1998.09.03 - Records of Meeting



RECORDS OF MEETING

MARKET REVIEW COMMITTEE

A meeting of the Market Review Committee of the Commonwealth Automobile Reinsurers was held at the offices of C.A.R. on-

THURSDAY, SEPTEMBER 3, 1998 AT 10:00 A.M.

The following Members were present-

Mr. Charles I. Boynton, - Chairman

Boynton Insurance Agency, Inc.

Mr. David Brussard* Safety Insurance Company

Mr. James D. Doherty Doherty Insurance Agency, Inc.

Mr. Edward F. Downey, Jr. Edward F. Downey, Insurance Agency Mr. Francis D. Gibbons O'Brien & Gibbons Insurance Agency, Inc.

Mr. Sumner D. Gilman Economy Insurance Agency, Inc.

Mr. Michael Hussey** Hanover Insurance Company

Mr. Bert LaChance*** Plymouth Rock Assurance Corporation

Mr. Douglas Long Berkshire Mutual Insurance Company

Mr. Kevin M. Meskell**** Quincy Mutual Fire Insurance Company

Ms. Virginia E. Neill Neill & Neill Insurance Agency, Inc.

Mr. Michael Richards***** Commerce Insurance Company

Ms. Susan Scott Premier Insurance Company of Mass.

Mr. Mark R. Silva Benson Young & Downs Ins. Agency, Inc.

Mr. Louis M. Xifaras Louis M. Xifaras Insurance Agency, Inc.

* Substituted for Mr. Daniel F. Crimmins

** Substituted for Mr. Wayne D. Howard

*** Substituted for Ms. Paula Gold

**** Substituted for Mr. William J. Whitebone

***** Substituted for Mr. David H. Cochrane

The following were also present-

Commonwealth Automobile Reinsurers

Mr. R. A. Iannaco President

Mr. M. J. Trovato Executive Vice President & Treasurer

Mr. D. I. Jewell Administrative Vice President & Secretary

Mr. J. J. Maher, Jr. Vice President and General Counsel

Mr. J. D. Metcalfe Administrative Manager

Mr. T. J. Costain R. P./S. C. Coordinator

Mr. P. W. Corsetti Director of Communications

Ms. Cleo Anderson Amica Mutual Insurance Company

Ms. Susan Flaherty Commonwealth Mutual Insurance Company

Ms. Erin Schaaf Horace Mann Insurance Company

Ms. Kathy Capuano New England Fidelity Insurance Company

Ms. Joanne Skiffington

Mr. Tom Rogers

Ms. Jewel Curtin Norfolk & Dedham Group

Ms. Diane Fortino The Premier Insurance Co. of Mass.

Mr. Francisco Sa Amazonia Insurance Agency

Mr. Stanley Shuman Shuman Insurance Agency, Inc.

Ms. Laurel Shuman

Mr. Ramon Vasquez Ramon Vasquez Insurance Agency

Mr. Alan Zagami New Main Street Insurance Agency

Peter T. Robertson. Esq. Law Office of Peter T. Robertson

Richard F. Wholley, Esq. Roche, Heifetz, Murphy & Wholley

Mr. Eoin Cannon The Standard

Chairman Charles Boynton called the meeting to order at 10:00 A.M.

M.R.

98.1 MINUTES OF PREVIOUS MEETING

A motion was made by Mr. James Doherty and seconded by Mr. Louis Xifaras to approve the Records of the Market Review Committee meeting of August 12, 1998, as written.

The motion passed on a unanimous vote.

M.R.

98.2 TRUST INSURANCE COMPANY / ERNEST SCOTT INSURANCE AGENCY, ET AL.

At its August 12, 1998 meeting, the Market Review Committee considered the appeal of the Ernest Scott Insurance Agency and heard testimony from several other Exclusive Representative Producers relative to the Trust Insurance Company's alleged unfair and unreasonable underwriting policies and procedures. In light of Trust's willingness to meet with the producers and address the issues raised at the hearing, the Committee voted to continue the matter until its September 3, 1998 meeting. Trust was directed to provide a written response to CAR Staff prior to the next Market Review Committee meeting detailing its policies and procedures for its producers and the manner in which those policies and procedures are communicated to them. Trust agreed to submit its responses to those issues to CAR Staff on or before Friday, August 28, 1998.

