Calm Before the Storm
By Richard A. Montgomery, III
MSBA Director of Governmental/Legislative Relations
Last year in this space I began by offering a
prediction that the bitter partisan rhetoric of the 2004 United States Presidential
election would not create much spillover into politics of the 2005 Maryland
General Assembly session. To a large degree, I believe that turned out to
be true. However, I do not believe that the tenor of political discourse
in Maryland is completely immune from the influences of the
"style" of political discourse at the federal level. I believe that 2006, regrettably,
will serve as proof of Maryland’s vulnerability to the type of political
rancor that plagues our Nation’s Capital. As we near the end of the first
term of divided government in Maryland since the late 1960s, rest assured that
the face-to-face collegiality that is the norm among members of the General
Assembly during the session is not what you will be reading about in newspapers.
The 2006 General Assembly session should be marked
by the notable absence of debate on a number of topics: medical malpractice
(been-there-done-that, although I am certain a few bills will be introduced
on the topic), judicial elections (a Senate task force is examining the issue)
and taxation of legal services ($1 billion State surplus). However, you need
not worry. There are always new issues.
Eminent Domain
At least in terms of sheer numbers, probably
no issue will cause so many bills to be introduced as the issue of condemnation
of private property through the use of eminent domain. Earlier this year,
the U. S. Supreme Court issued its decision in the case of Kelo v. City
of New London, in which the Court upheld that city’s right to acquire
private property for the purposes of economic development. The Court determined
that although the individual properties were taken from private individuals
by the government and conveyed to a private entity, the takings were legal
under Connecticut law and met the U.S. Constitution’s Fifth Amendment
requirement that the property owners be justly compensated, and that the
ultimate redevelopment project fit the definition of being a "public use."
Although the case has generated nationwide concern
over the ability of a governmental entity to seize private property (especially
non-blighted property), most of the Maryland experts in this area of the
law I have approached believe that the Court’s decision in Kelo is
consistent with current Maryland law. Nevertheless, the Maryland Republican
Caucus has vowed to introduce a constitutional amendment to prohibit eminent
domain condemnation for the purpose of economic development. Additionally,
legislation passed in 2004 created the State of Maryland Task Force on Business
Owner Compensation in Condemnation Proceedings. When the Kelo opinion
was issued, the Task Force incorporated issues raised in that decision into
their deliberations. The final report of the Task Force is scheduled for
delivery to the presiding officers of the General Assembly this month (December).
Since the Kelo decision was handed down,
several states have enacted either statutory or constitutional responses
to the decision, either limiting or prohibiting governmental takings that
ultimately confer benefits upon a private entity. Additionally, there are
several bills before Congress that would prohibit or strongly discourage
use of eminent domain condemnations for economic development. The most notable
Congressional action to date is a House of Representatives measure that would
deny federal funds to any city or state project that used eminent domain
to force homeowners to sell their property to make way for a profit-making
venture, such as a shopping center or hotel. That measure, an amendment to
an appropriations bill, would apply to any funds administered by the departments
of Transportation, Treasury, and Housing and Urban Development. Former House
Majority Leader Tom DeLay (R-Tex.) had previously pledged to seek passage
of a more inclusive measure that would apply to all federal funding.
At a briefing of the House Environmental Matters
Committee in October, Committee Chairman Delegate Maggie McIntosh noted that
she is aware of at least 40 bills related to eminent domain condemnation
under development in the House of Delegates alone. Stay tuned…
Life Insurance Trusts
In February of 2005, the U.S. District Court
for the Eastern District of Virginia determined in Chawla v. Transamerica
Occidental Life that a trust did not have an insurable interest in the
life of the insured, thereby allowing the insurance company to deny payment
of the trust’s claim to the life insurance policy proceeds. If upheld
on appeal or followed by other courts, this decision could adversely impact
numerous irrevocable trusts that currently own life insurance policies for
estate planning and investment purposes. However, many observers believe
that because the case had such an unusual fact pattern that, even if the
appeals court upholds the decision of the District Court to invalidate the
insurance policy in Chawla, it may not affirm the lower court’s
judgment in its interpretation of Maryland law with respect to the insurable
interest issue.
Presently, the case is on appeal before the U.
S. Court of Appeals for the Fourth Circuit, which could choose to overrule
the District Court’s ruling. However, even if the Fourth Circuit affirms
the decision, the District Court cited the insurable interest issue as a
secondary argument in its holding, which may decrease the chances of the
case establishing legal precedent. The principal reason for invalidation
of the policy was that the insured made multiple, deliberate misrepresentations
concerning the state of his health.
During the 2005 legislative session, House Bill
1608 (sponsored by Delegate Luiz Simmons) would have remedied the problem
raised by Chawla by expressing the "intent of the General Assembly
that a court interpreting Section 12-201 of the Insurance Article shall not
use as precedent the holding in Chawla v. Transamerica as to whether,
and under what standard, a trust, a trustee, or the beneficiaries of a trust
shall have an insurable interest with regard to a trust procuring an insurance
contract." Unfortunately, the bill died in the House Health and Government
Operations Committee without a vote. The MSBA Estates & Trusts Section has
been working since the end of the 2005 session to craft a revised version
of HB 1608 for introduction in the 2006 legislative session.
Sexual Predators
At the Maryland Association of Counties (MACo)
Annual Convention in August, Governor Robert L. Ehrlich, Jr., announced his
intention to introduce legislation to establish an integrated registration
and monitoring program to protect the public from sexual predators. The program
is to be known as the Sex Offenders Compliance and Enforcement in Maryland
Initiative. The initiative would involve more frequent monitoring of sex
offenders, a more intensive community awareness campaign, and the unveiling
of a new website that would include photographs and the most recent detailed
information on sex offenders who have failed to provide current registration
information.
State Employment Rights
In the aftermath of the furor created by the
revelation that former Ehrlich staffer Joseph Steffen was involved in the
alleged targeted firing of low-level State employees, the Presiding Officers
created the Special Joint Committee on State Employee Rights and Protections
in June 2005. The Special Joint Committee will focus on the rights of career
civil servants in State government and whether legislation is necessary to
protect certain classes of employees from removal without cause.
