The Automobile Insurers Bureau (“AIB”) has filed with the Division of Insurance for use by its members, a new 2016 Massachusetts Personal Automobile Insurance policy form. At least one company has either already filed or is about to file to use the new form. Based on the changes discussed below, the 2016 form should become the standard policy form for company use in short order.
The new policy form changes a number of provisions of the 2008 policy form presently used by Massachusetts automobile insurers. The new policy form also simplifies and clarifies some of the language used in the 2008 policy form.
The following summary highlights some of the changes in the new policy form. For those readers interested in the form itself and a detailed description of all the changes from the 2008 form, a link to the AIB site is provided at the end of this article.
Some changes big and small
The new policy form keeps the definitions of “You”, Your, “We” Us and Our referring to the insured and the company issuing the policy. However, one simplification is the inclusion of the insured’s “spouse while a household member” as a term within the definition of “You.” This change simplifies the term’s usage to the definition rather than having to be repeated in the various coverage sections as in the 2008 form.
Punitive damages excluded
Part 1. “bodily injury to others” and Part 5. “optional bodily injury to others” now have an explicit exclusion for punitive or exemplary damages that simply states:
“We will not pay for punitive or exemplary damages.”
Massachusetts law does not allow punitive damages or exemplary damages as a matter of the common law. There are statutes, however, that do allow punitive damages. The most important for purposes of an automobile insurance policy is the wrongful death statute. Under that statute punitive damages are awarded for gross negligence or willful acts. However, other states do allow punitive damages under more circumstances. For example, Florida may allow punitive damages for an accident involving excessive use of alcohol or knowingly driving a defective vehicle. Agents with insureds wintering or regularly visiting in states like Florida may wish to consider this exposure.
Ride-sharing exclusion part of policy now
The ride-sharing endorsement to the 2008 policy form, (See Agency Checklists October 7, 2013 article, “New Endorsement Makes It Clear: No Coverage for Personal Vehicle Used in Ride-sharing Program”) is now in the policy for Part 1. “bodily injury to others,” Part 2. “Personal injury protection”, Part 3. “Bodily Injury caused by an uninsured auto,” Part 4. “Damage to someone else’s property,” and all optional insurance, Parts 5-12. The relevant exclusion states that policy provides no coverage for “your auto:”
…[W]hile being used as, or available for use as, public or livery conveyance, including a vehicle for hire through a ride-sharing program, car-sharing program, and transportation network service which operate under an agreement and for compensation. …”
The addition of this exclusion to the compulsory coverages is new and results from the passage of the Network Transportation Company bill requiring such companies to have insurance and allowing automobile insurers to exclude coverage for compulsory liability and personal injury protection benefits. See Agency Checklists’ August 1, 2016 article, “Legislature Gets Transportation Network Law On the Books in The Nick of Time.”
Interest on arbitration awards
For Part 3. “Bodily injury caused by an uninsured auto” and Part 12.” Bodily injury caused by an underinsured auto” the policy adds a provision for the payment of interest on arbitration awards stating:
Unless otherwise agreed, all monetary awards not paid within thirty days after the receipt of the award shall bear interest from the date of award at the rate allowed by statute.
This additional provision resolves an issue arising from a Supreme Judicial Court decision, ruling that arbitration awards would bear interest from the date of the award. Since uninsured and underinsured claims must be arbitrated, the decision resulted in additional claims for unpaid interest on these awards. With this change, insure will have a 30-day grace period to pay the award and avoid having to calculate interest from the date of the award.
Property damage in loading and unloading
In Part 4. “Damage to someone else’s property” the insuring agreement has several changes. The first is to clarify the scope of the coverage by expanding the definition to read that payment applies to:
Under this Part, we will for damage or destruction of the tangible property of others caused by an accident and arising from the ownership, maintenance or use of an auto, including loading and unloading.
The 2008 form stated for this coverage that:
Under this Part, we will pay damages to someone else whose auto or other property is damaged in an accident.
