On January 28, 2019, Commonwealth Automobile Reinsurers (“CAR”) released the record of the December 19, 2018 hearing at CAR’s Market Review Committee on the Shannon Insurance Agency, of 429 S. Washington Street, North Attleboro’s appeal of the termination of the agency’s commercial automobile Exclusive Representative Producer appointment by the Commerce Insurance Company.
Nine-person Committee with five agency and four company members hear the appeal
The members of the Market Review Committee hearing the Shannon Agency’s appeal were:
Mr. Charles Boynton, III—Chair, Boynton Insurance Agency; Ms. Elizabeth Brodeur, Safety Insurance Company; Ms. Sheila Doherty, Doherty Insurance Agency, Inc.; Ms. Roberta Fitzpatrick, Arbella Insurance Group; Mr. Harold Gerbis, Quincy Mutual Group; Mr. Sumner Gilman, Economy Insurance Agency, Inc.; Mr. David McCormick, McCormick and Sons Insurance Agency, Inc.; Ms. Marie-Armel Theodat R. Theodat Insurance Agency, Inc.; and Mr. Kenneth Willis Plymouth Rock Assurance Corporation.
The tenth member of the Committee, Mr. Andrew Drayer, MAPFRE U.S.A., the parent company of Commerce Insurance, recused himself from participating in the hearing.
Shannon Agency first appealed over its nonreceipt of Commerce’s termination notice
On September 11, 2018, Commerce sent the Shannon Agency a thirty-day notice that Commerce was terminating the Shannon Agency’s commercial exclusive representative producer appointment for violations of CAR Rule 14.B.1.d., e., g., j., x., and y. The 150-page notice of termination documented, in Commerce’s opinion, the Shannon Agency’s failure to follow CAR’s rules justifying Commerce’s action to end the relationship.
Under CAR rules, the Shannon Agency had thirty calendar days from the delivery of the termination notice to file a completed “Request for Review/Relief” form with CAR to claim review by CAR’s Market Review Committee. By filing a proper request for relief within thirty days, CAR rules stay the termination pending the agency’s appeal.
On November 6, 2018, twenty-five day after termination’s appeal period expired, Paul F. Shannon, Jr. of the Shannon Insurance Agency, LLC, submitted a Request for Review appealing Commerce’s September 11, 2018 termination notice.
In its request for review, the Shannon Agency claimed it had never received the overnight letter sent by Commerce. Commerce filed an affidavit over the delivery of the notice to the agency per the delivery company’s tracking number. For the agency’s part, it contended the termination notice package had been left outside the agency’s office and never received.
CAR counsel advises the Committee to vote on both the procedural and substantive issues
At the December 19 hearing of the Market Review Committee, CAR counsel, Attorney Ben Hincks, provided the Committee with procedural information advising that the Committee has been convened to initially consider whether or not the termination should be upheld on the procedural ground that CAR received the Shannon agency’s Request for Review on November 6, 2018, rather than within 30 calendar days of the date on which Commerce alleges the termination letter was delivered to the agency.
However, he advised the Committee members that irrespective of the Committee ruling on whether the Shannon Agency’s November 6 request for review was untimely, the Committee should still rule on whether Commerce’s termination should be upheld based on any or all of the specific grounds stated in the notice of termination.
Committee hears the Shannon Agency’s complaints against Commerce
Mr. Paul Shannon of the Shannon Insurance Agency, LLC, presented the agency’s appeal. He stated that he was assigned to Commerce in 2012.
In December 2017, a new Commerce underwriter was assigned to his agency. In the past, the agency had never encountered any issues with the company, but beginning in December of 2017, many of the agency’s policies that included large risks such as buses, sand and gravel haulers and vanpools were being non-renewed by Commerce. Additionally, the company was no longer accepting any new business policies written by the agency.
Mr. Shannon stated that risks that had been on his books for many years and renewed by Commerce each year without issue were now being scrutinized and additional reports such as quarterly fuel tax records and trip logs were being requested at renewal. If this documentation was not received, Commerce would non-renew the policies.
However, Mr. Shannon pointed out that Commerce was then rewriting the same policies with another Commerce agent, without requesting the documentation previously requested from the Shannon agency. In his opinion, he felt that this inconsistency in underwriting requirements demonstrates a clear bias against his agency. He further noted that although he did not have a large amount of business with Commerce, he averaged approximately $3540,000 in commissions yearly over the past six years and the cancellation would cause a substantial loss of income for his agency.
In response to questions from Committee members, Mr. Shannon stated that he had received a June 5, 2018 letter from Commerce which identified a number of concerns that the carrier requested the agency address.
He said that prior to receiving this June letter, he had been in communication with CAR staff to request reassignment to another carrier because of the numerous issues that he was having with Commerce, He also pointed out that although his agency had been with Commerce for years, it had never been visited by a Commerce marketing representative. Also, while now he had many conversations with this new underwriter, his requests to speak with an underwriting manager had gone unheeded.
Now, as a result of Commerce nonrenewing the agency’s larger accounts, the agency’s current book of business with Commerce had dwindled to only eight to ten policies
Commerce says it acted properly and that the agency owes $24 thousand in return commissions
Ms. Sarah Clemens presented Commerce’s position on the agency’s request for review.
