Articles

2003 Maryland Legislative Update: Part 1

Each year the Maryland Legislature enacts a number of laws which impact, in varying degrees, on the personal and business lives of people living in or doing business in the State of Maryland. The General Assembly adjourned on April 7, 2003, and the Session actively concluded when the Governor enacted legislation into State law during four separate signing ceremonies on April 8, April 22, May 13 and May 22, 2003. This Annual Legislative Update is prepared for our clients and friends as a summary of important business, real estate, tax, trust and estate, and health care legislation which was passed during the 2003 Maryland Legislative Session. The Legislative Update is divided into sections by topic and each Bill is noted by subject matter. The date following each subject matter description is the effective date of the legislation. As you will see in reviewing the enclosed summaries, effective dates vary, although most are either July 1, 2003 or October 1, 2003.

GENERAL CORPORATE

• Miscellaneous Corporate Provisions (06/01/03). Provides, among other things, that if the Board of Directors of a corporation has given general authorization for a distribution and provides for or establishes a method or procedure for determining the maximum amount of the distribution, the Board may delegate to a committee or an officer of the corporation the power, in accordance with the general authorization, to fix the amount and other terms of the distribution. In addition, the Bill alters the notice requirements with respect to parent/subsidiary mergers if both the parent and subsidiary are Maryland corporations. The new provisions require the parent corporation owning less than all of the outstanding stock of the subsidiary to give notice to each of the subsidiary’s minority stockholders of record who would be entitled to vote on the merger. The notice requirement can be waived if all of the minority stockholders agree to waive it.
• Investment Companies (06/01/03). Provides that if the charter of a corporation registered as an investment company under the Investment Company Act of 1940 creates one or more classes or series of stock, and if separate and distinct records are maintained for that class or series and the assets are held and accounted for separately from other assets, then the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to a particular class or series are enforceable against the assets associated with that class or series only. In addition, the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to the corporation generally or associated with any other class or series are not enforceable against the assets associated with that class or series. The Bill also provides that unless the charter or bylaws of a corporation provide otherwise, the approval of the stockholders and articles of transfer or share exchange, as the case may be, are not required for any transfer of assets by a corporation registered as an open-end investment company under the Investment Company Act of 1940.
• Lawful Investments – Corporate Fiduciary (06/01/03). Authorizes a corporate fiduciary to invest in securities of, or interests in, a closed-end management type investment company or investment trust registered under the Investment Company Act of 1940 that does not impose a contingent deferred sales charge or distribution charge on that investment or reinvestment.
• Directors and Stockholders – Meetings, Notices, and Consents (06/01/03). Provides that unless the bylaws provide otherwise, a regular or special meeting of the Board of Directors may be held at any place in or out of the State or by means of remote communication. Also provides that notice of each such meeting may be provided in writing or delivered by electronic transmission. However, if the corporation has received a request from a stockholder that notice not be sent by electronic transmission, the corporation may not provide such notice to that stockholder. The Bill also provides that an affidavit of the secretary, an assistant secretary, the transfer agent, or other agent of the corporation stating that notice has been given by a form of electronic transmission, in the absence of actual fraud, is prima facie evidence of the facts stated in the affidavit. This Bill further provides that if the Board of Directors so authorizes, subject to any guidelines and procedures the Board adopts, stockholders and proxy holders not physically present at a meeting may participate by means of remote communication, may be considered present in person and may vote as long as the corporation implements reasonable measures to verify that each person considered present and authorized to vote at the meeting by remote communication is a stockholder or proxy holder and reasonable measures are implemented to provide a reasonable opportunity for the remote stockholders or proxy holders to participate and vote at the meeting including an opportunity to read or hear the proceedings of the meeting substantially concurrently.
• Disposition of Abandoned Property – Notice Requirement of Holder (07/01/03). Requires all holders of property subject to the abandoned property law to provide written notice by first-class mail, not more than 120 days or less than 30 days before the filing of the report required by the Commercial Law Article § 17-310, to the owner’s last known address informing the owner that the holder is in possession of the property and that the property will be considered abandoned unless the owner responds within 30 days of the notification. The Bill also clarifies that the notice requirement applies to banking or financial organizations or business associations holding property presumed abandoned. 

