<vt=10>
<pt=2>
RECORDS OF MEETING
GOVERNING COMMITTEE
A Meeting of the Governing Committee of the Commonwealth Automobile Reinsurers was held at the offices of C.A.R, on -
WEDNESDAY, JUNE 17, 1992 AT 10:00 A.M.
The following Members were present -
Mr. Craig M. BradleyMr. James D. Doherty
Mr. Richard W. BrewerMr. Sumner D. Gilman
Mr. Donald O. BurnsMr. David J. Lane
Mr. J. Barry MayMr. Robert V. McGowan
Mr. Arthur J. Remillard, Jr.Mr. George Peters
Mr. Edwin J. RinehimerMr. Louis M. Xifaras
Mr. James M. Stone
There were also present -
Commonwealth Automobile Reinsurers
PresidentMr. R. M. LaFontaine
Executive Vice President & TreasurerMr. M. J. Trovato
Vice President and General CounselMr. J. J. Maher, Jr.
Vice President-Financial ServicesMr. J. V. Kelly
Vice President-AuditingMr. F. C. Underhill
Director of CommunicationsMr. P. W. Corsetti
Adm. Assistant for Industry RelationsMr. G. F. Monahan
Administrative ManagerMr. J. D. Metcalfe
Underwriting ManagerMs. P. A. Wallace
Data Operations ManagerMs. W. S. Thompson
Claims ManagerMr. R. W. Bell
S/C Representative Producer CoordinatorMr. T. J. Costain
R.P./S.C. LiaisonMr. T. R. Weymouth
Senior Actuarial AnalystMr. R. N. Nevins
Actuarial AnalystMs. J. E. Callahan
Staff AnalystMs. M. S. Adgate
Adm. Ass't. to Adm. Vice PresidentMs. B. A. Seminatore
Massachusetts Division of InsuranceMr. Donald Baldini
Amica Mutual Insurance CompanyMr. J. J. Wolstencroft, Jr.
Arbella Mutual Insurance CompanyMs. Janet Corcoran
The Commerce Insurance CompanyMr. D. H. Cochrane
CNA Insurance CompaniesMr. A. J. Carpentier
CU Homeland Insurance CompanyMr. G. E. Davis
Crum & Forster Commercial InsuranceMr. Edward Colomey
Electric Insurance CompanyMr. N. A. Walczak
Fireman's Fund Insurance CompanyMr. Jeff Saunders
Fitchburg Mutual Insurance CompanyMr. G. R. Larson
Goldstein & ManelloMr. Donald Hillman
Goodwin, Proctor and HoarMs. M. J. Dee
I.S.I. Systems, Inc.Mr. Donald Devers
Mr. P. D. Luongo
Independent Insurance Agts. of MassachusettsMr. T. E. Petty
Lumbermens Mutual Casualty CompanyMr. R. J. Cogliano
Mr. James Dennis
Malloy & CorryMr. Martin Corry
MassWest Insurance CompanyMr. T. K. Randall
Metropolitan Property & Casualty Ins. Co.Mr. Joseph Cofield
National Grange Mutual Insurance CompanyMr. J. R. Conlon
Nationwide Mutual Insurance CompanyMr. W. J. Meade
Norfolk & Dedham Mutual Fire Ins. CompanyMr. Leonard Zamansky
Pilgrim Insurance CompanyMr. J. W. Delano
Plymouth Rock Assurance CorporationMr. G. H. Arnold
Ms. Linda Kaiser
Policy Management Systems CorporationMr. Thomas Bigelow
Ms. P. A. Duffy
Mr. Eric Mobero
Ms. Jean Walsh
Quincy Mutual Fire Insurance CompanyMr. W. J. Whitebone
Safety Insurance CompanyMr. D. F. Brussard
Travelers Insurance CompanyMr. Richard Welch
Trust Insurance CompanyMr. Mark Sweeney
Worcester Insurance CompanyMs. P. A. Bauckman
Chairman Brewer called the meeting to order at 10:00 A.M.
Chairman Brewer opened the meeting with a statement relative to the progress C.A.R. has made in regard to depopulation. Chairman Brewer advised that the private passenger cession rate for 1991 was approximately 29%. He commented that current statistics indicate the private passenger cession rate for the first quarter of 1992 was approximately 20%. He further noted that the 1992 rate includes the Aetna Casualty and Surety Company, which is required to cede all of its business as a result of its withdrawal agreement. Chairman Brewer acknowledged the progress made and complimented C.A.R. in its effort of depopulation.
92.1MINUTES OF PREVIOUS MEETING
A motion was made by Mr. James Doherty and duly seconded by Mr. Louis Xifaras to accept the Records of the Governing Committee Meeting of May 20, 1992.
The motion passed on a unanimous vote.
