Insurance companies, agencies, and insurance professionals operate in one of the most heavily-regulated industries in Maryland. While most businesses understand that some level of oversight is unavoidable, few are truly prepared for the disruption, stress, and long-term consequences that can come with a market conduct examination. Here at Brown & Bullock, our market conduct examination defense lawyers are here to help you. Contact our Maryland insurance attorneys for assistance today.

What is a Market Conduct Examination?

A market conduct examination is a formal review conducted by insurance regulators to evaluate how an insurance entity conducts its business. These examinations look closely an insurer’s business practices within the Maryland insurance market to evaluate whether those practices comply with state insurance laws.

Maryland regulators conduct market conduct examinations to ensure that insurance entities are treating policyholders fairly and operating within the bounds of the law. These examinations are designed to identify patterns of conduct over time, not just isolated errors or one-off issues. As a result, examiners often review several years of records, communications, and internal procedures. Importantly, findings can potentially lead to fines, corrective action plans, suspension or revocation of a certificate, or referrals for enforcement action. Even when violations are unintentional, adverse findings can disrupt operations and create lasting harm.

Who Conducts Market Conduct Examinations in Maryland?

Maryland market conduct examinations are conducted by the Maryland Insurance Administration. The Administration has statutory authority to examine insurers and insurance professionals doing business in the state or affecting Maryland consumers.

What Triggers a Market Conduct Examination?

Not every market conduct examination is triggered by wrongdoing. In fact, all insurers in Maryland are subject to a market conduct examination at least once every five years. Common triggers include:

Scheduled examination cycles
Patterns of consumer complaints
Data irregularities identified through regulatory filings
Referrals from other regulatory agencies
Follow-up from prior examinations or corrective actions

The Process

A rough outline of how the process generally goes is as follows:

Notice of Examination: The process begins with formal notice outlining the scope, time period, and business lines under review.
Initial Information Requests: Examiners issue requests for policies, procedures, training materials, claim files, underwriting records, and internal communications.
Document Production: The examined entity gathers and produces responsive materials, often involving significant internal coordination.
Examiner Review: Regulators review the materials to identify trends, compliance gaps, and potential violations.
Interviews and Follow-Up Requests: Examiners may conduct interviews or request additional clarification.
Preliminary Findings: Potential issues are identified, and additional information may be requested to support or refute conclusions.
Draft Proposed Examination Report: A draft proposed report is issued for comment outlining findings and citing applicable law or regulations.
Written Response Period: The entity has an opportunity to respond, correct errors, and provide additional context.
Draft Examination Report: A draft report is issued, including comments from the insurer.
Hearing Request and Hearing: The entity may request a hearing by timely submitting a hearing request on all factual and legal findings sought to be challenged. If a hearing is requested, the Maryland Insurance Administration will hold a hearing on the draft market conduct report.
Final Report Issuance: Following a hearing, or upon expiration of the time to request a hearing, the Administration issues a final report, which may include corrective action requirements.
Appeals: Final reports may be subject to post-hearing litigation, including judicial review to a circuit court of Maryland and subsequent appellate litigation in Maryland’s appellate courts.

Defending Against Adverse Findings

If timely acted upon, examiner conclusions in draft proposed market conduct examination reports can be challenged, clarified, or narrowed through a thoughtful response. Defensive strategies may include:

Challenging findings that are unsupported by law or evidence
Arguing legal issues and statutory interpretation
Providing additional documentation or operational context
Demonstrating a good-faith compliance effort and internal controls
Negotiating corrective action plans that are reasonable and achievable

Cooperation with regulators is paramount. However, unnecessary concessions can create long-term consequences and future exposure. Our experienced attorneys can help navigate these complex examinations and evaluate the best path forward to fit your goals.

Contact Our Maryland Insurance Lawyers

Here at Brown & Bullock, we work with clients through every step of this process to manage communications with regulators, protect legal positions, and pursue outcomes that allow businesses to move forward in the best way possible. Contact us today to discuss your market conduct examination needs.