Massachusetts Auto Cancellation, Repairs, Rates and Appraisal

This chapter covers cancelling and nonrenewing a Massachusetts auto policy, aftermarket parts and repairs, auto rate regulation, and the appraisal rules for physical damage claims. Earlier chapters covered the compulsory coverages, PIP, uninsured motorist coverage and the residual market plan; other chapters cover the general property and casualty cancellation rules (ch. 175, §§ 187B–187D) and chapter 175E’s general rate standards (§§ 4, 5).

Cancellation/nonrenewal (Mass. Gen. Laws ch. 90, § 34K; ch. 175, §§ 22C, 113A)

Grounds (Mass. Gen. Laws ch. 175, §§ 22C, 112)

A motor vehicle policy must be noncancellable by the company except for (Mass. Gen. Laws ch. 175, § 22C):

• Nonpayment of premium
• Fraud or material misrepresentation in the application or renewal
• Suspension or revocation, during the policy period, of the license or registration of the named insured or of a household member who usually drives an insured vehicle
• Coverages insurers may refuse to offer under the residual market plan rules (ch. 175, § 113H(A))
• The insured’s failure to allow a requested inspection of the vehicle

An insurer may also cancel up to 90 days after the renewal effective date if it is making a general reduction in the volume of auto insurance it writes, or if the applicant failed to return a completed renewal application at least 30 days before the previous policy expired (211 CMR 97.03(1)(b)). The policyholder may cancel the policy, or any of its coverage parts, at any time (211 CMR 97.03(2)), by the written notice described below.

A liability policy may not be cancelled or annulled by agreement between the company and the insured after the insured has become responsible for a loss; such a cancellation is void. An insurer also may not deny coverage because the insured gave late notice of an occurrence, claim or suit that may give rise to liability insured against, unless the delay prejudiced the insurer (Mass. Gen. Laws ch. 175, § 112).

Sidenote

Know this...

An accident or a claim is not on the § 22C list, so a Massachusetts insurer cannot cancel an auto policy midterm because of the accident or claim itself.

Notice (Mass. Gen. Laws ch. 175, §§ 22C, 113F; ch. 90, § 34K)

Cancellation notice. A cancellation by either party is valid only with written notice giving the specific reason at least 20 days before the intended effective date. The company’s notice may be delivered in hand, left at the insured’s last known address, or sent by first class mail; a mailed notice is effective only with a certificate of mailing from the U.S. Postal Service (Mass. Gen. Laws ch. 175, § 113A). “Underwriting reasons” is not a reason: the insurer must give the policyholder the specific facts behind its decision (211 CMR 97.04(1)(f)).

• Nonpayment. The notice states the amount owed and that the cancellation will not take effect if the insured pays it in full by the effective date. If the agent or broker paid the company but the insured did not pay the agent or broker, the company may still cancel for nonpayment (§ 113A).
• Who else is told. When the insurer cancels, it also sends its notice to any loss payee shown on the policy. The insurer notifies the Registrar of Motor Vehicles of every cancellation, whoever started it (211 CMR 97.04(3)).
• Effect on registration. The registrar revokes the vehicle’s registration on the cancellation’s effective date unless a new certificate covering the vehicle reaches the registrar at least two days before (Mass. Gen. Laws ch. 90, § 34H).
• Appeal. A person aggrieved by a notice of cancellation (other than for nonpayment on a taxicab or livery vehicle) may file a written complaint with the Commissioner before the intended effective date. The Board of Appeal on Motor Vehicle Liability Policies and Bonds hears it, and filing the complaint keeps the policy in force, but not past its expiration date, until the decision (Mass. Gen. Laws ch. 175, § 113D).
• Power of attorney. A power of attorney to cancel a motor vehicle liability policy may not be exercised until 10 days’ notice has been given to the policyholder by registered or certified mail, return receipt requested (Mass. Gen. Laws ch. 90, § 34K).