92.5COUNSEL REPORT
Mr. Joseph J. Maher, Jr., Vice President and General Counsel, reported that there is continuing negotiations with the following companies relative to their withdrawal status from the Massachusetts motor vehicle insurance marketplace: (1) Peerless Insurance Company, (2) Allstate Insurance Company (3) United States Fidelity and Guaranty Company and (4) Crum and Forster. Mr. Maher advised that more definitive results are expected before the next meeting of the Governing Committee.
92.5COUNSEL REPORT (Cont.)
Continuing, Mr. Maher distributed a decision from the Commissioner of Insurance relative to the petition by Cigna to review its private passenger buy-out agreement and whether or not it should be the beneficiary of a revisit of that agreement based on a change of the deficit projections and other subsequent Rule amendments. The Commissioner of Insurance in her decision has denied the petition. Mr. Maher advised that the decision essentially provides that the contract as signed, with all the parties being aware of the terms, is binding on the parties according to those terms. Mr.Maher advised that the Commissioner of Insurance's decision would be appealable to the Superior Court. To date, C.A.R. has not heard that the decision has been appealed.
Continuing, Mr. Maher advised at the Governing Committee's last meeting it was determined that the monies held as a consequence of the Aetna Casualty and Surety Company's withdrawal would be distributed and that subcommittees would continue to review the manner in which such funds are distributed. Subsequent to the meeting, an appeal was made by Trust Insurance Company to the Division of Insurance seeking to enjoin the distribution of those funds. C.A.R. was advised that the Commissioner declined to issue such an injunction and, further, there has not been any formal adjudication of the issue of the manner of distribution. C.A.R. received a request for the Governing Committee Review Panel to consider the Governing Committee's May 20, 1992 decision. The request has not been pursued by agreement between Counsel for Trust Insurance Company and for C.A.R., pending the subcommittee reports to this Governing Committee meeting. This matter will be discussed further in the Actuarial Committee report to follow.
Mr. Maher advised that C.A.R. is continuing to discuss the Commercial Rate Filing with the State Rating Bureau. C.A.R. has received correspondence from the Bureau outlining seven issues for which they requested additional data. C.A.R. is in the process of providing that data. A meeting with the State Rating Bureau has been scheduled for June22, 1992 to discuss the results of the Bureau's review of the requested data.
Continuing, Mr. Maher referred to correspondence C.A.R. received from the Commissioner of Insurance wherein she denied the request C.A.R. made for additional premium as a consequence of the pollution exclusion buy-back on the simplified commercial policy. Mr. Maher advised that the Commissioner, in her closing sentence, indicates that if C.A.R. wishes to pursue this further, C.A.R. should do so as part of its next general filing. Mr.Maher advised that this matter will be considered at the appropriate subcommittees.
In conclusion, Mr. Maher referred to proposed amendments to Rule 14, Representative Producer and Exclusive Representative Producer Requirements and Rule 15, Premium Collection Standards (see attached). Mr. Maher advised that Rule 15 was acted on at the Governing Committee's last meeting, wherein the Committee approved a concept of the Rule change, which
92.5COUNSEL REPORT (Cont.)
provides that if there is outstanding premium owed on a policy of motor vehicle insurance, and the applicant or person who usually drives that covered vehicle has failed to pay the insurance premium, the company shall not be required to issue a policy or bond until that obligation has been settled.
A motion was made by Mr. Edwin Rinehimer and duly seconded by Mr.James Doherty to adopt the proposed amendments to Rule 15, Premium Collection Standards, and directed Staff to submit the proposed amendments to the Commissioner of Insurance for approval.
The motion passed on a unanimous vote.
Mr. Maher advised that the proposed amendments to Rule 14 emanated from the Governing Committee's action at its last meeting, where it approved the concept. Rule 14 provides that those Exclusive Representative Producers (ERP) appointed prior to January1, 1992 would be required to have a minimum book of business of 100 motor vehicles as of the latter of January 1, 1992, or the first anniversary of their appointment. It further requires these Exclusive Representative Producers to have 250 motor vehicles as of the latter of January 1, 1993, or the third anniversary of their appointment. This changes the maximum minimum production criteria from 400 motor vehicles after three years to 250 motor vehicles for qualifying Exclusive Representative Producers. The amendment further provides that the Governing Committee or its designee may continue an appointment if it determines particular circumstances merit such a continuation.
A motion was made by Mr. James Doherty and duly seconded by Mr. Sumner Gilman to adopt the proposed amendments to Rule 14, Representative Producer and Exclusive Representative Producer Requirements, and directed Staff to submit the proposed amendments to the Commissioner of Insurance for approval.
