Horace Mann Exit of Mass. Market in 2001 Upheld

March 7, 2005

Horace Mann Educators Corp. did not violate any law or regulation in 2001 when, as part of its plan to exit the state’s auto insurance market, it transferred its best exclusive representative producers and their auto insurance accounts to Commerce Insurance Co and left its other ERPs and their highest risks for other insurers to assume.

That opinion, originally issued in April, 2003 by Suffolk Superior Court Justice Allan van Gestel, was again upheld March 2 after the state’s Supreme Judicial Court declined to review it.

The rulings were a defeat for Liberty Mutual Insurance Co. and Premier insurance Co., two of the companies that ended up with the highest risks from Horace Mann under procedures of Commonwealth Auto Reinsurers, the high risk reinsurance pool.

The insurers originally filed their suit against then-Insurance Commissioner Linda Ruthardt, who had rejected a request by the two and Arbella Insurance to have the reassignments stayed and a hearing held.

The controversy began when Horace Mann negotiated a deal to leave the auto market but keep its license to write auto insurance. In lieu of writing coverage itself, Horace Mann formed an alliance with Commerce to write auto insurance for its policyholders.

Horace Mann agreed to pay $6.4 million to cover its CAR obligations over three years and CAR reassigned its remaining four ERPs to Liberty Mutual, Arbella, Premier and National Grange.

The plaintiffs had argued that the reassignments were unfair and contrary to CAR rules and that Ruthardt had no jurisdiction in the matter.

After several appeals, the original decision in support of Horace Mann’s plan has been upheld.

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