Worcester Agency Settles With DOI And Pays A $500 Fine Over Offering A $75 Rebate For New Policies

In accordance with its web site, Mill Metropolis Insurance coverage Inc.(“MCI”) started in 2003 as a small insurance coverage company positioned in Lowell. MCI focuses on car and renters insurance coverage. Since its inception, MCI has expanded its places with workplaces in Lawrence, Lynn, Everett, and Worcester. The company additionally has an affiliated premium finance firm for financing assigned danger auto premiums.

Twenty thousand flyers providing a rebate to announce the opening of a Worcester workplace

Within the spring of 2019, MCI opened a brand new workplace at 218 Chandler Avenue, Worcester, with the advertising thought of getting flyers printed up saying the brand new MCI workplace and making a particular provide of $75.00 to anybody in the event that they took out a brand new insurance coverage coverage with MCI’s Worcester location.

To publicize its particular provide, MCI contracted with a printing firm for twenty thousand flyers to have distributed to Worcester residents. The flyers had been printed and distributed on parked automobiles round Worcester. One of many flyers left on a motorized vehicle in a car parking zone on Southbridge Avenue in Worcester got here to the eye of the Division of Insurance coverage by the use of criticism, most likely made by a competing Worcester insurance coverage company.

Division inquiry to MCI concerning the provide stops this system

After receiving the criticism about MCI’s monetary provide to acquire new insurance coverage insurance policies, on June 26, 2019, the Division opened an investigation and questioned MCI about its potential rebating violations.

On July 5, 2019, MCI had to reply to questions from the Division relating to the flyers. It admitted that it had ordered twenty thousand flyers via a printing firm and had the flyers with a suggestion of $75 to put insurance policies with MCI’s new location distributed to Worcester residents.

In protection and mitigation of its rebating violation, MCI claimed to the Division that:

  • The flyers “ought to have said that the $75.00 was to be given to anybody referring a brand new consumer, not the consumer themselves.”
  • As soon as the division made its inquiry concerning the rebating, the promoting was discontinued.
  • This system had solely resulted in three new insurance policies being issued with $924.00 in commissions.

After that, nothing occurred to resolve the criticism to the Division about MCI’s rebating provide for nearly two years.

Division’s discover to MCI of rebating violations cites potential fines and license motion

On Could 21, 2021, Lawyer Matthew M. Burke, counsel to the commissioner, notified MCI that based mostly upon an investigation performed by the DOI’s Particular Investigation Unit that the Division “has trigger to consider that Mill Metropolis Insurance coverage, Inc. has violated Massachusetts insurance coverage legal guidelines set forth beneath by the conduct described herein.”

insurance producers licensing decisions Massachusetts

The conduct described in MCI’s discover reiterated the information about MCI’s rebating provide and MCI’s solutions to the Division concerning the alleged error within the flyers, MCI stopping the distribution of the flyers, and the minimal outcomes of the rebate violation.

The authorized violations and the potential statutory sanctions listed within the discover said that “By distributing commercial flyers providing $75 to anybody opening an insurance coverage coverage with MCI, MCI supplied fee to induce an insurance coverage contract which constitutes an unfair technique of competitors within the follow of insurance coverage in violation of M.G.L. c. 176D, § 3(8).”

M.G.L. c. 176D is the unfair insurance coverage practices act which provides the commissioner broad regulatory powers over all individuals engaged within the enterprise of insurance coverage in Massachusetts. This statute additionally permits the commissioner to impose fines of $1,000 per violation of c. 176D. Part 3(8) of c. 176D particularly makes rebating unlawful by prohibiting, besides as in any other case expressly allowed by regulation, anybody within the enterprise of insurance coverage from rebating by:

“paying or permitting, or giving or providing to pay, permit, or give, immediately or not directly…any invaluable consideration or inducement no matter not specified within the contract; or giving, or promoting, or buying or providing to provide, promote, or buy as inducement to such insurance coverage contract…something of worth in anyway not specified within the contract.”

The division’s discover suggested MCI’s violation of the rebating prohibition might end result, after a listening to, of imposition of fines of as much as $1,000 for every violation beneath c. 176D, § 7. Whereas unsaid within the Division’s discover, in different instances, the Division has taken positions that suggest it might declare, on this case, that every flyer distributed constituted a separate violation if the matter went to a proper administrative listening to.

The Division makes MCI a suggestion it might probably’t refuse

After detailing all of the legal guidelines that allowed the Division to hunt substantial fines and license sanctions, the DOI then made MCI an inexpensive settlement provide.

The division proposed to resolve the matter by MCI agreeing to:

  1. waive its proper to a public listening to
  2. stop and desist from any comparable rebating conduct; and,
  3. pay a advantageous of $500.

The Division gave MCI till June 26, 2021, to simply accept its settlement provide by having “a certified consultant signal this letter the place supplied beneath and return it to my consideration together with a examine made payable to the Commonwealth of Massachusetts.

Eight days after the Division made its settlement provide, MCI properly resolved the matter by signing the settlement provide and returning it to the division with its examine to pay the $500 advantageous.

In late July, the Division revealed the settlement as a public report.

Per the Division, MCI settlement with the division was a reportable occasion

Though MCI settled this matter with no admission of legal responsibility or acknowledgment of any authorized violation, the division suggested MCI that it considers the acceptance of this settlement settlement to represent a reportable administrative occasion which should be included on MCI’s subsequent Massachusetts enterprise entity producer license renewal utility.”

The failure to report administrative actions by licensees is a recurrent theme in Company Checklists’ articles following insurance coverage division listening to selections revoking producer or company licenses. Normally, the revocations end result from a nonresident producer licensee’s failure to have reported a settlement or administrative motion that it had an obligation to report back to all of the jurisdictions wherein the individual or company held insurance coverage licenses.

Settlements with insurance coverage regulators are reportable by producers in all licensing jurisdiction

Nearly all states have legal guidelines, just like Massachusetts, based mostly on the Nationwide Affiliation of Insurance coverage Commissioner’s Mannequin Producer Licensing Act, which gives (within the Massachusetts model):

A producer shall report back to the commissioner any administrative motion taken towards the producer in one other jurisdiction or by one other governmental company within the commonwealth inside 30 days of the ultimate disposition of the matter. This report shall embrace a replica of the order, consent to order, or different related authorized paperwork. G.L. c. 175, §162V(a).

Thus, any producer having any administrative proceedings involving any jurisdiction the place they’re licensed could should report these proceedings to all jurisdictions the place they’re licensed inside the statutory time allowed by every state’s legal guidelines. Often, this era is thirty days based mostly on the Mannequin Act.

Any producer who has any formal dealings with any jurisdiction’s insurance coverage regulators leading to any kind of settlement or written motion ought to report them as a security measure for the reason that time period “administrative motion taken” that requires a report covers a broad vary of proceedings for the reason that statutes concerned don’t outline the time period.

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