Mass. High Court Upholds 2006 Home Insurance Hike for FAIR Plan

The Massachusetts Supreme Judicial Court has upheld the 2006 rate increases for the state’s homeowners residual market insurer, the FAIR Plan, against a challenge by the attorney general that the increases violated a state law placing caps on increases.

That rate decision in dispute by then-Commissioner Julianne Bowler granted the Massachusetts Property Insurance Underwriting Association (or FAIR Plan) a 12.4 percent statewide hike and 25 percent on the Cape effective Oct. 1, 2006.

Attorney General Martha Coakley’s office had pursued an appeal of the rate increase that was begun by her predecessor Tom Reilly.

That rate hike was the first since the Massachusetts Legislature amended the FAIR Plan statute in 2004 to eliminate rate caps for the 13 largest share territories by allowing predicted hurricane losses and the cost of reinsurance to be factored into the rate.

The Attorney General had contended that the rates approved by the commissioner exceed the cap on rate increases set by statute, and disputed the commissioner’s interpretation that a 2004 amendment authorized her to approve rates that exceed the cap after weighing predicted hurricane losses and costs of catastrophe reinsurance.

Coakley’s office had also claimed the commissioner abused her discretion in approving predicted hurricane losses based on the computer generated models relied on by MPIUA.

Since that filing for 2006, the FAIR Plan has requested another 25 percent homeowners insurance rate increase for Cape Cod residents, part of an overall statewide filing seeking a 13.6 percent average rate increase statewide.

The FAIR Plan, which provides coverage to homeowners unable to secure insurance in the private market, insures more than 130,000 homeowners statewide, including a third of all homeowners on Cape Cod.

Coakley expressed concern regarding the 25 percent rate increase for Cape Cod and has recommended a statewide average premium decrease of 18 percent. This proposal includes a 29 percent decrease for residents in Cape Cod and surrounding islands.