On June 25, 2015, the Division of Insurance issued Bulletin 2015-04, entitled “Timing of Notices of Transfer of Insurance Coverage”. The stated purpose of the Bulletin is to “to further clarify and supplement the provisions of Bulletin 2008-10 – Documenting Transfers of Private Passenger Motor Vehicle Insurance [–] regarding the timeframe for issuing a notification of coverage transfer to a person’s current private passenger motor vehicle insurance policy…”
Bulletin 2015-04 effective October 1, 2015 sets ten-day notice requirement on auto carrier changes
Bulletin 2015-04 states that the insurance coverage transfer notification ensures that the Registry of Motor Vehicles has the proper insurance information required by Massachusetts law for a valid motor vehicle registration.
The bulletin then provides that, in order to maintain proper coverage for vehicle registration purposes, and avoid any unintended lapses in coverage the following rules should be followed after the effective date of the bulletin, October 1, 2015:
- No notification of coverage transfer should be issued to the prior producer or insurer before the insurer of the replacement policy has actually received the required down-payment or first payment.
- Any notification of coverage transfer shall be issued no later than 10 days after the day the replacement insurer receives the down-payment or first payment for the replacement polic.
Prior Bulletin, 2008-10, set notice standards but no time standards except “as soon as possible”
The 2008 Bulletin which Bulletin 2015-04 clarifies originally sought to remedy situations arising out of the advent of managed competition where consumers “found themselves with duplicative coverage and obligations for two premiums.”
These situation apparently arose over producers losing business under the new system refusing to forward carrier change notices to their companies for purely formalistic reasons, such as the notice had an electronic, rather than handwritten, signature; that the insurance company stamp confirming new coverage was not an original; or that the notice has been submitted by an insured rather than by a producer.
The Division’s response to this obstructionism was to issue in Bulletin 2008-04 guidance that stated:
- The producer of record for the new policy must notify the prior producer of record, if known, or the prior insurer of the transfer of coverage as soon as possible.
- Prior producers of record must accept the notices of transfer or other forms of insurance verification from insureds, insurers or producers of record for the new policies…
Additionally, some producers had rejected notice of transfer of carriers on the grounds that the notices received did not conform to the industry’s Form 2A. Bulletin 2008-10 noted that the 2A Form was not an official form and then specified that the only requirements that the notice of transfer would have to meet were that:
(1) The notice had to be signed by the producer of record for the new policy or, it had to be on the company’s letterhead, if issued by the new insurer directly; and
(2) The notice had to bear the registry stamp of the new insurer in hardcopy or in electronic format.
While Bulletin 2008-10 solved the immediate problem of producers who were losing insureds to competing agents or direct writers objecting to the form of the notices being sent, the Bulletin’s “as soon as possible” time allowance still caused problems.
Complaints to the Division on late coverage transfer notices
Bulletin 2015-04 references that it issuance was “Based on complaints received by the Division, it appears that the requirement in Bulletin 2008-10 that such notifications be sent ‘as soon as possible’ has inadvertently resulted in brief lapses in motor vehicle insurance in a limited number of instances.”
The Division did not elaborate on the complaints that it had received, however, a May 18, 2015 formal complaint by the Massachusetts Association of Insurance Agents (“MAIA”) to the Commissioner of Insurance against GEICO described one such problem. See MAIA Files A Complaint With The Division of Insurance Against GEICO.
The MAIA complaint alleged that a member agent received a Form 2A Transfer from GEICO May stating the agent’s client had purchased a policy from GEICO some 10 month earlier. The insured’s second policy was cancelled for non-payment but, as a result of the extremely late notice from GEICO the insured’s earned premium balance equaled over $500.
Bulletin 2015-04’ ten-day notice provision does not have the force of law
As stated by the Division, the Bulletin is “to further clarify and supplement the provisions of Bulletin 2008-10.” However, the Division’s Bulletins, such as Bulletin 2015-04 do not have the force of law. See Agency Checklists’ August 1, 2011 article: “Division of Insurance Bulletins Do Not Have the Force of Law”.
However, Massachusetts courts have held that following the guidance and advice contained in the Division’s Bulletin is evidence of good faith in any contested proceeding. Correspondingly, Massachusetts court have also found that failing to follow the guidelines of the Division’s bulletins coupled with other evidence evidences bad faith and the awarding of punitive damages under G.L. c. 93A..
Accordingly, producers and insurers dealing with motor vehicle insurance notices of transfers would be well advised to follow the Division of Insurance’s guidance and issue such notices, “no later than 10 days after the day the replacement insurer receives the down-payment or first payment for the replacement policy.”
Link to Bulletin 2008-10 and Bulletin 2015-04:
The following is a link to the text of Bulletin 2015-04: “Timing of Notices of Transfer of Insurance Coverage”.
The following is a link to the text of the Bulletin 2008-10: “Documenting Transfers of Private Passenger Motor Vehicle Insurance”.
