PCI Urges Md. Court to Uphold 130-Year Old Law

December 13, 2004

In the last week, the Property Casualty Insurers Association of America (PCI) filed an amicus brief before the Maryland Court of Appeals, urging the court to affirm a lower court decision that upheld a law, in existence since 1872, that establishes the core requirement of “reliance” for fraud claims.

“We believe the trial court made a correct decision, and we are taking this opportunity to show the Appellate Court why the decision should be upheld,” Robert Hurns, counsel and legislative database manager for PCI, commented. “Historically in Maryland, as well as the other 49 states, reliance has been a core element for a claim based on fraud, and should remain so.”

In Smith v. Lead Industries Association Inc., the trial court dismissed counts 11 through 14 of the plaintiff’s complaint on the grounds that a claim for fraud based upon intentional or negligent misrepresentation, requires that the plaintiff relied upon the alleged fraudulent statement. The plaintiff appealed that ruling.

The issue pending before the Maryland Court of Appeals is whether plaintiffs can bring claims for common-law fraud when they did not rely on the misrepresentations at issue. PCI, along with the American Tort Reform Association, the U.S Chamber of Commerce, the National Association of Manufacturers, and the American Chemistry Council, filed an amicus brief urging the court to maintain the concept of reliance.

“The petitioners in this case are attempting to stretch the limits of common law liability by eliminating the requirement of reliance in fraud actions,” Hurns said. “Overturning the decision would represent a radical and unwise departure from traditional tort law, as reliance is the essential element of the tort. Maryland has followed this common law concept since 1872 and removing it would rob the law of fraud of its building block element: harm to an individual caused by the defendant’s representation. If a person did not rely on a statement, then he or she was not harmed by it and there is no fraud or negligent misrepresentation. In the long run, eliminating this concept would result in a vast unnecessary expansion of liability.”

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