HEALTH

• Consumer Protection – Maryland Consumer Protection Act –Private Rights of Action (07/01/03). Alters the scope of the Maryland Consumer Protection Act to exclude private rights of action for injuries sustained as the result of professional services provided by a health care provider. This Bill should end the lawyer’s use of the Consumer Protection Act in medical malpractice actions to circumvent Maryland’s $350,000 cap on non-economic damages.
• Health Occupations – Department of Health and Mental Hygiene – State Board of Physicians (07/01/03). The Board of Physician Quality Assurance is renamed the State Board of Physicians and continues in accordance with the provisions of the Maryland Program Evaluation Act by extending the termination of the Board until July 1, 2007. The term of the current Board will expire on July 31, 2003 and on August 1, 2003, the Governor, with the advice of the Secretary of the Department of Health and Mental Hygiene and the advice and consent of the Senate, will appoint the new State Board of Physicians. Highlights of this Bill include:
• Changes in composition and structure – the Board will include more consumers, an academic representative, and a physician’s assistant; it will not include more than two physicians of any one specialty; and the Chair will be elected by the Board.
• Disciplinary matters – the peer review and physician rehabilitation program will no longer be handled by MedChi (the Medical and Chirurgical Facility of Maryland), but, rather, the Board will enter into a written contract with a non-profit entity or entities for such services; a charge or dismissal vote will only require a majority of the quorum; and complainants will be allowed to appear at Case Resolution Conferences.
• Physician Rehabilitation – the Rehabilitation Committee will be required to report physicians who are noncompliant for 60 days.
• Physician profiles – will include information pertaining to final judgments within the last ten years and the number of settlements in the last five if three or more resulted in settlements in excess of $150,000; will include a description of convictions, guilty pleas, or pleas of nolo contendere for crimes of moral turpitude reported.
• Elderly Persons – Conversion of Existing Accommodations to a Continuing Care Retirement Community (10/01/03). Alters the continuing care law to provide for the process of taking a facility providing housing or shelter and converting that facility into a continuing care facility where residential accommodations exist and at least 60% of the available residential accommodations were occupied during the two previous fiscal years. All such providers are required to submit a statement of intent to provide continuing care at least 30 days prior to submission of a feasibility study. The Bill also modifies the requirements for a feasibility study, establishes minimum occupancy or reservation requirements in order for a facility to qualify for conversion; establishes the requirements for deposit agreements; clarifies operating reserve requirements, and prohibits a provider from terminating or failing to renew a lease for an accommodation in order to enter into a continuing care agreement.
• Health Care Facilities and Regulation – Assisted Living Facilities – Certification – Third Party Accreditation Programs (10/01/03). Authorizes the Department of Health and Mental Hygiene (“DHMH”) to accept all or part of a specified accrediting report as meeting the State licensing requirements for the renewal of a license to operate an assisted living facility program; however, such a report (available to the public on request) is not acceptable to meet initial licensing requirements. In addition, the Secretary of DHMH is authorized to inspect an assisted living facility program to investigate a complaint, follow up on a serious problem identified or to validate findings of an approved accrediting organization. Moreover, DHMH, in consultation with the assisted living industry, is required to review its current payment rates, study the costs of providing services, and consider reimbursement options including an annual rate-setting formula based on the actual cost and to report its findings to the General Assembly by January 1, 2004.
• Health Insurance – Health Maintenance Organizations – Definition of Covered Service (10/01/03). Provides that a service covered by a health maintenance organization (“HMO”) be rendered by a provider under contract with the HMO when obtained in accordance with the terms of the enrollee’s benefit contract or by a noncontracting provider when obtained in accordance with the terms of the enrollee’s benefit contract or pursuant to certain verbal or written referrals by (i) the HMO; (ii) a provider under written contract with the HMO; or (iii) preauthorized or otherwise approved by (i) or (ii). The Bill also provides for an exception to an HMO’s requirement that a referral or preauthorization be obtained in order for a trauma care center or trauma physician to render services.
• Health Maintenance Organizations – Patient Access to Choice of Provider (10/01/03). Requires HMO’s to allow a certified nurse practitioner to be designated as a primary care provider, provided that a member who selects a certified nurse practitioner as a primary care provider be provided with the name and contact information of the certified nurse practitioner’s collaborating physician.
• Elderly Persons – Department of Aging – Continuing Care Retirement Communities – Regulation (06/01/03). In determining whether a person, whose existing operations became subject to the Continuing Care Contracts law, has met the 65% presales requirement, the Department of Aging (the “DOA”) may count the agreements for continuing care services the person entered into before the DOA issues a Preliminary Certificate of Registration to the person, even if the agreements were not approved in advance by the DOA for use as a Continuing Care Agreement (provided certain requirements are met).
• Health Care Facilities and Regulation – Maryland Trauma and Emergency Medical Response System – Funding and Structure (07/01/03). Establishes the Maryland Trauma Physician Services Fund to be funded through motor vehicle registration surcharges. The purpose of the fund is to subsidize the documented costs of uncompensated care incurred by a trauma physician in providing care to a trauma patient on the State Trauma Registry; of undercompensated care provided by a trauma physician in providing care to an enrollee of the Maryland Medical Assistance Program who is a trauma patient on the State Trauma Registry; and other costs including those incurred by a trauma center in maintaining trauma physicians on-call as required by the Maryland Institute for Emergency Medical Services Systems.
• Health Insurance – Nonprofit Health Service Plans – Reform (06/01/03). Alters the provisions relating to the regulation of nonprofit health service plans; establishes the mission of nonprofit health service plans; establishes a Joint Nonprofit Health Service Plan Oversight Committee; prohibits the acquisition of a specified nonprofit health service plan for five years after the effective date of the Act.

