1756                                      VETOES

to stand in the place of the section so repealed and to be under the new
subheading "Coerced and Tie-in Sales Prohibited", to provide that it
shall be unlawful to require any person as a condition to the receipt
of a loan or any other consideration to buy insurance from any given
agent, broker or insurer; to prohibit any insurance transaction or
plan which is tied in with some other consideration; to prohibit the
public solicitation of combination plans, and providing generally for
the free choice of insurance.

May 4, 1967.

Honorable William S. James
President of the Senate
State House
Annapolis, Maryland

Dear Mr. President:

In accordance with Section 17 of Article II of the Maryland
Constitution, I have vetoed today Senate Bill 637 and am returning
it to you.

This bill would substantially alter the provisions of the Anno-
tated Code of Maryland governing the writing of insurance coverages
in connection with loans and sales.

Present law prohibits lenders and vendors from requiring as a
condition to a loan or sale that insurance coverages be written by a
particular agent, broker or type of insurer, but does not prevent ".....
the reasonable exercise by any such lender or vendor of the right to
approve or disapprove of the insurer selected to underwrite the
insurance on a reasonable non-discriminatory basis."

The effect of the bill would be to deprive a lender or vendor
completely of any voice in establishing reasonable qualifications for
the strength of insurance coverages to protect the security of his loan
or sale.

In requesting that I veto this measure, then Insurance Commis-
sioner Polovoy, in a letter dated March 27, 1967, stated:

"It seems to me entirely proper for a lender or seller who retains
an interest to have the right to require that a borrower place insurance
in a company which meets certain minimal non-discriminatory
standards. For example, it is not unusual for one lending money on
property to require that the insurance company insuring the risk shall
have a capital and surplus of at least ten million dollars. In view of
the fact that there are over one hundred companies licensed to do
business in Maryland which possess such a qualification, it would
certainly seem to represent a selection made on a reasonable non-
discriminatory basis.

"Simply stated, if I were lending money on property I would
certainly expect to have something to say concerning the strength of
the company insuring the property which is the sole security for my
loan. To deprive a lender of any voice in the selection of an insurer
in effect deprives him to some extent of the security for his loan.

"As you know, Maryland has in the past had four insolvent
insurance companies and each of these companies wrote a limited
amount of insurance on mortgaged properties. Under Senate Bill 637