# Maryland Attorney General Opinion 98 OAG 003

> Maryland Attorney General Reports · March 1, 2013

URL: https://www.frixlaw.com/law-library/cases/11146233

## Case

- **Court:** Maryland Attorney General Reports
- **Decided:** March 1, 2013
- **Precedential status:** Published
- **Opinion:** Opinion
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/11146233

## How later opinions describe it (automated extraction)

- noting that Consumer Protection Act, as remedial legislation, requires liberal construction
- describing fraudulent practices of Forest Hill, which refused to honor the terms of pre-need contracts and imposed additional charges

## Opinion text

MORTICIANS

HEALTH OCCUPATIONS – MORTICIANS – PRICE PROVISIONS
OF MONEY-TRUSTED PRE-NEED FUNERAL CONTRACTS
MUST BE GUARANTEED

March 1, 2013

The Honorable Wade Kach
Maryland House of Delegates

On behalf of the State Board of Morticians and Funeral
Directors (“the Board”), you have asked for our opinion as to
whether Maryland law permits a licensed mortician or funeral
director to enter into money-trusted pre-need funeral contracts in
which the price of some of the goods or services agreed upon is
not guaranteed. In a money-trusted pre-need funeral contract, the
consumer purchases funeral goods (e.g., a casket) and services
(e.g., embalming) for herself or another beneficiary ahead of time
and at then-prevailing market prices. You have explained that
such contracts often contain non-guaranteed price terms and that
funeral homes often ask the surviving relatives of the deceased to
“make up the difference” between the contract price and the
market price at the time the contracted-for goods and services are
actually provided. You have also explained that some uncertainty
exists among members of the funeral industry as to whether such
contracts are permissible under Maryland law.

In our opinion, the plain language of the statute—§ 7-405 of
the Health Occupations Article—requires that money-trusted pre-
need contracts include the “total price” of the services and
merchandise agreed upon, which we interpret to mean that the
price terms of the contract must be guaranteed. A pre-need
contract may include estimated prices for those goods and
services reasonably expected to be required at the time of need
but not included under the contract, but the licensed mortician or
funeral director may not accept pre-payment for such non-
included goods and services. This interpretation finds support in
the statutory scheme and legislative history, as well as in
principles of statutory construction that direct us to read the
statute in a way that furthers its consumer protection purpose.

3
4 [98 Op. Att’y
I
Background
Pre-Need Funeral Contracts

A pre-need funeral contract involves the purchase of funeral-
related goods and services prior to the death of the beneficiary,
who typically is the buyer or a family member or loved one of the
buyer.1 The buyer pays for the goods and services based on the
prices in effect at the time the contract is entered into, and the
seller agrees to provide the agreed-upon goods and services when
the beneficiary dies. The buyer may fund the contract with cash,
in which case the purchase money is placed in a trust to be paid to
the seller at the beneficiary’s death, or with a life insurance
policy, in which case the benefits of the policy are assigned to the
seller.
A pre-need contract provides several potential benefits to the
buyer. It gives the buyer a greater advance role in determining
the types of funeral services that will ultimately be provided to
memorialize the beneficiary. It also gives the buyer the
opportunity to purchase those services at his or her leisure, with
time to compare prices at different funeral homes. Further, pre-
purchasing funeral arrangements can save the beneficiary’s
survivors the expense and inconvenience of making funeral
arrangements at a difficult time. Finally, in certain jurisdictions—
and whether Maryland is one of them is central to this opinion—
the pre-need contract allows the buyer to lock in current market
prices as a way to protect against inflation, much as college pre-
paid tuition plans allow parents to lock in today’s tuition rates.

1
Three housekeeping items: First, we will use the term “buyer” to
refer to the consumer who enters into a pre-need contract, “seller” to
refer to the licensed funeral director or mortician who agrees to provide
funeral goods and services, and “beneficiary” to refer to the person
whose funeral is arranged pursuant to the contract. Second, although
the General Assembly uses the spelling “preneed” in enactments
addressing subjects other than mortuary practices, it uses the term “pre-
need” in the Maryland Morticians and Funeral Directors Act. As we
have previously, see 80 Opinions of the Attorney General 188, 193 n.3
(1995), we will use the spelling “pre-need” here. Third, except as
otherwise noted, all statutory citations in this opinion refer to Title 7 of
the Health Occupations Article of the Annotated Code of Maryland
(2009 Repl. Vol., 2012 Supp.).
Gen. 3] 5

For the seller, the pre-need contract allows the funeral home
to secure a more stable expectation of future business, which can
aid long-term business planning. The pre-need contract also
guarantees the funeral home full payment for services to be
rendered at the time services are rendered, which also provides
greater stability and financial predictability. Finally, depending
on state law, the pre-need contract can offer the seller operating
capital, if the funeral director is allowed to hold and use a certain
percentage of the purchase price, and the prospect of greater
profits, if the interest earned on the purchase price increases at a
rate greater than the cost of funeral expenses.
The practice of pre-need funeral planning dates back to at
least the 1930s, when burial associations began selling “burial
certificate plans.” The idea spread to the funeral industry in the
1950s, when funeral directors began selling pre-need funeral
arrangements in the United States. See Sandra B. Eskin, AARP
Pub. Policy Inst., Preneed Funeral and Burial Agreements: A
Summary of State Statutes 3 (1999), http://assets.aarp.org/
rgcenter/consume/d17093_preneed.pdf (last visited Feb. 23,
2013). Licensed funeral directors and morticians in Maryland
have been offering pre-need funeral contracts for decades. See
Undertakers Fight Cemeterians: Each Group Is Backing A
Different Funeral Fraud Bill, Baltimore Sun, March 10, 1967, at
C12 (describing testimony of industry representatives before
Senate Economic Affairs Committee). The prevalence of pre-
need contracts has increased over the past fifty years as the
population has aged, with recent industry estimates putting the
total amount invested in pre-need contracts at $35 billion
nationwide. U.S. Gov’t Accountability Office, GAO-12-65,
Death Services: State Regulation of the Death Care Industry
Varies and Officials Have Mixed Views on Need for Further
Federal Involvement 52 (2011) (“GAO Report”) (available at
http://www.gao.gov/assets/590/586972.pdf (last visited Feb. 27,
2013)).
The Regulation of Pre-Need Funeral Contracts

