2000.10.18 - Records of Meeting

RECORDS OF MEETING

MARKET REVIEW COMMITTEE

A meeting of the Market Review Committee of Commonwealth Automobile Reinsurers was held at the offices of CAR, 100 Summer Street, Boston, on-

WEDNESDAY, OCTOBER 18, 2000 AT 10:00 A.M.

MEMBERS OF COMMITTEE

Mr. Charles I. Boynton, III - Chairman Boynton Insurance Agency, Inc.

Ms. Nancy Z. Bender Nancy Z. Bender Insurance Agency, Inc. Mr. David H. Cochrane The Commerce Insurance Company Mr. Daniel F. Crimmins Safety Insurance Company Mr. James D. Doherty Doherty Insurance Agency, Inc. Mr. Francis D. Gibbons O'Brien & Gibbons Insurance Agency, Inc. Mr. Sumner D. Gilman Economy Insurance Agency, Inc. Ms. Paula Gold Plymouth Rock Assurance Corporation Mr. Douglas R. Long Berkshire Mutual Insurance Company Mr. Kenneth W. Mudie Hanover Insurance Company Ms. Deborah L. Pennisi* Quincy Mutual Fire Insurance Company Ms. Susan K. Scott Premier Insurance Company of Mass. Mr. Mark R. Silva Benson, Young & Downs Ins. Agency, Inc. Mr. Louis M. Xifaras Louis M. Xifaras Insurance Agency, Inc.

* Substituted for Mr. William J. Whitebone

Commonwealth Automobile Reinsurers –

Mr. Ralph A. Iannaco President Mr. Joseph J. Maher, Jr. Vice President, General Counsel & Secretary Mr. Timothy Costain Market Relations Manager Mr. John Metcalfe Director of Administration & Market Relations Records of Meeting 2 October 18, 2000 Market Review Committee

Mr. Paul Corsetti Director of Communications Ms. Adrianne Francis Senior Administrative Support Assistant

Also present –

Ms. Cleo Anderson Amica Mutual Insurance Company

Mr. James Herrick Berkshire Mutual Insurance Company

Ms. Joanne Borden Fireman’s Fund Insurance Company N. C. Trilling

Mr. Thomas G. Griffin Griffin Insurance Agency, Inc.

Ms. Rita Cherubini Horace Mann Insurance Company

Mr. Ronald Allen Liberty Mutual Insurance Company

Mr. James Haggerty MassWest Insurance Company Mr. Richard A. Van Edsinga

Edward J. Donahue, Esq. Morrison, Mahoney & Miller

Ms. Ruth Bradbury Norfolk & Dedham Group

Mr. Leonard Rollins Pilgrim Insurance Company

Ms. Diane Fortino The Premier Insurance Company of Mass.

Mr. John R. Rodrigues Rodrigues Insurance Agency, Inc.

Mr. Edward Patrick Safety Insurance Company

Mr. William Commette Sentry Insurance Company

Tracie Marciarelli Souza, Esq. Law Office of Tracie Marciarelli Souza

Mr. Richard S. Thomas Richard S. Thomas Insurance Agency Records of Meeting 3 October 18, 2000 Market Review Committee Committee Chairman Charles Boynton, called the meeting to order at 10:00 a.m.

MR 00.01 RECORDS OF PREVIOUS MEETINGS

A motion was made be Mr. Doherty and seconded by Mr. Xifaras to approve the Records of the Market Review committee meeting of July 11, 2000 as written.

The motion passed on a unanimous vote.

MR 00.12 QUALITY INSURANCE AGENCY

Chinh Quang of the Quality Insurance Agency requested a review contesting the declination of his request to transfer his “ERP agency from Springfield to Worcester” by CAR. Mr. Quang was appointed as an ERP to Peoples Service Insurance Company in June of 1998 following a purchase of the agency’s assets from a former Peoples Service ERP. The agency currently maintains a private passenger book of business of 386 exposures.

No representative of the Quality Insurance Agency attended the meeting nor was CAR informed prior to the meeting that the agency would have representation.

Following brief discussion, a motion was made by Mr. Gilman and seconded by Mr. Xifaras to dismiss the agency's request for review without prejudice.