Return premium. When the company cancels, the return premium is pro rata; when the insured cancels, it is figured after deducting short rates (Mass. Gen. Laws ch. 175, § 113A). But a policyholder’s cancellation returns pro rata if made within the first 30 days, within 30 days after the vehicle is a total loss, on entering military service, or because voluntary coverage replaced a residual market policy (211 CMR 97.05(4)). A company that cancels must, on demand, refund all money due within 30 days, or be liable for double the refund plus reasonable legal fees (Mass. Gen. Laws ch. 175, § 22C).

The policy also terminates when the vehicle is sold or transferred, when the plates are surrendered to the registrar to cancel the registration, or when another company files a certificate for the same vehicle (Mass. Gen. Laws ch. 175, § 113A).

Nonrenewal notice. A company that does not intend to renew a policy in force 45 days before its termination date gives written notice on or before that 45th day. The notice goes to the registrar, and to the insured or the agent or broker who placed the policy (Mass. Gen. Laws ch. 175, § 113F). The insurer sends it to the producer of record only if that producer is still appointed as its agent; otherwise, or if the producer is no longer licensed, it goes to the policyholder (211 CMR 97.06(3)(a)). It must also tell the insured about residual market plan eligibility (see the earlier chapter).

• The producer’s duty. An agent or broker who receives a nonrenewal notice must send a copy to the insured within 15 days, unless another company has already insured the vehicle. The Commissioner may revoke the license of an agent or broker who fails to (§ 113F).
• Insurer’s failure. A company that fails to send the notice, or sends it and then renews, must on request issue a new policy with at least the coverage of the expiring one (§ 113F).
• Same group. No nonrenewal notice is needed if an insurer in the same group issues a succeeding policy on the same terms and conditions. An insurer that moves the insured to a different company in its group must tell the insured in writing, when the policy is issued, of any changes in coverage from the preceding policy (§ 113F).

For example, an agent who receives a nonrenewal notice on March 1 must send the customer a copy by March 16, unless another company already insures the vehicle.

Aftermarket parts regulation (211 CMR 133.04; Mass. Gen. Laws ch. 90, § 34R)

Disclosure (ch. 90, § 34R). When visible exterior sheet metal or plastic parts must be repaired, any insurer or repairer writing an estimate must clearly identify each major replacement crash part not made or supplied by the original manufacturer. The estimate carries a printed notice, in at least 10-point type, that warranties on those parts come from their maker rather than the vehicle’s manufacturer, and the customer gets a copy. The repairer names the manufacturer or supplier of any non-original crash parts actually used on the repair order. A failure to comply is an unfair or deceptive act under chapter 93A (§ 34R).

When aftermarket parts are used (211 CMR 133.04). The appraiser specifies that damaged parts be repaired rather than replaced unless the part is damaged beyond repair, repair costs more than replacement with a part of like kind and quality, or the vehicle’s operational safety might be impaired (211 CMR 133.04(1)). When a part must be replaced, the appraisal uses a rebuilt, aftermarket or used part of like kind and quality unless:

• The vehicle’s operational safety might be impaired
• Diligent efforts to find such a part failed
• A new original equipment part would give the lowest overall repair cost
• For policies written or renewed on or after January 1, 2004, the vehicle has been driven no more than 20,000 miles, unless its pre-accident condition warrants otherwise

A part is of like kind and quality when it is in equal or better condition than the pre-accident part (211 CMR 133.04(1)). When an insurer specifies used, rebuilt or aftermarket parts, the source and the specific parts must be shown on the appraisal (211 CMR 133.04(2)). A violation of 211 CMR 133.00 is an unfair or deceptive practice under chapter 176D, and an insurer or repair shop answers for all of its appraisers, staff or independent (211 CMR 133.08).

For example, a car with 12,000 miles on it, insured under a current policy, needs a new fender. Because it has been driven no more than 20,000 miles, the appraiser need not specify a used or aftermarket fender, unless its pre-accident condition warrants otherwise.