Mr. Gilman noted for the record that he maintains a business relationship with the Trust Insurance Company and some of the Exclusive Representative Producers associated with the appeal through a premium finance company which he owns. Both parties waived any objection to Mr. Gilman's participation in the appeal as a Member of the Market Review Committee.

CAR Counsel Joseph Maher clarified for the record that the appeal before the Committee resulted from a request for a hearing submitted by Ms. Candace Scott of the Ernest Scott Insurance Agency. He advised that while other parties may speak to issues relating to the appeal under consideration, issues specific to entities other than the petitioner should be addressed separately. Mr. Maher advised other parties of their right under Rule 20 to petition for a hearing on their own behalf if they want the Market Review Committee to consider their individual circumstances. This allows both sides to any dispute an opportunity to be prepared to respond to any allegations raised by either party.

Ms. Scott indicated that she and several other Trust Insurance Company Exclusive Representative Producers had met in an effort to resolve the issues raised at the August 12, 1998, Market Review Committee meeting. According to Ms. Scott, while some of the issues appear to have been resolved, the matters involving disparate treatment of brokers by Trust and holds on pending non-payment cancellations remain open. She also expressed concern about the company's willingness to communicate underwriting/policy processing procedural changes in the future, noting that she had yet to receive any such communication from Trust Insurance Company. She also indicated that the Servicing Carrier's policy of assigning rate class 20 to drivers with foreign experience, regardless of the date first licensed, continues to drive business away from her agency.

98.2 TRUST INSURANCE COMPANY / ERNEST SCOTT INS. AGENCY, ET AL. (Cont.)

Attorney Peter Robertson, representing Trust Insurance Company, said that the company's policy on cancellation holds was provided in his August 28, 1998, letter to the Committee. He added that issues had been addressed in a meeting between Trust and several of its Exclusive Representative Producers and indicated that subsequent meetings are planned. He further explained that a second meeting with the producers scheduled for September 1, 1998, had been cancelled when Trust became aware that attorneys representing several of the producers possibly intended to raise issues related to a matter involving the payment of commissions by Trust Insurance Company, an issue which the company did not want included in its discussion with the producers. Mr. Robertson also explained that legal strategy dictated the company's reluctance to provide answers at the previous Market Review Committee meeting regarding Trust's policy on the application of SDIP steps for insureds with foreign driving experience. He added that the company is uniform in the application of its SDIP policy and in accordance with the 1990 rate decision from the Commissioner of Insurance, Trust assigns SDIP step 15 as a starting point to all insureds with foreign driving experience.

In response to suggestion from Mr. Gilman, Mr. Robertson acknowledged that a timeline for resolution of the issues at hand would be helpful. He asked that Trust Insurance Company be given breathing room to address the issues brought by the producers and, noting the absence of his client, suggested a period of 60 days to resolve the matters.

Mr. Maher advised that prior to the meeting, Trust had been provided with a series of questions developed from the August 12, 1998, Market Review Committee meeting which the company was to respond to prior to this meeting. He noted that no representatives of Trust Insurance Company other than Attorney Robertson were present and to the extent that Mr. Robertson could not answer a number of questions with respect to the issue of disparate treatment of its producers by Trust, Mr. Maher advised that the Committee could choose to hear from individuals other than Ms. Scott since this issue was properly before the Committee as part of the Scott petition.

Mr. Francisco Sa of the Amazonia Insurance Agency contradicted Mr. Robertson's assertion that Trust Insurance Company applies its SDIP policy uniformly. He provided several examples within his agency's book of business where Trust had applied different SDIP steps to insureds with foreign driving experience. He said the inconsistency has caused confusion among his staff and makes his agency look unprofessional.

