Records of Meeting - 15 - September 17, 1997
Governing Committee
RECORDS OF MEETING
GOVERNING COMMITTEE
A meeting of the Governing Committee of the Commonwealth Automobile Reinsurers was held at the offices of CAR, 100 Summer Street, Boston on-
WEDNESDAY, SEPTEMBER 17, 1997 AT 10:00 A.M.
The following Members were present -
*Ms. Betsy Branagan Ms. Nancy Z. Bender
Mr. Andrew J. Carpentier Mr. Charles I. Boynton, III
Mr. Joseph J. Giblin Mr. Edward F. Downey, Jr.
Mr. Robert C. Gowdy Mr. Sumner D. Gilman
Mr. Thomas K. Randall **Mr. Daniel J. Foley, Jr.
Mr. Arthur J. Remillard, Jr. Ms. Nanci S. Peters
Mr. Edwin J. Rinehimer
*Ms. Betsy Branagan substituted for Mr. Richard Brewer
**Mr. Daniel Foley substituted for Mr. William Hofmann
There were also present -
Commonwealth Automobile Reinsurers
President Mr. R. M. LaFontaine
Executive Vice President and Treasurer Mr. M. J. Trovato
Administrative Vice President and Secretary Mr. D. I. Jewell
Vice President and General Counsel Mr. J. J. Maher, Jr.
Vice President and Chief Information Officer Mr. Paul Ryan
Vice President-Human Resources Ms. Beatrice Fuller
Vice President-Auditing Mr. Frank Underhill
Vice President-Claims Ms. Valeri Gedziun
Administrative Manager Mr. J. D. Metcalfe
Director of Communications Mr. Paul Corsetti
Commonwealth Automobile Reinsurers (continued)
Servicing Carrier Coordinator Mr. Timothy Costain
Actuarial Manager Ms. Sharon Schorge
Audit Manager Mr. Donald Bergamasco
Data Operations Manager Ms. Wendy Browne
Financial Manager Ms. Susan Basilesco
Statistical Manager Ms. Natalie Hubley
Underwriting Manager Ms. Pamela Wallace
Statistical Department Mr. Jason Burns
Statistical Department Ms. Kristie Burns
Statistical Department Mr. Randall Scott
Statistical Department Ms. Pamela Davis
Administrative Assistant Ms. Nancy Sideri
Massachusetts Division of Insurance Mr. Joseph S. Mulkern
Hale and Dorr Robert W. Mahoney, Esq.
AMICA Mutual Insurance Company Ms. Cleo Anderson
Arbella Mutual Insurance Company Ms. Mimi Whitebone
Berkshire Mutual Insurance Company Mr. James Fleming
Commerce Insurance Company Mr. David Cochrane
Commercial Union Insurance Company Mr. Robert Cordner
Insurance Times Mr. Chris Mahoney
ISI Systems Mr. Al Bonfiglio
Law Offices of Finnegan and Underwood Mr. Richard J. Underwood
Law Offices of Gallagher & Gallagher Owen Gallagher, Esq.
Law Offices of McDermott, Will and Emery Ms. Linda Bentley
Law Offices of Morrison, Mahoney and Miller James J. Moran, Jr., Esq.
Law Offices of Peter T. Robertson Peter T. Robertson, Esq.
Metropolitan Property & Casualty Co. Mr. Joseph Cofield
Pilgrim Insurance Company Mr. John Delano
Mr. Barry Tagen
Plymouth Rock Insurance Company Mr. Geoffrey Arnold
Ms. Paula Gold
Mr. Bert LaChance
Policy Management Systems Corp. Mr. Steven Pace
Mr. R. W. Linehan
Premier Insurance Company Ms. Susan Scott
Ms. Kathleen Devericks
Robert Plan, Inc. Mr. John Lusardi
Safety Insurance Company Mr. David Brussard
The Standard Mr. Michael Dube
Tillinghast Mr. Joseph Bonanno
Governing Committee Chairman Gilman called the meeting to order at 10:10 a.m. and announced the substitution of Ms. Betsy Branagan for Mr. Richard Brewer and Mr. Daniel Foley for Mr. William Hofmann. He also distributed to the Committee the Governing Committee meeting schedule for calendar year 1998 (see attached).
97.1 MINUTES OF PREVIOUS MEETING
A motion was made by Mr. Thomas Randall and duly seconded by Mr. Edward Downey to accept the Records of the Governing Committee meeting of June 18, 1997, and the Records of the Special Governing Committee meeting of July 9, 1997.
The motion passed on a unanimous vote.
