AG Healey’s Office says payment will provide relief to the over 200 affected homeowners
Under an assurance of discontinuance filed in Suffolk Court on April 27, 2018, Liberty Mutual Insurance Group Inc. has agreed to pay the Massachusetts Attorney General’s office $50,000 in order to resolve allegations that it improperly cancelled approximately 200 homeowners insurance policies.
According to court documents, the Attorney General alleged that Liberty Mutual had engaged in unfair or deceptive acts and practices in violation of G. L. c. 93, which occurred when the insurer canceled, “…homeowners insurance policies after the underwriting period for reasons not permitted under G. L. c. 175, § 99.”
As explained in the Assurance of Discontinuance, G. L. c. 175, § 99 limits the circumstances under which an insurance company may cancel a homeowners insurance policy after the underwriting period. Those circumstances are:
(1) nonpayment of premium;
(2) conviction of a crime arising out of acts increasing the hazard insured against;
(3) discovery of fraud or material misrepresentation by the insured in obtaining the policy;
(4) discovery of willful or reckless acts or omissions by the insured increasing the hazard insured against;
(5) physical changes in the property insured which result in the property becoming uninsurable; or
(6) a determination by the commissioner that continuation of the policy would violate or place the insurer in violation of the law.
Lack of evidence justifying Liberty Mutual’s ability to cancel these policies under the exceptions provided for under G. L. c. 175, § 99
Following a review of records provided to the Attorney General’s Office by Liberty Mutual, the AG contended that Liberty Mutual had canceled approximately 200 policies in violation of state law. More specifically, the Attorney General said that the insurer had inaccurately applied “the fraud and misrepresentation exception” as a basis for the cancellations due to the fact that the insurer lacked the required information needed in order to make such a determination based upon that exception.
As explained further in the Assurance of Discontinuance:
From at least September 1, 2012 to the present, when an insured answered “yes,” to the application questions. Liberty Mutual would conduct an inspection of the dwelling to confirm that the work had been completed within six months. If Liberty Mutual made a determination that the work had not been completed within six months, and thus also after the underwriting period, it would issue a notice of cancelation based on “discovery of fraud or material misrepresentation by the insured in obtaining the policy” (the “notices of cancelation”). G. L. c. 175, § 99.
Based on a review of documents provided to the Attorney General by Liberty Mutual, the Attorney General alleges that Liberty Mutual did not have information to determine that approximately 200 of the insureds who received notices of cancelation obtained their homeowners insurance policies through fraud or material misrepresentation.
Liberty Mutual neither admits nor denies the allegations
One of the hallmarks of an Assurance of Discontinuance allows for a party to resolve a legal issue without having to admit or deny an allegation. Such was the case here. While neither admitting nor denying the Attorney General’s allegations, Liberty Mutual entered into the Assurance of Discontinuance which includes the insurer’s guarantee to agree to all of the terms outlined therein as well as to pay $50,000 dollars.
In return, the Massachusetts Office of the Attorney General says that the $50,000 will be used “…to provide relief to homeowners who had to purchase more expensive policies as a result of Liberty Mutual’s actions.”
Our readers may remember that in 2016, the AG’s office reached a similar settlement with the Massachusetts Property Insurance Underwriting Association, better known as the “MA FAIR Plan,” regarding allegations that it was cancelling hundreds of homeowners insurance policies per year in violation of state law.
For those interested in reading about that case, please refer to Agency Checklists article entitled, “Mass. FAIR Plan To Refund $350,000 For Unfairly Cancelling Homeowners Policies.”
How to obtain a copy of the Assurance of Discontinuance as filed
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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