In answer to a query as to whether current legislation by Representative Mara would impact the proposed amendments to Rule 14, Mr.Gilman advised that the proposed legislation included the 250 production criteria, which is consistent with the proposed amendment. The proposed legislation and C.A.R.'s Rule differ only in regard to Exclusive Representative Producers appointed after January 1, 1992. The proposed legislation reflects a maximum minimum production requirement of 250 motor vehicles, whereas C.A.R. Rules stipulate a maximum minimum production requirement of 400 motor vehicles for those Exclusive Representative Producers. Mr. Gilman stated it was his opinion that there was nothing that should preclude the Governing Committee from approving this Rule change. Mr.Gilman did not feel that the Committee would be contradicting Representative Mara or the Joint Committee on Insurance's intention relative to the proposed legislation.
The motion passed on a unanimous vote.
92.5COUNSEL REPORT (Cont.)
It was the consensus of the Governing Committee that the Chairman of the Governing Committee should formally advise Representative Mara of the Governing Committee's decision in this matter.
Mr. Michael Trovato, Executive Vice President and Treasurer, advised that C.A.R. received a letter in the form of an assessment from the office of the Secretary of Consumer Affairs to fund their Automobile Insurance Public Education program. Statutorily, it obliges C.A.R. to be assessed $100,000 a year, but a reconciliation from prior year expenses makes the assessment $96,000 for 1992.
A motion was made by Mr. James Stone and duly seconded by Mr. Robert McGowan to authorize payment this year and every year, unless a vote to the contrary is taken, of assessments of up to $200,000 made pursuant to statute by the Secretary of Consumer Affairs, for Automobile Insurance Public Education.
The motion passed on a unanimous vote.
92.6MARKET REVIEW COMMITTEE
Mr. James Doherty, reporting on the Market Review Committee Meeting of May 29, 1992, advised that the Committee considered an appeal by Mr. Frank Cody in regard to the May 15, 1992 decision of the Market Review Committee to grant an Exclusive Representative Producer (ERP) appointment to the Southwick Insurance Agency, Inc. Mr. Doherty advised that the Market Review Committee voted to deny the appeal and uphold its May 15, 1992 decision.
Continuing, Mr. Doherty advised that the Market Review Committee considered an appeal by Mr. Christopher Tyrrell, Tyrrell Insurance Agency, Inc., in regard to the termination of his agency's Exclusive Representative Producer appointment by the CNA Insurance Company for failure to remit payments on a timely basis. Mr. Doherty advised that the Market Review Committee voted to uphold the appeal and overturn the termination by the CNA Insurance Company.
The Market Review Committee considered an appeal by Mr. Alfred Matthews in regard to the declination of his application for appointment as an Exclusive Representative Producer by C.A.R. Staff. Mr. Doherty advised that Mr. Matthews presented new information to the Committee, which appeared to satisfy the eligibility requirements which he had previously failed to meet. Mr. Doherty advised that the Market Review Committee voted to uphold the appeal and grant the agency an ERP appointment, subject to its meeting all eligibility requirements.
92.6MARKET REVIEW COMMITTEE (Cont.)
Mr. Doherty, reporting on the Market Review Committee Meeting of June10, 1992, advised that the Committee considered an appeal by Mr.Edward J. Partyka, representing the San Pedro Insurance Agency, in regard to the termination of the agency's Exclusive Representative Producer appointment by Amica Mutual Insurance Company for numerous violations of C.A.R. Rules pertaining to producer performance requirements. Mr. Doherty advised that the Market Review Committee voted to deny the appeal and uphold the termination of the agency's ERP appointment by Amica Mutual Insurance Company.
Continuing, Mr. Doherty advised that the Market Review Committee considered an appeal by the Coverall Insurance Agency, H. Mottard Insurance Agency, Inc., and the Alfa Insurance Agency in regard to the change in Servicing Carrier assignments as a result of alleged actions by the Horace Mann Insurance Company relative to the rollover of their agency's private passenger books of business from the Safety Insurance Company as a result of the recently completed physical redistribution. Mr. Doherty advised that the Market Review Committee, while not making a specific determination to grant or deny the requests, but act expeditiously, voted to recommend to the Governing Committee Chairman that the Commissioner of Insurance be informed of the situation and be requested to intervene as she deems necessary.
Mr. Michael Trovato advised that C.A.R. has contacted the Commissioner of Insurance and that C.A.R. has received communication from the Horace Mann Insurance Company that they agree to comply with the direction of the Market Review Committee.
In conclusion, Mr. Doherty advised that the Records of the Market Review Committee Meetings of May 5, 1992 and May 15, 1992 have been distributed and are on file with C.A.R.'s Secretary.
