On Thursday, March 15, 2017, a three-person Governing Committee Review Panel (“Review Panel”) of Commonwealth Automobile Reinsurers (CAR) held a two-hour hearing on the appeal by Point Insurance (“Point”) of the November 28, 2017, decision of CAR’s Market Review Committee. This decision had upheld Arbella’s June 29, 2017 notice of termination of its limited servicing carrier agreement with Point for commercial auto business.
Under CAR’s Rules, Arbella’s cancellation had been automatically stayed pending a final decision by the Review Panel. With this adverse decision, Arbella’s contract cancellation will take effect unless Point can obtain a further stay from the Division of Insurance.
Appeal involved five rule violations alleged by Arbella
Point’s appeal to the Review Panel afforded Point essentially a new hearing on Arbella’s cancellation: The Governing Committee Review Panel heard all the claims and parties anew and made their own decision independent of the Market Review Committee’s decision.
The Review Panel consisted of Mr. Thomas DePaulo, Chair, Cabot Risk Strategies, Mr. John Kelly MAPFRE U.S.A., and Ms. Meredith Woodcock, Liberty Mutual Group.
The panel heard evidence relating to the five rule violations alleged by Arbella in its cancellation notice:
- Rule 14 B.1.c: Point failed to refrain from engaging in fraudulent activity in connection with the business of Motor Vehicle Insurance;
- Rule 14 B.1.e: Point failed to provide a reasonable and good faith effort to verify the information provided by applicants, including licensing and rating data;
- Rule 14 B.1.k: Point failed to notify Arbella of Suspected Fraud;
- Rule 14 B.1.l: Point failed to cooperate with Arbella during its investigation;
- Rule 14 B.1.n: Point ordered coverages from Arbella for which the insured was not eligible.
Continuance to await a pending decision by Division of Insurance denied
Counsel for Point commenced the hearing before the Review Panel seeking a stay or continuance of the proceeding to await a decision of the Division of Insurance.
Before Arbella issued its cancellation, Point had sought relief against Arbella from CAR alleging ten practices employed by Arbella, in dealing with Point and its customers, constituted unfair, unreasonable, and improper conduct in violation of CAR’s Rules. After CAR denied any relief, Point appealed its case to the commissioner of insurance. Arbella’s See Agency Checklists’ article of February 17, 2017, “Point Insurance Loses Appeal to CAR Review Panel; Next Stop Commissioner of Insurance.”
Point submitted to the Review Panel communications with the Division of Insurance hearing officer. In February the hearing officer had stated in response to Point’s advice on the Review Panel scheduling a hearing for March 15, 2018, ” “This matter remains a top priority and I anticipate issuing a decision shortly, but I cannot provide an exact timeline.”
Point’s counsel, Dana A. Casher, argued to the Review Panel that the imminent decision of the Division of Insurance was essential for her client having a fair hearing. To Point, the issues before the Division of Insurance involved matters which if decided in Point’s favor would materially affect the validity of the grounds Arbella relied upon for its cancellation.
After consultation with counsel for CAR, the Review Panel denied the request for a continuance.
Review Panel hearing although independent involved prior filings by Arbella and Point
Although the appeal to the Review Panel is de novo, the underlying documentary evidence presented by both sides at the Market Review Committee was part of the hearing evidence.
In this case, Arbella had submitted in support of its cancellation letter almost 500 pages including documentary evidence related to fifteen insureds and applicants for insurance with transcripts of an interview with each insured by an Arbella SIU investigator and a private detective.
These transcripts of the recorded statements according to Arbella proved Point had:
- Represented, on several occasions, in applications for commercial policies that licensed Massachusetts drivers would be operating the vehicles when in fact, no validly licensed driver was going to operate the vehicle.
- Advised applicants that did not have a valid Massachusetts license to find “anyone” with a Massachusetts license and fraudulently represent that the Massachusetts license holder would be operating the vehicle to be insured.
- Represented that the vehicle was owned by a business entity when it was not. Point had also represented that operators of the vehicles owned a business when they did not.
- Had continued to commit premium fraud by advising operators that their insurance was cheaper when they represent that they have a business entity even though they do not.
- Had fraudulently represented that individuals were employees of businesses when they were not.
- Had advised drivers that do not have a Massachusetts license or do not have businesses to make fraudulent representations to procure a commercial policy.
Point, for its part, had submitted a 600-page response to Arbella’s cancellation documentation.