With the growth of pre-need funeral planning have come
fraud warnings and consumer advisories about the risks of pre-
need contracts. See, e.g., GAO Report at 52-55. Due to the
nature of pre-need contracts, there often is a long period of time
between bargaining and performance, which provides a “fertile
field for fraud.” State of Kansas, ex rel. Londerholm v. Anderson,
408 P.2d 864, 870 (Kan. 1965). Misappropriation of contract
funds may not become apparent until years later, when the goods
6 [98 Op. Att’y

and services are required. See Eskin at 3. It is also often difficult
to determine whether the contract is performed in a manner that
fulfills the parties’ expectations in those instances where the
buyer is also the beneficiary and, thus, is deceased at the time of
performance. Id. And “pre[-]need agreements are becoming
increasingly complex, involving more decisions and more
potential for fraudulent activity.” Id. at 4. Journalists, consumer
advocates, and government agencies all advise potential buyers to
consider carefully before making pre-need arrangements. See,
e.g., Anne Tergesen, When Prepaid Funeral Plans Are Wealth
Killers, Wall St. Journal, May 22, 2010 (available from
http://online.wsj.com (search “prepaid funeral plans”); Funeral
Consumers Alliance, The Pitfalls of Preneed,
http://www.funerals.org/faq/198-preneedpitfalls (last visited Feb.
27, 2013); Fed. Trade Comm’n, Funerals: A Consumer Guide
(available at http://www.consumer.ftc.gov/articles/pdf-0056-
funerals.pdf (last visited Feb. 28, 2013)).

Because of the risk of fraud, it appears that all fifty states
regulate pre-need funeral contracts in some manner. Eskin at 3.2
Although state regulation of pre-need contracts varies in many
significant respects, most regulatory regimes include provisions
governing the disclosure of certain contract terms and the
management of contract funds held in trust prior to performance.
Many states also afford consumers the right to terminate the
contract and re-direct the contract funds to another funeral
home—referred to as “portability.” GAO Report at 48-50.

At the federal level, the Federal Trade Commission (“FTC”)
has enacted regulations that require various disclosures to the
buyer. The funeral home must provide a “general price list” of
the goods and services that it offers, must make specific written
disclosures about the funeral process, and is specifically
prohibited from making certain misrepresentations. See generally
16 C.F.R. Part 453. For example, FTC rules make it a deceptive
trade practice to “[r]epresent that state or local law requires that a
deceased person be embalmed when such is not the case,” 16
C.F.R. § 453.3(a)(1)(i), or to “[c]ondition the furnishing of any
funeral good or funeral service . . . upon the purchase of any other
funeral good or funeral service.” 16 C.F.R. § 453.4(b)(1)(i).

2
Eskin, writing in 1999, identified Alabama as the only state that
did not regulate pre-need funeral contracts, but it has since enacted
legislation that does so. See 2002 Ala. Acts 74 (codified at Ala. Code
§ 27-17A-33 (2012)).
Gen. 3] 7

Despite these state and federal regulatory efforts, the GAO
reports that the pre-need segment of the industry has “come under
increasing scrutiny in recent years because of various allegations
of fraud and mismanagement of pre-need funds.” GAO Report at
55. In one instance, the new owners of a Tennessee funeral home
refused to honor existing pre-need contracts and required the
survivors to pay an additional $4,000 for the agreed-upon goods
and services. See In re Forest Hill Funeral Home & Mem. Park -
East, 364 B.R. 808, 815 (Bankr. E.D. Okla. 2007). A subsequent
prosecution revealed that the owner of the funeral home had
diverted millions of dollars from pre-need funeral trust accounts
and had used the money to purchase shares in hedge funds and to
finance the operations of another company in which he held an
interest. Id. at 812-13; see generally GAO Report at 55-60
(describing Forest Hill and other civil and criminal fraud suits).
Maryland appears to have experienced isolated instances of fraud
as well, including a March 2007 federal grand jury indictment of
the owner-operator of a Baltimore funeral home for allegedly
defrauding Maryland consumers of $525,000 in pre-paid funeral
expense accounts. Md. Dep’t of Legis. Services, Office of Policy
Analysis, Sunset Review: Evaluation of the State Board of
Morticians and Funeral Directors at 21-22 (Oct. 2007).

Maryland Law

Maryland first enacted legislation pertaining to pre-need
funeral contracts in 1969. See 1969 Md. Laws, ch. 684. The
1969 enactment contained many of the same provisions that exist
under current law. See Md. Ann. Code art. 43, § 366A (1965
Repl. Vol., 1969 Cum. Supp.).3 Those provisions now define a
pre-need funeral contract as “an agreement between a buyer and a
licensed funeral director, licensed mortician, or surviving spouse4