92.7CLAIMS ADVISORY COMMITTEE
Mr. Joseph Conlon, reporting on the Claims Advisory Committee Meeting of May 27, 1992, advised that the Committee was addressed by Mr. Michael Kelly, the former Vice-President of the Boston Claim Managers Council, who advised the Committee that the Claim Managers Council was now defunct having had its charter withdrawn by the industry's three trade associations who governed and supported the Council. Mr. Conlon advised that Mr.Kelly, on behalf of the Council, was now seeking the sponsorship of C.A.R. to continue operation of the Boston Claim Managers Council. After lengthy discussion, a motion was made to recommend, for Governing Committee approval, that C.A.R. Counsel provide a legal opinion on the proposal that C.A.R. sponsor the Claim Managers Council and that this matter be referred back to the Claims Advisory Committee for further consideration.
92.7CLAIMS ADVISORY COMMITTEE (Cont.)
A motion was made by Mr. James Doherty and duly seconded by Mr. George Peters to adopt the recommendation of the Claims Advisory Committee.
After discussion, the motion passed on a unanimous vote.
Continuing, Mr. Conlon advised that the Claims Advisory Committee was presented with a report from Staff concerning the savings, which resulted from investigations of Bodily Injury claims and the affect of Chapter 93A activity on Physical Damage claim handling.
Mr. Conlon reported that the Cost Containment Seminars are planned for June 23, 1992, June 24, 1992 and June 25, 1992 and are in the final stage of preparation. Mr. Conlon advised that the speakers are scheduled and the program is entitled Bodily Injury Evaluation, Negotiation and Settlement Techniques.
In conclusion, Mr. Conlon advised that recent activities of the Automobile Damage Appraisers Licensing Board were brought to the attention of the Claims Advisory Committee. Concerns were expressed regarding the high failure rate of applicants taking the appraisal exam and other areas pertaining to claims handling. Specific issues were requested and the matter was referred to Staff for consideration in those areas of concern. Staff will report back to the Committee following their investigation of the operations of the Board and the complaints expressed by the Industry.
92.8OPERATIONS COMMITTEE
Mr. John Kelly, Vice President of Financial Services, reported on the Operations Committee Meeting of May 28, 1992. Mr. Kelly advised that the Operations Committee considered an appeal by Norfolk and Dedham Mutual Fire Insurance Company to rescind the $6,000 penalty it incurred as a result of not returning the CA50l0 - Flat Cancellation Documentation Listing by the due date of February 28, 1992. The Norfolk and Dedham based the appeal on the fact that they are in the process of implementing an imaging system and that 175,000 files were moved from the Home Office to an off-site location. Mr. Kelly advised that during this time period, the company misfiled the listing and did not discover the error until it was too late. The listing was received by C.A.R. on March 9, 1992. The Norfolk and Dedham felt that the penalty of $6,000 was excessive for being only six business days late. Mr.Kelly advised that the Operations Committee denied Norfolk and Dedham Mutual Fire Insurance Company's appeal on a vote of eight in favor, with one opposed, one recusal and one abstention. The Operations Committee based its decision on the fact that the problem causing the late submission of the listing was within the control of Norfolk and Dedham.
92.8OPERATIONS COMMITTEE (Cont.)
Continuing, Mr. Kelly reported that the Operations Committee considered an appeal by Amica Mutual Insurance Company to rescind the $8,250 penalty it incurred as a result of returning the flat cancellation listing one day late. Amica interpreted the cover Memo of the listing as saying that the documentation must be sent to C.A.R. by February 28, 1992 rather than received by C.A.R. on February 28, 1992. Mr. Kelly advised that the Operations Committee voted eight in favor, with one opposed, one recusal and one abstention, to approve Amica Mutual Insurance Company's appeal. Mr. Kelly advised that the Operations Committee based its decision on the fact that the wording contained in the Memo was unclear regarding the exact return date of the listing.
Mr. Kelly reported that the Operations Committee considered an appeal by Pilgrim Insurance Company to rescind the $7,500 penalty it incurred for not returning the supporting documentation with the listing relating to the 1989 and 1990 policy years. Pilgrim did submit the proper documentation for the 1991 policy year by the due date, but accidentally overlooked the other two years. The proper documentation of the 1989 and 1990 policy years was received by C.A.R. Staff two business days after Pilgrim was notified. Mr. Kelly advised that the Operations Committee voted eight in favor, with one opposed and two recusals, to deny Pilgrim Insurance Company's appeal. Mr. Kelly advised that the Operations Committee felt that the problem was within the control of the company.
Continuing, Mr. Kelly reported that at the request of the Governing Committee Review Panel, the Operations Committee considered the wording contained in Chapter II, Cession Rules and Procedures, of C.A.R.'s Manual of Administrative Procedures, regarding the criteria for transactions 1 and 2 cession backdates. The Governing Committee Review Panel suggested that the Operations Committee consider adding wording that would allow backdates based upon reasons of intent to cede. Mr. Kelly advised that the Operations Committee voted unanimously to recommend, for Governing Committee approval, to modify Chapter II of the Manual of Administrative Procedures.