RECORDS OF MEETING
GOVERNING COMMITTEE REVIEW PANEL
A meeting of the Governing Committee Review Panel was held at the offices of Commonwealth Automobile Reinsurers, 100 Summer Street, Boston on
WEDNESDAY, APRIL 11, 2001 AT 1:00 P.M.
Members present -
Mr. James T. Masterson – Chairman
Liberty Mutual Group
Ms. Nanci S. Peters George Peters Insurance Agency, Inc.
Mr. Andrew J. Carpentier Encompass Insurance
Commonwealth Automobile Reinsurers present -
Mr. Joseph J. Maher, Jr. Vice President, General Counsel & Secretary
Mr. John D. Metcalfe Director of Administration & Market Relations
Mr. Timothy J. Costain Market Relations Manager
Records of Meeting -4- April 11, 2001
Governing Committee Review Panel
Commonwealth Automobile Reinsurers (continued)
Ms. Wendy Browne Senior Manager of Operations Services
Ms. Adrianne Francis Senior Administrative Support Assistant
Ms. Pamela Wallace Director of Data Quality Services
Also present –
Owen Gallagher, Esq. Gallagher & Gallagher
Ms. Eileen Gil Holyoke Mutual Insurance Company
Governing Committee Review Panel Chairman, James Masterson, called the meeting to order at 1:00 p.m.
GCRP
00.01 Records of Previous Meeting
A motion was made by Ms. Peters and seconded by Mr. Carpentier to approve the Records of the Governing Committee Review Panel meeting of September 20, 2000, as written.
GCRP
01.02 Holyoke, Metropolitan and USF&G Insurance Companies –
First City Acceptance Corporation of Saugus
A Request for Review form was submitted by Attorney Owen Gallagher, representing the Holyoke, Metropolitan and USF&G Insurance Companies, requesting a formal review of the matter involving the First City Acceptance Corporation of Saugus.
Mr. Gallagher, provided the Panel with a status report on the matter, indicating that Anthony Visone, owner of First City Acceptance Corporation, has petitioned for bankruptcy in Florida. As a result of the bankruptcy filing, all litigation proceedings have been stayed and the Servicing Carriers have retained counsel in Florida to represent their rights as creditors pursuant to the bankruptcy filing. Mr. Gallagher stated that it originally appeared that Mr. Visone might have hidden assets which would be available to satisfy any judgement obtained. He noted that the three Servicing Carrier’s in this case have been engaged in over four years of costly litigation in an attempt to recover unpaid premium and have diligently pursued all reasonable avenues to collect it. Mr. Gallagher requested that the Committee grant the Servicing Carrier’s petition for reimbursement of uncollectable premium and associated legal expenses.
CAR Counsel, Joseph Maher, provided a review of the CAR committee activity to date, noting that the matter had originally been brought before the Operations Committee by the Holyoke Mutual Insurance Company. He advised that the Operations Committee had denied Holyoke's request for reimbursement of premium and legal fees without prejudice. Mr. Maher continued that the Operations Committee considered the information available to it at that time and while negotiations for a settlement between Holyoke, Metropolitan, and USF&G and First City were ongoing, the Committee was reluctant to become a party to them.
GCRP
01.02 Holyoke, Metropolitan and USF&G Insurance Companies –
First City Acceptance Corporation of Saugus (continued)
Mr. Maher further advised that the Panel would have to be satisfied that the circumstances surrounding the unpaid premium were beyond the control of the Servicing Carriers, that the Servicing Carriers made all reasonably prudent, and appropriate business efforts to recover the premium, that they made all reasonable efforts to mitigate the damages, and that the failure to recover the premium was not the result of any misfeasance by any of the Servicing Carriers. Mr. Maher concluded that the Operations Committee went as far as they did based on the information available to them and by denying the company's request without prejudice, the Committee left the door open for reconsideration of the matter at a later date as events progressed.
Mr. Gallagher responded that the assets involved in the settlement agreement between the parties involved real estate in Indiana which was later determined to be of little value to the Servicing Carriers. He noted that Mr. Visone had negotiated in bad faith and refused to enter into any further settlement agreements.