3
In 1981, the law was re-codified into the Health Occupations
Article (“HO”), see 1981 Md. Laws, ch. 8, and in 1992 it was re-
numbered at its current location within HO § 7-405, see 1992 Md.
Laws, ch. 155. In 1999, the law was expanded to authorize the use of
insurance proceeds to fund pre-need contracts. See 1999 Md. Laws, ch.
578; see generally 80 Opinions of the Attorney General 188 (1995)
(describing the history of how Maryland has regulated pre-need
contracts for funeral services and burial services).
4
A surviving spouse of a licensed mortician may obtain a license
to continue the business under the supervision of another licensed
mortician. HO § 7-308; 1981 Md. Laws, ch. 184. As we have
previously observed, the availability of a surviving spouse license
(continued. . . .)
8 [98 Op. Att’y

to provide any goods or services purchased prior to the time of
death.” HO § 7-101(v). Two types of pre-need funeral contracts
are relevant here: money-trusted and insurance-funded. In a
money-trusted pre-need contract, the buyer selects certain goods
and services and pre-pays the “total price” of those goods and
services based on the prices then in effect.5 The money that the
buyer pays under the contract must be deposited into a federally-
insured, interest-bearing trust or escrow account. HO § 7-
405(d)(2). The only exception to the trusting requirement allows
the seller to retain for its own use 20 percent of the selling price
of the casket or casket vault. HO § 7-405(d)(1)(ii)1. The money
in the account may not be withdrawn by the seller prior to
performance and must be refunded to the buyer upon written
demand at any point prior to the seller’s performance of the
contract.6 The interest or dividends generated on the account

“recognizes and preserves the value to a mortician’s family of the
funeral home as a going concern” and “affords the community a
measure of continuity in the operation of the funeral home by one
presumably familiar with the business.” 72 Opinions of the Attorney
General 141, 145-46 (1987).
5
Although the contract must state the “total price” of the agreed-
upon goods and services, the statute does not require that the price be
paid at one time. Sellers often allow buyers to pay in installments, but
with interest. See S.B. 578, 1999 Leg., Reg. Sess., Hearing Before the
Senate Finance Comm. (March 2, 1999) (written testimony of Sen.
Delores G. Kelley). If the beneficiary dies before the entire contract
amount has been paid, the seller may consider the contract void, in
which case the beneficiary’s heirs are entitled to a refund of “all
payments and interest held for the buyer.” HO § 7-405(e)(3)(iv); see
also infra n.6 (describing refund provisions).
6
The statute allows the buyer to terminate the contract at any time
by demanding in writing “a refund of all payments made,” HO § 7-
405(e)(3)(i), at which point the seller must refund “all payments and
interest held for the buyer.” HO § 7-405(e)(3); see also COMAR
10.29.06.06C. Although 20 percent of the purchase price of the casket
is not deposited into the trust account and is, therefore, arguably not
“held for the buyer,” it is our understanding that the Board interprets
the statute and regulations such that all of the payments made under a
pre-need contract are “held for the buyer” in the sense that they must be
put toward the cost of the funeral services ultimately provided. Under
the Board’s interpretation of the statute and regulations it administers—
an interpretation that is entitled to “considerable weight,” Motor
Vehicle Admin. v. Carpenter, 424 Md. 401, 413 (2012) (quoting
Maryland Aviation Admin. v. Noland, 386 Md. 556, 571-72 (2005))—
(continued. . . .)
Gen. 3] 9

“belong to” the buyer until the beneficiary dies and the agreed-
upon goods and services have been provided, at which point the
seller may withdraw the money from the account and keep “any
interest or dividends earned.” HO § 7-405(d)(4)(ii).

An insurance-funded pre-need contract provides for the same
services as a money-trusted contract but is funded by assigning to
the seller the benefits of a life insurance policy or annuity
contract. See generally HO § 7-405(f). As with a money-trusted
contract, the buyer may unilaterally terminate an insurance-
funded contract at any time, here by revoking the assignment of
benefits. HO § 7-405(f)(3)(i)2, (f)(3)(ii). Unlike a money-trusted
contract, however, an insurance-funded contract does not entitle
the buyer to a refund of the purchase price of the insurance policy
in the event the buyer revokes the assignment of benefits. Rather,
the insurance policy remains in place and is governed by
insurance law, not the provisions of § 7-405. HO § 7-
405(f)(3)(iii)2.7 Another significant difference between money-
trusted and insurance-funded pre-need contracts is that, under an
insurance-funded contract, if the benefit amount under the
insurance policy exceeds the “total price” of the funeral goods
and services “as determined at the time of death of the insured,”
the excess benefits “are paid to the beneficiary under the life
insurance policy or annuity contract.” HO § 7-405(f)(3)(i)4.8

the buyer is entitled to a refund of all payments made under the
contract.
7
The buyer who wishes to terminate the underlying life insurance
policy may be able to surrender the policy, but likely will receive in
return something less than its face value. See National Funeral
Directors Association, Model Consumer Protection Guidelines for
State Preneed Funeral Statutes at 4 (as amended Oct. 6, 2007)
(available at http://www.nfda.org/additional-tools-preneed/258-nfda-
model-consumer-protection-guidelines-for-state-preneed-funeral-
statutes.html (last visited Feb. 27, 2013)).
8
Maryland law provides for a third type of pre-need contract,
which is also money-trusted, but involves the formation of an
irrevocable trust to hold any portion of the contract amount until it is
needed to pay for funeral goods and services upon the beneficiary’s
death. The formation of an irrevocable trust is allowed “only for the
purpose of entitling the buyer to be eligible for any current Social
Security benefits or for any benefits under any other plan that restricts
eligibility to those with limited assets.” HO § 7-405(e)(4)(i). Unlike
ordinary money-trusted pre-need contracts, the use of an irrevocable
(continued. . . .)
10 [98 Op. Att’y

