First-Party Property Damage Demand Letter - Maryland

FIRST-PARTY PROPERTY DAMAGE DEMAND LETTER

State of Maryland

[LAW FIRM LETTERHEAD]

SETTLEMENT COMMUNICATION - FOR RESOLUTION PURPOSES ONLY
ADMISSIBILITY SUBJECT TO MD. RULE 5-408 AND FED. R. EVID. 408, WHERE APPLICABLE

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [ADJUSTER_EMAIL]

Date: [__/__/____]

[INSURANCE_COMPANY_NAME]
[PROPERTY_CLAIMS_DEPARTMENT_ADDRESS]
[________________________________]

Attention: [ADJUSTER_NAME], [ADJUSTER_TITLE]
Re: FORMAL DEMAND FOR PROPERTY INSURANCE BENEFITS — MARYLAND LAW
Insured: [________________________________]
Property Address: [________________________________]
Policy Number: [________________________________]
Claim Number: [________________________________]
Date of Loss: [__/__/____]
Type of Loss: [________________________________]
Coverage Limits: $[________________________________]
Response Deadline: [__/__/____]

Dear [ADJUSTER_NAME]:

I. INTRODUCTION AND NATURE OF DEMAND

This firm represents [________________________________] ("our client"), the named insured under the above-referenced Maryland property insurance policy, in connection with a first-party claim for property damage sustained at [PROPERTY_ADDRESS] in [COUNTY] County, Maryland, on [__/__/____]. This letter constitutes a formal demand for full payment of all benefits owed under the policy and serves as written notice that [INSURANCE_COMPANY_NAME]'s handling of this claim will be presented to the Maryland Insurance Administration ("MIA") under Md. Code Ann., Ins. § 27-1001 and, thereafter, will form the basis of a civil action for first-party bad faith under Md. Code Ann., Cts. & Jud. Proc. § 3-1701 if this demand is not resolved.

II. MARYLAND FIRST-PARTY PROPERTY INSURANCE LAW

A. The Policy is a Contract Governed by Maryland Law

Maryland applies ordinary contract interpretation to insurance policies. Read the policy and endorsements as a whole, giving terms their customary meaning unless the parties used them technically. Do not presume coverage from a rule that every policy term is construed against the insurer. Prince George’s County v. Local Gov’t Ins. Trust, No. 127, Sept. Term 2004 (Md. 2005) (applying Cole and Sullins).

B. Unfair Claim Settlement Practices — Md. Code Ann., Ins. §§ 27-303 and 27-304

Maryland's Unfair Claim Settlement Practices Act prohibits, among other things:

• Misrepresenting pertinent facts or policy provisions relating to coverages at issue;
• Failing to acknowledge and act reasonably promptly upon claim communications;
• Failing to adopt and implement reasonable standards for the prompt investigation of claims;
• Refusing to pay claims without conducting a reasonable investigation based on all available information;
• Not attempting in good faith to effectuate prompt, fair, and equitable settlement of claims in which liability has become reasonably clear;
• Compelling insureds to institute litigation by offering substantially less than the amounts ultimately recovered;
• Attempting to settle claims for less than the amount the insured would reasonably believe was owed;
• Failing to promptly provide a reasonable written explanation for the denial of a claim or an offer of compromise settlement.

Section 27-303 lists unfair claim settlement practices without a general-business-practice qualifier. Section 27-304 separately lists conduct that violates the subtitle only when committed with frequency indicating a general business practice; do not transfer subsection numbers or elements between the two sections.

C. First-Party Statutory Bad Faith — Md. Code Ann., Cts. & Jud. Proc. § 3-1701

Enacted by the General Assembly in 2007 (effective October 1, 2007), § 3-1701 creates a statutory cause of action for insureds against insurers who fail to act in good faith on first-party property and casualty claims. "Good faith" is defined at § 3-1701(a)(5) 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."

D. Mandatory Maryland Insurance Administration ("MIA") Pre-Suit Process

Under Md. Code Ann., Ins. § 27-1001(c)-(d), an insured pursuing a covered § 3-1701 action generally must first file a complaint with the MIA. Subsection (c)(2) excepts an action within the District Court's small-claim jurisdiction under Cts. & Jud. Proc. § 4-405, an agreed waiver by insured and insurer, or a qualifying commercial-policy claim with an applicable liability limit exceeding $1,000,000. The MIA process proceeds as follows:

