2013 Maryland Code
COMMERCIAL LAW
§ 12-909 - Insurance generally

§12-909.

(a) In connection with a plan established for a consumer borrower:

(1) The purchase of credit life, credit accident and health, credit disability, involuntary unemployment benefit, and similar coverages is optional with the consumer borrower; and

(2) Subject to § 12-909.1 of this subtitle, the purchase of property insurance, title insurance, and credit loss insurance from an insurer of the borrower’s choice may be required if the loan is secured.

(b) The provisions of this section do not alter or modify rights, privileges, or restrictions heretofore existing between the credit grantor and a nonconsumer borrower.

(c) Premiums for any insurance coverage permitted by this section are not interest or finance charges under the plan.

(d) The offering and placement of insurance under this section shall be subject to the provisions of the Insurance Article.

(e) (1) (i) In this subsection the following words have the meanings indicated.

(ii) “Improvements” means buildings or structures erected upon or affixed to real property that enhance the value of the real property.

(iii) “Property insurance coverage” means property insurance against losses caused by perils that commonly are covered in insurance policies described with terms similar to “standard fire” or “standard fire with extended coverage”.

(iv) 1. “Replacement cost” means the amount needed to repair damage to or rebuild improvements on real property to restore the improvements to their pre-loss condition.

2. “Replacement cost” does not include the value of land.

(2) (i) A credit grantor may not require a borrower, as a condition to receiving or maintaining a loan secured by a lien, to provide or purchase property insurance coverage against risks to any improvements on any real property in an amount exceeding the replacement cost of the improvements on the real property.

(ii) In determining the replacement cost of the improvements on any real property, the credit grantor may:

1. Accept the value placed on the improvements by the insurer; or

2. Use the value placed on the improvements by the credit grantor’s appraisal of the improvements.

(3) A violation of this subsection shall entitle the borrower to:

(i) Seek an injunction to prohibit the credit grantor who has engaged or is engaging in the violation from continuing or engaging in the violation;

(ii) Reasonable attorney’s fees; and

(iii) Damages directly resulting from the violation.

(4) A violation of this subsection does not affect the validity of the lien securing the loan.

§ 12-909 - 1. Insurance binders

(a) "Binder" defined. -- In this section, "binder" means a binder or other temporary contract of insurance as provided under § 12-106 of the Insurance Article.

(b) Compliance with section. -- A credit grantor shall comply with this section if the credit grantor:

(1) Makes any loan secured by a first lien on any interest in owner-occupied residential real property; and

(2) As a condition of making the loan, requires the consumer borrower to purchase property insurance or credit loss insurance.

(c) Acceptance as evidence of insurance. -- A credit grantor who makes a loan subject to this section shall accept as evidence of insurance a written binder issued by any authorized insurer or its insurance producer if the binder includes or is accompanied by:

(1) The name and address of the insured consumer borrower;

(2) The name and address of the credit grantor;

(3) A description of the insured residential real property;

(4) A provision that the binder may not be canceled within the term of the binder unless the credit grantor and the insured consumer borrower receive written notice of the cancellation at least 10 days prior to the cancellation;

(5) Except in the case of the renewal of a policy subsequent to the closing of the loan, a paid receipt for the full amount of the applicable premium; and

(6) The amount of coverage.

(d) Refusal to honor. -- This section does not prohibit a credit grantor from refusing to honor a binder in cases where:

(1) The credit grantor receives notice of the cancellation of the binder by the insurer; or

(2) At the expiration of 30 days of the date the binder was given, the insurer has failed to issue the policy of insurance.