The Maryland Insurance Administration (MIA) recently completed a year-long industry survey of 119 insurance companies regarding the mishandling of vehicle insurance claims in the wake of changes to total loss vehicle taxes and fees. Of the companies investigated, 67 violated state law when handling total loss claims.
As of January 2008, an increase in sales tax and Motor Vehicle Administration fees resulted in a greater cost when declaring a vehicle a total loss. These additional costs are required to be added to the actual cash value of the vehicle when determining an appropriate settlement.
“The industry as a whole seemed to miss the implication of these legislative changes,” said Insurance Commissioner Ralph Tyler. “We found widespread violations.”
The MIA found that insurance companies had not updated their method of calculating the vehicles’ values to reflect new sales tax and title fees and had been underpaying claimants by an average of $100 per claim. Many companies also failed to pay costs associated with tag transfer as required by state law.
The investigation resulted in the companies paying nearly $250,000 in penalties to the state and about $500,000 in restitution to 4,000 Maryland residents.
