On March 25, 2019, Commonwealth Automobile Reinsurers (CAR) published Bulletin 1075, implementing the standards approved by CAR’s Governing Committee unanimously approved at their February 13, 2019 meeting. The approved standards will apply to validate the radius class and geographic classifications of trucks, tractors and trailers and public automobiles of commercial automobile residual market risks.
Bulletin’s standard effective June 1, 2019, for all commercial servicing carriers and exclusive representative producers
The standards will take effect on June 1, 2019, and will apply to all commercial automobile servicing carriers and exclusive representative producers. The standards provide that in determining and validating radius class and geographic classification of trucks, tractors and trailers and public automobiles in the residual market managed by CAR that upon request of the servicing carrier, the applicant shall be required to substantiate with permanent records that the automobile is being used as set forth in the application or renewal questionnaire.
Servicing carriers and exclusive representative producers will validate an automobile’s principal place of garaging and principal geographic area of operation to determine the radius and geographic classification under the new standards.
The standards for determining and validating garaging
Under the standards for garaging, the evidence should establish the location at which the automobile is garaged the majority of the time that the automobile is not in regular use. Servicing carriers and exclusive representative producers may use to verify principal garaging:
- Google Maps;
- Registry of Motor Vehicles records;
- Secretary of the Commonwealth Corporations Division web site records;
- The risk’s web site; and the;
- Federal Motor Carrier Services Administration web site.
If any inconsistencies appear in the underwriting of the risk relating to garaging, the applicant will have to provide credible documentation, such as lease agreements or property owner certification, to validate garaging as represented on the application.
Standards for the determining and validating principal area of operation of risks
Under the standards for area of operations, the evidence should validate an automobile’s principal geographic area of operation. For this determination, servicing carriers and exclusive representative producers may use:
- The Mass. Department of Revenue Form IFTA-101—Quarterly Fuel Use Tax Schedule
- Individual vehicle mileage reports
- Vehicle trip logs.
- Central Analysis Bureau (CAB) reports.
- Safety and Fitness Electronic Records (SAFER)
- SafeStat Systems
- Executed service provider contracts
Requirements for the risk or the exclusive representative producer to provide garaging and operations validation
The servicing carrier may also request an SIU investigation of the risk’s garaging or operations in cases of suspected insurance fraud or questionable evidence.
In either case, whether as part of the underwriting process or an SIU investigation, the exclusive representative producer placing the risk’s principals or owners will have to provide evidence to corroborate the garaging and operations information submitted by the exclusive representative producer placing the risk.
If the applicant is unable to provide “credible permanent records” to confirm an automobile’s principal garaging, the risk’s radius class will default to “intermediate radius” and its territory to “territory 10 (Boston).”
If the risk that has been in business for more than a year and subsequently provides credible documentation to validate a different radius class and territory, the servicing carrier may only endorse the policy prospectively based on the date the risk provided the necessary documentation.
If the risk that has been in business for less than a year, it can have its policy’s corrected radius and territory endorsed back to the policy’s inception date. However, to have its policy so endorsed, it must provide credible evidence of garaging to its servicing carrier at least ninety days before the policy’s expiration. When such a risk provides this evidence within ninety days of the policy’s expiration date, the rating change would only apply for a renewal policy.
Commercial servicing carriers required to audit and monitor garaging and operations
The bulletin notes that under CAR Rule of Operation 10–Claims, servicing carriers are required to conduct audits on representative samples of policies to verify garaging and policy facts.
However, the bulletin cautions that occasions may occur where market conditions may require mandatory servicing carrier SIU investigations principal garaging and operations because of:
- suspected fraud:
- increased loss experience, or
- other negative impacts on the commercial automobile residual market during a servicing carrier’s contract period.