• Bob Siems

The 27-1001 Appeals Process (in relatively plainer English than prior descriptions)

Reviewing our statistics, the most trafficked post on the blog was about the appeals process for bad faith actions and Thompson v. State. That was also one of the earliest post we’ve written. Rereading it, it’s bad blog writing. It’s unclear, assumes a great deal of familiarity with the rules, and it fails to translate dense legal writing into readable prose.

It also fails to do a good job at answering what we suspect most people are interested in —how to get their §27-1001 action to a jury.

So we’re rewriting it. This is the new-and-improved version.

How §27-1001 works

Md. Code Insurance §27-1001 creates an administrative remedy that must be exhausted to get a jury trial under Md. Code Courts & Judicial Proceedings §3-1701. An insured may not “bring or pursue” a §3-1701 action until it complies with §27-1001. (§27-1001(c).)

To comply, an insured must file its “complaint stating a cause of action under §3-1701” with the MIA, accompanied by a wide variety of documents. The administration forwards the document to the insurer. The insurer responds. The MIA issues a decision. (§27-1001(d-e))

Once the MIA reaches a decision, the insured can then file in Circuit Court under §3-1701. (§3-1701(c)). This action has a jury trial. (§3-1701(j).) So you can file in Circuit Court and get your jury trial without appealing.

The MIA's decision becomes a "final decision" once the deadline to request a hearing passes .§27-1001(f).

That said, appealing §27-1001 decisions gets complicated:

Getting to a Final Decision: “Hearing” and “Appeal”

Once the MIA decides the case, §27-1001 provides two ways to appeal: a "hearing" and an "appeal".

First, if a party gets an adverse decision, that party can ask for a de novo hearing that before the Office of Administrative Hearings within 30 days. Making this request holds off the time of a final decision, which prevents the filing of the §3-1701 action and/or the Circuit Court appeal (described below.) This hearing will “result in a final decision that makes the determinations” made before the MIA. (§27-1001(f).) Essentially, this affords the insured a more formal administrative forum to try their case. Unlike the §27-1001 commissioner, the OAH Administrative Law Judge hears testimony and judges the credibility of witnesses.

In addition to the hearing process, §27-1001 also has an “appeals process.” A party “who receives an adverse decision” can appeal “a final decision by the Administration or an administrative law judge” to the Circuit Court “in accordance with [Md. Code Insurance] §2-215” and Md. Code State Government §10-201 et seq. (Those laws are the appeals process from MIA decisions and the Maryland administrative procedure act for contested cases). This appeal is de novo. (§27-1001(g).) This allows the losing party to skip the Office of Administrative Hearings stage entirely and go straight to Circuit Court.

If more than one party gets an adverse decision and one chooses to appeal to circuit court and the other chooses to request a hearing, the case goes to circuit court.

Alternatively, an insured can choose not to request a hearing. Once the appeal deadline runs out, the MIA's decision becomes final. This allows the Insured to file a §3-1701 action in Circuit Court.

Summary of Options

  • Loser appeals to Circuit Court.

  • Loser appeals to Office of Administrative Hearings. Loser there appeals to Circuit Court.

  • Nobody appeals. Insured files §3-1701 action in Circuit Court the day after the appeal period runs out.

Every case eventually gets a jury trial. The only question is when.

Thompson v. State’s rule on venue

When the statute of initially passed, creative lawyers thought that the “appeals” clause meant that you could get a jury trial in Baltimore City. Under Md. Code Insurance §2-215, appeals from MIA decisions get Baltimore City venue. Insureds wanted that because Baltimore City is considered a plaintiff-friendly jurisdiction. In Thompson v. State (our one line summary here), the Court of Special Appeals held that if you wanted a jury trial under §3-1701, you don’t get the venue provisions for administrative appeals in §2-215.

Strategy Considerations

The first question is whether either side should bother appealing (since if a person does not appeal, a person can simply file directly). In my judgment, losing insureds should appeal. It will prevent the MIA opinion from becoming final. Since the MIA’s opinions do matter, that is probably a good thing. (That said, if a party did not appeal and just filed a 3-1701 action in Circuit Court, I doubt the MIA’s legal or factual conclusions would control under res judicata or collateral estoppel principles because (among other reasons) the 27-1001 review is paper-only.) To my knowledge, nobody has tried to differentiate appeals from new 3-1701 filings.

(For insurers, not appealing a loss means paying the MIA verdict. So insurers that wish to continue to litigate must appeal.)

The second question is the quickest route to a jury. For an insured trying to keep down litigation related costs, this means avoiding the Office of Administrative Hearings. (That is usually an Insured consideration since Insureds tend to lack financial resources. I see no reason why an Insured would want to pay for an OAH decision that the Insurer can simply appeal de novo to Circuit Court. I can see Insurers doing it in the hope of making the Insured run out of money.)

The only way Insureds can get forced to litigate before the OAH is on the off chance that the Insured won because the Insured would not have an adverse decision to appeal to Circuit Court. One possible solution is to simply make some excessive demand, which the MIA will reject, creating an adverse decision. That adverse decision gives you a right to appeal to Circuit Court, thereby allowing you to avoid the OAH entirely. (Practically, the MIA has almost always refused to enforce a contingency fee agreement and that refusal would create an adverse-enough ruling to appeal.)

Updates: 9/1/15 --Edits to remove typos (and of course compulsive improvements.)

#Appeals #MarylandInsuranceAdministration #LitigationStrategy #CivilProcedure #InsuranceBadFaith

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