RECORDS OF MEETING
MARKET REVIEW COMMITTEE
A meeting of the Market Review Committee was held at the offices of Commonwealth Automobile Reinsurers, 100 Summer Street, Boston on
Thursday, January 21, 1999 AT 10:00 A.M.
Members present -
Mr. Charles I. Boynton, III – Chairman
Boynton Insurance Agency, Inc.
Ms. Nancy Z. Bender Nancy Z. Bender Insurance Agency, Inc.
Mr. David H. Cochrane Commerce Insurance Company
Mr. Daniel F. Crimmins Safety Insurance Company
Mr. James D. Doherty Doherty Insurance Agency, Inc.
Mr. Sumner D. Gilman Economy Insurance Agency, Inc.
Ms. Paula W. Gold Plymouth Rock Assurance Corporation
Mr. William F. Hofmann, III Provider Insurance Group, Inc.
Mr. Wayne D. Howard Hanover Insurance Company
Mr. Douglas R. Long Berkshire Mutual Insurance Company
Ms. Susan K. Scott Premier Insurance Company o Mass.
Mr. Mark R. Silva Benson, Young & Downs Ins. Agency, Inc.
Mr. William J. Whitebone Quincy Mutual Fire Insurance Company
Mr. Louis M. Xifaras Louis M. Xifaras Insurance Agency, Inc.
Commonwealth Automobile Reinsurers -
Mr. Joseph Maher, Jr. Vice President & General Counsel
Records of Meeting -12- January 21, 1999
Market Review Committee
Mr. Paul Corsetti Director of Communications
Mr. Timothy Costain R. P./S. C. Coordinator
Ms. Cynthia Duffy Statistical Analyst
Ms. Adrianne Francis Administrative Assistant
Mr. Dana Jewell Administrative Vice President & Secretary
Mr. John Metcalfe Administrative Manager
Ms. Suzanne Riddle Statistical Analyst
Mr. Michael Trovato Executive Vice President & Treasurer
Mr. Frank Underhill Vice President of Auditing
Ms. Jennifer Viera Statistical Analyst
Also present –
Mr. John McDonough Allmerica Financial
Mr. Russell Furlong Amica Mutual Insurance Company
Mr. Russell Bigwood AMGRO, Inc.
Mr. Bruce Cregger CNA Insurance Companies
Ms. Susan Flaherty Commonwealth Mutual Insurance Company
Mr. Phil Dann Community Ins. Agency of Greater Fall River
Mr. Al DiVirgilio DiVirgilio Insurance Agency, Inc.
Mr. Gene Dvorkin Gene Dvorkin Insurance Agency
Ms. Candace Scott Ernest Scott Insurance Agency
Ms. Joanne Borden Fireman’s Fund Insurance Company
Mr. Frank J. Gorman, Sr. Gorman Litchfield Insurance Agency
Mr. Thomas Green Green Insurance Agency
Robert Mahoney, Esq. Hale & Dorr
Ms. Erin Schaaf Horace Mann Insurance Company
Mr. Alec Soule Insurance Times
Steven W. Kasten, Esq. McDermott, Will & Emery
Mr. James P. Haas Metropolitan P & C Insurance Company
Roberta R. Fitzpatrick, Esq. Mintz, Levin, Cohn, Ferris, Glovsky & Popeo P.C.
Ed Donahue, Esq. Morrison, Mahoney & Miller
Mr. Tom Rogers New England Fidelity Insurance Company
Ms. Joanne Skiffington
Ms. Jewel Curtin Norfolk & Dedham Group
Ms. Marietta M. Paquette Paquette Insurance Agency
Mr. John Delano Pilgrim Insurance Company
Mr. Leonard Rollins
Ms. Diane Fortino Premier Insurance Company
James T. Scamby, Esq. Roche, Heifetz, Murphy & Wholley
Richard F. Wholley, Esq.
Mr. Stanley Shuman Stanley Shuman Insurance Agency, Inc.
Ms. Laurel Shuman
Mr. Eoin Cannon The Standard
Mr. David Brandies Trust Insurance Company
Ms. Natalie Silva
Mr. Turn Auguste Turin Insurance Agency, Inc.
Market Review Committee Chairman Boynton, called the meeting to order at 10:00 A.M.
New Business
CAR Counsel Joseph Maher, advised that materials provided to the Committee relative to the meeting represent part of a new docketing system instituted at CAR effective January 1, 1999. He indicated that the system will be used for all committees and will ensure that documentation associated with committee meetings is readily identifiable and accessible to interested parties.
MR
99.01 Records of Previous Meeting
A motion was made by Mr. Doherty and seconded by Mr. Gilman to approve the Records of the Market Review Committee meetings of December 1, 1998 and December 22,1998, as written.
The motion passed on a unanimous vote.