As you state in your letter, it is a common practice within the
funeral industry to include provisions in money-trusted pre-need
contracts that require the surviving family members of the
deceased to “make up the difference” between the contract price
of the agreed-upon goods and services and the price of the goods
and services at the time of death. Such contracts are known
within the industry as “non-guaranteed contracts.” See Tergesen
at 1. The question you have asked is whether sellers may include
non-guaranteed price provisions in money-trusted pre-need
contracts or must instead accept the contract price as payment in
full.
II
Analysis
We are called upon here to construe the provisions of § 7-405
of the Health Occupations Article, mindful that “[t]he ultimate
goal in construing and applying a statute is to ‘discern the actual
intent of the [L]egislature in enacting it.’” Ali v. CIT Tech. Fin.
Servs., 416 Md. 249, 260 (2010) (quoting Chow v. State, 393 Md.
431, 443-44 (2006)). When the Legislature’s intent is plain from
the language used, we “need not delve deeper.” Ali, 416 Md. at
260; see also Bourgeois v. Live Nation Entm’t, —Md.—, 2013
Md. LEXIS 10, 16 (Jan. 18, 2013) (“If the language is clear and
unambiguous, we need go no further.”). However, even when the
statute’s meaning may appear plain, we may “look at the purpose
of the statute and compare the result obtained by use of its plain
language with that which results when the purpose of the statute is
taken into account.” Kramer v. Liberty Prop. Trust, 408 Md. 1,
19 (2009). If, after considering the statutory language in its
proper context, “we conclude that the statute is subject to more
than one interpretation or that relevant terms are otherwise
ambiguous, we endeavor to resolve the ambiguity by looking to
the statute’s legislative history, purpose, and structure, as well as
to case law.” Bourgeois, 2013 Md. LEXIS at 17. Legislative
history “may be considered in an effort both to confirm what
appears to be a clear intent from the language itself and to discern
legislative intent when that intent is not entirely clear from the
statutory language.” Id. We may also look to the interpretation
of a statute by the agency that administers it, as courts will accord
a degree of deference to the agency’s interpretation. Dep’t of

trust means that the buyer “may not receive a refund of any payments
made for the pre-need burial contract.” HO § 7-405(e)(4)(ii).
Gen. 3] 11

Human Res. v. Hayward, 426 Md. 638, 650 (2012); Marzullo v.
Kahl, 366 Md. 158, 172 (2001).
A. Section 7-405 of the Health Occupations Article Requires
that the Pre-Need Contract Reflect the “Total Price” of the
Agreed-Upon Goods and Services

Section 7-405 of the Health Occupations Article governs the
form and content of pre-need contracts. It expressly provides that
money-trusted pre-need contracts must contain a “description of
any service or merchandise to be provided under the pre-need
contract,” HO § 7-405(c)(1)(ii), and must disclose “[t]he total
price of the services and merchandise agreed on.” HO § 7-
405(c)(1)(iv). Non-guaranteed price terms, by definition, do not
disclose the “total price”; assuming typical inflationary pressures,
they disclose only a portion of the price, with the balance to be
paid at the time of the beneficiary’s death, when the seller asks
the survivors to “make up the difference” between the contract
price and the prevailing market price. Because non-guaranteed
contract terms do not contain the “total price” of the goods and
services agreed upon, we believe the plain language of § 7-405
prohibits their inclusion in money-trusted pre-need contracts.

Our conclusion finds support in the different manner in which
the statute addresses insurance-funded pre-need contracts.
Although both types of pre-need contract must include the “total
price” as a contract term, see HO § 7-405(c)(1)(iv), see also HO
§ 7-405(f)(3)(iii)2 (exempting insurance-funded contracts from
subsections (d) and (e), but not (c)), the statute specifies that, for
purposes of determining the amount of refund potentially due the
buyer,

[a]ny benefits payable under the life
insurance policy or annuity contract in excess
of the amount necessary to pay the total
price, as determined at the time of death of
the insured, of the services and merchandise
agreed on in the pre-need contract are paid to
the beneficiary under the life insurance
policy or annuity contract.

HO § 7-405(f)(3)(i)4 (emphasis added). This provision, added to
the statute in 1999, expressly applies only to insurance-funded
pre-need contracts. 1999 Md. Laws, ch. 578. The Legislature did
not include a similar provision within the portion of the statute
governing money-trusted pre-need contracts. Had it done so, the
12 [98 Op. Att’y

statute would fairly clearly have allowed non-guaranteed price
provisions because the total price of the contract would consist of
the price paid at the time of contract formation, supplemented by
the balance due “at the time of death.”

As a matter of statutory construction, we presume that the
Legislature’s decision to include the phrase “at the time of death”
in the provisions governing insurance-funded contracts, but not
money-trusted contracts, was intentional. The Latin maxim is
“expressio (or inclusio) unius est exclusio alterius, or the
expression of one thing is the exclusion of another.” Potomac
Abatement, Inc. v. Sanchez, 424 Md. 701, 712 (2012); see 87
Opinions of the Attorney General 66, 74 (2002); see also Schisler
v. State, 394 Md. 519, 594-95 (2006) (express provision for
legislative approval of executive power to terminate executive
officers in § 10 of the Constitution suggests that its absence in
§ 15 was intentional); Chow, 393 Md. at 457-58 (Legislature’s
use of the term “loan” within statute regulating the registration of
machine guns suggests that its failure to include term within
subsequent statute regulating handguns was deliberate); Mossburg
v. Montgomery County, 329 Md. 494, 505 (1993) (“This court has
regularly held that where the Legislature in a statute expressly
authorizes a particular action under certain circumstances, the
statute ordinarily should be construed as not allowing the action
under other circumstances.”).9

