Is Maryland’s New Bad Faith Law Retroactive?

One question that has remained unanswered is whether Maryland’s new bad faith law is retroactive. On Dec. 17, 2007, U.S. District Court Judge J. Frederick Motz ruled that the Maryland legislature intended Maryland’s new first party bad faith law to be retroactive. In Schwaber v. Hartford, a case involving insurance coverage for a roof leak, Judge Motz had initially dismissed Plaintiff’s bad faith action prior to the effective date of the first party bad faith bill (2007 Md. Laws 150). Plaintiff sought to re-file the claim after the bill passed.

Interestingly, Hartford agreed that the Maryland legislature had intended the new bad faith statute to be retroactive, and instead objected on state and federal constitutional grounds. Judge Motz chose to defer ruling on these objections or certifying the state constitutional questions to the Maryland Court of Appeals, unless or until it becomes clear that resolution of these constitutional issues are necessary to the outcome of the litigation. So while it is not a slam dunk that this new law will pass constitutional muster, the court’s finding that the bad faith law was intended to be retroactive is a great step in the right direction.

You can find Judge Motz’s opinion here.

Happy New Year to everyone!

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