3364

VETOES

State House

Annapolis, Maryland 21404

Dear Mr. President:

In accordance with Article II, Section 17 of the
Maryland Constitution, I have today vetoed Senate Bill 653.

This message would prohibit the Maryland Insurance
Guaranty Association (MIGA) from denying a claim on the
ground that it is covered by uninsured motorists (UM)
coverage. Thus, the bill squarely presents the basic
question of how claims against the insureds of an insolvent
insurer can best be handled. Should the UM coverage be the
primary coverage and MIGA constitute an excess coverage? Or
should MIGA constitute the primary coverage?

According to proponents of the measure, since MIGA's
purpose is to pay the obligations of an insolvent insurer,
the payment of the covered claim should be primary by the
Association. Proponents also suggest that such a change in
policy would further the express legislative policy which
prompted the enactment of MIGA, viz., to provide a mechanism
for the prompt payment of covered claims. See, Code, art.
48A, § 504.1/ They also assert that the bill "would cure
the present inequity which allows most brokers to be paid
more quickly than those who obey the law."2/

Opponents strongly suggest that the present public
policy supporting the primacy of UM coverage is clear and
compelling. They assert that the proposed transfer from UM
to MIGA of the responsibility for providing primary coverage
will not promote the claimants' best interest in prompt
payment of covered claims, will raise the distinct
possibility that the insurance consumer will be forced to
pay twice for uninsured motorist coverage, and will leave a
claimant's proper cause of action in seeking a satisfaction
of a claim against an insolvent insurer wholly unsettled.
See, e.g., the attached May 1st letter on behalf of Maryland
Casualty Company.

I am sufficiently persuaded by the arguments of the
opponents that Senate Bill 653, while representing a good
faith attempt to speed up the resolution of valid claims by
the insured of an insolvent insurer, may unwittingly
lengthen that process, increase its costs and thereby be
counterproductive to the very purposes which motivated its
passage.

For these reasons, I have decided to veto Senate Bill
653.

Sincerely,
Harry Hughes