The Maryland Insurance Administration published a Bulletin addressed to all motor vehicle insurance companies, rating organizations, producers, agents, and the Maryland Automobile Insurance Fund (MAIF)–Maryland's auto insurance residual market. The purpose of the Bulletin is to alert insurers or anyone authorized to issue motor vehicle insurance in the state of the requirements related to uninsured and underinsured coverage as they relate to diminution of value claims, and the Administration's intention to enforce those requirements.
UM and UIM coverage protect insureds in situations where they cannot fully recover from an at-fault uninsured or underinsured driver, or in hit-and-run situations. The Administration holds that UM and UIM coverage, which are required to be carried under Maryland law, must also cover the diminution of value (DV) of a motor vehicle. Diminution of value is the loss of value of a vehicle after it has been damaged and repaired–it is the difference between the vehicle's market value before an accident and the lowered value even after it has been repaired following an accident. Maryland courts have held that the diminution of a vehicle's value is a valid and compensable part of loss payment.
Underinsured Motorist Property Damage (UMPD) is the component of UM/UIM coverage that includes DV coverage. UMPD is considered "first party" coverage, meaning that the coverage is optional and non-mandatory, and included as a part of a direct contractual agreement between the insurer and the policyholder. Because of the optional nature, insurers have historically excluded DV as a compensable payout, and the Administration did not disapprove those forms in the past.
The Administration is retracting that position, stating that while UMPD is a first party coverage, it is also mandatory. Since diminution of value is a category of damages that the insured is entitled by law to recover from the owner or operator of an uninsured motor vehicle, they are required to be covered under UMPD.
Any insurer authorized to write motor vehicle insurance may not exclude or limit coverage for diminution of value damages. Any policy that excludes or limits DV coverage is unenforceable, and DV claims made under UMPD coverage must be paid when proven, subject to the insured's UM/UIM limits. Insurers that have filed or issued policies that exclude DV damages as a component of UM must remove any such exclusion and refile the policy forms within 90 days of the date of the Bulletin (April 12, 2024).
The Bulletin can be found here.