Glass. When glass repair is covered by auto insurance, the insurer, producer, adjuster or administrator may not require the insured to use a particular registered glass repair shop, and the insured may change shops at any time. Each violation is fined $1,000 to $5,000 (Mass. Gen. Laws ch. 175, § 113X).

Regulation of rates for motor vehicle insurance (Mass. Gen. Laws chs. 175A, 175E)

Chapter 175E applies to all coverage, compulsory or not, written under motor vehicle liability policies (Mass. Gen. Laws ch. 175E, § 2). In private passenger auto insurance, a competitive market, where rates are not fixed and established by the Commissioner under ch. 175, § 113B, is presumed to exist unless the Commissioner finds after a hearing under ch. 175E, § 5 that competition is insufficient or destructive, and any such finding expires within one year (211 CMR 79.03(1)).

• Filing. Every insurer or rating organization files its manual of classifications, rules and rates, and every rating plan or change, at least 45 days before its effective date (Mass. Gen. Laws ch. 175E, § 7).
• Suspension. The Commissioner may suspend a filing for up to 45 days after its effective date to finish a hearing. An insurer may still use a suspended (not disapproved) filing by giving a bonded written agreement to adjust premiums to the final decision, with interest at 8 percent a year (ch. 175E, § 7).
• Notice to agents. When a filing changes the relationship between rates and the production expense (commission) portion, the filer must give written notice at the same time to every licensed agent of each insurer it covers, and an agent, broker or producer association may in good faith ask for a hearing (ch. 175E, § 7).

Private passenger motor vehicle insurance rates (211 CMR 79.00)

211 CMR 79.00 governs rates and premiums for all coverages under private passenger auto policies, including voluntary market filings under chapters 175E and 175A and residual market filings under chapter 175A (211 CMR 79.01). Voluntary market rate filings are made at least 45 days before the proposed effective date, and residual market (CAR) filings at least 15 days before (211 CMR 79.05(1)).

Prohibited rating factors. A rating plan based in whole or part on sex, marital status, race, creed, national origin, religion, age (except the required reduction for insureds 65 or older), occupation, income, education, homeownership, gender identity or sexual orientation violates public policy and may be disapproved (211 CMR 79.04(11)). No insurer may refuse to issue or renew a policy, or use the factor to place a customer with a particular affiliate, because of the same factors, age, or the vehicle’s principal place of garaging (211 CMR 79.04(12)).

Merit rating. An insurer’s own merit rating plan may not use an at-fault accident or traffic violation that predates the policy’s effective date by more than six years, and no single accident or violation may affect a vehicle’s premium for more than five years (211 CMR 79.04(7)). For accidents on or after July 1, 2015, an at-fault accident is one in which the operator was more than 50 percent at fault under the Board of Appeal’s Standards of Fault and the insurer’s payment, excluding any deductible, exceeds $1,000 (211 CMR 134.02). 211 CMR 134.00 defines the Safe Driver Insurance Plan surcharges and credits required during a fixed-and-established market; in either kind of market, the Merit Rating Board collects and exchanges the claim and traffic violation data that the SDIP or an insurer’s own merit rating plan uses (211 CMR 134.01).

Consumer information. An insurer with a website must post its Massachusetts private passenger coverage and price options, or conspicuously give a telephone number where a consumer can get them (211 CMR 79.09(3)).

Appraisal (Mass. Gen. Laws ch. 175, § 113O)

An appraisal is a written motor vehicle damage report, and an appraiser is a person licensed by the Auto Damage Appraiser Licensing Board to evaluate vehicle damage and determine the cost of the parts and labor to repair it (211 CMR 133.03).

Comprehensive coverage. Fire and theft or comprehensive coverage pays for loss to the insured vehicle up to its actual cash value, less a $500 deductible. Insurers must offer a $300 deductible option and, at the policyholder’s option, a $100 deductible for glass damage (Mass. Gen. Laws ch. 175, § 113O).

