RECORDS OF MEETING
GOVERNING COMMITTEE
A meeting of the Governing Committee was held at Commonwealth Automobile Reinsurers, Boston, MA on
WEDNESDAY, FEBRUARY 16, 2000 AT 10:00 A.M.
Members present -
Mr. Richard W. Brewer – Chairman
Arbella Mutual Insurance Company
Ms. Nancy Z. BenderNancy Z. Bender Insurance Agency, Inc.
Mr. Charles I. Boynton, IIIBoynton Insurance Agency, Inc.
Mr. Andrew J. CarpentierCNA Personal Insurance
Mr. Joseph F. Cofield *Metropolitan Property & Casualty Ins. Co.
Mr. Edward F. Downey, Jr.Edward F. Downey Insurance Agency
Mr. Sumner D. GilmanEconomy Insurance Agency, Inc.
Mr. William F. Hofmann, IIIProvider Insurance Group, Inc.
Mr. James T. MastersonLiberty Mutual Group
Mr. J. Barry MayThe Hanover Insurance Company
Ms. Nanci S. PetersGeorge Peters Insurance Agency, Inc.
Mr. Thomas K. RandallMassWest Insurance Company, Inc.
Mr. Arthur J. Remillard, Jr.The Commerce Insurance Company
* Substituting for Mr. Robert W. Harvey
Commonwealth Automobile Reinsurers present -
Mr. Ralph A. IannacoPresident
Mr. Michael J. TrovatoExecutive Vice President and Treasurer
Mr. Joseph J. Maher, Jr.Vice President, General Counsel & Secretary
Records of Meeting-1-February 16, 2000
Governing Committee
Commonwealth Automobile Reinsurers (continued) -
Ms. Susan BasilescoFinancial Manager
Mr. Donald BergamascoAudit Manager
Mr. Paul Corsetti Director of Communications
Mr. Timothy CostainMarket Relations Manager
Mr. Timothy GalliganActuarial Supervisor
Ms. Valerie Gedziun Vice President, Claims
Ms. Natalie HubleyStatistical Manager
Ms. Lynn JablonskiStatistical Department
Mr. John D. Metcalfe Director of Administration & Market Relations
Ms. Joyce QuinnExecutive Assistant
Ms. Lynne RosenburgOperations Service Supervisor
Mr. Paul RyanVP and Chief Information Officer
Ms. Sharon SchorgeManager of Actuarial & Statistical Services
Ms. Kim Tobin Administrative Assistant
Mr. Frank Underhill Vice President, Auditing
Ms. Jennifer VieiraActuarial Department
Ms. Pamela WallaceUnderwriting Manager
Also present –
Ms. Cleo AndersonAmica Mutual Insurance Company
Mr. Robert Suglia
Ms. Adrienne BerkleyArbella Mutual Insurance Company
Mr. James FlemingBerkshire Mutual Insurance Company
Mr. Robert CordnerCGU
Ms. Kathleen BarryComplete Business Solutions, Inc.
Mr. David H. CochraneThe Commerce Insurance Company
Mr. Warren McLeanConcord Group Insurance Companies
Mr. Norman WalczakElectric Insurance Company
Mr. Robert DuBien
Ms. Doreen CarterEmpire Insurance Company
Ms. Kausar Bhatti
Mr. Edward Colomey
Ms. Joanne BordenFireman’s Fund Insurance Company
Leonard Fisher, Esq.Attorney
Mr. Steven MeyersFitchburg Mutual Insurance Company
Mr. Alan PerlinHanover Insurance Company
Ms. Erin SchaafHorace Mann
Mr. Paul BrennanIMG
Mr. Alec SouleInsurance Times
Mr. Frank ManciniMassachusetts Association of Insurance Agents
Mary Kate Birch, Esq.Massachusetts Division of Insurance
Ms. Mary Ellen Thompson
Daniel R. Judson, Esq.
Ms. Jean DowneyNorfolk and Dedham Mutual Fire Ins. Co.