1. The insured files a written complaint with the MIA attaching all proof-of-loss documentation;
2. The insurer generally must respond in writing within thirty (30) days after the MIA forwards the filing, subject to the subsection's good-cause qualification (§ 27-1001(d)(4));
3. The MIA shall issue a decision within ninety (90) days after it receives the filing; failure to do so is treated as a no-breach determination (§ 27-1001(e)(1));
4. The MIA determines: (a) whether coverage exists, (b) the amount owed, (c) whether the insurer breached its obligation, (d) whether the breach was in bad faith, and (e) the amount of damages, expenses, costs, and interest;
5. A party receiving an adverse MIA decision has 30 days after service to request a de novo administrative hearing under § 27-1001(f). A final MIA or administrative-law-judge decision may be appealed to circuit court under § 27-1001(g); the circuit court hears that appeal de novo under § 27-1001(g)(3). A § 3-1701 civil action generally cannot be filed before a final § 27-1001 decision, subject to § 3-1701(c)(2). Calendar each route separately.

E. Recoverable Damages Under § 3-1701(e)

If bad faith is established:

• Actual damages — limited to the applicable policy limits;
• Pre- and post-judgment interest — at the legal rate, calculated from the date payment should have been made;
• Expenses and litigation costs, including reasonable attorney's fees — capped at one-third (1/3) of the actual damages recovered.

F. Other Claims Preserved

Section 3-1701(i) does not limit a civil action for damages or other remedies otherwise available under another law. This demand reserves any claim for benefits due under the policy; it does not treat § 3-1701 as the source of separate contract damages.

G. Scope of This Demand

This demand seeks policy benefits and, if the statutory elements are established, the remedies listed in § 3-1701(e). It does not demand punitive damages on the contract or § 3-1701 theory.

III. POLICY INFORMATION AND COVERAGE

A. Policy Details

B. Applicable Coverage and Limits

C. Coverage Analysis

The loss is indisputably covered because:

1. The cause of loss is a peril expressly insured under the policy's insuring agreement;
2. The damage occurred during the policy period;
3. The damaged property is "covered property" under the policy definitions;
4. No policy exclusions apply, or where the insurer cites an exclusion, [CARRIER_SHORT_NAME] bears the burden of proving the exclusion applies (Clendenin Bros. v. U.S. Fire Ins. Co., 390 Md. 449, 889 A.2d 387 (2006));
5. Our client has complied with all post-loss policy conditions, including notice, cooperation, and submission of sworn proof of loss.

IV. THE LOSS EVENT

A. Description of Loss

On [__/__/____], the insured property located at [PROPERTY_ADDRESS] in [CITY], [COUNTY] County, Maryland, sustained substantial damage as a result of [DESCRIBE_LOSS_EVENT].

[DETAILED_NARRATIVE]

B. Cause and Origin

The cause of loss was:

☐ Fire/lightning
☐ Windstorm or hail (including derecho, nor'easter, or tropical storm common to the Chesapeake region)
☐ Sudden and accidental water discharge (plumbing, appliance, HVAC)
☐ Weight of ice, snow, or sleet
☐ Falling objects/trees
☐ Theft or vandalism
☐ Hurricane/tropical storm
☐ Tornado
☐ [OTHER_CAUSE]

C. Mitigation — Satisfied

If the issued policy requires reasonable steps to protect the property from further damage, our client took the following steps:

The mitigation claim depends on the issued policy and any applicable sublimit. Include only documented expenses covered by that policy; do not assume the reasonable-repairs provision increases a coverage limit.

V. CLAIM HISTORY AND INSURER'S CONDUCT

A. Chronology

B. Insurer's Position

[CARRIER_SHORT_NAME] has [DESCRIBE_INSURER_POSITION — denial / partial payment / delay / undervaluation].

C. Why the Insurer's Position Is Unreasonable Under Maryland Law

1. [CARRIER_SHORT_NAME]'s estimate ignores observable scope items identified by our independent contractor;
2. [CARRIER_SHORT_NAME] has disputed overhead and profit despite the policy, scope, project-complexity, and contractor evidence described below;
3. [CARRIER_SHORT_NAME] has not supplied an itemized depreciation calculation identifying any labor or removal amounts and the issued policy language used to calculate actual cash value;
4. [CARRIER_SHORT_NAME] has failed to provide the written explanation required by § 27-303(6); and
5. The investigation does not satisfy the "informed judgment based on honesty and diligence" standard under § 3-1701(a)(5).

VI. DAMAGES AND CLAIMED AMOUNTS

A. Dwelling (Coverage A)

B. Other Structures (Coverage B)

$[________] — [DESCRIBE: fences, sheds, detached garage, etc.]

