Records of MeetingDecember 3, 1996
Market Review Committee
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-
TUESDAY, DECEMBER 3, 1996 AT 10:00 A.M.
The following Members were present-
Mr. Daniel F. CrimminsMr. Charles Boynton*
Mr. David H. CochraneMr. James D. Doherty
Mr. Edward F. Downey, Jr.Mr. Francis D. Gibbons
Mr. Sumner D. GilmanMr. William J. Whitebone
Mr. Louis M. XifarasMs. Diane Fortino**
Mr. Robert V. McGowanMs. Joan Adams
Ms. Virginia E. Neill
*Substitute for Mr. Mark R. Silva
**Substitute for Mr. Jay Johnson
The following were also present-
Commonwealth Automobile Reinsurers-
Administrative Vice President & SecretaryMr. D. I. Jewell
Vice President & General CounselMr. J. J. Maher
Director of CommunicationsMr. P. W. Corsetti
R.P./Servicing Carrier CoordinatorMr. T. J. Costain
R.P./Servicing Carrier LiaisonMs. K. A. Dillon
Administrative AssistantMs. A. Francis
Peoples Service Insurance CompanyMs. Terry Anderson
Morrison, Mahoney & MillerMr. Barnett D. Ovrut
Safety Insurance CompanyMr. James O’Brien
Robert Harron Insurance AgencyMr. Robert Harron
Vong Insurance AgencyMr. Doc Va Vong
Blake & LoffMr. Timothy Loff
Ms. Karen Cacciatore
Commonwealth Mutual Insurance CompanyMr. Peter Collins
Ms. Susan Flaherty
AMICA Mutual Insurance CompanyMs. Cleo Anderson
Commercial Union Insurance CompanyMr. Kenneth Flodstrom
Soewardiman Insurance AgencyMr. Art Soewardiman
John R. Haddad Insurance AgencyMr. John R. Haddad
Fireman’s Fund Insurance CompanyMs. Joanne Borden
Chairman Doherty called the meeting to order at 10:00 A.M.
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96.1MINUTES OF PREVIOUS MEETING
A motion was made by Mr. Xifaras and seconded by Mr. Gilman to approve the Records of the Market Review Committee meeting of October 15, 1996.
The motion carried on a unanimous vote.
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96.2ROBERT J. HARRON/U.S.F.& G. INSURANCE COMPANY
Mr. Robert J. Harron appeared before the Market Review Committee at its October 15, 1996 meeting to appeal the termination of his commercial Exclusive Representative Producer appointment by the U.S.F.&G. Insurance Company for violating the terms of the agency contract in accordance with C.A.R. Rule 14, A, 2, e, 5, f. Mr. Harron maintains a voluntary relationship with the Middlesex Insurance Company for private passenger automobile. At that meeting, the Committee voted to continue the matter for 30 days at which time all pertinent parties to the appeal were to be present to respond to questions, and report on updated actions, with the termination being suspended during the continuation period.
Mr. Welsh, representing U.S.F.&G., stated that the $13,731.77 returned by U.S.F.&G. to Mr. Harron has since been forwarded to Amgro Premium Finance Company. The finance company has issued a release to U.S.F.&G. and the account is clear. Referring to further account balances owed U.S.F.&G. of approximately $2,600, Mr. Welsh indicated that prior to the meeting, he met with Mr. Harron and they reached an agreement, on terms for payment of the outstanding amount, to the satisfaction of both parties.
Mr. Doherty asked if the company had any objections to the agency continuing their ERP appointment.
Mr. Welsh suggested that a six month probation period be instituted to ensure that all accounting irregularities and policy requests are corrected. He suggested U.S.F.&G. report back to the Market Review Committee at the end of that period.
Mr. McGowan made a motion to reinstate the agency’s ERP appointment in full and place the agency on probation for six months and directed U.S.F.&G. to report back to the Committee following the probationary period relative to Mr. Harron’s compliance with C.A.R. Rules. The motion was seconded by Mr. Gilman.
The motion carried on a unanimous vote.
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96.3DOC VA VONG / ARBELLA MUTUAL INSURANCE COMPANY
Mr. Timothy R. Loff, attorney representing Mr. Doc Va Vong, requested a hearing to appeal the termination of the Vong Insurance Agency’s Exclusive Representative Producer appointment by the Arbella Mutual Insurance Company for violation of C.A.R. Rule 14, A, 2, e, 5, f & h, “has not been involved in a material and substantial breach of a contract between a Servicing Carrier and a Producer” and “agrees to comply with the provisions of the Plan of Op-
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96.3DOC VA VONG/ARBELLA MUTUAL INSURANCE COMPANY(cont.)
eration, the Rules of Operation, the Manual of Administrative Procedures, the contract between the Exclusive Representative Producer and the Servicing Carrier, and the applicable regulations of the Division of Insurance” and C.A.R. Rule 13, B, 4, “Reporting Requirements.” The agency was appointed in December 1987 and currently maintains a book of business of 498 private passenger vehicles and $19,590 in commercial premium.
