Massachusetts Homeowners Requirements, FAIR Plan and Inland Marine

This chapter covers the Massachusetts rules that shape homeowners insurance (lead paint liability, flood insurance a lender requires, and the FAIR Plan for property owners the voluntary market will not insure) and the Massachusetts definition of what may be written as inland marine insurance. The previous chapter covers the standard fire policy and property cancellation and nonrenewal.

Homeowners policy

Lead paint liability abatement (Mass. Gen. Laws ch. 175, § 111H; 211 CMR 131.00)

The Lead Law. Massachusetts’s Lead Law (Mass. Gen. Laws ch. 111, §§ 189A–199B) puts the duty on the property owner. Whenever a child under six lives in premises with dangerous levels of lead in paint, plaster or other accessible structural material, the owner must abate or contain it, and a new owner of such premises has 90 days to do so (ch. 111, § 197(a)). An owner is liable for all damages to a poisoned child under six caused by failing to comply. An owner whose premises are covered by a letter of full compliance or a letter of interim control, however, is not strictly liable, though that owner must still take reasonable care to keep the premises in compliance (ch. 111, § 199(a)).

The insurance rules. The Commissioner’s lead paint rules are meant to encourage preventive lead abatement and to make sure liability insurance is available to owners who bring their premises into compliance (Mass. Gen. Laws ch. 175, § 111H; 211 CMR 131.03). They apply to residential premises built before 1978 (ch. 175, § 111H(e)).

Premises	What the liability policy must do
A letter of interim control or letter of full compliance is in effect	Must cover injury or damage from exposure to dangerous levels of lead occurring during the policy period, unless it results from gross or willful negligence (211 CMR 131.04)
The owner obtains a letter during the policy	The insurer must endorse the policy to add lead coverage from the date the endorsement takes effect (211 CMR 131.05)
A new owner who took title in a bona fide transaction comes into conformance within 90 days	Covered back to the date of taking title, or the policy’s effective date if the policy was bought later (211 CMR 131.06)
No letter is in effect	The insurer may exclude lead liability, but must at the same time offer to buy back the coverage, with separate limits of at least $100,000 per occurrence for personal lines and $300,000 per occurrence for commercial lines, or the policy’s general liability limit if that is lower (211 CMR 131.08)
Owner-occupied single-family home	Must include lead coverage; no exclusion-and-buyback option. The coverage does not apply to claims by persons insured under the policy (211 CMR 131.09)

Required lead coverage may not carry special limits that do not apply to other liability claims, and it applies unit by unit: each unit with a letter in effect is covered, even if other units in the building have none (211 CMR 131.07). Buyback coverage elected within 30 days of the offer is effective from the policy’s inception date (211 CMR 131.08(3)). Insurers must give each insured a disclosure notice summarizing the lead coverage provided or available on every policy issued or renewed (211 CMR 131.13).

For example, a landlord buys a liability policy on a 1920s three-family house with no letter of compliance. The insurer may exclude lead poisoning claims, but it must offer buyback coverage of at least $100,000 per occurrence under a personal lines policy. If the landlord has the house deleaded and obtains a letter of full compliance mid-term, the insurer must endorse the policy to cover lead claims from then on.

Sidenote

Know this...

The owner-occupied single-family home is the exception: its liability policy must cover lead poisoning, with no exclusion and buyback, but not for claims by people insured under the policy.

Massachusetts requirements for flood insurance (Mass. Gen. Laws ch. 183, § 69; Bulletin 2015-07)

What a lender may require. A lender may not require the owner or buyer of 1- to 4-unit residential property to buy flood insurance that (ch. 183, § 69):

• Exceeds the outstanding principal mortgage balance at the start of the policy year (for a home equity line, home equity loan or second mortgage, the full credit line or outstanding principal)
• Includes contents coverage
• Has a deductible of less than $5,000

The notice. When a lender requires flood insurance, both the lender and the insurance producer must give the owner or buyer a clear and conspicuous notice that the required insurance protects only the lender’s interest in the property, that Massachusetts law limits what the lender may require, that it may not pay for many repairs after a flood, and that the owner may want to buy more (§ 69).

What the producer does (Division of Insurance Bulletin 2015-07). A producer selling lender-required flood insurance on 1- to 4-unit residential property must:

1. Give the written notice when the owner or buyer applies for the flood insurance
2. Use the Division’s Flood Insurance Notice and Acknowledgement Form
3. Have the applicant sign an acknowledgement of receiving it
4. Keep a copy of the signed acknowledgement

The signature is not required when the producer gives the form before a lender’s forced placement of flood insurance. A producer who does not comply may face fines and other enforcement proceedings by the Division (Bulletin 2015-07).