Other aspects of the statutory scheme compel the same
conclusion we reach through application of the plain language of
9
We note that the statutory provisions governing pre-need burial
contracts use somewhat different language to describe the price
provisions of such contracts. Where pre-need funeral contracts must
include the “total price of the services and merchandise agreed upon,”
HO § 7-405(c)(1)(iv), pre-need burial contracts must contain “the
amount of the buyer’s financial obligation.” Md. Code Ann., Bus. Reg.
§ 5-704(a)(5). We believe the two provisions are capable of equivalent
construction and, thus, ascribe little substantive significance to the
different terms employed. Bus. Reg. § 5-704(a)(5). But even if the
choice of different terms could be seen as evidence of legislative intent
that the two provisions be interpreted differently, we conclude that the
different language employed within the Morticians’ and Funeral
Directors Act reveals more about legislative intent than that contained
in a different Article, and that the contrast between the price provisions
governing insurance-funded and money-trusted contracts makes clear
that money-trusted contracts must contain the “total price” of the
agreed-upon services and merchandise without mark-up at the time of
death.
Gen. 3] 13

the statute and interpretive canons. Disclosure of the principal
contract terms is a central provision of the Maryland statute, just
as it is central to the federal regulations that govern pre-need
contracts generally. See HO § 7-405(c)(1); see generally 16
C.F.R. Part 453. As we interpret the “total price” requirement of
§ 7-405(c), buyers are able to ascertain their entire financial
responsibility at the time they enter into the pre-need contract,
regardless of how the contract is funded. Under money-trusted
contracts, the buyer is responsible for the “total price” stated in
the contract; under insurance-funded contracts, the buyer is
responsible for the face value of the insurance policy, since the
seller is required to “accept the benefits payable under the life
insurance policy or annuity contract as payment in full.” HO § 7-
405(f)(3)(i)3. Either way, the buyer enters into the contract
knowing that her survivors will not have to pay more than the
“total price” reflected in the contract.

It is also important here to recognize that, even where the
statute allows for the price in an insurance-funded pre-need
contract to be determined “at the time of death of the
beneficiary,” it does so only for the purpose of determining
whether money should be refunded to the beneficiary. See HO
§ 7-405(f)(3)(i)4 (“Any benefits payable under the life insurance
policy or annuity contract in excess of the amount necessary to
pay the total price, as determined at the time of death of the
insured, . . . are paid to the beneficiary. . . .”). Thus, while the
beneficiary might or might not receive excess money from the
seller, under no circumstances does the price-at-time-of-death
provision operate to require the survivors to pay more. In this
respect, then, the interpretation we reach achieves what we see as
a critical consumer protection component of the statute, namely,
that a buyer knows up front what his or her financial outlay will
be.

B. Legislative Purpose and History Support the Conclusion
that the Price Provisions of Pre-Need Funeral Contracts
Must be Guaranteed

The General Assembly’s stated purpose for enacting the
predecessor to § 7-405 was to “regulate and restrict” pre-need
funeral contracts, 1969 Md. Laws, ch. 224 at 1522, and a previous
version of the statute was reported as “ostensibly designed to
protect the deceased and bereaved from burial fraud.”
Undertakers Fight Cemeterians, Baltimore Sun, March 10, 1967,
at C12; see also 80 Opinions of the Attorney General at 189 (“The
Maryland Morticians Act carefully regulates pre-need
14 [98 Op. Att’y

contracts.”). It is fairly self-evident that the Maryland pre-need
statute, as with similar statutes in other states, constitutes remedial
legislation intended to protect consumers. See Letter from Jack
Schwartz and Harry Matz, Assistant Attorneys General, to Robert
C. Adams, President, Board of Morticians at 4, 5 (Feb. 16, 1990)
(Maryland pre-need statute is designed to “protect[] the public”
and “consumers”); see also, e.g., Guardian Plans v. Division of
Ins., 793 P.2d 615 (Colo. Ct. App. 1990) (“The pre-need statutes
were enacted to protect the public from unconscionable dealings
regarding the sale of pre-need contracts.”); State ex rel. McGraw
v. Combs Servs., 526 S.E.2d 34, 41 (W.Va. 1999) (stating that the
“Legislature’s desire to protect purchasers of pre[-]need funeral
contracts from unscrupulous purveyors thereof is further
evidenced by its establishment of the Pre[-]need Guarantee Fund,
which ensures that consumers receive the benefit of their
contracted-for bargain”); compare H.B. 1090, 2008 Leg., Reg.
Sess., Revised Fiscal and Policy Note (enactment of Family
Security Trust Fund—now codified at HO §§ 7-4A-01 to 7-4A-
13—allows for claims when “pre[-]need money is obtained from
a person by theft, embezzlement, false pretenses, or forgery”).

Although little legislative history surrounds the 1969
enactment of Maryland’s pre-need statute, hearing testimony on
the 1999 amendments that authorized the use of insurance-funded
pre-need contracts reflects the understanding—held by legislators
and industry representatives alike—that one of the principal
consumer benefits of pre-need contracts is that they allow the
buyer to “lock in” the contract price. Senator Della repeatedly
asked whether S.B. 578, if adopted, would allow buyers to “lock[]
in” the purchase price under an insurance-funded pre-need
contract in the same manner as they could under the money-
trusted option then available. S.B. 578, 1999 Leg., Reg. Sess.,
Hearing Before Senate Finance Comm. (audio recording, Mar. 2,
1999) (statement of Sen. Della begins at the 37:50 time mark); see
also id. at 39:00 (asking whether consumer would be able to lock
in current prices “regardless of what the cost might be 20 years
down the road”). David Funk, the representative of an insurance
company planning to enter the market, replied in the affirmative,
id. at 38:05, as did all of the other witnesses who addressed the
issue. Among them were John P. Chaplin—then President of the
Board of Morticians—who testified that pre-need contracts allow
the buyer to “lock in the price of the funeral and not have to pay
any more for it,” id. at 6:15, and Erich W. March—representing
the Funeral Directors Association, and a former President of the
Board of Morticians—who testified that, as a funeral director, “if
[the contract price is] less than the funeral in the future, I’ve
Gen. 3] 15

guaranteed the contract; I’m the loser.” Id. at 51:35.
Mr. March’s comments on behalf of the Funeral Directors
Association are consistent with statements the Association has
made in connection with a Board-approved online course
designed to educate morticians about the basics of the Maryland
pre-need statute. In those course materials the Association
advises morticians, “Once a pre-need contract has been funded
and signed, the prices on the contract are guaranteed.” Maryland
State Funeral Directors Assn., How Much Do You Know About
Maryland’s Pre-need Statute? at 5, http://www.msfda.net/
sitemaker/sites/Maryla1/images/WebsitePreneedMDStatuteOnlin
eCourse01-2010.pdf (last visited Feb. 27, 2013). These statements
confirm what the language of the statute otherwise makes plain:
The requirement that money-trusted pre-need contracts reflect the
“total price” of agreed-upon goods and services does not allow for
sellers to ask surviving family members to make up the difference
between the contract price and the market price at the time the
services are rendered.

