Settling the Liability Claim When an Underinsured Motorist Claim Remains: Maryland’s Procedure, Consent Requirements, and What Can Go Wrong
Published .
The general concept
When the at-fault driver’s liability insurance is not enough to cover an injured person’s losses, the person may seek underinsured motorist (UIM) benefits from their own auto insurer. But settling with the at-fault driver can affect the UIM insurer’s right to pursue that driver for reimbursement. Settlement laws balance these interests by setting a notice and response process before the liability claim is released.
How Maryland applies it
For standard Maryland UM/UIM coverage, Insurance Article § 19-511 applies when a written settlement offer, together with any other settlements from the same occurrence, would exhaust the available bodily-injury liability limits. The injured person must send each UM/UIM insurer a copy of the offer by certified mail. Within 60 days after receipt, the insurer must give written consent to the settlement and releases, or refuse consent. If it refuses, it must pay the injured person the offered amount within 30 days; that payment preserves the insurer’s subrogation rights and assigns to it a corresponding share of any later recovery. The claimant may accept and release the at-fault driver and liability insurer without prejudice to the UIM claim after written consent, or if the UIM insurer fails to meet the statute’s response or payment requirements. Consent does not admit fault or damages: the insurer may still contest those issues in the UIM case. Where enhanced UIM coverage under § 19-509.1 applies, a parallel process is set out in § 19-511.1, so the policy and coverage type should be checked. Offers that do not exhaust liability limits may still implicate policy consent-to-settle terms. If the claimant accepts the liability settlement or signs a release before complying with the applicable statute and policy terms, the UIM insurer may assert that coverage was forfeited. Maryland’s Supreme Court has held that the actual-prejudice rule for late notice does not excuse noncompliance with § 19-511’s settlement procedure. A general release can be compatible with a preserved UIM claim when statutory conditions are met, but settlement, release, and UIM consent should be coordinated before execution. For standard coverage, § 19-509(g) reduces the UIM limit by applicable liability payments; enhanced coverage has a different rule and its limit is not reduced by those payments under § 19-509.1(h)(2). In either case, settlement alone does not establish liability or the amount of damages owed by the UIM insurer.
Related Maryland Cases and Authorities
Md. Code, Insurance §§ 19-509(g), 19-511, 19-511.1.; Woznicki v. GEICO General Insurance Co., 443 Md. 93, 115 A.3d 100 (2015).; Brethren Mutual Insurance Co. v. Buckley, 437 Md. 332, 86 A.3d 665 (2014).; Bowens v. State Farm Mutual Automobile Insurance Co., 492 Md. 608, 347 A.3d 415 (2025).