REAL ESTATE

• Department of Labor, Licensing, and Regulation – Real Estate Appraisers – Baltimore City – Reports (10/1/03). Requires real estate appraisers to file quarterly reports with the State Commission of Real Estate Appraisers and Home Inspectors or the Commission’s designee. Reports shall indicate the address and the appraised value of residential real estate in Baltimore City upon which the appraiser performed an appraisal during the calendar quarter. The Baltimore City Department of Housing and Community Development will serve as the designee of the State Commission of Real Estate Appraisers and Home Inspectors until funding is provided to the Commission in the State budget.
• Real Estate Brokers – Advertisements and Reciprocity (10/1/03). Allows nonresident commercial real estate brokers and nonresident salespersons working for nonresident brokers to engage in transactions within Maryland if they apply for and receive a temporary permit from the Maryland Real Estate Commission. This Bill also extends from October 1, 2003 to October 1, 2004 the date by which a licensed real estate salesperson or licensed associate real estate broker must have the full name of the business with which they are affiliated in the same size as their name or trade name in any advertisements.
• Real Estate Licensees – Continuing Education Certificate of Completion (10/1/03). This Bill permits the Maryland Real Estate Commission to accept as evidence of completion of a continuing education course: a certificate of completion, a photocopy of the certificate, an electronic mail certificate, or a photocopy of an electronic mail certificate.
• Baltimore City – Foreclosure Sales of Interests in Land – Recordation of Ratification (10/01/03). In Baltimore City, if a foreclosure sale, under a mortgage or a deed of trust, of an interest in land is ratified, the person making the sale shall record in the land records office, within 30 days of the issuance of the order, a final order of ratification, a copy of the report of sale, and an order authorizing a substitute purchaser within 90 days of the date of the final order of ratification if: (i) the vendor and the purchaser are the same; and (ii) a deed is not recorded. The copy of the final order of ratification shall include the name and address of the purchaser. Note that this requirement does not apply to a foreclosure that is subject to a stay issued by a court in a bankruptcy proceeding.