C. The Board’s Administrative Construction of the Statute is
Consistent With the Conclusion that the Seller May Not
Charge Survivors More at the Time of Death

The Board’s regulations do not elaborate on the “total price”
requirement. Instead, the regulations provide only that “[t]he
seller shall perform the contract according to the contract’s terms
and at the agreed upon price”—a regulatory construction that we
believe sheds little light on the meaning of the statutory phrase.
There is, however, one way in which the regulations suggest
strongly that the price terms of money-trusted pre-need contracts
must be guaranteed. Generally, the Board re-states the statutory
list of circumstances that provide grounds for termination of the
pre-need contract, see HO § 7-405(e)(3), but it has added
language to the third such circumstance: “The seller is unable to
perform under the terms and conditions of the pre[-] need contract
for reasons other than an increase in the cost of goods and
services . . . .” COMAR 10.29.06.06C(3) (emphasis added).

The Board’s addition of the italicized language makes clear
that a seller may not terminate a pre-need contract on the grounds
that the prevailing market price has outstripped the contract
price—a circumstance that would be of concern to the seller
principally if the contract price is guaranteed. If the price were
not guaranteed, and the seller were able to collect the prevailing
rates at the time of death, the seller would have no need to
terminate the contract because of “an increase in the cost of goods
16 [98 Op. Att’y

and services,” and there would have been no need for the Board to
prohibit the practice. Nor can we discern the policy goals that
would be advanced by prohibiting the seller from terminating the
pre-need contract on price grounds prior to the beneficiary’s
death—as the Board’s regulations do—while allowing the seller
to do so afterwards. That would, we think, defeat a fundamental
purpose of the pre-need contract, which is to allow the buyer to
bind the seller and thereby obtain a measure of control over his or
her own funeral. And yet, that is precisely the scenario that
would arise if the seller were able to require the beneficiary’s
survivors to “make up the difference” or go elsewhere for funeral
services. Cf. Bourgeois, 2013 Md. LEXIS at 35-36 (concluding
that the addition of an “‘authorized service charge,” if allowed,
would “essentially eviscerate[]” the ordinance’s requirement that
the ticket not be sold for more than the “established price” printed
on it). Our interpretation thus accords with that of the Board.10

D. Allowing Non-Guaranteed Pre-Need Contracts Would Alter
the Economic Incentives of the Contracting Parties in a
Manner that is Inconsistent with the Consumer Protection
Purpose of the Statute

Our reading of the “total price” requirement also finds
support in the fact that it preserves what we perceive to be the
economic incentive structure embodied within the money-trusted
pre-need contract. Although buyers likely pre-plan funeral
arrangements primarily to spare their survivors inconvenience and
expense, money-trusted pre-need contracts also provide buyers a
10
We are aware that the Board has previously reviewed and
approved contract forms that include separate provisions for guaranteed
and non-guaranteed price terms. It is our understanding, though, that
the forms the Board approved were for insurance-funded pre-need
contracts, which, as discussed above, are subject to different “total
price” provisions. Given that the price of goods and services under
insurance-funded contracts is “determined at the time of death of the
insured,” HO § 7-405(f)(3)(i)4, the same concerns that weigh against
allowing non-guaranteed price terms in money-trusted pre-need
contracts do not necessarily apply to insurance-funded contracts. The
statute expressly provides, though, that the seller must “accept the
benefits payable under the life insurance policy or annuity contract as
payment in full for the services and merchandise agreed on in the pre-
need contract.” HO § 7-405(f)(3)(i)3 (emphasis added). Accordingly,
the seller may not require additional payment for the agreed-upon
goods and services, and may not retain any portion of the assigned
benefits that exceeds the total price of the goods and services “as
determined at the time of death of the insured.” HO § 7-405(f)(3)(i)4.
Gen. 3] 17

means of protection against the effect of inflation on the price of
funeral goods and services. By paying the “total price” for goods
and services at the time of contract, buyers lock in the price of
those goods and services at then-prevailing rates and eliminate
any uncertainty about the kind of funeral they could afford in the
event that costs have increased by the time of death. See, e.g.,
Coleman & Coleman Enters. v. Waller Funeral Home, 2012 Miss.
LEXIS 570, *3 (Nov. 15, 2012) (“The purpose of these pre[-]need
[funeral] contracts was to fix the price of funeral services and
merchandise, so the customer could avoid the risk of inflation.”);
Utah Funeral Dirs. & Embalmers Ass’n, v. Memorial Gardens of
the Valley, 408 P.2d 190, 195 (Utah 1965) (observing that, in
contrast to insurance, where the benefits paid out may far exceed
the premiums paid, in pre-need funeral contracts “the amount to
be paid on the contract is fixed by its terms” and “[t]he only
possible profit or benefits which could accrue to the purchasers
under these contracts would be a possible raise in the price of
such services specified after the contract was entered into”).
Sellers make the opposite calculation. Because, “[u]pon
performance of the contract, any interest or dividends earned by
the escrow or trust account belong to the seller,” HO § 7-
405(d)(4)(ii), the seller stands to profit whenever the amount of
money deposited in the trust or escrow account, including accrued
interest, exceeds the price of the agreed-upon goods and services
at the time of death.11

