Proposed Mass. Bill Limits Auto Claims Investigations, Shifts Payments to Insurers

A proposed bill was heard last month in the Massachusetts legislature that aims to place a time limit on auto insurance claims investigations and would make investigating insurers responsible for premium payments until the cause of loss is determined.

The bill would limit auto claims investigations to 30 days and require that the insurer notify the insured at the start and conclusion of a claims investigation. During the investigation, the bill would require that any ongoing payments of premiums to the financial institution holding title of the insured vehicle be made by the investigating insurance company rather than the insured. If the cause of loss is found to be fraudulent or intentional, 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 this is the first time the legislation has been filed. The hearing on October 20th in the commonwealth’s Joint Committee on Financial Services served as the first time the bill was heard.

He told Insurance Journal he believes requiring investigating insurance companies to carry the financial burden of vehicle payments to the lender will incentivize a timely resolution for claims investigations.

“[Insurance companies] are certainly not going to want ongoing investigations with the financial risk or liability of having to pay those premiums, with the ability to collect if fraud is discovered,” he said. “And that protects the consumer from basically getting triple damages by having to pay insurance premiums, having to pay their principal on their car and not having the vehicle to use.”

The idea for the bill came about during a conversation with his legislative aide, Lori Joubert, regarding a situation several years ago in which her car burst into flames in her driveway due to a defect in the wiring of its heated seats.

She stated in written testimony for the bill that on July 16, 2016, she woke up to the sound of her neighbors shouting for her to call 911 and walked outside to find her Toyota Rav 4 on fire in her driveway. The police and fire department were called, and the fire was put out.

Although it was later discovered that her vehicle fit within the scope of a recall notice issued by Southeast Toyota Distributers for the affected vehicles, her insurer, MAPFRE (formerly, Commerce Insurance Company) initially investigated the claim to confirm the cause of loss.

“Understandably, the insurance company said, ‘Your car just burned to the ground in your driveway. That looks a little suspicious; looks like fraud. We’re going to investigate,'” Mckenna said.

In a letter obtained by Insurance Journal alerting Joubert to the investigation, a Commerce claims representative stated that Joubert would remain responsible for her premiums when due.

In the meantime, however, Joubert said she was left without a car and was required to pay her insurance premiums as well as the principle for the loan on the car until three months later in October when the claim was settled.

As a result, she said she believes legislation like this is needed so insurance companies are compelled 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 customers,” she said. “And hopefully this bill, whether it gets passed or not, will have them thinking about that. You know, we give [insurance companies] our money and all we ask is that they treat us fairly.”

McKenna agreed, adding he believes this legislation can protect consumers from the financial burden of continuing premium and principle payments during a claim investigation.

“This bill simply puts that burden onto the insurance company who certainly has the means to make those payments to the lending company,” he said. “And if at the end of the investigation period, it is found that fraud occurred, [the insurer] will have every right to go to collections for that amount from the car owner.”

MAPFRE said in a statement provided to Insurance Journal that it is reviewing the proposed legislation.

“MAPFRE takes great pride in its superior claim handling and customer service, and whenever our standards are not met we address any particular matter expeditiously,” a spokesperson said. “We don’t believe the contemplated changes are needed, but we are reviewing the proposed legislation.”

McKenna said that typically in Massachusetts, proposed legislation requires about two or three hearings before it moves forward, if it moves forward at all. He said he is open to working with the insurance industry on refining the bill and expects those conversations to happen following this initial hearing.

“I’m sure that the insurance industry will have its perspective, and we’ll take a look at the bill and see where it can be tweaked and refined and edited,” he said. “I’m certainly happy to have that conversation with the insurance industry and make refinements to the bill based on those conversations.”

The bill is Massachusetts House Bill 1151, an act to clarify auto insurance liability during claims investigations.

Topics Carriers Auto Claims Massachusetts