New Law in Maryland Will Require Insurers to Explain ACC Clause to Homeowners

May 6, 2013

Maryland has enacted a new law requiring insurers that write homeowners policies in the state with anti-concurrent causation clauses to explain these clauses to their policyholders on an annual basis.

Maryland Gov. Martin O’Malley signed into law H.B. 695 (“Homeowner’s Insurance – Anti-Concurrent Causation Clause – Notice and Study”) on May 2. The new law will take effect beginning June 1, 2013.

It states that “an insurer that issues a policy of homeowner’s insurance in the state that contains an anti–concurrent causation (ACC) clause shall provide a policyholder each year with a notice.”

This annual notice should clearly and specifically describe the ACC clause. The notice should also inform the insured to read the policy for complete information on the exclusions and that the insured can talk to their insurance producer or the insurer for further information regarding the scope of the exclusions.

Maryland’s insurance regulators may adopt necessary regulations to implement this requirement. The notice would not be part of the policy or a contract of insurance and does not create a private right of action.

This new requirement would apply to all homeowners insurance policies issued, delivered, or renewed in Maryland on or after Jan. 1, 2014.

“The Maryland Insurance Administration supported the measure, in part because the agency was receiving complaints about anti-concurrent causation clauses being used more often and in a more expansive manner,” Maryland Insurance Administration spokesperson Vivian Laxton told Insurance Journal.

Additionally, under the new law, the Maryland House Economic Matters Committee and the Senate Finance Committee will study the handling by insurers and the National Flood Insurance Program of property insurance claims in cases where there are two or more factors that could affect the loss.

Topics that the committees will examine include the history, nature, scope, and general effect of the ACC clause; the rationale given by various states for allowing or disallowing use of the ACC clause; and the number of complaints involving the ACC clause filed with the Maryland Insurance Administration in each of the past three years and their resolution.

The Maryland House Economic Matters Committee and the Senate Finance Committee will be required to issue a report on the ACC clause by the end of the year. The Maryland Insurance Administration will be required to provide all data requested by the committees to complete the study.

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