C. Personal Property (Coverage C) — Replacement Cost

D. Loss of Use / ALE (Coverage D)

E. Ordinance or Law Coverage

If applicable, increased cost of compliance with Maryland and local building codes (including applicable requirements of the [COUNTY] County building department): $[________]

F. Claim Summary

VII. OVERHEAD AND PROFIT UNDER MARYLAND LAW

Include an O&P request only after counsel ties it to the complete issued policy, actual repair scope, project complexity, contractor evidence, and current controlling Maryland authority. Do not use a fixed percentage or mechanical trade-count threshold. Claim-specific basis: [________________________________].

VIII. APPRAISAL DEMAND (IF APPLICABLE)

A. Invoking Appraisal

Do not cite Md. Code Ann., Ins. § 27-605 for appraisal; that section governs commercial-policy cancellation and nonrenewal. If the policy contains an applicable appraisal clause, the insured invokes that clause because the parties cannot agree on the amount of loss.

We appoint [APPRAISER_NAME] as our client's competent and disinterested appraiser.

Please designate [CARRIER_SHORT_NAME]'s appraiser within the time required by the policy.

B. Scope of Appraisal

• Amount of loss to dwelling (Coverage A)
• Amount of loss to other structures (Coverage B)
• Amount of loss to personal property (Coverage C)
• [SPECIFIC_DISPUTED_SCOPE_ITEMS]

Issues not clearly submitted by the policy's appraisal clause are reserved. Counsel must verify the clause and current Maryland authority before asserting that a particular coverage, causation, or scope issue is excluded from or included in appraisal.

IX. STATUTORY VIOLATIONS AND BAD FAITH

A. § 27-303 Violations

[CARRIER_SHORT_NAME] has committed the following violations of Md. Code Ann., Ins. § 27-303:

☐ Misrepresenting pertinent facts or policy provisions (§ 27-303(1))
☐ Refusing to pay for an arbitrary or capricious reason based on all available information (§ 27-303(2))
☐ Failing to settle promptly under one part of the policy to influence settlement under another (§ 27-303(5))
☐ Failing to provide promptly a reasonable explanation for denial (§ 27-303(6))
☐ Failing to act in good faith on a first-party property/casualty claim (§ 27-303(9))

The following require evidence of frequency indicating a general business practice:

☐ Failing to acknowledge and act promptly on communications (§ 27-304(2))
☐ Failing to adopt reasonable investigation standards (§ 27-304(3))
☐ Refusing to pay without a reasonable investigation (§ 27-304(4))
☐ Failing to attempt prompt, fair, and equitable settlement when liability is reasonably clear (§ 27-304(6))
☐ Compelling litigation by offering substantially less than the amount ultimately recovered (§ 27-304(7))
☐ Failing to provide a prompt, reasonable explanation for denial or compromise (§ 27-304(14))

B. § 3-1701 Bad Faith

[CARRIER_SHORT_NAME]'s handling of this claim reflects a lack of "informed judgment based on honesty and diligence supported by evidence the insurer knew or should have known" — the very definition of bad faith under § 3-1701(a)(5). Specific indicia of bad faith include:

1. Premature scope determination before completing the investigation;
2. Reliance on desk adjusters who never inspected the property;
3. Failure to retain qualified experts (engineers/contractors) despite the nature of the loss;
4. Unreasonable estimate that ignored documented damage;
5. Failure to timely respond to our client's communications;
6. Failure to provide the reasonable denial explanation required by § 27-303(6).

X. DEMAND

A. Monetary Demand

We demand payment of $[TOTAL_DEMAND]:

B. Settlement Terms

• Payment within ten (10) days of acceptance;
• No confidentiality requirement (policyholder communication with the MIA is statutorily protected);
• Release is limited to claims arising from this specific loss and does not waive future or unrelated claims.

XI. RESPONSE DEADLINE AND CONSEQUENCES

This demand must be accepted by 5:00 p.m. Eastern Time on [__/__/____].

Consequences of Non-Response

If [CARRIER_SHORT_NAME] fails to accept this demand:

1. MIA Complaint under § 27-1001 — If the covered route applies and settlement is not reached, we will prepare a complaint with the Maryland Insurance Administration, including the material required by subsection (d). The MIA's 90-day decision period runs from its receipt of the filing under § 27-1001(e)(1), subject to the subsection's no-decision effect.

2. § 3-1701 Civil Action — Following the MIA process, we will file suit in the Circuit Court for [________] County, Maryland, seeking:

   • Actual damages under § 3-1701(e), up to the applicable policy limits; any separate contract claim must rest on its own policy terms and law;
   • Interest as provided by § 3-1701(e)(3), at the § 11-107(a) rate;
   • Reasonable litigation expenses and attorney's fees under § 3-1701(e), with the fee ceiling in § 3-1701(g).

