Maryland regulators have fined nearly half of the 119 auto insurance companies doing business in Maryland a total of $235,000 in fines and nearly $400,000 in restitution to car owners for their mishandling of vehicle insurance fees after changes to state law in 2008.

Ralph S. Tyler

The Maryland Insurance Administration‘s yearlong survey of the insurance companies found that 67 of them violated the law regarding taxes and fees when cars were deemed a total loss. The cases were first reported in Insurance & Financial Advisor in February.

“The industry as a whole seemed to miss the implication of these legislative changes,” said Maryland Insurance Commissioner Ralph S. Tyler in a statement. “We found widespread violations.”

In January 2008, an increase in sales tax and Motor Vehicle Administration fees, including title fees, resulted in a greater cost when vehicles were declared a total loss after a crash. Insurers are required to include these additional costs as part of the actual cash value when determining an appropriate settlement, the MIA said.

The MIA discovered the companies had not updated their method of calculating the vehicles’ value and that companies had been failing to pay the costs associated with tag transfers, as required under state law.

The mishandling affected 4,120 Maryland vehicle owners, whose insurance companies were ordered to pay them $442,590 in restitution. The average underpayment as a result of these errors was $100.

Tyler said that the MIA is still examining seven more companies who may be in violation of the law.

Four companies – Federal Insurance Co., Great Northern Insurance Co., Vigilant Insurance Co. and Pacific Independent Co. – collectively failed to pay appropriate fees to 384 claimants, resulting in $242,299 in restitution and a $20,000 fine, according to MIA records.

Other insurers had fewer claims, smaller penalties and less to pay in restitution.