Allowing sellers to include non-guaranteed price terms within
money-trusted pre-need contracts would materially alter this
incentive structure in a way that insulates the funeral service
provider from all risk. If interest rates outstrip inflation, the seller
is entitled to keep the excess; that much is dictated by § 7-
405(d)(4)(ii). But if the inflation outstrips interest, the seller
would be able, under a non-guaranteed contract, to require family

11
We note also that sellers obtain other financial benefits from pre-
need contracts. Although a seller must place the vast majority of the
contract price into escrow and may not withdraw that money until the
beneficiary dies and the seller provides the agreed-upon services and
merchandise, HO § 7-405(e)(2), the seller is entitled to use as operating
capital 20 percent “of the selling price of a casket or casket vault under
the pre-need contract,” HO § 7-405(d)(1)(ii), which can amount to
hundreds of dollars in today’s market. See Sara J. Marsden, Points to
Consider When Buying a Funeral Casket, US Funerals Online,
http://www.us-funerals.com/caskets.html (last visited Feb. 27, 2013)
(cost of casket ranges from $1,000 to $3,000, with high-end models in
the tens of thousands of dollars).
18 [98 Op. Att’y

members to “make up the difference” between the contract price
and the price at the time of death. The buyer, by contrast, would
bear all of the risk associated with inflation.12

Allowing non-guaranteed price provisions would have other
anti-consumer effects that we believe the Legislature did not
intend. For example, one of the reasons why buyers enter into
pre-need contracts is to spare their loved ones the burden and
expense of having to arrange a funeral during a time of grief.
This important purpose of pre-need funeral planning would be
defeated, at least in part, if the seller may nevertheless require that
surviving family members “make up the difference” between the
contract price and the price at the time of death.13

We see nothing in the language of the statute or its legislative
history to suggest that the Legislature intended such anti-
consumer outcomes. In the absence of such intent, canons of
statutory construction require that we interpret § 7-405 “liberally
in order to promote its [consumer protection] purpose.”
Washington Home Remodelers v. State, 426 Md. 613, 630 (2012)
(noting that Consumer Protection Act, as remedial legislation,
requires liberal construction); see also Maryland Ins. Comm’r v.
Central Acceptance Corp., 424 Md. 1, 39 (2011). Reading § 7-
405 in a manner that would prohibit sellers from shifting the risk
of inflation entirely onto the buyer or his survivors advances that
purpose, is consistent with the available legislative history, and
gives effect to the plain language of the statute.

12
As one article explains, pre-need contracts typically involve a
trade-off: “With a so-called guaranteed plan, a funeral home promises
that if you pay today’s prices, it will provide the goods and services
you purchased, no matter how much prices rise. ‘Non-guaranteed’
plans offer no such protections. But if these accounts appreciate in
value, heirs get to keep the gains.” Tergesen at 1.
13
If the price difference were too great, the surviving family
members, through the “legal representative of the buyer,” HO § 7-
405(e)(3)(i), may be able to terminate the contract and receive a refund
of “all payments and interest held for the buyer,” HO § 7-405(e)(3), if
they do so before the seller actually provides the agreed-upon services
and merchandise. See HO § 7-405(e)(2)(i) (prohibiting seller from
withdrawing funds until contract is performed). We suspect, though,
that the prospect of having to make alternative funeral arrangements
under such trying circumstances would present a significant obstacle to
termination.
Gen. 3] 19

E. The Regulation of Pre-Need Funeral Contracts in Other
States

Although we have not completed a comprehensive survey of
state provisions, we recognize that our conclusion places
Maryland in the minority of states that prohibit non-guaranteed
pre-need contracts. Most states allow non-guaranteed provisions
in pre-need contracts, but do so expressly, with statutory or
regulatory language that requires the pre-need contract to disclose
whether a particular good or service is guaranteed. See, e.g., Va.
Code Ann. § 54.1-2820(A)(4) (2013) (prohibiting a pre-need
contract unless it “clearly discloses whether the price of the
supplies and services purchased is guaranteed”); Minn. Stat.
§ 149A.97.3a(3) (2012) (requiring that pre-need contract
“disclose[] clearly and conspicuously whether the prices of the
goods and services selected are guaranteed”); Tenn. Code Ann.
§ 62-5-406(b)(3) (2013) (pre-need contracts must “clearly identify
whether the contract is a guaranteed pre-need funeral contract or a
non-guaranteed pre-need funeral contract”); La. Rev. Stat. Ann.
§ 37:862(A)(11) (2012) (pre-need contracts must “specifically
identify which funeral goods and services are guaranteed funeral
goods and services”); Mich. Comp. Laws § 328.220 (2012) (“All
prepaid contracts provided for under this act shall be either a
nonguaranteed price contract or a guaranteed price contract and
shall be made and executed pursuant only to this act.”).
Maryland is not, however, alone in prohibiting non-
guaranteed price provisions. Utah does so, requiring that pre-
need contracts “clearly identify that the contract is a guaranteed
product contract,” Utah Code Ann. § 58-9-701(2)(c) (2012),
“wherein goods or services are selected which will be provided at
the time of need for the consideration specified in the contract
regardless of the market price at the time of need.” Utah Admin.
Code R156-9-102(3) (2013) (defining “guaranteed product
contract”). Arkansas does so too; “all contracts for sale of
prepaid funeral benefits shall provide that the seller shall furnish
to the buyer the merchandise and services as set forth in the
contract at the contract price, regardless of the cost of the
merchandise or services at the date of the beneficiary’s death.”
Ark. Code Ann. § 23-40-112(d)(1) (2012); see also Haw. Rev.
Stat. § 441-22.5(c) (2012) (“No mortuary, cemetery, or pre-need
funeral authority shall charge a price for the cemetery property,
interment, or funeral services, whether it be at-need or pre-need,
which is greater than the price on the itemized price list or
contract which the purchaser had signed . . . .”) (emphasis
20 [98 Op. Att’y

added). As with the states that allow non-guaranteed price terms,
though, the states that prohibit such terms generally do so
expressly.