3. Appraisal — If not already invoked, we will appoint our appraiser and demand appointment of yours.

4. MIA consumer complaint — If the claim-handling dispute remains unresolved, our client may file a property-insurance complaint with the Maryland Insurance Administration through its consumer complaint page. Counsel must determine whether that filing is separate from, or satisfies any part of, the § 27-1001 process described above.

XII. DOCUMENT PRESERVATION NOTICE

This letter constitutes formal notice to preserve all documents and electronically stored information relating to this claim, including but not limited to: the complete claim file; all estimates and supplemental estimates; adjuster notes, diaries, and activity logs; all drone, aerial, and on-site photographs; all engineer or contractor reports; reserve history and reserve-change documentation; all internal communications (email, chat, phone logs); supervisor approvals and declinations; claim-handling guidelines and training materials; and all correspondence with the insured. If relevant evidence is lost, a party may seek a remedy supported by the facts. A spoliation instruction is subject to the court’s decision and does not follow automatically from this notice.

XIII. STATUTE OF LIMITATIONS

Md. Code, Cts. & Jud. Proc. § 5-101 generally requires a civil action at law within three years after accrual unless another Code provision supplies a different period. Calendar the contract claim and any § 3-1701 action separately, including the MIA final-decision prerequisite and the administrative hearing or appeal route. Md. Code, Ins. § 12-104 makes a policy term that shortens the time to sue below the period required by Maryland law illegal and void. Confirm the actual accrual and filing dates before sending.

XIV. CONCLUSION

[CARRIER_SHORT_NAME] collected premiums from our client under the promise of Maryland insurance protection. That promise was memorialized in the issued policy, whose terms and endorsements must be read together. The loss occurred, coverage exists, and the only remaining issue is timely payment.

Maryland's General Assembly enacted § 3-1701 and the MIA administrative process specifically to address the type of conduct reflected in this claim file. We respectfully urge [CARRIER_SHORT_NAME] to use this opportunity to resolve the matter before the mandatory administrative process begins.

Respectfully submitted,

[LAW_FIRM_NAME]

By: _______________________________
[ATTORNEY_NAME]
Maryland Attorney Number (AIS): [____________]
[ADDRESS]
[CITY], MD [ZIP]
[PHONE]
[EMAIL]

Counsel for [CLIENT_NAME]

ENCLOSURES:
☐ Policy declarations page
☐ Complete policy
☐ Sworn proof of loss
☐ Independent contractor estimate
☐ Engineer / expert reports
☐ Photographs and drone imagery
☐ Personal property inventory
☐ Mitigation invoices
☐ Correspondence log

CC:

• [CLIENT_NAME]
• [MORTGAGEE_NAME] (if applicable)
• File

MARYLAND PROPERTY INSURANCE QUICK REFERENCE

SOURCES AND REFERENCES

• Md. Code Ann., Cts. & Jud. Proc. § 3-1701 — https://mgaleg.maryland.gov/mgawebsite/Laws/StatuteText?article=gcj&section=3-1701&enactments=false
• Md. Code Ann., Ins. § 27-1001 — https://mgaleg.maryland.gov/mgawebsite/Laws/StatuteText?article=gin&section=27-1001&enactments=false
• Md. Code Ann., Ins. § 27-303 — https://mgaleg.maryland.gov/mgawebsite/Laws/StatuteText?article=gin&section=27-303
• Md. Code Ann., Ins. § 27-304 — https://mgaleg.maryland.gov/mgawebsite/Laws/StatuteText?article=gin&section=27-304&enactments=false
• MIA Insurer Good Faith Requirements — https://insurance.maryland.gov/Pages/insurer-good-faith-requirements.aspx
• MIA File a Complaint — https://insurance.maryland.gov/Consumer/pages/fileacomplaint.aspx
• Md. Code, Ins. § 12-104 (shortened suit-limitation clauses): https://mgaleg.maryland.gov/mgawebsite/Laws/StatuteText?article=gin&section=12-104&enactments=false
• Sullins v. Allstate Ins. Co., 340 Md. 503, 667 A.2d 617 (1995)
• Clendenin Bros. v. U.S. Fire Ins. Co., 390 Md. 449, 889 A.2d 387 (2006)
• Prince George’s County v. Local Government Insurance Trust (insurance policy interpretation): https://www.mdcourts.gov/data/opinions/coa/2005/127a04.pdf
• Steamfitters Local Union No. 602 v. Erie Insurance Exchange (spoliation instruction): https://www.mdcourts.gov/data/opinions/cosa/2019/1142s17.pdf
• Maryland Insurance Administration — https://insurance.maryland.gov/