Section 113H: Assigned risk plans
Section 113H. (A) Insurance companies undertaking to issue motor vehicle liability policies or bonds, both as defined in section thirty-four A of chapter ninety, shall cooperate in the preparation and submission of a plan which shall provide motor vehicle insurance to applicants who have been unable to obtain insurance through the method by which insurance is voluntarily made available; except that the plan shall provide that no insurance company shall be required to issue such policy or execute such bond if:
(1) The applicant or any person who usually drives the motor vehicle has failed to pay an insurance company any motor vehicle insurance premiums due or contracted during the preceding twelve months; or
(2) Any person who usually drives the motor vehicle does not hold or is not eligible to obtain an operator's license.
Such a plan shall provide for the fair and equitable apportionment among such insurance companies of premiums, losses or expenses, or any combination thereof. Notwithstanding any law, rule, regulation, order, ruling or decision to the contrary, on and after January 1, 2011 every insurance company writing private passenger auto insurance in the commonwealth shall accept assignments of risks and any apportionment of premiums, losses or expenses, pursuant to the plan, and no exemption from those assignments, or from the apportionment of premiums, losses or expenses, shall thereafter be permitted; provided, however, that any exemption from the assignment of risks previously afforded any such insurance company shall be allowed to continue to be used until its expiration, but in no event shall the exemption continue beyond December 31, 2012. Assignments of risks and the apportionment of premiums, losses and expenses shall equal the proportion that each company's voluntary business bears to all companies' voluntary business and as adjusted for any credits calculated by the plan.
Such a plan shall provide that at least the following coverages be made available at the option of the applicant:
(1) bodily injury liability and property damage liability coverage in at least the minimum amounts required by law;
(2) personal injury protection;
(3) medical payments coverage, to a limit of at least five thousand dollars;
(4) increased limits of bodily injury liability coverage in an amount to bring the total bodily injury liability coverage available for any one accident to two hundred and fifty thousand dollars per person and five hundred thousand dollars per accident;
(5) increased property damage liability limits in an amount to bring the total property damage liability coverage available for any one accident to fifty thousand dollars;
(6) uninsured motorist limits in an amount up to the bodily injury liability limits of the policy;
(7) physical damage insurance, which shall mean: (a) collision coverage or limited collision coverage, (b) fire and theft coverage, or (c) comprehensive coverage, so-called, as those coverages are defined in sections thirty-four A and thirty-four O of chapter ninety and section one hundred and thirteen O. The plan shall permit the refusal of collision, fire, theft or comprehensive coverage or the charging of rates at the discretion of the insurer, under the following circumstances:
(i) comprehensive, fire and theft or collision coverage on a vehicle customarily driven by or owned by persons convicted within the most recent five year period of any category of vehicular homicide, auto insurance related fraud, or motor vehicle theft;
(ii) comprehensive, fire and theft or collision coverage on a vehicle customarily driven by or owned by persons who have, within the most recent five year period, made an intentional and material misrepresentation in making claim under such coverages;
(iii) collision coverage on a vehicle customarily driven by or owned by persons who have been involved in four or more accidents in which such person has been deemed to be at fault in excess of fifty per cent within the three years immediately preceding the effective date of the policy,
(iv) comprehensive or fire and theft coverages on a vehicle customarily driven by or owned by persons who have had two or more total theft or fire claims after January first, nineteen hundred and eighty-four and within the three years immediately preceding the effective date of the policy;
(v) comprehensive, fire and theft or collision coverage on a vehicle customarily driven, or owned by persons convicted one time within the most recent three year period of any category of driving while under the influence of alcohol or drugs;
(vi) comprehensive, fire and theft or collision coverage on any motor vehicle for which a salvage title has been issued by the registrar of motor vehicles unless a new certificate of title has been issued pursuant to section twenty D of chapter ninety D; or
(vii) comprehensive, fire and theft or collision coverage on a high-theft vehicle which does not have at least a minimum anti-theft or auto recovery device as prescribed by the commissioner of insurance. The commissioner may designate as a ''high-theft vehicle'' any vehicle, classified according to make, model and year of manufacture, which has both above-average incidence of theft and above-average original sales price, and may prescribe appropriate anti-theft or auto recovery devices for such vehicles.