No coverage for towing under property damage coverage
The 2016 form also provides a new restriction on payments for several ancillary expenses insureds or tow companies relating to third-party property damage claims. This additional sentence provides:
The amount we will pay does not include compensation for physical damage to, or towing or recovery of, your auto or other auto used by you or a household member with the consent of the owner, or any decreased value or intangible loss claimed to result from the property damage unless otherwise required by law.
The restriction in the above paragraph has resulted from seemingly exorbitant claims being made by tow companies providing services at the site of an auto accident. The restriction applies to Part 4 only.
Optional bodily injury limited to insured’s use of an auto
The insuring agreement for Part 5. “Optional bodily injury to others” has an additional condition added to the insuring agreement. The additional language from the 2008 form is underlined:
Under this Part, we will pay damages to people injured or killed in an accident if you or a household member is legally responsible for the accident and such accident arises out of the ownership, maintenance, or use of an auto by you or the household member.
This change appears to result from the optional bodily injury insuring agreement in the 2008 form having an unusually broad coverage. Without the additional language in the 2016 form, there might have been theoretically coverage for a situation where an insured became legally liable for an auto accident without actually using a motor vehicle. E.g. An insured riding a bike who negligently caused cars avoiding the bike to crash with resulting bodily injuries.
No optional coverage for liability assumed under contract
Part 5. “Optional bodily injury to others,” Part 7. “Collision,” Part 8. “Limited Collision,” and Part 9. “Comprehensive” all have a new exclusion for assumed liability. This exclusion states that insurer will not pay:
For any liability assumed under any contract or agreement.
For the exclusion Part 5. “Optional bodily injury to others” the exclusion also provides that the company “will not pay or defend.”
MedPay exclusion for bad acts
Part 6. “Medical Payments” now has the same exclusion that applies to Part 2. “Personal injury protection” for actions by a claimant in violation of the law or for intentional acts. This exclusion provides no coverage for:
Any person who contributed to his or her injury by operating an auto (a) while under the influence of alcohol, marijuana, or narcotic drugs, (b) while committing a felony or seeking to avoid arrest by a police officer, or (c) with the specific intent of causing injury to himself, herself, or others.
MedPay duplicate payment endorsement incorporated into policy
Part 6. “Medical Payments” also has incorporated into the body of the policy the medical payment endorsement. This addition avoids duplicate payments from the instant policy and from any other auto policies or health insurance and adds the following language to this coverage part:
No payments will be made under this Part that duplicate payments made for the same bodily injuries under Parts 1, 2, 3, 5, or 12 of this Policy. In addition, no payments will be made under this Part that duplicate payments made for the same bodily injuries under any other auto insurance policy or under a health insurance policy covering the injured person
The original endorsement had been prompted by a 2013 Supreme Judicial Court decision holding that MedPay benefits under and auto policy were payable even though an insured’s medical expenses were covered by and paid under a separate policy of health insurance.
Collision and comprehensive repair cost limited to prevailing competitive price
Probably the greatest change in the 2016 policy form over the 2008 form is a “prevailing competitive” price provision for the payment for repair costs under “Part 7. “Collision,” Part 8. “Limited Collision,” and Part 9. “Comprehensive.”
The 2016 form adds the following sentence relating to repair costs under these coverages:
The cost to repair the auto is limited to the prevailing competitive price, which is the price we can secure from a licensed repair facility conveniently located to you.
This prevailing rate provision may surprise insureds that decide to utilize auto body repair shops that are not preferred shops for the company issuing their policies. Many such auto body repair shops may not agree to accept the prevailing competitive price offered by insurers under this provision. As a result, some insureds may find their autos held by the independent auto body repair shops under mechanic liens for the payment of the difference between the prevailing competitive price paid by the carrier and the amount the auto body repair shops has charged.
Collision and comprehensive actual cash value includes depreciation, betterment, and physical condition.
