The Calianos Insurance Agency, a Roxbury agency established in 1955, will appear once more before the Market Review Committee of Commonwealth Automobile Reinsurers. The complaint filed by the Agency, and scheduled for hearing on April 7, 2016, at 1:00 P.M., complains that with regard to assigned risk business, the Commerce Insurance Company has withheld commission payments alleging that the Agency has guaranty checks or money orders issued by its insureds.
Agency’s prior CAR appearance led to a Division of Insurance decision
The Agency’s prior appearance before CAR’s Market Review Committee was initiated by Safety Insurance, in which the insurer sought to revoke the Agency’s commercial auto assignment. That hearing resulted in CAR revoking the Agency’s assignment and decertifying the Agency as an assigned risk producer.
The Agency appealed and ultimately won a complete reversal of CAR’s decision, as well as a rebuke of CAR’s decision-making process, from the Division of Insurance. See, Agency Checklists, December 13, 2013, “In A 46 Page Decision, Mass. DOI Reverses Calianos Agency’s ERP Cancellation and ARP Decertification by CAR.”
In the present case, the Agency filed for a hearing before the Market Review Committee against Commerce Insurance.
Claim that Agency guaranteed payment by accepting insured’s check payable to Commerce
The Agency’s allegations, contained in it request for review states that the Agency accepts payments from its insureds, on behalf of Commerce Insurance, through checks or money orders “made payable directly to Commerce Insurance.” As part of its procedure, the Agency calls Commerce notifying it that the Agency has received a money order or check for payment, as the case may be. The Agency place all checks received in a daily log and mails the checks directly to Commerce by “US Mail in a timely manner.”
As alleged by the Agency, when Commerce, has misplaced or misapplied payments or the Post Office has failed to deliver the mail promptly, Commerce has set-off the amount of the payment against the commissions due the Agency, “unjustly claiming that the acceptance of a money order or check made directly to them [Commerce] constitutes a guaranty of payment.”
Agency seeks Market Review Committee decision that Commerce “cease and desist”
The Agency Request for Review requests that the Committee rule, “…that all commissions that have been withheld be promptly paid to the agent and that this practice cease immediately and in the future.”
The Agency cites MAIP Rule 37(c) that the commission compensation must be in accordance with the commission schedule set forth in the rule and that Commerce does not, therefore, have any right of set-off the amount of the payment against the commissions due the Agency. The Agency further claims that no CAR rule “allows or even suggests” that an assigned risk carrier can withhold commissions as a guaranty against payments, where the payments have been accepted payable to the insurance company.
Commerce claims appeal is moot but MAIP Steering Committee should set policy
Commerce’s response to the Agency’s appeal to CAR, circulated by CAR on April 4, 2016, asserts that the Market Review Committee has nothing to decide. According to Commerce’s submission, “all commission dollars due the Agency for business written … have been paid. Therefore, according to Commerce, “… there is no ongoing dispute to be resolved by the Market Review Committee.”
Instead, Commerce argues that if the Agency is now essentially seeking an advisory opinion regarding “the right of set-off in [this] situation, that issue should be referred to the MAIP Steering Committee for consideration and appropriate action.”
Commerce’s response continued, notwithstanding the company’s mootness claim, to show the transactions that led to the Agency’s commissions being applied to the insured’s policy.
On one insured’s reported payment of $1,118, Commerce eventually received the insured’s payment and credited the amount of the payment back against the Agency’s withheld commissions. As for the remaining withheld balance of $879.88, Commerce returned this amount to the Agency on March 29, 2016.
In its final argument, Commerce advised that it would, “…refrain from withholding funds from the Agency’s commissions pending further developments regarding that right at C.A.R.” and reiterated that it believed that the MAIP Steering Committee should “explore” and “provide further direction to the industry regarding the right of set-off in such situations.”
Agency Checklists will be following this issue and will report if any decision comes out of this hearing allowing or prohibiting this type of commission set-off.
