The FAIR Plan neither admits nor denies what the AG has described as “improper cancellation practices”
Over $350,000 will be returned to Massachusetts homeowners under the terms of a settlement agreement that The Massachusetts Property Insurance Underwriting Association (“FAIR Plan” or “MA FAIR Plan”) entered into this past week with Attorney General Maura Healey’s Office. According to the terms of the assurance of discontinuance, filed on Monday, July 25th in Suffolk Superior Court, the FAIR Plan has agreed to pay this amount to resolve allegations that it incorrectly cancelled hundreds of homeowners insurance policies over a four-year time period.
Additionally, the Assurance of Discontinuance requires the Fair Plan to make a rule filing within thirty days to permit automatic renewals of homeowners policies.
Fair Plan also required to issue automatic renewals without prepayment under court agreement
Beyond the assurance to the Attorney General that the FAIR Plan will no longer issue underwriting cancellation in violation of law, the Attorney General also has required the FAIR Plan to make a rule filing with the Massachusetts Division of Insurance that will require the FAIR Plan to automatically renew homeowners insurance policies unless it issues an intent not to renew.
The filing, once approved, will require the FAIR Plan to start automatically renewing homeowner policies unless:
- The insured contacts the FAIR Plan prior to the renewal date to cancel or nonrenew his or her policy, or
- The FAIR Plan provides written notice of its intent not to renew at least forty-five (45) days prior to the expiration of the policy.
The Assurance of Discontinuance also provides that “no renewal shall be contingent upon receipt of payment.” Instead, the FAIR Plan may subsequently cancel a policy for nonpayment after providing the nonpayment cancellation notice allowed by G. L. c. 175, § 99.
Also, with regard to the notices of intent not to renew, the FAIR Plan will have the continued responsibility to issue any intents not to renew and, as provided by the Assurance of Discontinuance, the FAIR Plan cannot “transfer this responsibility to the insureds’ producers.”
Attorney General investigates FAIR Plan and finds one thousand illegal cancellations
In the Assurance of Discontinuance, the Attorney General alleged that the FAIR Plan had “engaged in unfair or deceptive acts and practices …by canceling new business homeowners’ insurance policies after they had been in effect for sixty (60) days for reasons not permitted under G. L. c. 175, § 99.
The Attorney General claimed that her investigation showed that between January 2010 and February 2014, out of more than 100,000 new business homeowners insurance policies, the FAIR Plan cancelled over 1,000 policies after they had been in effect for sixty (60) days, in violation of § 99’s prohibition of such cancellations.
The FAIR Plan in executing the Assurance of Discontinuance stated that it “neither admits nor denies the Attorney General’s allegations.”
“A home is frequently someone’s largest investment and homeowners should be treated fairly when they purchase insurance to protect that investment,” AG Healey said. “This agreement ensures that the FAIR Plan treats policyholders appropriately when it is considering cancelling policies.”
As the insurer of “last resort” for many Massachusetts homeowners, the Massachusetts FAIR Plan was created, by statute, with the goal of providing reasonable homeowner’s insurance coverage for those homeowners unable to obtain coverage through the open marketplace. As a result, for a large majority of urban and coastal homeowners the FAIR Plan is the only homeowners insurance option available to them.
As a result, any insured cancelled by the FAIR Plan essentially has no other alternative homeowner insurance available. This is especially egregious and costly for homeowners with mortgages that require homeowners insurance. A cancellation of a FAIR Plan policy for this type of insured generally ends with a mortgage company purchasing a force-placed policy on behalf of an insured. The mortgage company then bills the homeowner for that premium, which causes a homeowner to have a much higher insurance premium along with a lot less coverage than a traditional homeowners policy.
The AG will use the money to offset affected homeowners from unfair cancellations
Under Massachusetts law, once a homeowners insurance policy has been in effect for at least 60 days, it may only be cancelled for a limited number of reasons, such as in the case of nonpayment of premium. According to the AG’s Office, however, the FAIR Plan disregarded this requirement resulting in the improper cancellation of hundreds of homeowners’ insurance policies during a four year period starting in January 2010 through February 2014. In particular, it alleged that the FAIR Plan frequently inspected insured properties after the 60 day period and then “… impermissibly cancelled policies in instances where the FAIR Plan did not approve of the property’s condition.”
As a result of the AG’s investigation into the FAIR Plan’s practices and the resolution entered into by both parties, the Attorney General’s Office announced that it will use the $350,000 that the FAIR Plan has agreed to provide relief to those homeowners who were forced into forced-placed policies in response to the FAIR Plans improper cancellation of their traditional homeowners policy. While homeowners affected by the FAIR Plan’s practices have insured homes all across the Commonwealth, the AG says the main concentration of affected homeowners live in Boston, Brockton, Springfield, and Worcester.
Copy of Assurance of Discontinuance as filed available
For a free copy of the Assurance of Discontinuance as filed with Suffolk Superior Court by the Attorney General, send your request to: scotter@agencychecklists.com.
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