Point Insurance has locations in Boston, Everett, Framingham, Lynn, Marlborough, Plymouth, Waltham, and Worcester
The long-running saga of the Point Insurance (Point) Agency’s attempts to overcome the stigma of the fraud-ridden book of business it acquired from Rapo & Jepsen Insurance Services (Rapo & Jepsen), while that agency was being investigated by Arbella, may have ended with a decision of the Appeals Court on Monday, November 29, 2021.
In a decision involving Point, the Division of Insurance (DOI), Commonwealth Automobile Reinsurers (CAR), and the Arbella Protection Insurance Company (Arbella), the Appeals Court denied Point’s attempt to hold Arbella liable for allegedly unfair, unreasonable, or improper practices in connection with the sale and renewal of commercial-automobile insurance policies.
In its appeal, Point claimed that Arbella’s special questionnaires and forms for Point’s insureds who were renewing their commercial insurance policies in the residual market violated the rules of CAR, and that CAR and DOI, using unlawful procedures, had denied Point due process in deciding Point’s complaint.
The Appeals Court held that neither CAR nor the DOI had employed any unlawful procedures in violation of Point’s due process rights. Also, the Court found no violation of any CAR rule in Arbella’s use of questionnaires and forms to ferret out Point’s insureds’ who were not eligible for a commercial policy or who were not properly licensed.
Point’s purchase of a fraud-riddled book of commercial auto business leads to its dispute with Arbella
Point purchased the book of business of Rapo & Jepsen as Arbella was seeking to have that agency’s commercial appointment terminated at CAR. Arbella alleged, with good evidence, that Rapo & Jepsen had engaged in a massive fraud of allowing unlicensed and unqualified operators to obtain commercial insurance through Arbella, Rapo & Jepsen’s commercial servicing carrier. See Agency Checklists’ article of April 4, 2017, “DOI Moves To Revoke John Rapo’s And Rapo & Jepsen’s Producer Licenses And Impose Fines,” and the related links therein.
At the same time as CAR’s Market Review Committee was addressing the revocation of Rapo & Jepsen’s commercial lines appointment to Arbella, Point, a new corporation set up by an employee of Rapo & Jepsen, was in the process of buying Rapo & Jepsen insurance assets.
Following the execution of a purchase and sale agreement, Point immediately sought commercial lines exclusive designated producer status with CAR and, after an assignment of its newly acquired book of business back to Arbella, engaged in negotiations with Arbella to agree on a protocol to clean up the book of business on an ongoing basis.
The protocols that Point agreed to with Arbella quickly became a major sticking point between the two parties. Arbella re-underwrote the book of business requiring a new business application and investigation of the underlying entities that Point was submitting as commercial risks. This practice soon led to Point filing a lawsuit against Arbella and proceedings before the market review committee of CAR, with Arbella seeking successfully to terminate Point’s commercial auto exclusive representative producer contract.
Point appealed to a CAR Governing Committee Review Panel, which upheld Arbella’s cancellation. See Agency Checklists’ article of March 20, 2018, “CAR Review Panel Upholds Cancellation Of Point Insurance’s Commercial Lines Contract.”
Point’s second proceeding against Arbella’s alleged unfair, unreasonable, and improper underwriting practices
On December 15, 2016, Point submitted a “Request for Review/Relief” to CAR. Point claimed that Arbella was hindering its ability to operate in the residual market with its underwriting actions.
Point had hearings before CAR’s Market Review Committee and Governing Committee Review Panel, which both found against Point. See Agency Checklists’ article of February 7, 2017, “Point Insurance Loses Appeal to CAR Review Panel; Next Stop Commissioner of Insurance.”
Point appealed CAR’s final adverse decision of the CAR Governing Committee to the Commissioner of Insurance on February 2, 2017, alleging that Arbella had engaged in “unfair, unreasonable or improper practices” in connection with the sale or renewal of commercial motor vehicle insurance policies covering vehicles registered to business enterprises.
Point claimed Arbella’s illegal practices included:
- Arbella’s requiring special renewal applications for Point’s commercial policyholders and requiring Point to verify certain information on applications.
- Arbella’s applying application and renewal procedures for Point and its commercial customers that it did not apply to other ERPs or their customers.
- Arbella’s procedures applicable to Point conflicted with CAR Rules.
In its appeal, Point asked the Commissioner to issue permanent orders enjoining Arbella from continuing its allegedly improper practices and ordering Arbella to pay restitution to Point as well as its attorney’s fees.