MR
99.02 DIVIRGILIO INSURANCE AGENCY/METROPOLITAN P&C INSURANCE COMPANY
Albert V. DiVirgilio, President of the DiVirgilio Insurance Agency, requested a hearing to appeal the alleged actions of the Metropolitan P&C Insurance Company relative to the requirement that the agency collect earned premium due and remit 100% down payment on policies cancelled within the preceding 24 months.
Mr. Gilman noted for the record that he is a client, through his premium finance company, of Attorney Roberta Fitzpatrick, who represented Metropolitan Property & Casualty Insurance Company in the matter. Accordingly, Mr. Gilman refrained from participating in the appeal.
Mr. DiVirgilio described the procedure under which his agency has processed the collection of previously owed earned premium and the 100% down payment requirement from August 1995 to December 1998. Mr. DiVirgilio indicated that in August of 1995 when he transferred his book of business from Amica Mutual Insurance Company to Metropolitan, their policy concerning collection of earned premium and 100% down payment applied to policies cancelled in the previous twelve months. For policies written over twelve months, Metropolitan required the normal 25% deposit. According to Mr. DiVirgilio, in October, 1998 when he began transferring a purchased book of business to Metropolitan, the company arbitrarily ordered that he collect earned premium and remit 100% down payment on policies cancelled within the previous twenty four months. He said that Metropolitan is violating CAR Rule 15 by requiring him to collect earned premium due a prior carrier and remit 100% down payment on policies cancelled during the previous twenty four months. This sudden change of policy affected his purchase of the book of business, because it reduced the amount of business he retained from the sale and he did not buy the book on a retention basis. Mr. DiVirgilio said that following a complaint to Metropolitan regarding their policy change, he received a notice requesting his agency collect earned premium over twenty-four months and that failure to do so represented a violation of state laws as well as CAR Rule 15. Mr. DiVirgilio noted that Metropolitan later amended their policy, to up to twenty-four months.
Attorney Roberta Fitzpatrick, representing Metropolitan, distributed a position statement on behalf of Metropolitan and indicated that Metropolitan is not asking Mr. DiVirgilio to act as a collection agency on its behalf, but is requiring 100% down payment on previously cancelled policies. She indicated that while CAR Rule 15 provides for the remittance of 100% down payment for policies having defaulted on premium payment with the previous twelve months, M.G.L. Ch. 175 Sec. 113E, controls a companies right to collect no more than 30%, unless the applicant has been in default in the payment of premium during the preceding twenty-four months. Ms. Fitzpatrick stated that CAR Rules
will yield to statute in cases of conflict, noting the inconsistency between Rule 15 and MGL Ch. 175 Sec. 113E. She indicated that CAR Rule 14, B, 1, c, works in concert with Rule 15 and requires that an ERP verify whether an applicant for insurance owes a prior carrier money.
In response to a question from Ms. Bender as to whether down payment requirements applied to ERP’s and voluntary agents, Fitzpatrick indicated they do. She added that she had spoken to Metropolitan's underwriting department to confirm that the policy is enforced consistently and indicated that exceptions will be made when circumstances warrant them. In light of Mr. DiVirgilio's assertions
MR
99.02 DIVIRGILIO INS. AGENCY/METROPOLITAN P&C INS. COMPANY (continued)
that the company never enforced the policy until he began rolling in a new book of business, she said Metropolitan would review its records to confirm that the current policy has been enforced since its inception. She said a memorandum, dated April 16, 1998, documented the company's current policy for all Metropolitan producers.
Mr. DiVirgilio countered that while he doesn't dispute that the statute cited by Ms. Fitzpatrick is open to interpretation, he believes CAR Rule 15 contemplates MGL Ch. 175. Sec. 113E, and was purposely made more lenient to ensure public access to automobile insurance. He noted that there are only approximately 7 policies in question and he does not have a book of business filled with non-paying clients, but reiterated that the company never enforced the current policy until after he purchased another book of business. He said he never received the notice of a change in the company's policy referred to by Ms. Fitzpatrick.
Mr. Maher confirmed that Massachusetts General Laws take precedent over CAR Rules. He distinguished between M. G. L. Ch. 175 sec. 113E, which enables a carrier to demand 100% down payment from applicants who have defaulted on a premium payment in the previous twenty four months and CAR Rule 15 which speaks more to whether or not a company is required to issue a policy on an uncured default. He noted that Rule 15 is consistent with MGL Ch. 175 sec. 113H and further advised that an expansive review of CAR Rules currently under way will seek to reconcile distinctions of this type.
Mr. Crimmins indicated that he believes that Metropolitan's action is within the company's rights and noting that only 7 policies are involved, made a motion which was seconded by Mr. Xifaras to deny the appeal.
Ms. Gold suggested that the parties work together to resolve the question of Metropolitan's past practices and whether or not the appellant was justified in basing business decisions on those practices. The parties agreed to work together in the context of the book roll over and the question of 100% down payment requirements for twenty four month premium defaults in an attempt to resolve their dispute.
The motion passed on a unanimous vote.
CAR Counsel Joseph Maher, advised the parties of their rights pursuant to CAR Rule 20.
