

Following the MIA proceeding, our client may pursue de novo review in Circuit Court, including the right to a jury trial.

C. Claims to be Asserted

1. Breach of insurance contract
2. Failure to act in good faith under Md. Code, Ins. § 27-1001
3. Violations of Md. Code, Ins. § 27-303
4. Recovery of attorney's fees, expenses, and costs
5. Interest on costs

D. Discovery

In litigation, we will pursue extensive discovery, including:

• Complete claims file and all related documents
• Internal communications regarding this claim
• Training materials and claims handling guidelines
• Evidence of similar claims handling practices
• Depositions of all persons involved in handling this claim

IX. PRESERVATION OF EVIDENCE

LITIGATION HOLD NOTICE

This letter constitutes formal notice to preserve all documents and electronically stored information related to this claim, including but not limited to:

☐ Complete claims file
☐ All correspondence (internal and external)
☐ All emails, text messages, and other electronic communications
☐ Photographs, videos, and inspection reports
☐ Adjuster notes and diaries
☐ Expert reports and opinions
☐ Training materials and claims manuals
☐ Similar claims files for pattern evidence
☐ Financial records
☐ Personnel files of persons involved in claim handling
☐ All metadata associated with electronic documents

Failure to preserve this evidence may result in sanctions and adverse inference instructions.

X. RESPONSE REQUIRED

Please direct your response to:

[________________________________]
[Attorney Name]
[________________________________]
[Law Firm Name]
[________________________________]
[Street Address]
[________________________________]
[City, State, ZIP Code]
[________________________________]
[Telephone]
[________________________________]
[Email]

We require a substantive response by [__/__/____].

XI. CONCLUSION

Your company's handling of this claim has failed to meet Maryland's statutory standard of good faith. The decision on this claim was not "an informed judgment based on honesty and diligence supported by evidence." We urge you to reconsider your position and resolve this matter promptly.

This letter is written without prejudice to any rights, remedies, or defenses our client may have, all of which are expressly reserved.

We look forward to your prompt response.

Respectfully submitted,

________________________________________
[Attorney Name]
[Bar Number]
[Law Firm Name]

Date: [__/__/____]

VERIFICATION

STATE OF MARYLAND
[COUNTY/CITY] OF [________________________________]

I, [________________________________], being duly sworn, state that I am the [________________________________] in the above-referenced matter, that I have read the foregoing Bad Faith Demand Letter, and that the facts stated therein are true and correct to the best of my knowledge, information, and belief.

________________________________________
[Signature]

Subscribed and sworn to before me this [____] day of [________________], 20[____].

________________________________________
Notary Public
My Commission Expires: [__/__/____]

EXHIBITS AND ATTACHMENTS

☐ Exhibit A: Copy of Insurance Policy
☐ Exhibit B: Proof of Loss / Claim Documents
☐ Exhibit C: Correspondence with Insurer
☐ Exhibit D: Denial Letter(s)
☐ Exhibit E: Supporting Documentation
☐ Exhibit F: Expert Reports
☐ Exhibit G: Damage Calculations
☐ Exhibit H: Medical Records (if applicable)
☐ Exhibit I: Photographs/Video Evidence
☐ Exhibit J: Other: [________________________________]

CERTIFICATE OF SERVICE

I hereby certify that on [__/__/____], a true and correct copy of this Bad Faith Demand Letter was served upon the above-named insurance company by:

☐ Certified Mail, Return Receipt Requested
☐ Regular U.S. Mail
☐ Overnight Delivery
☐ Hand Delivery
☐ Electronic Mail to: [________________________________]

________________________________________
[Attorney Signature]