In response, Mr. Robertson said he must protect the interests of his client. He contended that having only received the questions referenced by Mr. Maher four days prior to the meeting, neither he nor Trust could be expected to provide answers to all of them.

Chairman Boynton noted that while Trust Insurance Company may have received the list of questions within the past week, those questions and issues were raised at the August 12, 1998 Market Review Committee meeting and were certainly ones that everybody at that meeting understood.

98.2 TRUST INSURANCE COMPANY / ERNEST SCOTT INS. AGENCY, ET AL. (Cont.)

Attorney Richard Wholley, representing several of Trust's ERPs, indicated that he attended the meeting which Trust Insurance Company held with its producers on the issues brought by Ms. Scott. He said that the company has known for some time the nature of the issues and should be able to respond to any related questions on the matters quickly. He added that Mr. Robertson's assertion that Trust has not had sufficient time to respond to questions posed by CAR is nonsense.

In light of matters relative to the Trust Insurance Company which involve pending litigation to which CAR could become a party, a motion was made by Mr. Gilman and seconded by Ms. Neill to convene in Executive Session to hear advice of counsel regarding legal strategies that could relate to this pending litigation.

On a roll call vote, the following Members voted unanimously to convene in Executive Session.

Mr. Charles I. Boynton, III Mr. Bert La Chance

Mr. David Brussard Mr. Douglas Long

Mr. James D. Doherty Mr. Kevin M. Meskell

Mr. Edward F. Downey, Jr. Ms. Virginia Neill

Mr. Francis D. Gibbons Mr. Michael Richards

Mr. Sumner D. Gilman Ms. Susan K. Scott

Mr. Michael Hussey Mr. Mark R. Silva

Mr. Louis M. Xifaras

Immediately following the Executive Session, the open session of the Market Review Committee reconvened.

Mr. Stanley Shuman of the Shuman Insurance Agency addressed the Committee relative to the matter of cancellation holds. He indicated that Trust has failed to comply with the Market Review Committee decision of August 12, 1998, which ordered the company to provide coverage for 6 policies identified by Mr. Shuman as having made sufficient payment to his agency prior to non-payment cancellation, but which the company cancelled.

Mr. Maher advised that while Mr. Shuman may provide testimony relative to the issues under consideration in Ms. Scott's appeal, issues pertaining specifically to his agency and Trust Insurance Company, were not part of the meeting agenda. He indicated that, if requested, the Committee could consider the issue raised by Mr. Shuman as it relates to his own agency under other business.

A motion was then made by Mr. Gilman and seconded by Mr. Xifaras that pursuant to CAR Rule 13, B, 3, j, that Trust Insurance Company be ordered to provide on or before September 11, 1998, to each Representative Producer, copies of all procedures necessary to effectively service policies issued through CAR. These procedures must be in writing with a copy to CAR. The motion further ordered that CAR audit Trust Insurance Company, their ERPs and other agents assigned to Trust to determine compliance with this order and whether any violations of CAR Rules exist, and report its findings to the Market Review Committee. Also a written chronology will be gathered of all complaints pending at CAR relative to the activities of the Trust Insurance Company in regard to their ERPs.

2. TRUST INSURANCE COMPANY / ERNEST SCOTT INS. AGENCY, ET AL. (Cont.)

The motion passed on a unanimous vote.

Following the vote, Attorney Robertson acknowledged that Trust Insurance Company would provide coverage for the 6 polices mentioned by Mr. Shuman.

M.R.