MR
99.03 GREEN INSURANCE AGENCY/NEW ENGLAND FIDELITY INSURANCE COMPANY
Thomas Green requested a hearing to appeal the termination of his Exclusive Representative Producer appointment by the New England Fidelity Insurance Company for violation of CAR Rules. Specifically, the appointment termination was for the agency's failure to maintain regular business hours and failure to address a market need as determined by criteria established by the Governing Committee of CAR. At its December 1, 1998 meeting the Market Review Committee voted to continue
MR
99.03 GREEN INSURANCE AGENCY/NEW ENGLAND FIDELITY INS. CO. (continued)
the matter for thirty (30) days and stay the agency's ERP appointment termination to provide Staff an opportunity to investigate the agency's Allston office to determine whether Mr. Green is maintaining regular business hours at his primary office location.
Mr. Timothy Costain, CAR Servicing Carrier Coordinator, provided a report on Staff's attempts to verify whether Mr. Green has been maintaining regular business hours at his agency's Allston office. He indicated that since December 1, 1998, he had called the agency's Allston office five times at various times during the workday, noting that Mr. Green personally answered the telephone four times. He also visited the office on two occasions and found Mr. Green present both times. He concluded that the producer appears to be maintaining regular business hours in his Allston office.
Attorney Edward Donahue, representing New England Fidelity, speculated that Mr. Green’s increased availability is due to CAR's monitoring of his presence in his Allston office. He expressed fear that Mr. Green would resume his previous pattern of not maintaining regular business hours in Allston. He suggested that CAR continue to monitor the agency for an additional 60-90 days.
Mr. Gilman indicated that CAR Staff conducted its review pursuant to the Committee's directive and the Servicing Carrier has an ongoing obligation to police Exclusive Representative Producer compliance with CAR Rules.
Mr. Maher advised that Mr. Green should be aware of his obligations under CAR Rules and their associated non-compliance penalties. If his agency is found to be in violation of CAR Rules, the company may reissue termination of the producer’s Exclusive Representative Producer appointment without prejudice.
Following further discussion, a motion was made by Mr. Gilman and duly seconded by Mr. Xifaras to uphold the appeal.
The motion passed on a unanimous vote.
Mr. Maher advised the parties of their rights pursuant to CAR Rule 20.
MR
99.04 STANLEY SHUMAN INSURANCE AGENCY, INC./TRUST INSURANCE COMPANY
The Stanley Shuman Insurance Agency, Inc., requested a hearing to appeal the termination of the agency’s Exclusive Representative Producer appointment by the Trust Insurance Company for various alleged violations of CAR Rules including but not limited to failure to remit premiums in accordance with Rule 14 and the Exclusive Representative Producer Agreement.
MR
99.04 STANLEY SHUMAN INSURANCE AGENCY, INC./TRUST INS. COMPANY (continued)
Mr. Gilman refrained from participating in the matter, noting for the record, that he has a business relationship with Trust Insurance Company and the Shuman Insurance Agency, Inc. through his premium finance company.
Attorney Steven Kasten, representing Trust Insurance Company, said the termination of the Shuman Agency's Exclusive Representative Producer appointment was justified and that Mr. Shuman has been unfair to Trust and to all CAR constituents. He cited failure of the agency to verify premium due a previous carrier on new business and policy rewrites. He distributed a series of RMV screen print outs listing insureds of the Shuman Agency displaying previous cancellation information along with earned premium due prior carriers. He said that the agency should have known that the individuals listed owed money, but chose to ignore its obligations rather than verify and collect earned premium before writing a policy through Trust. He noted that earned premium could have been easily verified by calling Trust. Mr. Kasten indicated that the Shuman Agency also has a history of failing to remit premium payments on non-payment cancellation holds in a timely manner. He said that charges leveled by Mr. Shuman, that the company is not opening mail from his agency in a timely manner, are untrue. Mr. Kasten indicated that Trust did not terminate the agency's appointment impulsively, adding that the company/agency relationship is irreparably damaged and the Shuman Agency is responsible for it's predicament.
Ms. Natalie Silva, Trust Personal Lines Assistant Manager, explained that many other agencies call the company to determine earned premium, but the Shuman Agency does not. She noted that during the past several months Trust has experienced an increase in requests from other insurers to collect earned premium or cancel polices written through the Shuman Agency, due to unpaid earned premium. She said the agency has been largely uncooperative toward the company's efforts to collect earned premium from a prior policy term. With respect to Trust's handling of mail, Ms. Silva said that mail comes directly to her service team and she personally delivers premium checks three times daily to the company's accounting department for posting. She asserted that premium payments from agencies are posted within 48 hours of arriving at Trust. Ms. Silva noted that the company receives numerous calls from insureds of the Shuman Agency seeking direct service rather than contacting the agency. She said the agency's failure to verify earned premium on a consistent basis has resulted in a high percentage of cancellations for misrepresentation.