Auto News:
Springfield law firms reach $8 million settlement in class-action suit
against Progressive Insurance ...
According to an article by Patrick Johnson in The Republican / Masslive ,
two Springfield law firms have settled a federal class-action lawsuit against
Progressive Direct that has the potential to pay out more than $8 million to
4,300 Massachusetts residents in an ongoing dispute over Personal Injury
Protection (PIP) benefits.
The two law firms -- Alekman DiTusa LLC and Connor, Morneau and Olin
LLC -- filed suit against Progressive Direct Insurance Company claiming that
between 2008 and 2010, Progressive deceptively had customers agree to
an $8,000 PIP deductible.
Each of the people listed in the suit -- 4,311 in total -- is eligible for a
payment of $1,875 provided they file for it by the end of the February. If
all of the claims are filed, the payout by Progressive will be $8.08 million.
Progressive also agreed to pay all legal fees. Progressive agreed to the
settlement to bring the four-year court action to an end but admitted no
wrongdoing.
Many of you will recall that MAIA filed a formal complaint with the
Commissioner of Insurance regarding Progressive‘s practice of including an
$8,000 PIP deductible for the applicant and all household members if the
applicant indicated that all household members had health insurance. We
argued at the time that PIP provided protection for things other than
medical bills, like lost wages, replacement services and funeral expenses,
but Commissioner Nonnie Burnes took no action on our complaint.
One of the plaintiffs‘ attorneys, DiTusa, said, “Insurance is a fairly
complicated product. When you start getting the average consumer online
buying this fairly complex product, you are going to run into problems.“
In our opinion, money can‘t by better advertising for the value of doing
business with an independent insurance agent.
While we‘re on the subject, here are some interesting, new Personal
Auto provisions ...
As most of you know, MAIA gathers and reviews all company personal auto
rate and form filings placed on file by the Division of Insurance. Recently,
we‘ve noticed some interesting forms and/or rules that have been placed
on file which we believe are contrary to Massachusetts statute.
Here is a brief review of these forms:
(continued on page 2)
February 11, 2016
In this Issue ...
•
•
Auto News:
Springfield Law Firm Settles
Class-Action Suit Against
Progressive
1
New Personal Auto
Provisions
1-4
DOI News:
• PRAC Requests Hearing on
CAR Rule 29 Amendment
E&O Update:
• Personal Lines - More E&O
Expores Than You Think
4
Project Invest News:
• Keefe Tech InVEST
Marketing Program
Winners
5-6
6
Thanks Company
Partners 6
2
February 11, 2016
Auto News ... continued from page 1
1. Allstate - The Allstate Massachusetts Mandatory Endorsement (AU14324-2) includes a new General Provision 25.
Payments which says: “If your initial premium payment for your first policy is by check, draft, or any remittance
other than cash, such payment is conditional upon the check, draft or remittance being honored upon
presentation. If such check, draft or remittance is not honored upon presentation, this policy shall be deemed
void from its inception. This means that we will not be liable under this policy for any claims or damages which
would otherwise be covered had the check, draft or remittance been honored upon presentation.”
2. Esurance—Esurance has filed and received approval of a Notice of Null Contract form which says: “Esurance
attempted to collect premium funds for your initial policy payment with the account information you provided
when you applied for insurance coverage. Your financial institution refused to process the debit transaction.
Esurance was unable to collect consideration (payment) for the insurance contract identified at the top of this
form.
Because no initial payment was received, your insurance policy is void. No insurance coverage is now in effect,
nor has it ever been in effect. Addtionally, you may be responsible for return fees charged by your financial
institution.
3. GEICO—GEICO has received approval of a Null and Void Misrepresentation letter (NullVoidMsRpMa—12-14)
which reads as follows:
“After carefully reviewing your policy, we have determined that we are unable to offer an insurance policy at this
time and must cancel this policy for misrepresentation due to the following reason(s):
Due to the [material misreprsentation/undisclosed information], we must notify you as follows:
THE INSURANCE PROVIDED UNDER THE POLICY OR POLICIES AS NUMBERED ABOVE IS HEREBY DECLARED NULL
AND VOID AND OF NO EFFECT AS OF ITS INCEPTION ON [EFFECTOVE DATE].