MR 00.13 RODRIGUES INSURANCE AGENCY, INC./MASSWEST INSURANCE COMPANY

Mr. John R. Rodrigues of the Rodrigues Insurance Agency, Inc. requested a review contesting the termination of his agency’s Exclusive Representative Producer (ERP) appointment by MassWest for violations of Rule 14, B, 1, L, Rule 14, B, 1, F, Rule 15, CAR Rules of Operation, “Conduct all monetary transactions with the insured and the Servicing Carrier as required by the Rules of Operation and the ERP contract”, and “Remit payments on a timely basis…”. The Rodrigues agency was appointed as an ERP in March of 1994 and currently maintains a private passenger book of business of 473 exposures.

As a courtesy to the parties, Mr. Gilman indicated that he maintains a business relationship with the Rodrigues Agency and the MassWest Insurance Company parties through his premium finance company. He offered to withdraw from consideration of the matter if either party objected to his participation. Neither party objected to his participation in the matter.

MR 00.13 RODRIGUES INSURANCE AGENCY, INC./MASSWEST INS. CO. (continued) Records of Meeting 4 October 18, 2000 Market Review Committee Attorney Tracie Souza, representing the Rodrigues Insurance Agency, indicated that during his seven years as an ERP, Mr. Rodrigues has consistently complied with CAR Rules and has had no prior complaints or violations issued by a Servicing Carrier. She said that bank merger activity had resulted in a number of agency checks being returned for insufficient funds, but noted that the checks were sent to MassWest in good faith and in a timely manner. Ms. Souza added that Mr. Rodrigues has since remitted the premium to MassWest making the company whole, and has secured overdraft protection to prevent future checks from being returned. She indicated that errors made by Mr. Rodrigues are common and suggested that MassWest has engaged in egregious acts by attempting to put her client out of business.

Mr. Richard Van Edsinga, representing the MassWest, stated that over the course of several months there had been 10 instances wherein agency checks submitted as down payments on new business, had failed to clear. Mr. Van Edsinga indicated that since July 25, 2000, MassWest had sent three registered letters to the agency pursuant to the returned checks, but did not receive a response from Mr. Rodrigues until an appointment termination letter was issued on September 8, 2000 for violation of CAR Rules and the ERP contract.

Mr. Gilman questioned the length of time which the Rodrigues Agency had been an ERP and how many policies the agency maintained. Several other Committee Members questioned whether there had been any other accounting problems and to what amount the overdraft protection obtained by Mr. Rodrigues will indemnify MassWest.

Mr. Rodrigues indicated that he has been an Exclusive Representative Producer for approximately 7 years while CAR records reflect that the agency maintains a book of business of approximately 500 vehicles. Mr. Rodrigues was not aware of the limit of overdraft protection, but noted that he has never had agency checks returned for insufficient funds while appointed to Trust. Ms. Souza added that most of the accounting problems occurred due to the Fleet/BankBoston merger and her client his not being made aware of changes in the bank's service fee structure. She noted that Mr. Rodrigues had been charged with more that $500 in check charges which exacerbated the problem of returned checks with MassWest.

Countering those statements, Mr. Van Edsinga said that some of the returned checks were issued from Citizens – Union Savings Bank, which was not part of a merger. Adding that MassWest in the past has in good faith redeposited checks and not charged Mr. Rodrigues an insufficient fund fee. Mr. Van Edsinga continued stating that MassWest has acted in a responsible manner, to make sure consumers are not left behind

Mr. Rodrigues indicated that once he became aware of returned checks and the amended bank fee structure, he took steps to ensure sufficient funds would be in the accounts drawn upon. He added that he had asked MassWest to redeposit the checks, but that the company insisted on duplicating the bank charges which doubled the amount of charges he faced. He expressed confidence that with the steps that have been taken, he does not anticipate any problems of this kind in the future.

MR 00.13 RODRIGUES INSURANCE AGENCY, INC./MASSWEST INS. CO. (continued)

Following discussion a motion was made by Mr. Gilman which was seconded by Mr. Silva to uphold the agency's request and reinstate the agency's Exclusive Representative Producer appointment with MassWest, with a probationary period in effect for six months. Records of Meeting 5 October 18, 2000 Market Review Committee The motion passed with 11 in favor, and Ms. Gold opposed.

