The Mass. Property Insurance Underwriting Association (FAIR Plan) has agreed to pay $350,000 to resolve allegations that it impermissibly cancelled homeowners insurance policies between January 2010 and February 2014, Attorney General Maura Healey announced on 7/26.
Under the assurance of discontinuance, filed in Suffolk Superior Court, the FAIR Plan will pay $350,000 to settle allegations that it has been cancelling hundreds of policies each year in violation of state law. This payment will be used to provide relief to homeowners who had to purchase more expensive force-placed policies after their FAIR Plan policies were cancelled. The affected homeowners are located all over the state, with concentrations in Boston, Brockton, Springfield, and Worcester.
“A home is frequently someone’s largest investment and homeowners should be treated fairly when they purchase insurance to protect that investment,” AG Healey said. “This agreement ensures that the FAIR Plan treats policyholders appropriately when it is considering cancelling policies.”
Under Massachusetts law, after a homeowners insurance policy has been in effect for 60 days, it can only be cancelled for a limited number of reasons, such as nonpayment of premium. According to the assurance of discontinuance, the FAIR Plan frequently inspected insured properties after 60 days and then impermissibly cancelled policies in instances where the FAIR Plan did not approve of the property’s condition.
The FAIR Plan is a statutorily created entity jointly run by the state’s property insurance companies. It is designed to provide coverage at reasonable rates to homeowners who have been unable to purchase insurance through the open market. The FAIR Plan is frequently the only option for homeowners who live in urban areas or along the coast.
Because the FAIR Plan is the insurer of last resort, many of those insured by the association whose policies were cancelled could not find alternate insurance on their own. Their mortgage companies purchased force-placed policies on their behalf and then billed the homeowners for the premiums. Force-placed policies are much more expensive than traditional homeowners insurance policies and provide more limited coverage.
In addition to protecting FAIR Plan customers from unfair cancellations, the AG’s Office also regularly advocates to keep rates appropriate and affordable. The AG represents the public interest in administrative rate cases in front of the Commissioner of Insurance, and has repeatedly and successfully stopped unjustifiable rate hikes sought by the FAIR Plan.
In 2012, the AG’s Office blocked a proposed average seven percent rate increase, and in 2014 saved homeowners in New Bedford, the Cape and Islands, Lynn, Worcester, Springfield, and parts of Boston from a nine percent proposed rate hike.
The AG’s Office has also been conducting outreach events around the state to help inform homeowners about the FAIR Plan, their insurance options, and the nature of the rate setting process.
Click to download the 8/4/16 issue: 08-04-16 TeddyBearParade