Records of Meeting-1-February 29, 2000

Governing Committee Review Panel

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 -

TUESDAY, FEBRUARY 29, 2000 AT 10:00 A.M.

MEMBERS OF THE PANEL

Members present -

Mr. Richard W. Brewer - Chairman

Arbella Mutual Insurance Company

Ms. Nanci S. PetersGeorge Peters Insurance Agency

Mr. Andrew J. CarpentierCNA Insurance Companies

Commonwealth Automobile Reinsurers –

Mr. Michael J. TrovatoExecutive Vice President & Treasurer

Mr. Joseph J. Maher, Jr.Vice President, General Counsel & Secretary

Ms. Wendy BrowneOperations Services Manager

Mr. Paul CorsettiDirector of Communications

Mr. Timothy CostainMarket Relations Manager

Ms. Adrianne FrancisSenior Administrative Support Assistant

Ms. Natalie HubleyStatistical Manager

Mr. John MetcalfeDirector of Administration & Market Relations

Ms. Pamela WallaceUnderwriting Manager

Also present –

Ms. Ellen SullivanCommonwealth Mutual Insurance Company

Garrett Harris, Esq.Gallagher & Gallagher, P. C.

Ms. Erin SchaafHorace Mann Insurance Company

Michael Balady, Esq.The Travelers Indemnity Company

Mr. Michael DeConti

Governing Committee Review Panel Chairman Richard Brewer, called the meeting to order at 10:00 A.M.

GCRP

00.01Minutes Of Previous Meeting

A motion was made by Mr. Carpentier and seconded by Ms. Peters to approve the records of the Governing Committee Review Panel Meeting of January 25, 2000 as written.

The motion passed on a unanimous vote.

GCRP

00.04Travelers Indemnity Company

Attorney Garrett Harris, representing the Travelers Indemnity Company, requested a formal review of the December 15, 1999 Operations Committee decision which denied the company's request for relief relating to a bulk adjustment against the company in the amount of $859,937. The bulk adjustment related to Travelers failure to comply with its statistical reporting obligations stemming from a premium dispute with its insured, Kellaway Transportation.

Mr. Harris provided a summary of facts and events resulting in the Travelers petition for relief of the bulk adjustment applied by CAR. Mr. Harris indicated that Aetna issued a policy to Kellaway Transportation for the period of January 25, 1995 to December 31, 1995, with an initial cost of hire estimate of $100,000. A subsequent audit determined that the cost of hire exposure was dramatically higher than initially believed, resulting in a significant premium increase. According to Mr. Harris, the insured objected to adjusted premium and took an unusual course of action of seeking resolution of the

GCRP

00.04Travelers Indemnity Company (continued)

premium dispute through CAR. He noted that Kellaway filed a petition with CAR in March 1998 disputing Aetna’s audit, the manner in which the policy was issued, and alleged improper conduct by the broker for the account. He indicated that CAR was made aware of the cost of hire issues early in the process and has held the rate dispute within its administrative review structure since March 1998. That matter remains unresolved and Mr. Harris contended that Travelers, as successor to Aetna, does not feel the company is obligated to statistically report and submit ceded premium when the final premium has not yet been determined.

CAR Counsel, Joseph Maher, advised that the merits of the premium dispute between Travelers Indemnity Company and its insured Kellaway were not at issue within the context of this meeting of the Governing Committee Review Panel and should not bias or prejudice the parties positions relative to the bulk adjustment matter before the Panel. Counsel took exception to the proposition that CAR had not expeditiously handled the premium dispute presented by Kellaway. He noted that several issues needed clarification by the parties before CAR could proceed with its administrative processes and advised that CAR took a deliberate and responsible approach to the matter in order to make it possible for more informed decisions to be reached as to the issues raised by Kellaway.

CAR Executive Vice President, Michael Trovato, indicated that Travelers is responsible for reporting and submitting written premium on ceded risks in accordance with the Rules of Operation and Manual of Administrative Procedures, regardless of the existence of a rate dispute between the Servicing Carrier and its insured. He indicated that in this case, Travelers arbitrarily and without notification, reversed the reporting of approximately $900,000 in written premium with no basis for doing so. He noted that in addition to the premium, Travelers' action deprived CAR of 2 years of interest income. Mr. Trovato explained that there is process through which a Servicing Carrier may seek relief in cases such as this, but that must be done after the Servicing Carrier complies with its statistical reporting obligations. He said that in the interests of a responsible, well functioning residual market pool, all Servicing Carriers must comply with the procedures and standards established for the reporting and submission of ceded premiums.

Travelers representative, Michael DeConti, indicated that a question exists as to how written premium should be defined in this matter. He contended that Kellaway's final written premium has yet to be determined and the dispute exists relative to an audited adjustment associated with the written premium and currently the subject of an administrative hearing. He noted that while the administrative process is ongoing, the company has been prevented from pursuing collection of premium from the insured and the uniqueness of the situation warrants consideration.

The Panel acknowledged that CAR's handling of the bulk adjustment against Travelers and returning the premium to the pool was in accordance with current procedures and past practices. Mr. Carpentier noted that procedures exist to provide for appropriate adjustments to premium and investment income, depending on the outcome of the premium dispute. He indicated that regardless of the premium dispute characteristics of the matter between the Travelers and Kellaway, the company's obligations relative to the reporting and submission of ceded premium are the same as those for all Servicing Carriers.

GCRP

00.04Travelers Indemnity Company (continued)

In the interests of a healthy residual market, the Panel affirmed the need for all Servicing Carriers to comply with established standards and procedures for reporting and submitting written premium to CAR. There was also consensus among the Panel that pending legal matters which may inhibit the Travelers' ability to proceed with premium collection efforts do not supercede the company's Servicing Carrier obligations. Accordingly, the Panel did not believe that any information had been provided which warranted reversal of the Operations Committee decision.

Following further discussion a motion was made by Mr. Carpentier and seconded by Ms. Peters to deny the appeal and uphold the decision of the Operations Committee.

The motion passed on a unanimous vote.

Mr. Maher advised the parties of their rights pursuant to CAR Rule 20.

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 10:45 a.m.

TIMOTHY J. COSTAIN

Market Relations Manager

Boston, Massachusetts

March 21, 2000