<vt=9>
<pt=2>
RECORDS OF MEETING
GOVERNING COMMITTEE
A Meeting of the Governing Committee of the Commonwealth Automobile Reinsurers was held at the offices of C.A.R, on -
WEDNESDAY, JUNE 19, 1991 AT 10:00 A.M.
The following Members were present -
Mr. Craig M. BradleyMr. James D. Doherty
Mr. Richard W. BrewerMr. Sumner D. Gilman
Mr. Donald O. BurnsMr. David J. Lane
Mr. J. Barry MayMr. Robert V. McGowan
Mr. Arthur J. Remillard, Jr.Mr. George Peters
Mr. Edwin J. RinehimerMr. Louis M. Xifaras
Mr. James M. Stone
There were also present -
Commonwealth Automobile Reinsurers
PresidentMr. R. M. LaFontaine
Executive Vice President & TreasurerMr. M. J. Trovato
Vice President and General CounselMr. J. J. Maher, Jr.
Vice President and Chief Information OfficerMr. P. P. Ryan
Vice President-Statistical and ActuarialMs. M. L. Corbett
Vice President-ClaimsMs. V. B. Gedziun
Vice President-AuditingMr. F. C. Underhill
Adm. Assistant for Industry RelationsMr. G. F. Monahan
Director of Financial ServicesMr. J. V. Kelly
Administrative ManagerMr. J. D. Metcalfe
Statistical ManagerMs. M. S. Adgate
Data Operations ManagerMs. W. S. Thompson
Senior Actuarial AnalystMr. R. N. Nevins
Market Information CoordinatorMr. R. G. Iorio
Actuarial AnalystMs. J. E. Callahan
Adm. Assistant to Administrative Vice PresidentMs. B. A. Seminatore
Massachusetts Division of InsuranceMr. D. R. Judson
Hale and DorrMr. R. W. Mahoney
Amica Mutual Insurance CompanyMr. J. J. Wolstencroft, Jr.
Arbella Mutual Insurance CompanyMr. W. C. Thurston
Chubb Insurance GroupMs. Regina Cancellare
Crum & Forster Commercial InsuranceMr. Edward Coloney
CU Homeland Insurance CompanyMr. G. E. Davis
E. F. Bishop AgencyMr. E. F. Bishop
Goodwin, Proctor and HoarMs. M. J. Dee
The Hanover Insurance CompanyMr. Wayne Keller
Independent Insurance Agts. of MassachusettsMr. Thomas Petty
I.S.I. Systems, Inc.Mr. D. E. Devers
Mr. P. D. Luongo
Mr. B. F. Powers
Ms. D. B. Sparrow
John Hancock Property & Casualty Ins. Co.Mr. Jerry Heberlein
Mr. A. P. Johnson
Liberty Mutual Insurance CompanyMr. F. E. Wilde
Metropolitan Property & Casualty Ins. Co.Mr. Joseph Cofield
Morrison, Mahoney & MillerMr. J. J. Moran, Jr.
National Grange Mutual Insurance CompanyMr. J. R. Conlon
Neill & Neill Insurance AgencyMs. V. E. Neill
New Hampshire Insurance GroupMs. Anne Koeck
Mr. G. P. Lagos
Norfolk & Dedham Mutual Fire Insurance Co.Mr. T. J. DelGrande
Pilgrim Insurance CompanyMr. J. W. Delano
Mr. Vincent Nieroda
Plymouth Rock Assurance CorporationMr. G. H. Arnold
Mr. Edward Ford
Policy Management Systems CorporationMr. Thomas Bigelow
Ms. P. A. Duffy
Professional Insurance Agents of New EnglandMr. D. J. Foley, Jr.
Royal Insurance CompanyMr. J. C. Fleming
Safety Insurance CompanyMr. D. F. Brussard
TillinghastMr. T. L. Ghezzi
Travelers Insurance CompanyMr. Timothy Sterritt
Mr. Richard Welch
United States Fidelity and Guaranty CompanyMs. S. A. Millen
Worcester Insurance CompanyMs. B. L. Rankin
Chairman McGowan called the meeting to order at 10:00 A.M. and announced that the Governing Committee Meeting scheduled for Wednesday, August21,1991 hasbeen cancelled.
Continuing, Chairman McGowan noted that the private passenger cession rate for 1991 through June 1, 1991 was 27.1%, as compared to December 31, 1990, which was approximately 45%.
91.1MINUTES OF PREVIOUS MEETINGS
A motion was made by Mr. James Doherty and duly seconded by Mr.Richard Brewer to accept the Records of the Governing Committee Meetings of April 24, 1991 and May 15, 1991.
The motion passed on a unanimous vote.