We urge you to obtain other insurance immediately. If you have any questions, please do not hesitatee to
contact us at the number below.
GEICO has also received approval of a non-payment null and void letter which says:
“Your financial institution has not honored the payment that you recently submitted to [issue] your Automobile
policy. All payments are subject to normal collection.
Since your payment was not honored, there was no consideration (valid payment) and the requirements under
which your insurance policy was [issued] were not satisfied.
Accordingly, you are hereby notified:
WE HEREBY DECLARE THE ABOVE CAPTIONED POLICY NULL AND VOID, AND OF NO EFFECT AS OF ITS INCEPTION
DATE. NO INSURANCE COVERAGE IS NOW IN EFFECT, NOR HAS IT EVER BEEN IN EFFECT.
Any subsequent payment which you may have submitted, prior to or after this letter, will be refunded.”
GEICO has also filed and received approval for a letter informing the policyholder of a change in the deductible
which says:
“As a result of a recent review of your policy records, we wanted to let you know that the following coverage
deductible adjustments will be made for [the [yr mk mld VIN]/all vehicles] insured under this policy effective
12:01 a.m. on [effective date]:
[Previous: [Coverage & Deductible]
New: [Coverage & Deductible]]
We are taking this action for the following reason(s):
Please rest assured that all other coverage will remain unchanged. Your new premium is $[premium] and
updated policy documents will arive shortly.
Thank you for insuring with GEICO. We look forward to serving your insurance needs for many years to come.
GEICO has also introduced a number of cancellation and non-renewal letters for varying reasons.“
February 11, 2016
3
Auto News ... continued from page 1
4. Harleysville—Harleysville Insurance has filed and received approval of its Cancellation and Nonrenewal Notices;
however, they recently began using a combination Notice of Policy Expiration/Notice of Cancellation for Nonpayment of Premium which says:
You are hereby notified that the Massachusetts Motor Vehicle Liability Policy, herein designated, issued to you by
the above named company is hereby expired in accordance to its terms, such expiration became effective at
12:01 A.M. on the date stated above.
In accordance with the provisions of Section 113A of Chapter 175 of the General Laws, as amended, a notice of
cancellation will be sent to the registrar of motor vehicles of the Commonwealth of Massachusetts on the
effective date of cancellation stated above.
This policy provides auto liability coverage. You should contact your agent or any agent concerning your possible
eligibility for replacement coverage through another insurer, or the Massachusetts Commonwealth Auto
Reinsurers.”
The form we reviewed for a member whose client failed to pay the renewal premium provides an extended due
date (15 days) but provides a 10 day notice to the insured that coverage terminated as of the expiration of the
prior policy. We were unable to find any approval of the Notice of Policy Expiration/Notice of Cancellation and
believe MA law requires the statutory 20 day notice of cancellation in this instance.
5. Progressive—Progressive has an approved Application for Massachusetts Motor Vehicle Insurance form
(approved for use effective 5/9/14) which includes the following language:
Application agreement
Verification of content
I declare that the statements contained herein are true to the best of my knowledge and belief and do agree
to pay any surcharges applicable under the Company rules which are necessitated by inaccurate statements.
I declare that no persons other than those listed in this application regularly operate the vehicle(s) described
in this application. I declare that none of the vehicles listed in this application will be used as a public or livery
conveyance. I understand that this policy may be rescinded and declared void if this application
contains any false information or if any information that would alter the Company‘s exposure is
omitted or misrepresented.
Acknowledgement and agreement
• If I make my initial payment by electronic funds transfer, check, draft, or other remittance, the coverage
afforded under this policy is conditioned on payment to the Company by the financial institution. If the
transfer, check, draft, or other remittance is not honored by the financial institution, the Company
shall be deemed not to have accepted the payment and this policy shall be void.