(B) The plan shall be prepared and administered by a governing committee appointed by the commissioner for terms of 6 years, consisting of 6 members from insurance companies participating in the plan and 1 additional representative from a domestic insurer in the commonwealth whose annual motor vehicle policy premiums amount to less than 2 and one-half per cent of the private passenger insurance market and unaffiliated with any other insurance company represented on the governing committee, and 6 members from associations of insurance producers. Effective as of July 1, 1982, the governing committee shall consist of 3 members from insurance companies participating in the plan and 2 members from associations of insurance producers appointed for terms of 6 years, 2 members from insurance companies participating in the plan, 2 members from associations of insurance producers appointed for terms of 4 years, 2 members from insurance companies participating in the plan and 2 members from associations of insurance producers for terms of 2 years. This section shall not be construed to alter or amend the terms of the present governing members. The governing committee shall be responsible for the hiring of the employees of the plan.
In the event that a company represented on the committee decreases its book of automobile business in the commonwealth by more than ten per cent from the previous calendar year, as determined by the commissioner, the member representing such company shall cease to be a member of the committee and a new company and a member thereof shall be appointed as prescribed herein. Not more than one insurer in a group under the same management shall serve on the committee at the same time.
(C) The plan shall provide that every licensed agent or broker shall be assigned to at least one servicing carrier; except that the governing committee shall not be required to make any such assignment if subject, to reasonable standards adopted by the governing committee:
(i) the agent or broker has been convicted of a dishonest act related to his occupation as an insurance agent or broker;
(ii) the broker's license to engage as an insurance broker has been revoked;
(iii) there has been a material and substantial breach of a contract between a servicing carrier and a producer by a broker or agent; or
(iv) the broker or agent has an uncured default in remittance of any premiums due the servicing carrier.
The plan shall require the appointment and participation at all times of no fewer than twenty servicing carriers and the plan shall establish reasonable eligibility requirements for appointment as a servicing carrier, including but not limited to, the maintenance of a specific investigative unit to investigate suspicious or questionable motor vehicle insurance claims for the purpose of eliminating fraud. Not more than one insurer in a group under the same management shall serve as a servicing carrier at the same time. There shall be provided within the plan a specific investigative unit to monitor the effectiveness of servicing carrier fraud control efforts. No domestic insurance company shall be denied participation as a servicing carrier based solely upon its share of the Massachusetts motor vehicle insurance market.
The governing committee shall on or before March thirty-first, nineteen hundred and eighty-nine and thereafter not later than two years after such standards were most recently approved, prepare performance standards for the handling and payment of claims by the servicing carriers. Such standards shall be designed to ensure the speedy settlement of valid claims at the lowest reasonable cost and the denial of fraudulent or otherwise invalid claims. Such performance standards shall be submitted to the commissioner of insurance who, after a public hearing, shall approve or modify such performance standards. The plan shall collect and maintain data on compliance with the performance standards by servicing carriers. Such information shall be reported annually to the commissioner of insurance and may be the basis for adjustments to premiums.
No insurer acting as servicing carrier of the plan, or their employees or agents, no member company, employee or agent, or any employee of the plan or any official or officer of any law enforcement agency, shall be subject to civil or criminal liability in a cause of action of any kind for furnishing any evidence or information to any specific investigative unit created pursuant to this section, its employees or any law enforcement agency or any other insurer relating to an investigation conducted involving losses under liability or physical damage coverages for motor vehicles.
In order to insure an orderly transition from the existing plan, the plan shall provide for assignment of licensed agents and brokers, as far as is practicable, to a servicing carrier through whom such agent or broker is currently writing a substantial portion of his private passenger automobile insurance business and such carrier shall service such agent or broker under substantially the same contractual terms and conditions governing their normal agency relationship and may not endorse or declare that the policy is underwritten by the plan.
Changes of assignment of servicing carriers, for reasonable business purposes, may be make upon application to and approval by the governing committee, provided there is not significant disruption of the marketplace and no unfair or inequitable apportionment of premiums, losses or expenses.
The plan shall include guidelines for installment payment plans to be provided by servicing carriers.
To control the size of the population of the plan, the plan shall annually provide for territorial and classification credits for those companies voluntarily writing private passenger automobile insurance within those territories and classifications that would otherwise be disproportionately represented in the plan. The size of the credits shall be such as to enhance the prospects that no classification or territory is disproportionately represented in the plan.
