State’s Largest Auto Writer, Commerce, Questions Legality of Reforms of Mass. High Risk Pool

June 21, 2004

The biggest writer of auto coverage in Massachusetts has raised possible legal problems with a plan to change the state’s high risk pool, just as the plan is being submitted for approval to Commissioner Julianne Bowler, who effectively ordered the reforms.

Commerce Insurance Co. wrote to the governing committee of the existing organization, Commonwealth Automobile Reinsurers, on June 16, citing a host of potential problems with current attempts to change the reinsurance facility to an assigned risk plan. Commerce warned that many of the changes sought by changing in CAR rules might violate state laws.

“It is in our mutual best interest to create a residual market system that is not only fair and equitable, but also consistent with current law,” stated Arthur J. Remillard, Jr., chief executive officer of Commerce. Remillard is also chairman of CAR’s governing committee.

“In our view, there are serious questions regarding whether the fundamental components of the proposed new systems comply with applicable laws,” Remillard wrote. As laws potential in conflict, he cited the state’s “take-all-comers” law, a law banning disparate treatment of agents, and another preventing disproportionate representation of certain territories or classifications in the residual market system.

“We are raising these legal issues because we fear that operating under the proposed systems, absent legislative action, would subject Commerce and other carriers to significant potential liability,” he argued.

CAR will address Remillard’s questions at a special June 29 meeting.

Despite raising what could be roadblocks to the proposed reforms of CAR, Remillard urged others not to label his company as an “opponent of reform” and insisted that his company is “strongly in favor of reform of the residual market, provided that reform is fair, equitable and legal.”

Remillard maintained that his company raised its concerns about the legality of reforms back in May. “Unfortunately, in the haste to reform the residual market, it appears that the legal foundation for these particular systems has been overlooked,” he added.

In other news out of CAR, final rules to change the commercial auto residual market operation to a limited servicing carrier model were passed and set to the commissioner for approval.

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