91.5COUNSEL REPORT
Mr. Joseph J. Maher, Jr., Vice President and General Counsel, distributed a draft of an amendment to Rule 13, Servicing Carrier Requirements. Mr. Maher advised that the amendment would allow a Servicing Carrier to make an election as to whether it intends to cede 100% of the business written through an Exclusive Representative Producer or whether it wishes to voluntarily underwrite that business according to the provisions of Rule13, Section B, 4, c. Mr. Maher advised that the amendment further provides that a Servicing Carrier may make an election separately for private passenger or all other lines and reserves to the Servicing Carrier an opportunity to make a subsequent election for the remaining line of business without waiting for the passage of one year from when it made the initial election.
91.5COUNSEL REPORT (Cont.)
A motion was made by Mr. Edwin Rinehimer and duly seconded by Mr.James Doherty to adopt the amendment to Rule 13, Servicing Carrier Requirements, and to direct Staff to submit the proposed amendment to the Commissioner of Insurance for approval.
The motion passed on a unanimous vote.
Continuing, Mr. Maher advised that in a number of circumstances where there are negotiations or litigation pending with companies that are seeking or which have withdrawn from the Massachusetts motor vehicle market, C.A.R. has tried to manage the cash flow that would arise from those companies' fulfillment of their financial obligation until such time as the litigation is concluded or withdrawal negotiations have been completed. Mr.Maher advised that one case still pending in the litigation is Peerless Insurance Company. C.A.R. has escrowed the positive cash flow owed to Peerless and netted that against the cash flow owed to C.A.R. on the quarters subsequent to its requested withdrawal date. Mr. Maher advised that as of this quarter there would not be sufficient monies to cover the cash flow into C.A.R.
Mr. John Kelly, Director of Financial Services, advised that the balances from the quarter ending March 31, 1991, which will be distributed in mid-July, C.A.R. will have a balance due from Peerless Insurance Company in the amount of $1,003,357.88. In addition to that, C.A.R. will have a balance from several insolvent companies totaling $66,382. Mr. Kelly advised that in order to fund these balances, C.A.R. Staff requests the Governing Committee's authorization to perform a special assessment in the amount of $1,069,739.88.
At Mr. Maher's suggestion, the Governing Committee agreed that further discussion relative to the status of Peerless Insurance Company would be in Executive Session, due to pending litigation.
Continuing, Mr. Maher advised that C.A.R. will be appearing this afternoon before the magistrate in the Federal District Court to present arguments in regard to the Allstate Insurance Company. Mr. Maher advised that there have been two new cases decided in the Federal Courts relative to the legal positions taken by both parties. Mr. Maher suggested that this matter would be appropriate for the Governing Committee to consider in Executive Session.
Mr. Maher reported that negotiations have been proceeding with the United States Fidelity and Guaranty Company in regard to its intent to withdraw from the marketplace. Mr. Maher suggested that due to pending litigation, it would be appropriate for the Governing Committee to consider this matter in Executive Session.
91.5COUNSEL REPORT (Cont.)
Continuing, Mr. Maher advised that in regard to John Hancock Property and Casualty Insurance Company, there have been negotiations relative to the buy-out of John Hancock from the commercial lines market. Mr.Maher suggested due to elements pertinent to litigation, it would be appropriate for the Governing Committee to consider this matter in Executive Session.
In regard to the New Hampshire Insurance Group and Arbella Mutual Insurance Company's proposal to transfer business from the New Hampshire to Arbella, Mr. Maher suggested that due to direct correlation to other pending litigation, it would be appropriate for the Governing Committee to consider this matter in Executive Session.
Continuing, Mr. Maher reported that there was a hearing last week in Superior Court before Judge White in regard to Utica Mutual Insurance Company relative to the grossing-up provisions of the recent changes to Rule11. Mr. Maher advised that the judge took oral argument, but indicated a need to further review information presented. Mr. Maher anticipates a subsequent hearing to address questions that will arise from the judge's review and research in that matter.
Mr. Maher reported that a meeting is scheduled for June 24, 1991, with attorneys from Crum and Forster, relative to the negotiations for its departure from the market.
The Fireman's Fund Insurance Companies has submitted a check to C.A.R. representing its fee for Inactive C.A.R. Membership. Mr. Maher suggested that relative to ramifications this might have to prior litigation, it would be appropriate for the Governing Committee to consider this matter in Executive Session.