97.5 COUNSEL'S REPORT
Mr. Joseph Maher, Vice President and General Counsel advised that amendments to Rule 14, Dual Status Exclusive Representative Producers, were filed with the Commissioner of Insurance on June 23, 1997. The Commissioner of Insurance advised on July 22, 1997 that she was disapproving the proposed amendments because of her concern with the time frames the changes are to take effect and the impact on inner city insureds. Mr. Maher noted these issues will be further discussed during the Market Review Committee’s report.
Continuing, Mr. Maher reported that the Commissioner of Insurance has indicated that she will not act on the proposed suspension of Rule 11, B, 1, 2 - Minimum Allowable Exposure, until such time that she has an opportunity to review and investigate the issue. A report of Rule 11, B, 1, 2, will be presented as a separate agenda item.
97.5 COUNSEL'S REPORT (continued)
Mr. Maher advised that the Home Insurance Company had entered into a voluntary liquidation status. As this affects their obligations to CAR, it would be appropriate to discuss in Executive Session, CAR’s position relating to the anticipation of litigation and the strategies used therein.
Continuing, Mr. Maher reported on the status of the 1998 Commercial Rate Filing which is now pending at the Division of Insurance. Mr. Maher indicated that some issues have arisen that will have an affect on CAR’s litigation strategies, and recommended the discussion be conducted in Executive Session.
Concluding his report, Mr. Maher reported on pending litigation regarding requests made to CAR pursuant to the Public Records Law. Mr. Maher indicated that where the matter is in litigation, it is appropriate for Executive Session discussion.
97.6 MARKET REVIEW COMMITTEE
Mr. Boynton, reporting on the Market Review Committee meeting of July 9, 1997, informed the Committee that the Market Review Committee had previously been advised that progress was being made toward resolution of complaints by certain ERP’s assigned to Peoples Service Insurance Company regarding its performance as a CAR Servicing Carrier. The matter had been continued several times prior to the July 9, 1997 Market Review Committee meeting. Attorneys representing both parties reported that while minor issues remain unresolved, most of the problems identified have been solved. The Committee voted to remove the item from its agenda, without prejudice, toward future action which might be brought by either party.
Continuing, Mr. Boynton reported that at its meeting of December 3, 1996, the Market Review Committee voted to reinstate the ERP appointment of the Doc Va Vong Insurance Agency on six months probation insofar as the carrier was not represented at the hearing, and directed Arbella Mutual Insurance Company report back to the Committee on the agency’s compliance with CAR Rules. Following Arbella’s report that the agency has continued its pattern of noncompliance with CAR Rules and the terms of its contract with the company, the Committee voted to deny the agency’s appeal and reinstate the appointment termination.
Mr. Boynton advised that the Bamford Insurance Agency appealed the termination of its commercial ERP appointment by the Arbella Mutual Insurance Company for “failure to develop and maintain a minimum book of business.” The agency is voluntarily contracted with the Premier Insurance Company for private passenger business and currently maintains a book of business of 222 vehicles. Based on the agency’s efforts to increase its book of business, the Committee granted a one year extension.
Continuing, Mr. Boynton reported that the Turin Insurance Agency appealed the termination of its ERP appointment for “failure to conduct all monetary transactions with the insured and Servicing Carrier as required by the Rules of Operation and the Exclusive Representative Producer contract.” Violations involved outstanding unearned commissions due the Amica Mutual Insurance Company. Based on a report by attorneys for both parties that an agreement for repayment of approximately $5,800 by the agency had been reached, the Committee voted to uphold the appeal and approved reinstatement of the agency’s ERP appointments.
97.6 MARKET REVIEW COMMITTEE (continued)
Mr. Boynton advised that the Roseann M. Preston Insurance Agency appealed the termination of her agency’s ERP appointment by the Trust and Commercial Union Insurance Companies for failure to develop and maintain a minimum book of business.” The Market Review Committee previously granted the agency, which currently maintains a book of business
of 170 vehicles, a one year extension to comply with Rule 14, C. Based on the producers efforts to comply with Rule 14, C. the Committee voted to grant a one year extension to develop a book of business of 400 vehicles.
Continuing, Mr. Boynton reported that the Commonwealth Mutual Insurance Company appealed the action of CAR Staff in appointing a newly emerging ERP to the company. The company contended that based on its own ERP growth projections, newly emerging ERP appointments should be made to a Servicing Carrier other than Commonwealth Mutual. The Committee voted to deny the appeal and directed that Commonwealth Mutual contract the particular ERP in question.
Continuing, Mr. Boynton reported on the meeting of August 13, 1997, and informed the Committee that the Battista Insurance Agency’s ERP appointment was terminated in April 1997, by the Middlesex Insurance Company for “failure to remit premium payments on a timely basis...” At its May 8, 1997 meeting, the Market Review Committee voted to reinstate the agency’s appoint for a probationary period of ninety days after which time the parties were to report back to the Committee regarding the agency’s operation and compliance with CAR Rules. In consideration of a report from Middlesex Insurance Company that Battista Agency has complied with CAR Rules during the past ninety days and that the agency principal has acted in a responsible and professional manner, the Committee voted to reinstate the agency’s ERP appointment in full.