In its submission, Point had stated that since January 2017, it had diligently applied Arbella’s eligibility criteria, and by following Arbella’s policies and procedures and CAR’s Rules, of the 3105 commercial policies in force from January 1, 2017, through July 31, 2017, Point only renewed or rewrote 784. The remaining 2095 of those policies were no longer with Point.
Also, Point submitted as part of its 600-page response documentation concerning each of the fifteen customers identified by Arbella. This part of its submission included:
(1) written statements from the insureds concerning the allegations asserted by Arbella;
(2) written statements from Point stating the facts surrounding the particular transaction; and
(3) statements of facts concerning the individual transactions and claimed contradictions and flaws contained in the SIU interview transcripts submitted by Arbella.
Point argues double standard applied by Arbella
In her presentation arguing the Review Panel should uphold Point’s appeal, Attorney Casher focused on Point’s efforts to comply with Arbella’s guidelines. Guidelines Point had sought from Arbella after it had purchased its book of business from Rapo & Jepsen. She argued that Arbella was punishing Point for the failings of Rapo & Jepsen. See Agency Checklists’ article of January 17, 2017, “Rapo & Jepsen Round Two: Agency’s Purchaser Files In Court, At The DOI, And At CAR, Actions Alleging Discrimination by Arbella.”
Point was a separate and distinct legal entity from Rapo & Jepsen with different owners, and Arbella’s continued attempts to tie Point to actions of Rapo & Jepsen were not appropriate.
Attorney Casher focused on the fifteen insureds that Arbella had presented to CAR as “proof’ of the alleged violations of Point:
- Arbella has renewed three of them;
- another four have obtained commercial policies from other insurers;
- three others Point arranged to qualify for a personal policy; and
- four others arranged their own personal
None of the policies Arbella had cited had been new business to Arbella. Each had been a renewal. As stated in Point’s filings, Attorney Casher reiterated that Point was unfairly losing business because of Arbella nonrenewing Point insureds that Arbella or other servicing carriers would then rewrite for other agents without any problem.
Under Rule 13, Attorney Casher argued the onus was on the servicing carrier to verify the information in the customer’s application through the underwriting process. To hold Point to a higher standard of scrutiny because Arbella failed to perform its obligations diligently was “unfair and unreasonable.”
Arbella case proceeds with statements by SIU and private investigator
Attorney Roberta Fitzpatrick presented Arbella’s opposition to Point’s appeal. She detailed for the Review Panel the history of Arbella’s fraught relationship with Point involving a lawsuit, prior proceedings at CAR and the Division of Insurance. All of these proceedings arose from Arbella’s attempts to clean up the rampant fraud involved in the book of business Point had bought from the Rapo & Jepsen agency after Arbella had canceled that agency for fraud. See Agency Checklists’ article of May 10, 2016, “Arbella Filing Seeks To Prove Its Claim Of Premium Fraud Against Rapo & Jepsen.”
As at the Market Review Committee, Arbella presented testimony from an SIU investigator and a private investigator.
They spoke about the interviews with some of the fifteen insureds whose dealings with Point insurance were the subject of Arbella’s attachments to its cancellation notice of Point. Mr. Spellman who laid out for the board some of the submissions in Arbella’s documents regarding particular insureds and Point’s actions regarding the placement of those insured.
The insured statements discussed all showed in Arbella’s opinion these insureds had no right to a commercial auto policy and evidenced these insureds were improperly insured by Point with commercial policies from Arbella. For details on the actual statements, See Agency Checklists’ article of December 5, 2017, “Point Insurance Loses Appeal Of Arbella’s Contract Cancellation At Market Review Committee.”
Unanimous vote to uphold Arbella’s cancellation
After some questions by the Chair of the Review Panel, the Review Panel denied Point’s appeal by unanimously voting, as had the Market Review Committee, on each separate charge that Arbella had proven Point had
- failed to refrain from engaging in fraudulent activity in connection with the business of Motor Vehicle Insurance;
- failed to provide a reasonable and good faith effort to verify the information provided by applicants, including licensing and rating data;
- failed to notify Arbella of suspected fraud;
- failed to cooperate with Arbella during its investigation of fraud;
- ordered coverages from Arbella for which the insured was not eligible.
Thirty days to appeal to commissioner of insurance
Based on the vote to uphold Arbella’ termination, Point has 30 days to appeal to the commissioner of insurance. There is no appeal to the full Governing Committee of CAR as under CAR’s Rules decisions of the Governing Committee Review Panel are considered to be those of the full Governing Committee.
Agency Checklists will keep you posted
Agency Checklists will monitor and update its readers of any appeal by Point to the commissioner of insurance.