Mr. Timothy R. Loff, referencing documentation from Arbella explaining their absence from the hearing, stated that he had spoken with Ms. Susan McCann, of Arbella, last week about the appeal. He indicated that they had discussed the various problems involved in the termination of the agency. Mr. Loff suggested that it would be best to agree on an appropriate probation period. Ms. McCann’s response was that she would respond to the suggestion only after she cleared it with her marketing manager, Mr. Al Sarnessian. Subsequent phone calls indicated that she had not yet discussed the matter with Mr. Sarnessian. Mr. Loff requested the appeal be granted by default stating Arbella reserved the right to terminate in the future if cause warranted.
Mr. Gilman made a motion to hear the appeal without Arbella’s presence. Expressing concern about the fraud and misuse of stamps referenced in Arbella’s letter of termination, Mr. McGowan seconded the motion.
The motion carried on a vote of 10-2, with the Messrs. Whitebone and Crimmins opposed.
Mr. Loff stated that Mr. Vong’s agency was started in 1987, is located in Chinatown, and services mainly Asian clients, assisting with the language barrier between insured and company. The agency writes approximately 500 vehicles, is a sole proprietorship, and has had no prior problems with his carrier. He allegedly violated the agency contract by accepting substantial brokered business, Mr. Loff stated referencing Paragraph 12 of the agency contract which states, “the producer shall have no authority to appoint sub-agents or to accept business from an insurance broker except upon specific written authority.” Continuing, he said that Mr. Vong had been contacted by another Asian representative whose brother was licensed and was interested in producing for Mr. Vong. Mr. Vong agreed to provide the sub producer a market through his Servicing Carrier. Subsequently, Mr. Vong contacted Ms. McCann and was given a sub-code. Ms. McCann’s position was she understood the producer would be operating from the Vong Agency as a direct employee of Mr. Vong. Mr. Loff stated that Mr. Vong denies this representation, indicating that individual was considered as a producer for and not directly employed by the agency. He assumed that a producer was acceptable and he began to write the business. However, the applications by the producer came directly from the Handel Insurance
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96.3DOC VA VONG/ARBELLA MUTUAL INSURANCE CO.(cont.)
Agency in Revere. The producer that Mr. Vong hired was actually a brother of the owner of Handel Insurance Agency which was trying to find an Arbella agent to write their business. When Ms. McCann discovered Handel Insurance was involved, she contacted Mr. Vong and advised the brokerage arrangement was not acceptable and requested that the realtionship be terminated and to rescind the sub-code back to its inception date. Mr. Vong assumed this meant that he could no longer use the sub-code, not that it would include terminating the issued policies. Additionally, Handel had replicated the Arbella stamp and was submitting applications using the duplicate stamp. Mr. Loff provided an affidavit from Mr. Vong stating that he did not have an additional Arbella stamp and that he had returned his stamp to the company upon issuance of the termination notice. Ms. McCann had demanded the stamps from both the Vong and Handel Agencies. The Handel Agency stamp was returned to Arbella only after the stamping of 45 policies. Arbella felt the need to terminate the relationship based on fraud and a substantial violation of the contract by writing brokered business. Finally, Mr. Loff noted that there are no money problems involved.
Based on there being no money issues and the problem having been a misunderstanding of the brokerage agreement in the Arbella contract, Mr. Gilman made a motion to uphold the appeal with a six month probationary with a possible review if necessary. Noting his satisfaction with the affidavit provided, Mr. McGowan duly seconded the motion.
The motion carried 10-2, with the Messrs. Crimmins and Whitebone opposed.
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96.4ART SOEWARDIMAN / PEOPLES SERVICE INSURANCE COMPANY
Mr. Art Soewardiman requested a hearing to appeal the termination of his agency’s Exclusive Representative Producer appointment by the Peoples Service Insurance Company effective October 15, 1996 for violation of Rule 14, A, 2, e, 5, b, c, f, g & h, “Exclusive Representative Producer Eligibility Requirements,” Rule 14, B, 1, a, b, c, f, h, i & j, “Ongoing Exclusive Representative Producer Requirements”, and Rule 15, “Premium Collection Standards.” The agency was appointed in April 1996 and currently maintains a book of business of 120 private passenger vehicles and $1,412 in commercial premium.
Mr. Daniel Crimmins recused himself as the agent is assigned to Great American Insurance Company which maintains a vendor relationship with Safety Insurance Company.
Mr. Art Soewardiman referenced his appeal letter of November 7, 1996 citing reasons he felt his agency should not have been terminated. Reasons were 1) Peoples Service terminated
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96.4ART SOEWARDIMAN/PEOPLES SERVICE INSURANCE COMPANY(cont.)
his ERP appointment without warning, 2) PSI never gave him any evaluation on his performance as a broker, 3) PSI never gave him any classes on company policies on writing business with them, and 4) felt that reasons for termination were fabricated by PSI, which have caused hardship for him and his family. He proceeded to read his letter with explanations to his perceived accusations by PSI of Rule violations. Regarding regular business hours not being maintained, Mr. Soewardiman indicated he had to left the country abruptly due to his father passing away. In response to Rule violations, he stated that he has been sending complete applications with payment in a timely manner to the company.