As a matter of clarification, the Committee agreed that its decision did not preclude MassWest from terminating the agency's Exclusive Representative Producer appointment again for CAR Rule violations committed prospectively.

CAR Counsel, Joseph Maher, advised the parties of their rights pursuant to CAR Rule 20.

MR 0.14 SUBSCRIPTION METHODOLOGY

CAR Counsel, Joseph Maher, advised that questions have been raised through CAR Staff relative to the crediting of ERP exposures following the sale of an ERP book of business to another ERP. He indicated that currently exposures from the sale of an ERP agency are credited to the buyers Servicing Carrier and debited from the sellers Servicing Carrier on an as written basis. Mr. Maher contrasted this method of crediting exposures with that of two party agreements, wherein 100% of an ERP's private passenger exposures are immediately debited from the prior Servicing Carrier and credited to the new Servicing Carrier upon execution of the change of assignment. Mr. Maher added that CAR Staff is seeking direction from the Committee as to the appropriate way to administer the crediting of ERP to ERP exposures resulting from a sale. He noted that there is specific language in Rule 13 addressing two party agreements, but none addressing ERP to ERP sales.

Mr. Gilman recommended that the exposures relating to the sale of an ERP book of business to another ERP be credited to the receiving Servicing Carrier immediately. He indicated that this method would assure a measure of consistency with the way two party agreements are handled currently. He suggested that Counsel draft new Rule language to that end and that a proposed change to Rule 13 take effect January 1, 2001.

The Committee discussed further what would be an appropriate timeframe for implementation of the proposed rule change. Ms. Gold voice objection to any retroactive application of a change to the current method of determining subscription levels and that Servicing Carriers be given ample notification prior to implementation. Mr. Mudie, on the other hand, felt that it should take effect when the new Rule is approved.

Following discussion, a motion was made by Mr. Doherty and seconded by Mr. Gilman to direct CAR Staff to draft Rule language for consideration by the Market Review Committee at its next meeting.

MR 00.14 SUBSCRIPTION METHODOLOGY (continued)

Mr. Maher also asked for direction relative to how and when Servicing Carriers who have been granted subscription relief should distribute the $15.00 payment per exposure for randomly reassigned ERP’s. He noted that CAR had received inquiries from Servicing Carriers relative to a variety of payment methods that would ensure their ability to collect anticipated negative commissions.

The Committee discussed the benefits and disadvantages of lump sum versus installment payments. Mr. Cochrane supported the concept of paying in installments, noting that such a method Records of Meeting 6 October 18, 2000 Market Review Committee provides a measure of security against unanticipated agency activity such as sales of voluntary contracts before the entire book is transferred. Mr. Gilman suggested a split payment ninety days apart while Mr. Crimmins suggested the Servicing Carriers should handle the matter as they deem appropriate

Following further discussion the Committee formed a consensus to take no action on the matter at this time and let aggrieved parties come before the Committee as individual situations arise.

MR 00.15 GRIFFIN INSURANCE AGENCY, INC.

Mr. Thomas G. Griffin, of the Griffin Insurance Agency, Inc., requested a review contesting the recent reassignment of the agency's private passenger Exclusive Representative Producer appointment from the Middlesex Insurance Company to the Safety Insurance Company. The agency was reassigned in accordance with procedures provided in CAR Rule 13, C, 2, ERP Subscription Relief - Private Passenger. CAR records currently reflect that the agency maintains a book of 622 private passenger vehicles.

For the record Mr. Long informed the Committee that he had discussions with Mr. Griffin about a possible 2 party transfer of his Exclusive Representative Producer appointment with Middlesex prior to the agency's random reassignment to Safety.

Mr. Crimmins indicated that he would not participate in consideration of the matter.

Mr. Griffin distributed a letter from his doctor indicating that he suffers from a heart condition which can be exacerbated by stressful changes in his work environment. Mr. Griffin requested that he not be reassigned from Middlesex because it could cause undo stress and be detrimental to his health and to level of service provided to his clientele. He indicated that Safety Insurance Company wants him to input his agency's data at the agency, but that he is virtually computer illiterate and unable to perform the necessary functions to enter the necessary data. He investigated the compatibility between his agency and Safety Insurance Company prior to the reassignment and decided it would not be a good fit for his agency. Mr. Griffin indicated that he can't afford to hire someone else and relies on the help of his wife who is also ill. Mr. Griffin indicated that he prides himself on servicing his clients and said that he believes CAR is not fulfilling its role of service to the public by allowing the reassignment to proceed.