She first noted that Commerce had complied with the termination provision specified in Rule 13.B.6.b. and that the Shannon Agency’s request for review was not within the thirty-day period allowed by CAR rules. She stated that the company had mailed the termination letter in compliance with CAR Rules, included proof of mailing to the agent’s principal place of business and that a confirmed receipt to the agency’s front door in Attleboro was received.
Ms. Clemens did acknowledge, as the agency alleged, that in December 2017, a new individual took over as the agency’s underwriter. However, in dealing with the agency, Commerce’s underwriter actions were consistent with the obligations of the Limited Servicing Carrier Agreement. The requests for additional reports were to validate eligibility, proper classification and rating of the risk consistent with the standards CAR’s committees have approved to create consistency among Servicing Carriers’ handling of risks in the commercial marketplace.
On June 5, 2018, Commerce issued a warning letter to Mr. Shannon identifying the areas of the agency’s non-compliance and inconsistencies with CAR Rules. Mr. Shannon was given sufficient opportunity to communicate with Commerce’s underwriting team relative to the issues contained in the letter. However, the agency did not communicate, and the identified concerns were never addressed. Additionally, an offer for Mr. Shannon to communicate with Mr. John Kelly at MAPFRE was taken up by the agency.
Ms. Clemens then addressed the information contained in Commerce’s termination letter and some inaccuracies not disclosed by Mr. Shannon. She identified several Rule 14 violations incurred by the agency, including:
- Failure to provide a signed premium finance application/agreement in accordance with the two business day requirement:
- Failure to verify the information provided by the applicant:
- Failure to verify policies canceled for non-payment to collect unearned premium due to other carriers: and,
- Forwarding payments to the Servicing Carrier within two business days.
Ms. Clemens further noted that the Shannon agency as of the hearing had a return commission balance of over $24,000 owed to Commerce relative to policies that had been canceled.
The Committee unanimously allows a late appeal by the agency
After the presentations ended, the Committee considered the question of the late appeal by the agency. After some discussion, on a unanimous motion, the Committee decided to accept the late appeal and consider the termination on its merits despite the lateness of appeal.
Committee votes on the merits to deny the Shannon Agency’s appeal
Following their decision to decide the Shannon Agency’s request for review on its merits, the Committee engaged in reviewing the issues relating to the termination and the violation of the CAR Rules. After further discussion, the Committee then proceeded to vote on each of the Rule sections cited in Commerce’s termination letter. The votes were as follows:
- CAR Rule 14.B.1.d. violation: In a vote with 7 in favor, 1 opposed and 1 recused, the Committee agreed that Commerce has established that Shannon Insurance has violated CAR Rule 14.B.1.d. by failing to submit for all applicants a new business application for insurance with appropriate certification form(s), completed in their entirety, and a signed premium finance agreement, if applicable, within two business days.
- CAR Rule 14.B.1.e. violation: In a vote with 8 in favor and 1 recused, the Committee agreed that Commerce has established that Shannon Insurance has violated CAR Rule 14.B.1.e. by failing to provide a reasonable and good faith effort to verify the information provided by the applicants, including licensing and rating data.
- CAR Rule 14.B.1.g. violation: In a vote with 8 in favor and 1 recused, the Committee agreed that Commerce has established that Shannon Insurance has violated CAR Rule 14.B.1.g. by failing to verify that the applicant has not been in default in the payment of any Motor Vehicle Insurance premium in the past 24 months.
- CAR Rule 14.B.1.j. violation: In a vote with 8 in favor and 1 recused, the Committee agreed that Commerce has established that Shannon Insurance has violated CAR Rule 14.B.1.j. by failing to forward all premium payments to a Servicing Carrier within two business days of receipt or within the additional time allowed for qualified premium financing by a licensed premium finance company.
- CAR Rule 14.B.1.x. violation: In a vote with 7 in favor, 1 opposed and 1 recused, the Committee agreed that Commerce has established that Shannon Insurance has violated CAR Rule 14.B.1.x. by failing to comply with all of the conditions set forth in its Limited Servicing Carrier Agreement with Commerce, namely paragraphs 1.B. and 1.H of that Agreement.
- CAR Rule 14.B.1.y. violation: In a vote with 6 in favor, 2 opposed and 1 recused, the Committee agreed that Commerce has established that Shannon Insurance has violated CAR Rule 14.B.1.y. by failing to comply with all of the provisions of the Rules of Operation and the Manual of Administrative Procedures.
Also, following each of the above votes, the Market Review Committee voted whether the several violations “provide[d] a valid basis for termination.” By the same exact votes, on each of the identified rule violations, the committee member voted the rule violations in each instance provided a valid basis for Commerce’s termination of the Shannon Agency.
Accordingly, based on these votes, the Committee upheld Commerce’s termination of the Shannon Agency’s Exclusive Representative Producer contract with the company.
Agency notified of its right to appeal the denial of its appeal to the Governing Committee Review Panel
Following the votes to uphold Commerce’s termination, the Shannon Agency was advised it had thirty days to petition CAR for a review of the Market Review Committee’s decision by a Governing Committee Review Panel under CAR Rule 20.
Also, pursuant to CAR rules, during the appellate process, there is an automatic stay of Commerce’s termination until the appeal process is completed.