Mr. Barnett Ovrut, attorney representing Peoples Service Insurance Company, distributed additional documentation to the Committee. He stated that the termination of the agency was due to consistent, persistent and ongoing violations of C.A.R. Rules and various provisions of PSI’s brokerage agreement with the agency.
Ms. Terry Anderson, of Peoples Service, stated that Mr. Soewardiman was provided all necessary materials pertinent to the assignment including company guidelines and C.A.R. Rules and instructions how to use them when he signed the PSI contract. She indicated that there had been no discrimination, only documentation of problems as would be with any agent, voluntary or involuntary. Ms. Anderson cited further violations which occurred after the termination including an incident in which Mr. Soewardiman submitted an RMV-1 stamped with Metropolitan, indicating that either the agent still has Metropolitan property or their stamp in his office. In conversations with Mr. Soewardiman on October 29, he indicated he had just returned to the country the previous night. However, PSI received an application dated and signed on October 25. The PSI marketing representative picked up the stamp from the agency on October 30 and the only application left was pre-signed. The company has reason to believe that the agency is operating from six other locations from information obtained from their SIU, PSI field representatives, calls to the agency, and policyholders. She stated that Mr. Soewardiman refers to this as networking or his center of influence. Company representatives visited a Lynn location operating as the Universal Group. Employees at the location indicated that Mr. Soewardiman is the office manager and they did sell PSI and Metropolitan Insurance. Other agencies have called PSI requesting additional pre-stamped applications and some have stamps in their office. Only 15% of the business written by the Soewardiman Agency is from the Allston area. Additional violations include, not collecting earned premium and the deposit, not ordering endorsements properly, and timely submission of applications completed in full. The company has assisted the agency’s customers due to the agent being unavailable.
Based on the substantial number of violations, Mr. McGowan made a motion to deny the appeal. The motion was seconded by Mr. Xifaras.
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96.4ART SOEWARDIMAN/PEOPLES SERVICE INS. CO.(cont.)
The motion carried on a unanimous vote, with Mr. Crimmins recused.
Mr. Maher advised the appellant of his rights pursuant to Rule 20 of the C.A.R. Rules of Operation.
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96.5JOHN R. HADDAD INSURANCE AGENCY
Mr. John R. Haddad requested a hearing to appeal the rescission of his agency’s Exclusive Representative Producer appointments to the Commonwealth Mutual Insurance Company (private passenger), the Commercial Union Insurance Company (commercial), and the Empire Insurance Company (Limousine/Taxi) in accordance with C.A.R. Rule 14, A, 2, e, 5, c, requiring that an Exclusive Representative Producer “will maintain regular business hours.” Mr. Haddad was appointed as an Exclusive Representative Producer after losing his last voluntary automobile market. Commonwealth Mutual and Commercial Union sent correspondence citing their reasons for not contracting and returning the agency appointments to C.A.R.
Mr. Haddad stated that in February 1989, he received an ERP appointment and was assigned to Commercial Union. In January 1991, he acquired a voluntary contract with Norfolk & Dedham Mutual Insurance Company. In 1994 an incident occurred causing health problems over the last two years and during that time he has been undergoing medical treatment. In the meantime, his wife has been handling the day-to-day agency operations through his direction and the business has doubled. Recently, Norfolk & Dedham canceled the agency contract putting his agency out of business and prompting Mr. Haddad to apply to C.A.R. for an ERP appointment. He stated he had made C.A.R. aware of his condition at the time of application. Empire Insurance Company has made the requested apointment with the agency. Commonwealth Mutual met with the agent in early November and said that they would be in touch for private passenger insurance. Mr. Flodstrom, of Commercial Union, made an appointment with Mr. Haddad which had to be cancelled due to medical emergencies involving Mr. Haddad’s wife. Ms. Flaherty, of Commonwealth Mutual, told Mr. Haddad of her inability to reach him which constituted not maintaining regular business hours. Mr. Haddad stated that rehabilitation is making it possible for him to spend a few days a week at the office and he is available 24 hours a day for his insureds. Because of this, he stated that he should not be denied an appointment due to his disability.
Ms. Susan Flaherty read her letter to C.A.R. dated November 21, 1996 which cited the reason Commonwealth Mutual could not contract the agency due to the agent not maintaining regular business hours.
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96.5JOHN R. HADDAD INSURANCE AGENCY(cont.)
Mr. Gilman asked if Mr. Haddad had plans to maintain regular business hours.
Mr. Haddad said he does maintain regular business hours as he is available 24 hours a day.
Mr. Gilman made a motion to uphold the appeal and directed the involved Servicing Carriers to complete the assignment immediately. The motion was seconded by Mr. McGowan.
The motion carried on a unanimous vote.
Mr. Maher advised the parties of their rights pursuant to Rule 20 of the C.A.R. Rules of Operation.
There being no further business, Mr. Gilman made a motion to adjourn which was seconded by Mr. Xifaras.
The motion carried on a unanimous vote.
The meeting adjourned at 11:30 A.M.
KATHERINE A. DILLON
Representative Producer
Servicing Carrier Liaison
Boston, December 13, 1996
Note:These records have not been approved. These will be considered for approval at the next meeting of the Market Review Committee.
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