A committee from the Massachusetts Legislature has held a hearing on a bill that will limit the amount of time insurance companies need to investigate cause of a loss, and would require the insurer to create payments for that vehicle while the investigation is ongoing.
The bill, H.1151, filed by state Rep. Joseph D. McKenna, a Republican representing the 18th Worcester district, would amend existing state regulations by adding essential that any investigations in to the reason for a loss be concluded within 30 days of the occurrence from the event that caused losing.
In addition, the investigating insurance company would be required to make any premium payments because of the financial institution holding title to the vehicle during the course of its investigation. If the loss were determined to be fraudulent, the insurer could be permitted to recover those payments from the insured.
Violations would be punishable by a fine of up to $10,000, to be determined by the state’s commissioner of insurance.
Testifying before the Joint Committee on Financial Services on Oct. 20, McKenna said the bill “ensures that somebody who has lost the use of their vehicle isn’t triple influenced by having to continue to pay insurance premiums as well as car payments on the vehicle they no more have.”
McKenna said he filed the balance after learning of the incident involving his aide. The aide’s car, a Toyota Rav4, burst into flames in her own driveway, as a result of that which was later going to be faulty wiring in the car’s heated seats.
“The insurer said, ‘Well, your car burned down in your driveway. That looks suspicious, we’re going to open an investigation.’ So that they conducted an investigation. Understandable,” McKenna said.
“However, throughout the investigation, there is an unknown timeframe. And she had to continue paying insurance premiums as well as the principal on that car which she no more had the use of.”
“What exactly this bill does is it shifts the burden from the continuing premiums to the lender to the insurance agency that is conducting your research, using the caveat that if they do find that fraud occurred, they have the ability to to reclaim all of those foregone premiums and payments from the fraudulent owner,” he said.
In written testimony meant for the bill, the aide, Lori Joubert, said that following the fire, she filed a claim, rented a car and cooperated fully with an insurance adjuster.
“A few days later I received a phone call from Mapfre/Commerce Insurance and also the adjuster inquired about to convey my name and explained to me that the call had been recorded. The following words from her mouth were why did you do it. I had been shocked, and asked do what? She then explained to me that we were under investigation. I stated that we would cooperate once we had absolutely nothing to hide,” Joubert wrote.
She said she was informed that her car rental would no longer be covered under her insurance. When she said that she and her husband owed payments around the Rav4, “I was informed which i required to keep paying on a vehicle I no longer had. Then i asked if we might take the car from the policy and not have to purchase the insurance policy. I had been then told they policy would need to stay in effect and that we have to keep paying insurance on the car that we no more had.”
She and her husband paid for a lawyer out of pocket. “We were late on two car payments and our credit was adversely affected. Not to mention the strain and the uncertainty of coping with an insurance coverage adjuster who kept delaying our claim,” she wrote.
Three months later, the claim was settled. “Toyota was paid off, we did not get any from the from the payments made from pocket retroactive, we didn't receive any refund around the insurance and that we did not receive reimbursement on the attorney fees,” she wrote.
“I’m not arguing that she shouldn't have been investigated,” McKenna told Repairer Driven News. “But she'd to pay for her car payments and her insurance payments. It became a really, really tough financial burden for her.”
McKenna said he believed the legislation would produce a financial incentive for insurers to complete their investigations in a timely manner. He explained that the 30-day window “feels reasonable,” but said he'd welcome views to the contrary from the insurance industry.
He acknowledged that “there’s many issues to become discussed with this,” and the man had not raised the problem with his aide’s insurer, or with industry representatives. “I certainly anticipate having those conversations, and to dealing with the committee on this bill to make certain that we address any unintended consequences.”
McKenna told RDN he has to date received no response in the insurance industry to his bill.