98.3 RAMON VASQUEZ INSURANCE AGENCY / NEW ENGLAND FIDELITY INS. CO.

Ramon Vasquez, principal of the Ramon Vasquez Insurance Agency, requested a hearing to appeal the termination of his agency's Exclusive Representative Producer appointment by the New England Fidelity Insurance Company for violation of CAR Rules 14, A , 2, e, 5, b, and c, requiring that an Exclusive Representative Producer, "will operate from an established location…", and "will maintain regular business hours.", and in accordance with CAR Rule 13, B, 3, f, 1, for "Failure to maintain a valid brokers license as issued by the Division of Insurance." CAR records reflect that the Vasquez Agency was appointed as an Exclusive Representative Producer in October 1997, and maintains a private passenger book of business of approximately 125 vehicles.

Ramon Vasquez indicated that the alleged Rule violations cited in the company's termination action are not true. He said that New England Fidelity has known for some time that his agency maintains offices in Lowell and Jamaica Plain. He said he holds a valid Massachusetts brokers license and has two employees who are not currently licensed, but are pursuing licensing. He said his Lowell office, through which he obtained his Exclusive Representative Producer appointment, is open from 9:30 A.M.-5:00 P.M. He acknowledged that most of his business to date has come from Jamaica Plain, due in large part from his longstanding presence in that town's business community. He said there is no CAR Rule requiring that a certain percentage of his business comes from Lowell. With respect to regular business hours, Mr. Vasquez indicated that since being cited by New England Fidelity in April 1998 that he was not maintaining regular business hours in Lowell, he has complied. Mr. Vasquez reiterated that the reasons for termination are invalid and speculated that claims frequency from business written by his agency is the real motivation for the company's action. He added that the company's billing system is sub-standard, company personnel are not always available and have been rude to his customers. He requested a mutual termination of his relationship with New England Fidelity.

Ms. Joanne Skiffington of New England Fidelity, indicated that Mr. Vasquez has operated a two office agency with himself as the only licensed producer. She provided a chronology of visits to the agency's Lowell office when Mr. Vasquez was either not there or the office was closed completely. She said this lack of availability to the public in Lowell compromises service to his clients and represents a clear misrepresentation of information provided in Mr. Vasquez's application to CAR for Exclusive Representative Producer appointment. Ms. Skiffington also detailed a case in which one of

98.3 RAMON VASQUEZ INS. AGENCY / NEW ENGLAND FIDELITY INS. CO. (Cont.)

Mr. Vasquez's non-licensed employees completed and signed an application and accepted money on behalf of the agency and New England Fidelity. She said the employee accepted a fraudulent photo copy of a license in binding coverage in the agency's Jamaica Plain office. The employee has not denied the act and there was a subsequent loss on the policy, the result of which was the loss of approximately $4,000 in legal costs by New England Fidelity and the loss of what she termed a legitimate subrogation opportunity by the other insurer associated with the loss. Ms. Skiffington indicated that the Insurance Fraud Bureau is conducting an investigation into the matter. She requested that the appointment termination be upheld.

Mr. Maher asked Mr. Vasquez whether he understood the implications of his request for a mutual termination of his agency's Exclusive Representative Producer appointment. He advised that if the termination stands, Mr. Vasquez would be ineligible for Exclusive Representative Producer appointment for two years, in accordance with CAR Rule 14. He asked if the appellant intended to request that CAR re-appoint his agency to another Servicing Carrier.

Mr. Vasquez said that if Jamaica Plain is later determined to be a market need community eligible for Exclusive Representative Producer appointment, he would apply for an appointment. He added that his agency is a multi-service business and is well established in the Jamaica Plain community.

Given the testimony of the representative from New England Fidelity and the ongoing investigation by the Fraud Bureau, Mr. Gilman made a motion which was seconded by Mr. Xifaras to deny the appeal.

The motion passed on a unanimous vote.

CAR Counsel advised the parties of their rights pursuant to CAR Rule 20.

There being no further business, a motion was made by Mr. Doherty and seconded by Mr. Gilman to adjourn.

The meeting adjourned at 11:30 A.M.

TIMOTHY J. COSTAIN

Representative Producer

Servicing Carrier Coordinator

Boston, MA

September 28, 1998

Note: These records have not been approved. They will be considered for approval at the next meeting of the Market Review Committee.

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