This question was answered based upon current rules, regulations & statutes in effect on April 11, 2019
Reaching out to clarify - if we receive a new business application to review, and ultimately decline due to it being an ineligible risk, but the agency stamped an RMV form - are we technically/legally bound to that risk? Even without the approval from the company?Tthank you!
Kathy Cormier: To answer your question, if an agent binds coverage and stamps an RMV-1, the carrier is on the policy as the agent has binding authority by virtue of their contract. The stamp is valid for 30 days at the RMV. If you find that it does not meet the companies underwriting requirements you can cancel the policy in the first 90 days for any reason. After the 90 days you can only cancel for the reasons stated in the policy. So the carrier would have to issue 20 days legal notice to get off of the policy and the plates would go through the revocation process with the RMV.
I had this conversation with Dan Foley, Esq. on the 90 day cancellation section of the law and this was his response:
The answer to your first question is yes, within the first 90 days of the effective renewal date of the auto policy, a company can cancel for any reason, provided that it gives the insured the proper notice of at least 20 days prior to the intended effective date giving the specific reason or reasons for such cancellation, per Section 113A of Chapter 175. Because the 90 day language is set forth in the law, it would not have to be listed in the MAP, but I would think that it would be a good idea to have the 90 day language set out as a provision in the auto policy.
After 90 days, an auto policy shall be noncancellable by the company except for non-payment of premiums, fraud or a material misrepresentation in the application for insurance or renewal thereof, or unless the operator’s license or motor vehicle registration of the named insured is under suspension or revoked, as provided in Section 22C of Chapter 175. So in answer to your second question, after 90 days, a company can only cancel for the three reasons set out in Section 22C.
Here is the law:
Section 22C. Cancellation of motor vehicle policies.
Section 22C. No company shall issue any policy of insurance which provides coverage, as described in section thirty-four O of chapter ninety, or coverage against loss or damage to, or loss of, use of, motor vehicles resulting from collision, fire, lightning, larceny, pilferage, theft, malicious mischief, vandalism or other perils usually insured against; or provides personal injury protection or which insures any person against legal liability for loss or damage on account of the bodily injury or death of any other persons or on account of any damages to property of another, arising out of the ownership, maintenance, control or use of motor vehicles, including a motor vehicle liability policy as defined in section thirty-four A of chapter ninety, unless said policy contains a provision that, except with respect to a notice of cancellation issued either before or after the effective renewal date by the company to take effect within the first ninety days of the renewal policy period for those policies not renewed in accordance with section twenty-two E or except with respect to a notice of cancellation issued for failure of the applicant to complete and furnish the insurance company a renewal application on a form prescribed by the commissioner at least thirty days before the expiration of the previous policy period, it shall be noncancellable by the company, except for nonpayment of premiums, fraud or a material misrepresentation in the application for insurance or renewal thereof, or unless the operator's license or motor vehicle registration of the named insured or of any other person who resides in the same household as the named insured and who usually operates a motor vehicle insured under the policy has been under suspension or revocation during the policy period, or for coverages which insurers refuse to offer under the provisions of paragraph (A) of section one hundred and thirteen H, or in the event an insured fails to comply with a request for any inspection, provided for under the provisions of section thirty-four O of chapter ninety, of his vehicle by his insurer. Every company cancelling an insurance policy under authority of this paragraph shall, upon demand, refund within thirty days all money due to the insured as the result of such cancellation. Any company violating the provisions of the preceding sentence shall be liable to the insured in an action of contract for double the amount of the refund plus reasonable legal fees.
Here is the 2016 policy language:
We can cancel all or any part of this policy including your Compulsory Insurance if:
- You have not paid your premiums.
- We find that you were responsible for fraud or material misrepresentation when you applied for this policy or any extension or renewal of it.
- The driver’s license or auto registration of you, or any person who resides in your household and usually operates an auto insured under this policy, has been under suspension or revocation during the policy period.
- You fail to comply with a request for a safety inspection test for a vehicle for which total damage has been paid.
So as long as they are cancelling with at least 20 days’ notice in the first 90 days...it is legal.
I hope this helps.
Insurance Company: Thank you for the prompt response, and appreciate the assistance!
Have a wonderful day.
This document is not a legal opinion and should not be relied upon as such. The intent of this document is to provide a general background regarding the topic or topics discussed, not to provide legal advice. Producers and agencies should consult an attorney regarding specific situations and specific questions with respect to the topic or topics covered in this document. Neither the Massachusetts Association of Insurance Agents, Number One Insurance Agency nor any of its employees shall be responsible for any errors or omissions regarding any statements made in this document, nor any errors or omissions regarding any statutes, regulations, court rules, and/or any other government documents cited in this document.