Mr. John DelanoPilgrim Insurance Company
Mr. Barry Tagen
Paula Gold, Esq.Plymouth Rock Assurance Corporation
Mr. Geoffrey Arnold
Mr. Nathan LaCombe
Ms. Susan ScottThe Premier Insurance Company
of Massachusetts
Peter T. Robertson, Esq.Law Offices of Peter T. Robertson
Ms. Michaela HildrethPricewaterhouseCoopers
Mr. Peter Brennan
Mr. Edward PatrickSafety Insurance Company
Mr. James P. McGilloway
Ms. Kathy BarnesTillinghast Company
Governing Committee Chairman, Richard Brewer, called the meeting to order at 10:00 a.m. Chairman Brewer announced that Mr. Joseph F. Cofield of Metropolitan P&C Insurance Company would be substituting for Mr. Robert W. Harvey. Mr. Cofield is the pre-designated alternate for Mr. Harvey and may attend one meeting of the Governing Committee without prior approval from the Commissioner.
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00.01Records of Previous Meeting
A motion was made by Mr. Sumner Gilman and duly seconded by Mr. Andrew Carpentier to approve the Records of the Governing Committee meeting of November 17, 1999 as written.
The motion passed unanimously.
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00.02President’s Report
CAR President, Mr. Ralph Iannaco reported that, as a result of the many issues and activities involving the Trust Insurance Company over the past few months, CAR instituted a monitoring process of the company, coordinated by Mr. Michael Trovato that began approximately one year ago and included weekly updates of Trust’s data and financial reporting status relating to its CAR obligations. Mr. Iannaco reported that as of this date Trust has satisfied its financial requirements and noted further that data reporting obligations have been met through November with the December shipment expected today. The receipt of the shipment will allow CAR to meet its regular processing schedule for the quarter. CAR will continue to be vigilant in its monitoring process and maintain a working relationship with Mr. John Meyers, who was recently appointed by the Commissioner of Insurance as the Operations Manager of Trust Insurance Company during the Receivership period.
Mr. Iannaco reported that on February 10, 2000 Commissioner Ruthardt petitioned the Supreme Judicial Court and was appointed Temporary Receiver for the Trust Insurance Company. On February 11, 2000 CAR Staff met with Commissioner Ruthardt and Atty. Daniel Judson. As Temporary Receiver, Commissioner Ruthardt directed that Trust producers write no new business. As a result, CAR reviewed the provisions of Rule 14, CAR Rules of Operation, and after discussion with the Division of Insurance it was determined that a need existed to reassign Trust’s Exclusive Representative Producers (ERP’s) to successor Servicing Carriers for the purpose of writing new and renewal business. CAR then called all the most undersubscribed Servicing Carriers notifying them of the potential reassignment activity. Copies of the court documents were also made available. On February 14, 2000 a fax transmission was sent to all Trust ERP’s advising them of the Commissioner’s directive and requesting them to notify CAR no later than 3:00 p.m. as to whether or not they had an existing market for motor vehicle insurance. CAR also requested all Servicing Carriers to notify CAR by the same deadline of any voluntary agreement or any two-party transfer entered into involving any Trust ERP. All transfer activity was subsequently compiled and the Private Passenger Subscription Report was recalculated to reflect exposure movements. On the morning of February 15th, the remaining Trust ERPs were reassigned in accordance with CAR’s approved subscription methodology. All ERP’s and Servicing Carriers were notified via fax and subsequently by regular postal mail. A total of 23 Trust ERP’s, totaling 24,085 exposures, were randomly reassigned to the 7 most undersubscribed Servicing Carriers. (See Attached)
Mr. Iannaco reported that CAR’s Y2K Readiness Plan has been in place for several months and CAR has been successfully processing renewals for year 2000 policies. The January 1, 2000 transition period passed smoothly and efficiently with no reporting problems from within or from any of our member companies. CAR’s Y2K Readiness surveys have been filed with the NAIC and the Division of Insurance for January and February. The final survey will be filed on April 6th. The archiving of critical files has also been completed. The frequent archiving of critical data files is a function of CAR’s business cycle and will continue throughout the year 2000 and beyond.