Continuing, Mr. Maher noted that the Governing Committee, at its last meeting, considered and adopted amendments to Rule 14, Representative Producer and Exclusive Representative Producer Requirements. The Committee, during its deliberations, raised questions relative to commissions and reduction of 10% per annum for three years in commissions paid to an Exclusive Representative Producer who failed to make a valid attempt to obtain a voluntary market. Mr. Maher advised that the Rule refers to commissions and the statute provides that a Servicing Carrier must pay all commissions allowed in the rates, within a 10% up or down deviation to individual producers, provided all monies allowed in the rate decision for commissions are paid out. Mr. Maher reported that C.A.R.'s interpretation of the statutes was that those monies could not be taken from the producers in the form of a fee to C.A.R., but that the Servicing Carrier would have to distribute those savings among the other producers with which it writes business.
91.5COUNSEL REPORT (Cont.)
Mr. David Lane noted that the Professional Insurance Agents had submitted a letter regarding Rule 14, which should be considered. After discussion, it was the consensus of the Governing Committee to consider Rule14 under other business.
In conclusion, Mr. Maher reported that the Division of Insurance has notified C.A.R. that the Motors Insurance Company wished to withdraw from writing private passenger in the Massachusetts marketplace. Mr. Maher suggested that discussion in regard to the posture that the Governing Committee would take in this matter would be appropriate for consideration in Executive Session.
91.6MARKET REVIEW COMMITTEE
Mr. James Doherty advised that an oral report of the Market Review Committee Meeting of May 2, 1991 was given at the Governing Committee Meeting of May 15, 1991. The written Records being available for Governing Committee consideration and review, a motion was made by Mr. Richard Brewer and duly seconded by Mr. Sumner Gilman to accept the Records of the Market Review Committee Meeting of May 2, 1991.
The motion passed on a unanimous vote.
Continuing, Mr. Doherty advised that the Market Review Committee, at its Meeting of May 17, 1991, considered an appeal by Ms. Zhanna Voronov d/b/a the Omega Insurance Agency in regard to the termination of her Exclusive Representative Producer appointment by the Royal Insurance Company for "failure to report all coverages bound and all registrations or titles certified to the Servicing Carrier within two working days." Following considerable discussion, the Market Review Committee unanimously voted to deny the termination by Royal Insurance Company and to uphold Ms.Voronov's appeal.
A motion was made by Mr. Richard Brewer and duly seconded by Mr. Louis Xifaras to receive the verbal report of the Market Review Committee Meeting of May 17, 1991.
The motion passed on a unanimous vote.
A motion was made by Mr. Louis Xifaras and duly seconded by Mr.Richard Brewer to accept the written Records of the Market Review Committee Meeting of May 17, 1991.
The motion passed on a unanimous vote.
91.7CLAIMS ADVISORY COMMITTEE
Mr. Joseph Conlon, reporting on the Claims Advisory Committee Meeting of May 29, 1991, advised that the Chairman of the Educational Subcommittee provided the Committee with a status of the Bodily Injury Cost Containment Seminars that were held on May 21, 1991, May 22, 1991 and May 23, 1991. Mr. Conlon reported that over 400 claims personnel attended these seminars.
Continuing, Mr. Conlon advised that the Committee considered the Salvage Title Law that went into effect on May 1, 1991, which requires that carriers obtain a salvage title on all total loss vehicles. Staff advised the Claims Advisory Committee that reporting the $50 fee as a salvage expense requires a change to C.A.R.'s Statistical Plan. C.A.R.'s Operations Committee is recommending that the appropriate changes be made to the Statistical Plan. Mr. Conlon reported that the Claims Advisory Committee is recommending, for Governing Committee approval, that the Operations Committee recommendation be approved as expeditiously as possible as the dollar impact of the Salvage Title Law is anticipated to be $7 million in 1991.
A motion was made by Mr. James Doherty and duly seconded by Mr. George Peters to adopt the recommendation of the Claims Advisory Committee.
The motion passed on a unanimous vote.
In conclusion, Mr. Conlon reported that the Claims Advisory Committee considered the Quantification Subcommittee's efforts to develop a uniform method for companies to quantify the bodily injury savings realized through their investigative efforts on fraudulent claims. Mr. Conlon advised that the Claims Advisory Committee is recommending, for Governing Committee approval, that savings should be calculated from the claims file reserve at the time of payment on PIP and bodily injury claims.
A motion was made by Mr. James Doherty and duly seconded by Mr.Richard Brewer to adopt the recommendation of the Claims Advisory Committee.
The motion passed on a unanimous vote.
A motion was made by Mr. James Doherty and duly seconded by Mr. Barry May to receive the verbal report of the Claims Advisory Committee Meeting of May 29, 1991.
The motion passed on a unanimous vote.