• If I make my initial payment by credit card, the coverage afforded under this policy is conditioned on
payment to the Company by the card issuer. I understand that if the Company is unable to collect my
initial payment from the card issuer, the Company shall be deemed not to have accepted the
payment and this policy shall be void. I also understand that if I authorize a credit card transaction for
any payment other than the initial payment, this policy will be subject to cancellation for nonpayment of
premium if the Company is unable to collect payment from the card issuer. The Company is deemed
“unable to collect“ in the following instances: (1) when I reach my credit limit on my credit card and the
card issuer refuses the charge; (2) when the card issuer cancels or revokes my credit card; or (3) when the
card issuer does not pay the Company, for any reason whatsoever, upon the Company‘s request.
We‘re not sure which came first -- this form or the BMC Appeals Court decision reported in the December 31,
2015 edition of The Massachusetts Agent -- but we believe that in all of the examples highlighted above, a
statutory notice of cancellation would be required.
We have brought all of these forms to the attention of the Division of Insurance, and they have agreed to take a
second look at all of these null and void forms.
4
February 11, 2016
DOI News:
Plymouth Rock Assurance Corporation Requests Hearing on Proposed CAR Rule 29. Assignment Process
Amendment ...
At the request of the Plymouth Rock Assurance Corporation, pursuant to the provisions of Article X of the Plan of
Operation of Commonwealth Automobile Reinsurers (“CAR”), a hearing will be held on February 25, 2016, at 10:00
a.m. at the Offices of the Division of Insurance, 1000 Washington Street, Boston, MA 02118. The purpose of the
hearing is to afford all interested parties an opportunity to provide oral and written comment regarding a proposed
amendment to Rule 29 of the CAR Rules of Operation, approved by the CAR Governing Committee on January 13,
2016. The proceeding has been designated as Docket No. C2016-01.
In brief, the proposed amendment to Rule 29 proposes adjustments to the method for determining values of
voluntary keep out credits for policies effective April 1, 2016 and later. The proposal results in a 22.6% decrease
in credit eligible exposures and a 21.4% decrease in available quota share credit premium. The proposal does not
change the policy assignment process or the determination of quota share for the purpose of assignment.
Any person who wishes to offer oral comment on the proposed amendment is requested to submit a Notice of
Intent to Comment no later than February 22, 2016. All other interested persons will be heard after those who notify
the Division in advance. All notices, written comment and other submissions must be sent to the Docket Clerk,
Hearings and Appeals, Division of Insurance, 1000 Washington Street, Suite 810, Boston, Massachusetts 02118-6200,
and shall refer to Docket No. C2016-01.
Electronic mail should be addressed to [email protected]. A paper copy of the proposed
amendment may be reviewed at the Division by appointment with the Docket Clerk, who may be reached at
617-521-7330. It may also be viewed electronically at by clicking here.
E&O Update:
Personal Lines: More Errors &
Omissions Exposure Than You Think
by Curtis M. Pearsall, CPCU, AIAF, CPIA
President – Pearsall Associates, Inc
and Special Consultant to the Utica
National E&O Program
Most Agents’ Errors & Omissions (E&O) carriers report
that commercial lines generates the majority of E&O
claims. However, a significant number of E&O claims
arise from the sale and service of personal lines. For
agents selling personal lines, understanding the risks
and knowing how to minimize the potential of an E&O
claim are vital. Simply turn on the news to see the
devastation caused by Mother Nature and consider
how many personal lines customers are or are not
covered for the losses they are facing.
On average, when an E&O claim involving personal
lines occurs, the severity (size of the claim) is much less
than the commercial lines counterpart. However,
depending on the agency’s clientele, E&O claims
involving personal lines can easily reach the $1
million-plus level.
In personal lines, three lines of business typically
generate the bulk of the activity: homeowners, auto
and umbrella.