Repair before payment. An insurer makes no payment under comprehensive or collision coverage until it receives a claim form stating that the repair work described in an appraisal, made under the Auto Damage Appraiser Licensing Board’s regulations, has been completed, unless it pays under a direct payment plan the Commissioner approved (Mass. Gen. Laws ch. 175, § 113O; ch. 90, § 34O).

• Seven days. If the insurer does not pay within seven days of receiving that claim form, the insured may sue, and recovers double the damage plus costs and attorney’s fees if the court finds the refusal unreasonable (§ 113O; ch. 90, § 34O).
• Not repaired. If no claim form arrives, the insurer pays only the decrease in actual value, less any deductible. If the insured does not repair the vehicle, the insurer reduces the vehicle’s actual cash value by the amount of the damage (§ 113O).
• Copy of the appraisal. On request of the insured, the claimant or their chosen repair shop, the insurer or appraiser sends a copy of the appraisal within three days (Mass. Gen. Laws ch. 90, § 34O).
• Choice of shop. A direct payment plan may be required to provide that no insurer or appraiser may require repairs at a specific shop or list of shops (§ 113O).

Reinspection. An insurer must have licensed appraisers conduct intensified appraisals (an appraisal before repair plus a reinspection after) of at least 25 percent of damaged vehicles appraised at less than $4,000 and at least 75 percent of those appraised at more than $4,000, for collision, limited collision and comprehensive claims (211 CMR 133.07).

Total losses. When the appraised repair cost plus probable salvage may exceed the vehicle’s actual cash value, the insurer determines actual cash value, considering the retail book value of a like vehicle, the price paid plus prior improvements less depreciation, any prior unrelated damage, and the actual cost of buying an available like vehicle (211 CMR 133.05(1)). If the claimant keeps title, the appraiser gets bids from two licensed salvage companies and uses their average as the salvage value (211 CMR 133.05(2)).

Third-party property damage claims. A person with a property damage claim against an insured (or a limited collision claim) may send the insurer a written demand. The insurer must answer in writing within 15 working days, accepting, rejecting or offering to compromise. If the claimant sues and recovers substantially the full claim, the court may add a penalty if the insurer failed to respond or its position was unreasonable (Mass. Gen. Laws ch. 90, § 34O).

Lesson summary

• An insurer may cancel midterm only for nonpayment, fraud or material misrepresentation, a license or registration suspension or revocation of the insured or a usual household driver, § 113H refusable coverages or a refused inspection (ch. 175, § 22C), plus two grounds within 90 days after renewal (211 CMR 97.03); no cancellation by agreement after a loss (§ 112).
• Cancellation needs 20 days’ written notice with the specific reason, mailed with a certificate of mailing (§ 113A); “underwriting reasons” is not enough (211 CMR 97.04). An appeal to the Board of Appeal before the effective date keeps the policy in force (§ 113D).
• Company cancellation returns premium pro rata; insured cancellation is short rate, with listed exceptions (§ 113A; 211 CMR 97.05).
• Nonrenewal notice goes out 45 days before expiration, to the registrar and the insured or appointed producer; the producer forwards it within 15 days or risks license revocation (§ 113F).
• Estimates must identify non-original crash parts with a warranty notice (ch. 90, § 34R). Appraisals use like kind and quality used or aftermarket parts unless an exception applies, such as a vehicle with 20,000 miles or fewer (211 CMR 133.04).
• Private passenger auto rates are presumed competitive and filed 45 days ahead (ch. 175E, § 7; 211 CMR 79.03, 79.05). Rating may not use the factors 211 CMR 79.04(11) lists, such as sex, marital status, age (except the 65+ reduction) or income.
• Collision and comprehensive claims are paid after a claim form certifying repairs under a licensed appraiser’s appraisal, within seven days (ch. 175, § 113O; ch. 90, § 34O); at least 25 percent of claims under $4,000 and 75 percent over $4,000 get an intensified appraisal (211 CMR 133.07).