A law suit by the Arbella Mutual Insurance Co and the insurance agents of the state based on costs given to a new company and the policy related to the risk plan was approved by the Supreme Court of Massachusetts. This legal battle began in June of 2008, questioning the decision made by Commissioner Nonnie Burnes who added a process to help new insurance companies to assign high risks and the profile of individual agents who owned the rights to rework on this process.
The state’s earlier auto insurance system gave private organizations levy to charge their customers, which was challenged by many representatives and insurance companies. This was done to have new insurance companies to invest in the state, which was at 19 has now added a few more to the list, especially after April of 2009.
The Arbella Mutual Insurance Co was defeated on both grounds with high risk drivers and premium amounts paid and its various losses incurred. The concept of high risk drivers was to have a process plan implemented leading to representatives or agents not in a position to renew the business, which did make the agents irate. To add to the fury the court also mentioned that insurance companies can stop making payments to the agents that was given in form of a commission. The court also stated, “The random assignment process of the (assigned risk plan) does not create a contract between a particular agent and an insurer; there is no agreement between them. Without a contract, there is nothing to which to apply the principles of the American agency system.”
The court also ruled out the other option of the law suit stating “Although newly writing companies are not assigned policies issued to high-risk drivers and therefore do not collect insurance premiums or incur losses related to such policies, they do contribute to the administrative cost of (the plan) through these assessments. Thus, they are not completely exempted.”
Massachusetts Association of Insurance Agents (MAIA) had its President completely unhappy about the rule stating, “We have two other avenues of relief we are pursuing, and remain confident that we will be successful in one or both. The ownership of those rights is the basis for the value of your agency. If you don’t own the business the value of your agency is zero. We need to continue to fight this issue.” The President of MAIA is not willing to let the matter go and is working towards other means to have the rights to expire various policies.