(D) The plan shall provide for the payment of a commission to independent insurance agents or brokers on business insured through the plan which shall be stated in the filing of rates as a percentage equal to the average percentage commission paid for risks not insured through the plan to agents by companies which do business through independent insurance agents pursuant to the so-called American Agency System.
A duly licensed insurance producer, certified to place business in the plan, shall own and have an exclusive right, as the insured's producer of record, to use certain insurance information of the insured embodying the records of the insurance agency which shall include, but not be limited to, the name of the insured, the policy inception date, the amount of insurance coverage, the policy number and the terms of insurance. If a policyholder, insured through the plan with an assigned risk carrier, is offered voluntary coverage by that carrier and the policyholder accepts the offer, the insured's producer of record shall continue to represent the insured written or renewed in the voluntary market, and the policy shall be continued to be serviced through the producer of record, unless: (1) the producer is decertified or suspended by the plan or the commissioner; (2) at the insured's request, the insured terminates the producer as its producer of record; or (3) the producer of record is precluded from dealing with other insurance companies pursuant to an exclusive agency contract; provided, however, that if a policy is written or renewed on a voluntary basis, the assigned risk carrier shall pay the insured's producer of record the commission rate as set forth in the first paragraph, regardless of whether the producer of record has an agency agreement with that assigned risk carrier.
The plan shall provide that the allocation of premiums, losses and expenses among companies for all policies issued during the first year of operation of the plan shall be based on the total number of risks written by each company during the calendar year nineteen hundred and eighty-two, excluding risks written through designated producers. Adjustment and consideration may be given to those companies that, due to percentage of business ceded during the base year, fall at either extreme as a result of this method of allocating premiums, losses and expenses under this plan. For policy years thereafter, the allocation shall be based on a method so that no company materially or substantially reduces its percentage of participation by reducing its writings, nor shall any company have their participation materially or substantially increased because of the action of other companies.
All policies insured through the plan shall be rated in accordance with the manual of classifications, rules and rates, and rating plans filed by or on behalf of the plan under the provisions of chapter one hundred and seventy-five A. The statistical data previously and hereafter recorded under this section for risks insured through the plan shall be given due consideration in developing the rates for such risks.
Each risk insured through the plan shall be subject to the provisions of the safe driver insurance plan established by the commissioner pursuant to the provisions of section one hundred and thirteen B in the same manner as risks who are not insured in the plan.
The premium charges filed by or on behalf of the plan shall provide that such premium charges for all vehicles rated in accordance with the Massachusetts Private Passenger Automobile Insurance Manual and all other nonfleet private passenger vehicles shall not exceed the premium charges which would be used by each risk's servicing carrier for that risk if such risk were not insured in the plan. The premium charges filed by or on behalf of the plan may provide that such premium charges for any risk insured in the plan, other than vehicles rated in accordance with the Massachusetts Private Passenger Automobile Insurance Manual and all other nonfleet private passenger vehicles will exceed the premium charges that would be used by each risk's servicing carrier for that risk if such risk were not insured in the plan, provided, however, that such a filing shall go into effect only if approved by the commissioner and may be disapproved by the commissioner if he determines that it would produce rates or classifications that would be unfair or inconsistent with sound public policy.
(E) Meetings of the governing committee of the plan shall be conducted in accordance with the provisions of section eleven A1/2 of chapter thirty A.
Before becoming effective and upon any written request of the commissioner on a new plan thereafter, any such plan shall be filed with the commissioner, who shall conduct a public hearing within thirty days to determine whether such plan is consistent with public policy and meets the requirements of this section. At such hearing, insurance companies and any other party having a direct interest shall have an opportunity to be heard. Unless sooner approved or disapproved in writing by the commissioner, such plan shall be deemed to meet the requirements of this section within thirty days after the public hearing.
Amendments to such plan shall be prepared and filed in the same manner as herein provided with respect to the original plan. Such amendments, unless sooner approved or disapproved in writing by the commissioner, shall be deemed to meet the requirements of this section in thirty days from the date of filing. The commissioner shall, prior to the disapproval of any such amendments, issue a notice specifying in what respects the amendments do not meet the requirements of this section and fixing a date for a public hearing thereon, at which insurance companies and any other parties having a direct interest shall have an opportunity to be heard.