MR 00.15 GRIFFIN INSURANCE AGENCY, INC. (continued)

Ms. Bender indicated that service is important to all agents and brokers, but noted that the insurance business can be a stressful industry. Adding that she was very apprehensive about processing business on a computer after having been in the business for twelve years, she noted that automation of her agency has saved money and time and contributed to a reduction in stress. Ms. Bender added that Safety has a good reputation for service and believes the company will assist Mr. Griffin in making the transition of his book of business as stress free as possible.

Several Committee Members questioned the extent to which Mr. Griffin had spoken with Safety representatives to discuss ways to facilitate a smooth transition of his business. There was general consensus Records of Meeting 7 October 18, 2000 Market Review Committee among the Committee that an effort should be made by the parties to create a positive working relationship to the benefit of the agency's insureds.

Following further discussion a motion was made by Mr. Gilman and seconded by Mr. Mudie to deny the agency's request that the reassignment from Middlesex to Safety be rescinded.

The motion passed on a unanimous vote with Mr. Crimmins not participating.

Mr. Maher advised the parties of their rights pursuant to CAR Rule 20.

MR 00.16 RICHARD S. THOMAS INSURANCE AGENCY

Mr. Richard S. Thomas, of the Richard S. Thomas Insurance Agency, requested a review contesting the recent reassignment of the agency's private passenger Exclusive Representative Producer appointment from the Middlesex Insurance Company to the Premier Insurance Company of Mass. The agency was reassigned in accordance with procedures provided in CAR Rule 13, C, 2, ERP Subscription Relief - Private Passenger. CAR records currently reflect that the agency maintains a book of 1,116 private passenger vehicles. Also submitted was information provided by the Premier Insurance Company of Mass. detailing the company's efforts in attempting to contract with the agency.

Ms. Scott indicated that she would not participate in consideration of the matter.

Mr. Thomas stated that his agency provides service to low income clientele in western Massachusetts, many of whom seek out his agency for the 15% down payment offered by Middlesex. He expressed fear that if his agency is forced to leave Middlesex many of the low income clientele will end up driving without insurance due to an inability to afford higher down payments required by a successor Servicing Carrier. Mr. Thomas contended that he is not motivated by money in the matter, noting that he runs a very desirable agency with a good loss ratio and was approached by several Servicing Carriers for a change of assignment. According to Mr. Thomas, Middlesex has indicated their willingness to keep his agency as an Exclusive Representative Producer if the matter can not be resolved satisfactorily.

MR 00.16 RICHARD S. THOMAS INSURANCE AGENCY (continued)

Mr. Gilman questioned the assertion of Mr. Thomas that the lack of the low down payment offered by Middlesex will result in many more uninsured drivers. He noted that Mr. Thomas does not enjoy a monopoly on low income clients in the greater Springfield area and concluded that people are securing coverage through other agencies with different down payment options. He added that the low down payment offered by Middlesex is an advantage for the Thomas Agency, to which Mr. Thomas agreed.

Ms. Bender indicated that Mr. Thomas was aware of the subscription relief process and chose not to avail himself of an opportunity for a change of assignment before being randomly reassigned to Premier. She added that the Rules for subscription relief are clear and she sees no reason to support the agency's request. Records of Meeting 8 October 18, 2000 Market Review Committee Following further discussion a motion was made by Mr. Gilman and seconded by Mr. Gibbons to deny the agency's request that the reassignment from Middlesex to Premier be rescinded.

The motion passed on a unanimous vote with Ms. Scott not participating.

Mr. Maher advised the parties of their rights pursuant to CAR Rule 20.

There being no other business to come before the Committee, a motion was made by Mr. Gilman and seconded by Mr. Xifaras to adjourn the meeting.

The meeting adjourned at 12:45 p.m.

TIMOTHY J.COSTAIN Market Relations Manager

Boston, MA December 8, 2000

Note: These records have not been approved. They will be considered for approval at the next Market Review Committee meeting.