On June 21, 2017, the Market Review Committee of Commonwealth Automobile Reinsurers (“Market Review”) heard Patriot PCL Insurance, LLC’s (“Patriot”) Request for Review of Safety Insurance Company’s (“Safety”) May 3, 2017 cancellation notice terminating Patriot’s assignments to Safety as an exclusive representative producer or both ceded commercial motor vehicle insurance policies and ceded taxi, limousine and car service insurance policies effective June 2, 2017.
Safety cancellation notice presents litany of violations
Safety’s May 3, 2017 notice terminated Patriot’s contracts due to ongoing performance issues with Patriot’s production of ceded commercial business as an assigned exclusive representative producer.
Safety conducted an on-site audit of the agency’s Everett and Hyannis offices in November of 2016. On January 5, 2017, Safety issued a letter to Patriot detailing various areas of noncompliance with CAR Rules and Safety’s policies and procedures illustrated by the audit, as well as continuing issues related to dishonored premium payments submitted by Patriot to Safety. These compliance issues included:
- late submission of new business,
- late notice of certified registrations,
- failure to timely submit required down payments: and,
- charging insureds prohibited fees.
Patriot’s president does not dispute finding of Safety’s audits or alleged violations
At the Market Review hearing, Patriot’s president, Ricardo De Oliveira, appearing without counsel, did not dispute Safety’s allegations that Patriot had violated CAR Rules and Safety’s policies and procedures. As he had claimed in Patriot’s Request for Review Mr. De Oliveira acknowledged the agency’s failures and blamed them on the rapid growth of the agency’s book of business, his own poor management and decision making, and the alleged dishonesty of a former employee.
Patriot’s 143-page Request for Review did have attached a police complaint filed by Patriot against a former employee of Patriot. In that complaint, Mr. De Oliveira stated that he owned a hotel in Florida and was rarely in Massachusetts. He had hired this employee in April 2016, to manage the agency. The employee quit in January 2017, when Mr. De Oliveira returned to Massachusetts to audit the agency’s files and “noticed $50,000 missing in cash.”
The additional pages in Patriot’s Request for Review consisted of various customer testimonials, customer satisfaction surveys, commission statements, copies of Safety’s agreements with Patriot, Safety’s cancellation notice, letters from Safety to Patriot on “Unresolved Dishonored Payments,” and billing guidelines from Safety.
Mr. De Oliveira’s essentially requested the committee to recognize that the agency now had a business plan and additional partners, including his family’s attorney, who could ensure that the agency complied with CAR’s rules and Safety’s billing and collection standards going forward. And based on these changes he and the agency should be given an additional chance.
Safety’s attorney lists Patriot’s past and present failings
Safety’s Corporate Counsel and Director of Legal & Regulatory Compliance, Elizabeth B. Brodeur, presented Safety’s position that the Market Review Committee should uphold Safety’s cancellations.
Attorney Brodeur argued that none of Patriot’s submissions or Mr. De Oliveira’s statements overcame the “longstanding, clearly-documented and continuing compliance issues occurring at the agency.” She noted:
- The agency’s customer satisfaction surveys’ were completely unrelated to whether Patriot has complied with CAR Rules and Safety’s policies and procedures in the production of ceded commercial motor vehicle insurance policies.
- The commission statements Patriot submitted may show the growth of the agency’s book of ceded commercial business, but Safety’s termination letter and its response to Patriot’s Request for Review prove that Patriot was unable and continues to be unable to accept and place this business in accordance with CAR Rules and Safety’s policies and procedures.
- Also, that the agency’s book of business may be growing is no reason to allow the agency to continue to operate in violation of the required rules and procedures.
Attorney Brodeur also noted that Mr. De Oliveira did not file the police report until on May 19, 2017, after Safety had cancelled the agency and that this timing suggests that it was pursued in support of Patriot’s Request for Review. However, Attorney Brodeur said Patriot’s non-compliance preceded this individual’s employment and continued after his departure up to and beyond Safety’s cancellation.
The bulk of Attorney Brodeur’s statement in support of Safety’s cancellation consisted of hard evidence of Patriot’s violations and seeming inability to comply with CAR rules and Safety’s contract.
As an example of Patriot’s inability to comply with CAR and Safety’s rules, Safety’s documentation showed that in the 36 days following Safety’s May 3, 2017 cancellation notice, Patriot failed to:
- submit any down payment on 26 ceded commercial policies;
- timely notify Safety of the binding of at least four ceded commercial policies;
- timely submit a sufficient down payment on 13 ceded commercial policies: and,
- have sufficient funds in its premium account resulting in four of the agency’s checks down payment checks being dishonored.
Also, on May 17, 2017, Safety dunned the agency for $33,064.00 in insufficient down payments submitted and then on June 8, 2017, again dunned the agency for another $19,994.00 in insufficient down payments.
The examples of Patriot’s prior violations based on Safety’s audits of the agency showed:
- The agency charged some of its customer’s “application fees” of up to $200.00, “binding fees” of up to $300, and “corporation/dba fees” of up to $650.00.
- The agency’s failure to collect and remit required down payments resulting in Safety dunning the agency on an almost monthly basis for anywhere from several thousand dollars up to almost seventy thousand dollars.
- The agency’s failure to submit on a regular basis any down payment for business it bound again resulting in Safety chasing the agency for the money owed.
- The agency failure to report bound business under the 48-hour rule with late reporting often being up to 20 to 30 days and in some cases, being over 30 days late all the way up to almost 90 days in at least one case.
Motion made and seconded to uphold Safety’s cancellation
At the end of Mr. De Oliveira’s statement, none of the committee members had had any questions. Likewise, when Attorney Brodeur finished her statement again no committee members had any questions.
When the chair called for discussion, committee member Sumner Gilman made a motion that was quickly seconded for the Market Review Committee to uphold Safety’s cancellations. The committee voted unanimously to deny Patriots Request for Review and to uphold the cancellations.
CAR staff member, John Metcalfe, advised Mr. De Oliveira of the agency’s right to appeal the Market Review Committee decision to a Governing Committee Review Panel.
Pursuant to CAR Rule 14.F, notwithstanding the Market Review Committee’s vote Safety’ termination are stayed pending Patriot exhausting its appeal rights under CAR Rule 20.