The next two sentence added to “Part 7. “Collision,” Part 8. “Limited Collision,” and Part 9. “Comprehensive” specify the calculation of actual cash value of the insured vehicle stating:
Unless you have purchased agreed amount coverage, actual cash value of the auto will be determined at the time of the loss. Actual cash value may include an adjustment for depreciation and betterment and for the physical condition of the auto.”
Although the term “actual cash value” is qualified in this section, the 2016 form also adds a new and more complete definition of the calculation of actual cash value to the policy form for possible total losses. This appears in ¶ 21 of the policy’s General Provisions and Exclusions. This provision, 21. Actual Cash Value, states:
Whenever the appraised cost of repair of an auto plus the probable salvage value of the auto may be reasonably expected to exceed the actual cash value of the auto, we shall determine the auto’s actual cash value. Our decision shall be based on a consideration of all of the following factors:
- The retail book value for an auto of like kind and quality, but for the damage incurred;
- The price paid for the auto plus the value of prior improvements to the auto at the time of the accident, less appropriate depreciation;
- The decrease in value of the auto resulting from prior unrelated damage which is detected by the appraiser; and
- The actual cost of purchase of an available auto of like kind and quality but for the damaged sustained.
Although this provision by its terms applies to potential total losses, the detailed considerations for calculating actual cash value likely will become the standard applied for calculating actual cash value for losses under the policy form.
Supplementary payment for judgment interest applies to policy limit only
In the policy form’s General Provisions and Exclusions’ ¶ 3(B), the payment of postjudgment interest on suits that the insurer defends no longer applies to the whole judgment. The 2016 policy form provides that postjudgment interest is only payable for:
Interest on that part of a judgment or arbitration award that is within our limits of liability which accrues after the judgment or award in any matter we defend
The 2008 policy form provided for the payment of, “Interest that accrues after judgment is entered in any suit we defend.”
Anti-assignment provision for collision and comprehensive
The 2016 policy form also adds in ¶ 22 of its General Provisions and Exclusions, a new provision applicable to” Part 7. “Collision,” Part 8. “Limited Collision,” and Part 9. “Comprehensive” that prohibits the assignment of any interest under the policy without the issuing company’s knowledge or consent. Any such assignment is “void or invalid.”
The full provision entitled “Assignment” states:
Under Collision (Part 7), Limited Collision (Part 8), and Comprehensive (Part 9), an assignment of interest under this policy will not bind us without our knowledge or consent. Any improper assignment shall be void and invalid. The assignee shall acquire no rights under this contract and we shall not recognize any such assignment. This limitation on assignment shall not affect our right to subrogation under this policy.
This provision would seem to have it genesis from a movement among auto body repair shops that have no insurance company repair affiliations to obtain broad assignments of rights from insureds. These auto body repair shops then seek to use the assignments as the basis for Division of Insurance complaints or suits against the insurance company issuing the policy in the name of the insured for the benefit of the auto body repair shop.
About the AIB
The 2016 policy form was prepared and filed with the Division of Insurance for use by its member insurance companies.
The AIB has been the auto industry’s service bureau here in Massachusetts since 1925, throughout the “Fix and Establish” era, and now in the “Managed Competition” era. It is an all-service organization for personal and commercial auto offering rating support, rules and forms support, actuarial and legal services and much more for its 270+ member companies.
It provides to its member companies broad market based knowledge from over 80 years of experience; advisory rates for personal and commercial auto for companies writing less than 1% of the market; rules and forms service for its members for both personal and commercial auto; actuarial data support for members with their own company data for making personal and commercial filings; and customized filing service and actuarial support for competitive based filings of our members.
The AIB also administers the nation’s premier auto claims database for in-depth anti-fraud efforts of Massachusetts auto insurers and provides training and education on key aspects of the Massachusetts automobile insurance process.
Links to the 2016 policy form and memo on policy form changes
The 2016 policy form and the memo on all changes from the 2008 form appear at: AIB Massachusetts Automobile Insurance Policy