If the commissioner shall have requested the submission of a new plan or amendments to the plan, and no such plan or amendments have been filed with and approved by the commissioner within sixty days after such request, the commissioner may, if he deems it necessary to carry out the purposes of this section, prepare and publish proposed amendments or a proposed plan that in his opinion would carry out the purposes of this section. He shall submit a copy of such proposed amendments or proposed plan to the joint committee on insurance at the time of publication, and shall schedule a public hearing thereon not less than ten days after the publication thereof. After such hearing the commissioner may promulgate such plan or amendments thereto as he finds will best carry out the purposes of this section.
When such plan or amendment has been approved or promulgated, no insurer may thereafter issue a motor vehicle policy or bond unless such insurer shall participate in such an approved or promulgated plan.
Any insurer and any other party affected may appeal to the commissioner from any ruling or decision with reference to the operation of such plan.
The rules for such plan shall require that separate statistical data be recorded for risks insured in the plan and may provide incentives and penalties to prevent abuse of such plan. The rules for such plan shall also include a provision giving the commissioner authority, after due hearing and investigation, to order that any company he finds using practices which have the effect of distributing risks or expenses or losses of risks unfairly and inequitably on other companies or agents or brokers be assigned a share of the expenses and losses of said risks to insure a fair and equitable distribution. The commissioner may relieve any insurer of a part or all of its obligations under the plan, if he finds that continuation of such obligations would threaten the solvency of such insurer.
In appointing a statistical agent, the commissioner shall require, in addition to all other duties and responsibilities, that the statistical agent oversee and conduct a closed claim study so-called. In addition to any other information that the commissioner may require, said study shall include the following: the number of claims filed in a particular year, the average property damage liability coverage claim for said year, the average collision claim for said year, the number of lawsuits filed in said year, the number and average dollar amount granted in court tried cases in said year, the number and average dollar amount agreed upon in out of court settlements in said year, the average payment arising out of property damage in an out of court settlement and through a judicial decision, the number of multiple claims filed under the same vehicle over a three year period, the number of claims closed in said year, the number of claims closed without payment in said year and overall motor vehicle accident severity and frequency. Said study shall also include a report of the profits and losses, generated as the result of writing a private passenger motor vehicle insurance in the commonwealth, of each property and casualty company writing said coverage in the commonwealth.
Any insurer or group of insurers participating in such plan and other person aggrieved shall be authorized to bring a complaint to the commissioner alleging unfair or unreasonable or improper practices by any insurer, agent, or broker. The commissioner shall, in all such cases, cause a proper hearing on such complaint to be held and shall issue such orders as he then deems appropriate.
If the commissioner finds that, after due hearing and investigation, that any activities or practices of any insurer, agent or broker in connection with the submission or operation of such plan is unfair or unreasonable or inconsistent with the provisions of this section, he may issue a written order specifying in what respects such activity or practice is unfair or unreasonable or inconsistent with the provisions of this section, and requiring the discontinuance of such activity or practice.
Any ruling, order or decision of the commissioner under authority of this section shall be subject to review by appeal to the superior court department of the trial court of Suffolk county at the instance of any party in interest, which appeal shall be on the basis of the record of the proceeding before the commissioner. Said court shall have jurisdiction to modify, amend, annul, review or affirm such action, order, finding or decision, shall review all questions of fact and of law involved therein, and may make any other appropriate order or decree. Said court shall determine whether the filing of the appeal shall operate as a stay of any such order or decision of the commissioner.
The plan shall adopt performance standards for claims handling and anti-fraud efforts, including but not limited to programs to control costs and expenses as described in section one hundred and thirteen B, for risks insured or reinsured by the plan. All insurers issuing policies insured or reinsured by the plan shall comply with said performance standards. The plan shall develop pre- and post-payment screening systems designed to identify claims overpayments, possible fraudulent claims, and inefficient claims handling practices. The plan shall provide for periodic audits of all members of the plan as required by the commissioner. The audit shall include policies not insured or reinsured by the plan in order to determine whether there is a difference in claims handling between policies insured voluntarily and those insured or reinsured by the plan. Noncompliance with said performance standards and audit requirements shall constitute a violation of the provisions of this chapter. The plan shall propose and the commissioner shall establish rules concerning the submission of data by insurers. Such rules shall include penalties for the late submission of data, the submission of faulty data, and the failure of insurers to comply with the express terms of audit requests. In addition, the plan shall provide for appropriate adjustments in the allocation of premiums, losses and expenses among companies for companies which do not meet such performance standards or which do not comply with said audit requirements. Such adjustments shall reflect excessive claims payments which result from said noncompliance.