Commissioner rules against Point, and the Superior Court affirms
In March 2019, the Division of Insurance upheld CAR’s decision denying Point any relief against Arbella, finding on Point’s charges:
- Arbella’s use of correspondence, forms, and applications with Point and its customers and Arbella’s requirements that Point follow certain procedures were not improper, unfair, or unreasonable.
- Arbella’s use of a special commercial auto renewal application and questionnaire and the nonrenewal and denial of policies to certain Point commercial customers was not improper, unfair, or unreasonable.
- The Proceedings at CAR were consistent with its adjudicatory obligations under the CAR rules.
For details of the DOI decision, See Agency Checklists’ article of March 19, 2019, “In A 23-Page Decision, Massachusetts Division Of Insurance Denies Point’s Appeal Against Arbella.”
Point appealed the DOI decision to Suffolk Superior Court under the special appeal provision of CAR’s enabling act, G.L. c. 175, § 113H. Per this statute, Point’s appeal of the DOI decision to the Superior Court proceeded under the Massachusetts Administrative Procedure Act.
The Administrative Procedure Act limited Point’s appeal to a review of the record of the proceedings before the DOI and CAR.
To prevail on its appeal under the Administrative Procedure Act, Point had to prove to the Superior Court that its substantial rights were prejudiced because the DOI decision was either:
(a) In violation of constitutional provisions.
(b) In excess of the DOI’s statutory authority or jurisdiction.
(c) Based upon an error of law.
(d) Made upon unlawful procedure.
(e) Unsupported by substantial evidence.
(f) Arbitrary or capricious, an abuse of discretion, or otherwise not in accordance with the law.
The Superior Court found that none of Point’s substantial rights were prejudiced and affirmed the DOI decision based on the hearing record before the DOI.
After the Superior Court ruled against it, Point filed an appeal to the Appeals Court.
After five years, a final judgment affirming CAR’s original decision
The Appeals Court decision noted that in appeals from an administrative agency, courts “give deference to the decision of an agency interpreting its own regulations” and that before reaching the Appeals Court, Point’s claims had passed through four levels of administrative review: CAR’s Market Review Committee, a CAR Governing Committee Review Panel, a DOI hearing, and a Superior Court judge.
The Appeals Court found, “After a careful analysis of Point’s claims,” that it had no basis to disturb the DOI’s and CAR’s interpretations of their governing laws and rules.
The appellate judges found that the DOI and CAR had properly rejected Point’s arguments that:
- the corporate form insulated its commercial customers from any scrutiny as to their eligibility for coverage.
- Arbella’s actions, taken to address the possibility that the customers Point acquired from Rapo & Jepsen were not bona fide commercial customers, were unreasonable or violated CAR’s governing statute or rules.
Although Point argued to the Court that it was “persecuted” because Rapo & Jepsen’s prior fraudulent conduct was effectively attributed to it, the appellate judges noted that the record before them did not support Point’s “dramatic characterization.” Instead, the judges summed up the case before them in a one-sentence ruling:
“As Point, Arbella, CAR, DOI, and the Superior Court judge all recognized, the book of business that Point acquired from Rapo & Jepsen was potentially tainted by fraudulent activity, and Arbella was warranted in taking steps to ensure that this activity did not survive the change of ownership.”
Accordingly, the judges found, in applying the legal standards under § 14 of the Administrative Procedures Act, which Point had to meet to overturn the decisions of CAR and the DOI, that it had failed to show that the DOI decision in favor of Arbella was:
- erroneous as a matter of law or procedure.
- arbitrary or capricious.
- an abuse of discretion, or
- otherwise not in accordance with the law.
Accordingly, the Appeals Court entered an order stating, “Judgment affirmed,” upholding the CAR and DOI decisions against Point.
Twenty days to apply for further appellate review to the Supreme Judicial Court
The Massachusetts Appeals Court is an intermediate appellate court. The ultimate judicial authority resides with the Supreme Judicial Court. Parties dissatisfied with an Appeal Court’s decision may apply for further appellate review. However, the allowance of any further appeal is discretionary with the Supreme Judicial Court.
Under the Massachusetts Rules of Appellate Procedure, Point will have twenty days from November 29, 2021, to file an application for further appellate review to the Supreme Judicial Court. However, in this case, Point has twenty-one days or until Monday, December 20, 2021, since the twentieth day for filing the application falls on a Sunday.
