A bill was heard last month in the Massachusetts legislature that seeks to impose a time limit on investigations of auto insurance claims and would make investigating insurers responsible for paying premiums until the cause of the loss is determined.
The bill would limit auto claims investigations to 30 days and require the insurer to notify the insured at the start and end of a claims investigation. During the investigation, the bill would require that any ongoing payment of premiums to the financial institution holding title to the insured vehicle be made by the investigating insurance company rather than the insured. If the cause of the loss turns out to be fraudulent or intentional, the payments made by the insurance company during the investigation can then be collectively recovered from the insured.
Massachusetts State Representative Joseph McKenna, who is sponsoring the bill, said it was the first time the legislation had been tabled. The October 20 hearing at the Commonwealth Joint Committee on Financial Services was the first time the bill has been heard.
He told the Insurance Journal that he believed requiring investigating insurance companies to bear the financial burden of vehicle payments to the lender would prompt prompt resolution of claims investigations.
“[Insurance companies] will certainly not want ongoing investigations with the financial risk or liability of having to pay those premiums, with the possibility of recovering if fraud is discovered, ”he said. “And it protects the consumer from triple the damages by paying insurance premiums, paying the principal on their car and not having the vehicle to use.”
The idea for the bill arose during a conversation with his legislative assistant, Lori Joubert, about a situation several years ago in which his car caught fire in its driveway due to a fault in the wiring of its heated seats.
She said in written testimony for Bill that on July 16, 2016, she woke up to the sound of her neighbors yelling at her to call 911 and went out to find her Toyota Rav 4 on fire in her driveway. Police and firefighters were called and the fire was extinguished.
Although it was later discovered that his vehicle fell under a recall notice issued by Southeast Toyota distributors for the affected vehicles, his insurer, MAPFRE (formerly, Commerce Insurance Company) first investigated on the claim to confirm the cause of the loss.
“Naturally, the insurance company said, ‘Your car just burned to the ground in your driveway. It sounds a bit suspicious; looks like a fraud. We will investigate, ”Mckenna said.
In a letter obtained by Insurance Journal alerting Joubert to the investigation, a Commerce claims representative said Joubert would remain responsible for his premiums at maturity.
In the meantime, however, Joubert said she found herself without a car and had to pay her insurance premiums as well as the principle of the loan on the car until three months later, in October, when the complaint has been settled.
As a result, she said she believes legislation like this is necessary for insurance companies to be required to act in a timely and fair manner when investigating claims for signs of fraud.
“All insurance companies have an obligation to work with their clients, their clients,” she said. “And I hope this bill, whether it passes or not, will make them think about that. You know we give [insurance companies] our money and all we ask is that they treat us fairly.
McKenna agreed, adding that he believes this legislation can protect consumers from the financial burden of continued premium and principle payments during a claim investigation.
“This bill just puts that burden on the insurance company who certainly can afford to make these payments to the lending company,” he said. “And if at the end of the investigation period, it is found that fraud has taken place, [the insurer] will have every right to go to collections for this amount from the owner of the car.
MAPFRE said in a statement provided to Insurance Journal that it was reviewing the bill.
“MAPFRE takes great pride in its superior complaint handling and customer service, and whenever our standards are not met, we deal with any specific issue promptly,” said a spokesperson. “We do not think the envisaged changes are necessary, but we are reviewing the proposed legislation.”
McKenna said that typically in Massachusetts, proposed legislation requires about two or three hearings before moving forward, if it does move forward. He said he was ready to work with the insurance industry to refine the bill and expects those conversations to happen after that first hearing.
“I’m sure the insurance industry will have their point of view, and we’ll look at the bill and see where it can be tweaked, refined and changed,” he said. “I’m certainly happy to have this conversation with the insurance industry and to make improvements to the bill based on those conversations. “
The bill is Massachusetts House Bill 1151, an act to clarify auto insurance liability during claims investigations.
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