Homeowners
With homeowners, one of the more significant issues
involves valuation. While many agencies use a cost/
quality estimator, these are not perfect. In many cases,
the quality of the output is directly attributable to the
quality of the input. Be cautious in securing the
various inputs and be certain to verify the accuracy of
the data. For example, some websites may not
include an indicator that an addition has been put on
the house. It is best to ask the customer additional
questions to determine if changes occurred. When
quoting a new business account, don’t presume that
the limit shown on the current policy is accurate or up
to date.
Other issues involving homeowners include:
•
•
•
various limitations contained within the policy.
Make the customer aware of these limitations
in writing;
the carrier’s underwriting guidelines. Carriers
have been known to sue agents, when the
agency bound the carrier on a risk prohibited
by the underwriting guidelines; and
vacancy and ordinance or law coverage. Agents
would be wise to educate customers on these
two key coverage matters.
Personal Auto
A central issue with personal auto is limits. Customers
do not expect to get into a crash and many do not
fully comprehend what can happen when their 3,000
pound vehicle hits something or someone. This is an
area where $1 million losses can occur and, when the
customer realizes he or she does not have sufficient
coverage, there is greater potential for E&O litigation.
In all situations, provide the customer with limit
options from which to choose.
5
February 11, 2016
E&O Update continued from page 4
Surprisingly, there have been E&O claims where the
customer moved to a new location, but never notified
the agency. When the vehicle was stolen, the carrier
denied the claim citing it was unaware of the new
garaging location of the vehicle. In addition, a child
taking a car to college raises significant insurance
issues. Once again, agents would be wise to educate
customers on these matters.
Uninsured/underinsured motorist (UM/UIM) coverage
also continues to be an issue. When quoting personal
auto, quote UM/UIM limits equal to the bodily injury
(BI) and property damage (PD) limits.
Personal Umbrella
How many of your personal lines customers have an
umbrella? An E&O claim can develop when a
customer is involved in a significant claim – involving
their homeowners, personal auto, watercraft or other
liability exposure – and faces a significant uninsured
exposure because they allege your error in not
providing this coverage. Find a way to offer an
umbrella policy to all customers that have the
necessary underlying limits. Most agency
management systems can identify customers that
don’t carry an umbrella.
There are also instances where the customer has an
umbrella but, for some reason, the underlying limits
are not at the proper level. Every year when the
umbrella policy renews, you must verify that policies
covered by the umbrella have the necessary
underlying limits. When they don’t and a gap occurs,
agents frequently face E&O litigation.
Documentation of Discussions
Agents can benefit greatly by educating their
customers on coverages the customers have and
coverages and limits they should have to avoid
uninsured gaps. Each file should reflect discussions
with clients and, where necessary and appropriate, the
agency should send the client a written
communication memorializing any discussions.
Without that documentation, courts have taken the
position, “if it’s not in the file, it didn’t happen.”
Project InVEST News:
Keefe Tech InVEST Job Shadow and Marketing Project Winners ...
Wayne Texeira of D. Francis Murphy Insurance Agency, Inc. volunteered for
Joseph P. Keefe Technical High School‘s Project InVEST program. Wayne
spoke to the group about marketing and then chose the winner of their
marketing project (creation of an agency name and logo). In the picture
from left to right are: Stacy Eusebio, Charline Carrasquillo, Wayne Texeira,
and Michael Taddeo.
InVEST is an educational program that provides free resources for high
school and college educators to implement insurance education and career training in the classroom. It is an
interactive and exciting program that provides a hands-on approach to creating insurance literate consumers
while also establishing marketable skills in students that they can take into the insurance industry or any
career of their choice.
MAIA NEEDS your help putting us in touch with local high schools that could benefit from this program.
If you have any contacts with your local schools, please contact Heather Kramer at MAIA by phone at
800.222.2699 or by email at [email protected]. Again this program is FREE to schools and is a way to
entice younger generations to think about insurance as a future career choice.