Mr. Iannaco reported that Mr. Joseph Maher will be conducting the third Committee Workshop on March 1, 2000 at 10:00 a.m. All Advisory Committee members have been invited to attend these workshops as well as any company employee that interacts with the various CAR Committees. The intent of these workshops is to provide an overview of the practices and procedures of CAR’s Committee review process focusing on the Open Meeting Law, the content of meetings, the decision making process and the Rule 20 appeal process.
Mr. Iannaco reported that renovations to the reception area are nearly complete with the funding for this entire project coming from building management.
00.02President’s Report (continued)
Concluding his report, Mr. Iannaco was pleased to announce that CAR’s 2nd Annual Employee of the Year Award, as chosen by CAR employees, was presented to Ms. Robin Tigges, Senior Receptionist.
Chairman Brewer commended CAR Staff for the handling of the Trust matter in an efficient and timely manner. On behalf of the Governing Committee Mr. Brewer extended his thanks to CAR for the excellent work and also thanked the Division of Insurance for their cooperation for avoiding a significant disruption in the market by appropriate use of CAR Rules on a timely basis.
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00.03 Counsel’s Report
Mr. Joseph Maher reported that amendments to Rules 11, 12 and 17 of CAR’s Rules of Operation relative to credits and expense allowances for year 2000 have been approved by virtue of the expiration of thirty days since its filing with the Commissioner of Insurance, without any action being taken on the filing. These were distributed to the industry as Bulletins 666, 667, 668 and 669.
Responding to a question as to whether CAR should go forward with pre-existing legal actions involving Trust, Mr. Maher stated CAR had discussions on these matters with the Temporary Receiver and anticipates holding further conversations in the near future.
That concluded Mr. Maher’s report.
GC
00.04 Market Review Committee
Mr. Charles Boynton reported that the Market Review Committee met on December 8, 1999 and noted that the Marietta M. Paquette Insurance Agency, Inc. petitioned for a change in the agency’s private passenger Servicing Carrier from the Trust Insurance Company. The matter had previously been continued several times to provide the parties an opportunity to seek resolution to the issues raised within the context of the request for reassignment. The Market Review Committee was advised that CAR had received no complaints from the agency in recent weeks relating to its working relationship with Trust and the company's representative indicated that he was not aware of any continuing problems between the Servicing Carrier and agency. The Market Review Committee voted unanimously to dismiss the matter and consider it closed.
Mr. Boynton reported that the Rodrigues Insurance Agency requested a review of the termination of the agency's ERP appointment by the Trust Insurance Company for alleged failure to "Cooperate with the Servicing Carrier and CAR personnel during all audits and investigations", "Quote proper premiums based on information provided by the applicants for coverage desired", and comply with Rule 15, Premium Collection Standards. At its August 24, 1999 meeting, the Market Review Committee agreed to continue the matter until its next meeting in hopes that the matter might be resolved without the need for a CAR review process. Prior to the meeting, CAR received correspondence from the Rodrigues Insurance Agency indicating that the agency/company relationship is working well and requested that the matter be withdrawn. The Market Review Committee voted unanimously to remove the matter from the agenda and consider it closed.
00.04Market Review Committee (continued)
Mr. Boynton reported that the Market Review Committee continued discussion on Servicing Carrier tolerance levels and the letter submitted by the Commerce Insurance Company. At its August 24, 1999 meeting the Market Review Committee requested that Staff review the impact of a proposal submitted by the Commerce Insurance Company on the existing Servicing Carrier population to determine which companies might be exempted from Servicing Carrier status using the revised tolerance levels.
Mr. Boynton reported that following a review of the exhibits provided by Staff, the Market Review Committee voted unanimously to recommend to the Governing Committee that Rule 13 be amended to include the following Servicing Carrier tolerance criteria as follows:
1.The private passenger Servicing Carrier tolerance will be amended from the current 0.25% of the total private passenger market to 3,000 exposures.
2.The commercial automobile Servicing Carrier tolerance will remain at 0.5% of the commercial market, but the calculation will apply to only voluntarily produced market premiums rather than the current total market premiums.
- Apply the private passenger and commercial tolerances separately, and not require that a company become a Servicing Carrier for both markets when it exceeds tolerance level of one of the markets.
