​​Date:          September 10, 2026 

To:               Life Insurers, Health Insurers, Nonprofit Health Service Plans, and Health Maintenance Organizations 

Re:              Conflict of Laws and Unfair Claims Settlement Practices

This Bulletin is issued by the Maryland Insurance Administration (the “Administration") to provide guidance to life insurers, health insurers, nonprofit health service plans, and health maintenance organizations subject to § 12-209 of the Insurance Article of the Maryland Code regarding conflict of laws and unfair claim settlement practices. [1]

Section 12-209 of the Insurance Article states, in pertinent part:

A life insurance … policy … may not be delivered or issued for delivery in the State if the policy or contract:
(1)   states that the policy or contract is to be construed according to the laws of another state or country;
(2)  states that the rights and obligations of the insured or of a person with a claim under the policy or contract are to be governed by laws other than the laws of this State;
      *          *          *          *
(4) deprives the courts of the State of the jurisdiction of any action against the insurer.

 Section 27-303 of the Insurance Article states, in pertinent part,

It is an unfair claim settlement practice and a violation of this subtitle for an insurer . . . to:

                     *          *          *          *
          (2)       refuse to pay a claim for an arbitrary or capricious reason based on all available information.

 In the case that an insurer acts in violation of § 12-209 by applying the laws of a state other than the intended state of Maryland to a Maryland-sitused life insurance policy and by refusing to pay a claim based on this application, the Insurance Commissioner for the State of Maryland (the “Commissioner") will determine the action to be a violation of § 27-303. Furthermore, the action will be deemed an unfair claim settlement practice based on arbitrary or capricious reasoning, subject to the imposition of sanctions by the Commissioner. 

 Applicability

The following is an example that illustrates the Administration's application of the relevant statutes to conflict of laws. 

Example

An insurer issued a group life insurance policy to a Maryland group comprised of Maryland residents. The insured person, later domiciled in Pennsylvania, assigned his wife, who was also a resident of Pennsylvania, as the designated beneficiary of his life insurance policy. The insured and his wife later divorced in Pennsylvania. The insured person did not change the designated beneficiary of his life insurance policy following his divorce. Three years later, the insured person died while a resident of Maryland, and the insurer received a claim from the insured's ex-wife for the life insurance benefit under the policy.

The insurer argued that under Pennsylvania state law, a beneficiary designation naming a spouse was nullified upon the parties' divorce and the designated spouse should be treated as having predeceased the insured. The Administration rejected this argument and determined that the group policy in question, issued to a Maryland group, was a Maryland-sitused policy, subject to Maryland law, and could not be construed according to the laws of Pennsylvania. The Administration established that the rights of the former spouse under the group policy could not be governed by laws other than the laws of Maryland. The Administration ordered the insurer to pay the claim to the ex-wife in accordance with the terms of the policy, as she was the beneficiary of the Maryland-sitused policy at the time of the insured's death.

The proceeds under the decedent's life insurance policy were payable to the former spouse as beneficiary. Moreover, the insurer was cited as having violated § 27-303(2) for refusing to pay a claim for an arbitrary or capricious reason based on all available information and thus committing an unfair claim settlement practice.

Questions about this Bulletin may be directed to the Life/Health Section of the Maryland Insurance Administration, 200 Saint Paul Place, Suite 2700, Baltimore, MD 21202, or call at 410-468-2170. 

MARIE GRANT
Commissioner

By:

Megan Mason
Associate Commissioner
Life and Health

[1] All statutory citations herein are to the Insurance Article of the Maryland Code, unless otherwise noted.