On June 3, 2024, CAR’s Governing Committee Review Panel issued its Record of Meetings. The meeting addressed the appeal of the Calianos Insurance Agency against Norfolk & Dedham.
The issue before the Review Panel was Norfolk & Dedham’s practice of requiring policyholders to pay their full remaining premium balance upon issuance of a third cancellation notice – a policy Calianos argued ran afoul of CAR’s rules.
Complaint of the Calianos Agency over demand for full payment by the carrier after third installment plan cancellation
The dispute originated when Calianos appealed Norfolk & Dedham’s payment acceleration policy to CAR’s Market Review Committee. Calianos contended that this practice violated Rule 28.C.2 of CAR’s Rules of Operation, which governs the installment payment plans assigned risk carriers must offer.
The rule mandates a 25% initial deposit and nine subsequent equal installments. Calianos argued that by demanding full payment upon a third cancellation notice, Norfolk & Dedham was essentially de-enrolling policyholders from the installment plan, which the producer characterized as impermissible.
Norfolk & Dedham countered that its practice, which it claimed had been in place for voluntary and assigned risk policies alike for over three decades, was necessary to ensure payment before commencing renewal processing. The insurer also maintained that the additional language included on cancellation notices advising policyholders of the payment acceleration was allowed, as the relevant regulations only prescribed mandatory minimum verbiage. Norfolk & Dedham asserted that the policyholder in the case at hand had first violated the installment plan terms by failing to adhere to the agreed-upon payment schedule.
Market Review finds no Rule violation and no unfair, unreasonable, or improper practice
The Market Review Committee, which had last met on December 19, 2018, determined that Norfolk & Dedham’s practice of demanding full payment after a third cancellation notice did not violate the letter of Rule 28.C.2 and was not an unfair, unreasonable, or improper practice under CAR’s Rule.
The Calianos Agency appealed the Market Review decision, as of right, to CAR’s Governing Committee Review Panel.
Calianos’ Arguments: Intent of Rule 28.C.2
Before the Review Panel, Calianos argued once again that the unambiguous language of Rule 28.C.2 is intended to ensure that payment plans remain in effect throughout the life of the policy. He pointed out that the 25% down payment requirement keeps the insurance company in an equity position. Calianos also submitted an opinion from Assistant Attorney General Glenn Kaplan, received by both the Agency and CAR, opining that CAR Rule 28.C.2 did not allow an insured’s de-enrollment from the CAR installment payment plan after any late payment.
Norfolk and Dedham’s Response: Long-Standing Billing Practice
In its response to the Review Panel, Norfolk and Dedham disagreed with the Attorney General’s interpretation of the law and regulation concerning Rule 28.C.2’s requirements.
The Company’s representative advised that while the Attorney General has been in contact with the Company inquiring about its cancellation practices, the Attorney General had never advised the Company to cease this cancellation practice.
Norfolk & Dedham advised the Review Panel that their billing practice, which has been in place for over 30 years, ensures full payment before the renewal process, allowing for proper underwriting. The Company also noted that CMR 211 specifies minimum language for cancellation notices but does not restrict the addition of further language. Norfolk and Dedham maintained that, in this case, the policyholder violated the plan by not adhering to the payment schedule, but the policy remains active with commissions still being paid.
Review Panel Discussion: Violation of Rule 28.C.2
During its discussion, the Review Panel focused on determining whether Rule 28.C.2 was violated and if Norfolk and Dedham’s practice was unreasonable, unfair, or improper. It was clarified that the company bills only the past due premium with a cancellation notice, and after payment, they bill the next installment. However, late payments can delay underwriting. The Review Panel noted that the practice applies to both voluntary and assigned policies, with some exceptions. It was also observed that Rule 28.C.2 and CMR 211 lack details on cancellations, and it was unclear if this practice of demanding full payment after three cancellations was widespread among insurance companies.
Review Panel Votes: Violation of Rule 28.C.2 established, but no impropriety proven
After deliberation, the Review Panel decided on a strict interpretation of Rule 28.C.2 and voted 2-0 that Norfolk and Dedham requiring full remaining premium upon a third cancellation notice did indeed violate Rule 28.C.2. However, in a separate 2-0 vote, the Review Panel determined that it was not established that this practice was unfair, unreasonable, or improper.
Thirty-day appeal period
The decision carries the weight of the full Governing Committee and may be appealed to the Division of Insurance within 30 days of official notification.
It was not clear from the record of the meeting issued by the Review Panel if either party had appealed the Review Panel’s split decision.