91.8OPERATIONS COMMITTEE
Mr. John Kelly, Director of Financial Services, reporting on the Operations Committee Meeting of May 23, 1991, advised that the Committee considered an appeal by Metropolitan Property and Casualty Insurance Company for cession backdates to the effective dates on 973 new and renewal business cessions. On November 27, 1990, Metropolitan attempted to transmit the 973 cessions via telecommunications. Mr. Kelly advised that due to Metropolitan's operator error or system error, the transmission was never completed. Metropolitan based its appeal on the fact that C.A.R. received the premium and loss data for these policies in a timely manner, which shows the company was not attempting to manipulate the cession rules and procedures. Mr. Kelly reported that the Operations Committee denied Metropolitan's appeal, with nine voting in favor and three opposed. Mr.Kelly noted that this decision was based on the fact that the problem was within the control of Metropolitan insofar as the company had no internal checks for verifying its cession submissions at the time of the error transmission and did not follow procedures properly.
Continuing, Mr. Kelly reported that the Operations Committee considered an appeal by the Norfolk and Dedham Mutual Fire Insurance Company for 546 transaction 5 cession backdates for January, February and March, 1991, effective date policies. Mr. Kelly advised that Norfolk and Dedham inadvertently changed one line in its programming code that identified which policies are ceded and which policies are retained voluntarily. This change resulted in a nongeneration of thirty-five transaction 5 cessions. The Operations Committee denied Norfolk and Dedham's appeal, with ten voting in favor, one abstention and one opposed. Mr. Kelly noted that the decision was based on the fact that the problem was within the control of Norfolk and Dedham and that Staff acted properly in denying the appeal.
The Operations Committee considered an appeal by Cigna Insurance Company in regard to an effective year 1989 Excessive Noncritical Error penalty of $10,350 for error code 2, C.A.R. I.D. Inconsistencies. Mr.Kelly advised that Cigna based its appeal on the fact that the penalty amount is unreasonable in that the amount is excessive relative to any financial or other impact that may result from its error policies over the tolerance level. The Operations Committee voted ten in favor, with two abstentions, to deny Cigna's appeal. Mr. Kelly noted that this decision was based on the fact that the problem was within the control of Cigna and that Staff acted properly in denying the appeal.
Continuing, Mr. Kelly advised that the Operations Committee considered an appeal by Motors Insurance Company for a reporting extension for its April through August 1991 effective data transactions. Due to a problem with its new Commercial Multi-Peril processing computer program, Motors is unable to update its systems in order to meet the appropriate reporting deadlines published in the Call Schedule. Therefore, the company requested an extension until the September 1991 monthly accounting/statistical shipment. The Operations Committee voted eleven in favor, with one abstention,
91.8OPERATIONS COMMITTEE (Cont.)
to deny Motors' appeal. Mr. Kelly noted that this decision was based on the fact that the problem was within the control of the company.
The Operations Committee unanimously voted, for Governing Committee approval, to adopt the Statistical Subcommittee's recommendation relative to a 1992 Statistical Plan update to add a new class code, which identifies commercial risks engaged in the petroleum business.
A motion was made by Mr. James Doherty and duly seconded by Mr.Richard Brewer to adopt the recommendation of the Operations Committee.
The motion passed on a unanimous vote.
Continuing, Mr. Kelly advised that the Operations Committee unanimously voted, for Governing Committee approval, to adopt two updates to the 1991 Statistical Plan: (1) to modify the decision table applicable to Motorcycle Rider Training Discount program for policies effective July1, 1991 and subsequent and optionally for policies effective January1, 1991-June 30, 1991 and (2) require insurance companies to statistically report fees, which have been incurred as a result of the Salvage Title Law, as a salvage recovery loss. Mr. Kelly noted that this is transaction type 25 in the Massachusetts Statistical Plans.
A motion was made by Mr. Richard Brewer and duly seconded by Mr. James Doherty to adopt the recommendations of the Operations Committee.
The motion passed on a unanimous vote.
In conclusion, Mr. Kelly advised that the Operations Committee unanimously voted, for Governing Committee approval, to adopt an update to the Manual of Administrative Procedures relative to Chapter II, Cession Rules and Procedures. Mr. Kelly advised that this update allows companies to use printouts from the Registry of Motor Vehicles as valid documentation for the CA50l0-Randomly Requested Flat-Cancellation Documentation Listing when an insured changes carriers. The Operations Committee also voted unanimously, for Governing Committee approval, to adopt an update to the Manual of Administrative Procedures relative to Chapter III, Premium. Mr.Kelly advised that wording has been added to detail the reporting procedures for the mid-term cancellation of a a policy from C.A.R.
A motion was made by Mr. Craig Bradley and duly seconded by Mr.Richard Brewer to adopt the recommendations of the Operations Committee.
The motion passed on a unanimous vote.
91.8OPERATIONS COMMITTEE (Cont.)
A motion was made by Mr. James Doherty and duly seconded by Mr. Barry May to receive the verbal report of the Operations Committee Meeting of May23, 1991.