48                           JOURNAL OF PROCEEDINGS                   [June 22

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 millions 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
the agent placing the insurance would have more to say than the
person lending the money on the property. As a practical matter
it would seem that this would have the effect of further restricting an
already tight money market in Maryland."

Moreover, the Commissioner, in subsequently informing me
that he was not consulted, nor were his views requested, on the bill,
raised the further question that the measure is subject to an inter-
pretation that might permit placement of insurance with companies
not authorized to do business in Maryland.

Similar objections have been voiced by the Division of Invest-
ments of the State Retirement Systems and the State Department of
Building, Savings and Loan Associations.

I am strongly opposed to the practice that I am certain the
proponents of this bill feel it is designed to eliminate—requiring a
borrower or purchaser to obtain insurance from a particular agent or
company—and will work to strengthen laws for that purpose.

Nevertheless, I feel just as strongly that this bill is not an
adequate answer to the problem. And since we have now a provision
that many deem adequate to cover the situation, there seems to be