The Panel discussed whether the petitioners had satisfied the standards for reimbursement as detailed by Mr. Maher. Mr. Carpentier indicated that the Operations Committee did not find fault with the premium calculations of any of the Servicing Carriers relative to the First City account or their attempts to collect the premium owed. He said that the issue of reimbursement in this case is twofold, whether to credit the ceded premium paid to CAR by the Servicing Carriers and secondly, to decide whether reimbursement of the legal expenses is appropriate. Mr. Carpentier contended that the evidence shows that the failure of the insured to pay earned premium was beyond the direct control of the Servicing Carriers and that the companies made reasonable efforts to collect the premium. Mr. Carpentier questioned whether the Panel should postpone action, based on the case’s status in the Florida Court.
Mr. Masterson questioned the information available to the Operations Committee and what impact the latest information provided by Attorney Gallagher might have had on that Committee's decision to deny the request for reimbursement. He attempted to gain a better sense of the thought process of the Operations Committee in not wanting to recommend reimbursement in the face of what appeared, at the time, to be a potentially successful settlement effort. Mr. Masterson asked about precedent involving reimbursement requests for uncollected premium and what bearing they might have in this matter.
Mr. Maher advised that 2 previous cases involving uncollected premium reimbursement requests were considered by the Operations Committee, adding that the Panel could be provided with information involving those cases if the Members wished to review the material. He continued that if the Panel were to reach a decision on the forgiven premium and the reimbursement of legal fees it would be subject to a letter of agreement from CAR and Counsel for the Servicing Carriers that any money subsequently recovered would be paid into CAR. He added that CAR would review the legal bills submitted to ascertain that they are reasonable and proper.
Mr. Masterson stated that he was uncomfortable presupposing what the decision of the Operations Committee would be, had it been given all of the information currently available to the Governing Committee Review Panel.
GCRP
01.02 Holyoke, Metropolitan and USF&G Insurance Companies –
First City Acceptance Corporation of Saugus (continued)
Ms. Peters concurred with Mr. Masterson, adding that the ongoing court proceedings in Florida lead her to conclude that a decision to reimburse the Servicing Carriers at this time could be premature.
Mr. Carpentier noted that the insured in this case jumped from one Servicing Carrier to another in an obvious attempt at rate avoidance. He said that despite their best efforts, the companies were unable to properly experience rate the risks and they should not be blamed for that. Mr. Carpentier said he felt comfortable with the Servicing Carriers efforts and felt that they should be reimbursed at this point.
Mr. Carpentier made a motion that was seconded by Ms. Peters to grant reimbursement of the uncollected premium as well as the reimbursement of legal fees, with the proviso that the Servicing Carriers continue their collection efforts.
Mr. Gallagher indicated that the Servicing Carriers originally sought collection of premium in the amount of $1.5 million dollars, but agreed to a settlement amount of $900,000 and $300,000 in legal fees, plus interest. He added that the legal fees are now approaching $600,000.
The Panel discussed whether a decision should be made at this time or held until pending court action in Florida is finished. Mr. Masterson expressed a preference for the Operations Committee to reconsider the matter with the benefit of the latest information which it did not have previously. The Panel considered whether remanding the matter back to the Operations Committee would delay consideration of the matter by the Governing Committee. The Panel concluded that the Operations Committee should be given an opportunity to reconsider the matter at its next meeting with the benefit of new information presented today.
Mr. Carpentier withdrew his previous motion, and made a substitute motion, which was seconded by Ms. Peters to refer the matter back to the Operations Committee for further review.
The motion passed on a unanimous vote.
There being no further business, a motion was made by Mr. Carpentier and duly seconded by Ms. Peters to adjourn the meeting.
The motion passed on a unanimous vote.
The meeting adjourned at 1:55 p.m.
TIMOTHY J. COSTAIN
Market Relations Manager
Boston, Massachusetts
May 2, 2001
Note: These Records have not been approved. They will be considered for approval at the next Governing Committee Review Panel meeting.