After some discussion, a motion was made by Mr. Sumner Gilman and duly seconded by Mr. Arthur Remillard to have CAR Staff draft language amending Rule 13 to include the above Servicing Carrier tolerance criteria for review at its next meeting.
The motion passed unanimously.
Mr. Boynton reported that Scott A. Greenwood requested a review of the declination of his application for appointment as an ERP by CAR for failing to conduct business operations from a location within a town eligible for a private passenger ERP appointment. The Market Review Committee noted the timing of the application submitted to CAR and the recalculation of data, which determined the communities eligible for ERP appointment for the fourth quarter of 1999. The Market Review Committee discussed concerns about the risks associated with establishing an office and setting up a business without a guarantee that an appointment will be granted, while remaining cognizant of the fact that documentation provided to the applicant clearly indicated that the communities eligible for ERP appointment are recalculated on a quarterly basis. The Market Review Committee voted to deny the request that an ERP appointment be granted with 10 Members in favor, 1 opposed, and 1 recused.
Mr. Boynton reporting on the Market Review Committee meeting of January 5, 2000 stated that the One Call Insurance Agency, Inc. petitioned for reassignment of the agency’s private passenger ERP appointment from the Trust Insurance Company. The agency alleged that the company failed to account for non-payment of commissions, was inconsistent in interpreting CAR Rules with respect to the processing of endorsements, and was abusive to the agency resulting in the loss of business. The Market Review Committee expressed concern about the agency's situation and the impact that unresolved service issues relating to Trust's recent system conversion are having on all of its ERPs. The Market Review Committee identified that while many of the service related issues raised by the agency appear to have emanated from the system conversion, they are largely the same issues brought before the Market Review
00.04Market Review Committee (continued)
Committee by several ERPs last year. Based on assertions made by Trust's representative that the
company anticipated elimination of its processing backlog by mid January and that all producers and their business are being treated on an equal basis, the Market Review Committee voted unanimously to deny the request for reassignment, but requested that the agency maintain records of its dealings with Trust for 60 days and report back to the Market Review Committee as to the status of the agency/company relationship.
Mr. Boynton reported that the Jorge A. Elias, Jr. Insurance Agency requested a review of termination of the agency's ERP appointment by Arbella Mutual Insurance Company for alleged failure to "Remit payments on a timely basis in accordance with the provisions set forth in the contract between the Servicing Carrier and the ERP.” and failure to “Conduct all monetary transactions with the insured and the Servicing Carrier as required by the Rules of Operation and the ERP contract.” The Market Review Committee considered the agency's explanation that checks returned for insufficient funds resulted from the closure of the bank account from which the funds were to be drawn. Previous remittance violations documented by the company resulted from the alleged embezzlement of funds by a former agency employee. While Arbella representatives indicated that the returned checks were part of a pattern of rule violations and agency misconduct, the company acknowledged that the agency does not currently owe any money to Arbella. In light of the information presented and the fact that the agency has been appointed to Arbella for approximately five years and maintains a book of private passenger business in excess of 1,000 vehicles, the Market Review Committee voted to uphold the agency's request that its ERP appointment to Arbella be reinstated. The Market Review Committee also directed that both parties present a report in three months as to the status of the agency/company relationship.
Mr. Boynton reporting on the Market Review Committee meeting of February 8, 2000 stated that the James R. Flanagan Insurance Agency, Inc., requested a review of the termination of its ERP appointment by Arbella for alleged violations of the Servicing Carrier / ERP contract which states that the, “producer shall have no authority to appoint sub-agents, or to accept business from any insurance broker, except upon written authority.” The Market Review Committee considered the information provided by the parties relative to the nature of the business relationship between the agency principal and an alleged independent broker. Arbella representatives characterized the relationship as an unauthorized brokerage arrangement, about which they had been misled. The agency claimed that an equity partnership exists between Mr. Flanagan and the individual in question, and that Arbella has condoned the situation for years. In light of the conflicting information, the Market Review Committee voted to direct CAR Staff to investigate the matter and gather information in an effort to determine the ownership structure of the agency and report back to the Market Review Committee within thirty days. During that time the agency's ERP appointment is reinstated in full.