The Attorney General of Massachusetts, Maura Healey, has reached a settlement with the Massachusetts Property Insurance Underwriting Association (the “FAIR Plan”), which agreed to pay $350,000 to resolve allegations that it impermissibly cancelled homeowners insurance policies between January 2010 and February 2014.
Under an assurance of discontinuance filed in a Massachusetts state court, the FAIR Plan agreed to settle allegations that it had been cancelling hundreds of policies each year in violation of state law. Attorney General Healey said that the payment would be used to provide relief to homeowners who had to purchase more expensive force-placed policies after their FAIR Plan policies were cancelled. The affected homeowners were located all over the state, with concentrations in Boston, Brockton, Springfield, and Worcester.
Under Massachusetts law, after a homeowners insurance policy has been in effect for 60 days, it only can be cancelled for a limited number of reasons, such as nonpayment of premium. According to the assurance of discontinuance, the FAIR Plan frequently inspected insured properties after 60 days and then impermissibly cancelled policies in instances where the FAIR Plan did not approve of the property's condition.
The FAIR Plan is a statutorily created entity jointly run by the state's property insurance companies. It was designed to provide coverage at reasonable rates to homeowners who were unable to purchase insurance through the open market. The FAIR Plan is frequently the only option for homeowners who live in urban areas or along the coast.
According to the attorney general, because the FAIR Plan is the insurer of last resort, many of those insured by the association whose policies were cancelled could not find alternate insurance on their own. Their mortgage companies purchased force-placed policies on their behalf and then billed the homeowners for the premiums. Force-placed policies are much more expensive than traditional homeowners insurance policies and provide more limited coverage, the attorney general noted.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].