Maryland and Nevada are the only two states that appear to
lie in the middle, with statutory provisions requiring that pre-need
contracts include the “total price” or the “purchase price,” but
without expressly permitting or prohibiting non-guaranteed price
provisions. See Nev. Rev. Stat. § 689.275(1)(c) (2012) (“All
forms for a prepaid contract offered or sold in this state must
contain . . . the purchase price of each item of supply or service
and how payable.”). Although we have found no Maryland or
Nevada cases construing the price provisions of their respective
state’s pre-need statutes, a Colorado case—Guardian Plans v.
Div. of Ins., 793 P.2d 615 (Colo. Ct. App. 1990)—construed an
analogous provision of Colorado law to reach the same
conclusion we reach here.

In Guardian Plans, the Colorado Court of Appeals heard the
appeal of a funeral home that had its license suspended in part
because its pre-need contracts contained non-guaranteed price
terms. Id. at 616. The Division of Insurance had determined that
such terms violated Colorado’s pre-need statute because they did
not “set forth the purchase price and the terms under which it is to
be paid.” Id. at 618.14 The funeral home argued that “the
Division misconstrued and misapplied the pre-need statute by
requiring it to state a ‘fixed price’ or ‘purchase price’ for funeral
goods and services,” and that its contracts, which listed “a price
that is ‘subject to change from time to time,’” complied with the
statutory requirements. Id. at 617-18.

The court upheld the suspension. In reaching the conclusion
that non-guaranteed price provisions did not constitute a
“purchase price,” the Colorado Court of Appeals emphasized the
importance of the disclosure within the statutory scheme:

The pre-need statutes were enacted to protect
the public from unconscionable dealings

14
The Colorado statutory provision at issue in Guardian Plans—
Colo. Rev. Stat. § 10-15-109(1) (1987 Repl. Vol. 4A)—has since been
amended and recodified and now requires that pre-need contracts
“[s]pecify the services or merchandise, or both, to be provided, and
clearly indicate that the pre[-]need contract seller guarantees and fully
pays for each such service or merchandise, or both, when it is provided
. . . .” Colo. Rev. Stat. § 10-15-105(g) (2012).
Gen. 3] 21

regarding the sale of pre-need contracts. The
General Assembly has developed detailed
disclosure requirements designed to provide
meaningful protection to consumers.
Accordingly, listing a price that is “subject to
change” would render the statutory
disclosure requirement meaningless and
would provide the consumers with little
useful information about the pre-need
contract price.

Id. at 618. “Consequently,” the court concluded, “we agree with
the trial court’s judgment holding that the plaintiff sold funeral
goods and services on a pre-need basis without properly
disclosing the price of those goods and services as required by
statute.” Id.

We believe the same reasoning applies to Maryland’s pre-
need law, which similarly includes detailed disclosure
requirements concerning the types of goods and services to be
provided and the “total price” thereof. See HO § 7-405(c)(1).
The purpose of requiring the seller to disclose the “total price”
that the buyer will have to pay, it would seem, is to ensure against
the eventuality that generated this opinion, namely, that the
funeral home would seek to increase the contract price once the
beneficiary dies. Indeed, as discussed above, that practice is
precisely what led to one of the most widely-reported fraud
prosecutions involving pre-need contracts to date. See In re
Forest Hill, 364 B.R. at 815 (describing fraudulent practices of
Forest Hill, which refused to honor the terms of pre-need
contracts and imposed additional charges).

In fact, we believe that the “total price” requirement set forth
in § 7-405(c)(1)(iv) presents an easier case than the “purchase
price” language at issue in Guardian Plans. While a non-
guaranteed price may still plausibly qualify as the “purchase
price,” it cannot, by definition, disclose the total price of an
agreed-upon service or merchandise; it discloses only a portion
thereof, with the balance to be paid at the time of the beneficiary’s
death. We conclude, then, that Maryland law prohibits the
inclusion of non-guaranteed price terms within money-trusted
pre-need contracts.

This is not to say that the statute requires the seller to bind
itself to guaranteed price provisions for all of the funeral goods
and services expected to be necessary at the time of death. To the
22 [98 Op. Att’y

contrary, the statute expressly allows—actually, requires—sellers
to “[s]tate[] that all funeral costs may not be covered under the
pre-need contract,” HO § 7-405(c)(1)(iii)1, and to list in the pre-
need contract “all funeral goods and services that are reasonably
expected to be required at the time of need, but are not included in
the contract.” HO § 7-405(c)(1)(iii)2. Thus, if a seller does not
wish to run the risk that inflation will outstrip interest rates for
caskets, embalming, or other goods and services, it may simply
exclude those goods and services from the contract and inform the
buyer that they are excluded. But if the seller includes goods and
services in a money-trusted contract, and requires payment under
the contract for those goods and services, the contract price for
those goods and services must be guaranteed.
III
Conclusion
In our opinion, the requirement of § 7-405 of the Health
Occupations Article that money-trusted pre-need contracts
include the “total price” of the agreed-upon goods and services
means that the price terms of the contract must be guaranteed.
Although the contract may include estimated prices for the goods
and services that are not included under the contract, the licensed
mortician or funeral director may not accept pre-payment for such
goods and services.
Douglas F. Gansler
Attorney General

Adam D. Snyder*
Chief Counsel,
Opinions & Advice

* Linda Zang, a volunteer intern in the Opinions and Advice
Division, contributed substantially to the preparation of this
opinion.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11146233. Public record. Not legal advice.