Mr. Boynton advised that the GLK Insurance Agency appealed the termination of its ERP appointment by Liberty Mutual for “failure to develop and maintain a minimum book of business.” The agency maintains a book of business of 178 vehicles. In light of marketing plans submitted by the appellant designed to obtain the required number of vehicles, the Committee voted to grant the agency an extension of one year to develop and maintain a minimum book of business of 250 vehicles.
Continuing, Mr. Boynton reported that the Tarpey Insurance Group appealed the action of the Metropolitan P&C Insurance Company relating to a purchase agreement with an agency assigned to Metropolitan as an ERP. The appeal pertained to Metropolitan’s decision to issue non-renewal notices directly to the insureds of the seller’s agency rather than accommodating the Tarpey Group’s request for an alternative method of transferring the book of business. After consulting with representatives of Metropolitan prior to the hearing, the petitioner requested that the appeal be withdrawn, without prejudice, in the interests of seeking a compromise solution to the problem. The Committee granted the request for withdrawal.
Mr. Boynton informed the Committee that the Market Review Committee agreed that an Ad Hoc Committee should be established to consider issues pertaining to the sale of ERP agencies and whether current CAR Rules governing the administration of such sales are in need of updating to more accurately reflect current market conditions.
97.6 MARKET REVIEW COMMITTEE (continued)
Mr. Boynton, reporting on the Market Review Committee meeting of September 15, 1997, informed the Committee that Robert Virta appealed the termination of his agency’s commercial ERP appointment by Arbella Mutual for “failure to develop and maintain a minimum book of business.” In light of the appellant’s status as a voluntary agency for private passenger business and an apparent lack of market need to justify continuation of the agency’s commercial ERP appointment, the Committee voted to deny the appeal.
Continuing, Mr. Boynton advised that the Market Review Committee reconsidered a proposed amendment to CAR Rule, 14, A, 2, c, which would impact the appointment status of an ERP who obtains a voluntary contract with another Servicing Carrier or non-Servicing Carrier for the same type of business. The Rule amendment had previously been disapproved by the Commissioner of Insurance due to concerns relative to the timeframe outlined in the amendment and the potential for disproportionately negative impact on inner city ERP’s. Information provided by Staff detailed that the implementation of the amendment would not have a disproportionately negative impact on inner city ERPs. The Committee considered alternative implementation timeframes (see attached).
Mr. Maher detailed the above amendment by informing the Committee that the language being proposed would provide that subsequent to today’s date, a producer who obtains a voluntary contract with another Servicing Carrier or non-Servicing Carrier will retain that ERP relationship for three months from the date on which the contract is effective for renewal business. The relationship would cease for new business immediately. In regards to an ERP who is found to have entered such an agreement prior to this date (September 17, 1997), the ERP relationship would cease November 16, 1997, for new business and December 31, 1997, for renewal business.
A motion was made by Mr. Arthur Remillard and was duly seconded by Mr. Charles Boynton to adopt the Market Review Committee’s recommended amendments to Rule 14, A, 2, c.
The motion passed on a unanimous vote.
Mr. Boynton reported that the Market Review subcommittee met on September 4th and 15th to review issues involving the servicing of an ERP’s existing book of business in the event of an agency sale and the concept of allowing ERPs involved in the purchase of large books of business to maintain two Servicing Carriers following the purchase. The Subcommittee discussed the issues and reviewed potential Rule amendments, and agreed to continue discussion on the issues at its next meeting.
In conclusion, Mr. Boynton reported that the Market Review Committee Records of June 5, July 9, and August 13, 1997, have been distributed and are on file with CAR’s Secretary.
97.7 CLAIMS ADVISORY COMMITTEE
Ms. Kathleen Devericks, reporting on the Claims Advisory Committee meeting of June 25, 1997, reported that the Committee discussed the Reinspection Regulation which requires certain percentages of vehicles to be reinspected once repairs are completed. The members
agreed that the benefit of this Regulation has diminished under the Direct Repair Program and that suggestions for modifying the Regulation should be brought to the Division of Insurance. A subcommittee was appointed to review the Regulation and develop a proposal.
Continuing, Ms. Devericks reported that the Automobile Damage Appraiser’s Licensing Board subcommittee reported on two meetings that were held with the Appraiser’s Licensing Board. After discussing the merits of improving communications with the Board, the Committee agreed to expand the original subcommittee to engage in periodic meetings with the Appraiser’s Licensing Board.