Sidenote

Know this...

The § 69 limits cap what a lender may require. They do not limit what an owner may buy: the notice tells the owner the required amount may be too little, and the Division’s form has the owner acknowledge being free to buy more coverage, contents coverage and a lower deductible.

Massachusetts Property Insurance Underwriting Association (MPIUA), known as the Massachusetts FAIR Plan (Mass. Gen. Laws ch. 175C, § 4)

Massachusetts’s property market of last resort is the Massachusetts Property Insurance Underwriting Association (MPIUA), also known as the FAIR Plan. It was created by state law and acts like an insurance company, but it is not a state agency and is not state funded. The Division of Insurance regulates it, including reviewing and approving its rates (Division of Insurance).

Who belongs. Every insurer licensed to write and writing basic property insurance in Massachusetts on a direct basis must be a member of the association, as a condition of its authority to write that insurance. The association provides basic property insurance to eligible applicants unable to obtain it in the voluntary market (Mass. Gen. Laws ch. 175C, § 4(a)). Members share its writings, expenses, profits and losses in proportion to the basic property insurance premiums each writes in Massachusetts, with adjustments for members writing personal lines (§ 4(e)). It is governed by 18 directors: 10 elected by the members, plus 2 representatives of agents’ and brokers’ associations and 6 public representatives appointed by the Commissioner (§ 4(f)).

What it writes. Basic property insurance is insurance against direct loss as defined in the standard fire policy and extended coverage endorsement, plus vandalism and malicious mischief, dwelling and homeowners coverages, and other coverages the Commissioner sets. It does not include automobile risks, or manufacturing risks except classes the Commissioner designates (ch. 175C, § 1). It includes liability coverage for non-owner-occupied 1- to 4-unit dwellings; a signed application for that coverage certifies that the applicant tried the voluntary market and was declined by at least 2 insurers (§ 1). The FAIR Plan does not cover flooding, and since 2025 a new FAIR Plan policy for property in a Special Flood Hazard Area in communities overseen by the Massachusetts Office of Coastal Zone Management also requires a separate flood policy (Division of Insurance).

Who is eligible. An eligible applicant is anyone with an insurable interest in property eligible for basic property insurance (ch. 175C, § 1). According to the Division, an applicant may qualify if the property is residential and in Massachusetts and the applicant can certify a reasonable effort to obtain insurance elsewhere; the property must also be maintained, not vacant or condemned, and free of outstanding tax liens. Some commercial properties may also be eligible for limited coverage. Most applicants apply through a licensed agent or broker (Division of Insurance).

Rules for producers (ch. 175C, § 3).

• No insurer or agent may direct a producer not to submit business to the association, and no producer may be penalized for doing so.
• A licensed agent or broker may not refuse an eligible applicant’s request for an inspection unless the applicant owes premium for the coverage requested or will not make satisfactory payment arrangements.
• Producers are paid commissions only, on the original policy, each installment and each renewal, at a rate the Commissioner sets.

Appeals (ch. 175C, § 7). An applicant may appeal a denial of coverage, or a requirement to make improvements or take loss prevention measures, to the Commissioner within 10 days. A person aggrieved by the Commissioner’s decision may appeal to the superior court within 10 days.

The FAIR Plan is also bound by § 4C’s ban on considering race, sex, age, disability and the other listed characteristics in homeowners decisions (see the previous chapter).

Commercial inland marine

Nationwide marine definition (211 CMR 10.00)

211 CMR 10.00, the Nation-Wide Marine Definition, describes the kinds of risks and coverages that may be classified as marine, inland marine or transportation insurance under Mass. Gen. Laws ch. 174A. The list is not complete, and appearing on it does not make a risk marine in every instance (211 CMR 10.01).

Marine or transportation policies may cover (211 CMR 10.02):

• Imports, exports and domestic shipments
• Instrumentalities of transportation and communication, such as bridges, tunnels, piers and wharves, pipelines, power and telephone lines, radio and television towers, and outdoor cranes (but not buildings and their contents)
• Personal property floaters, such as personal effects, furs, jewelry, fine arts, stamps and coins, musical instruments and wedding presents
• Commercial property floaters, including mobile equipment floaters, builders risk or installation coverage (when perils beyond fire and extended coverage are insured), property in transit or in the custody of bailees, accounts receivable and valuable papers, floor plan policies, signs, dealers policies such as jewelers block, difference in conditions coverage (excluding fire and extended coverage perils) and electronic data processing policies

Exceptions (211 CMR 10.03). Unless otherwise permitted, marine or transportation policies may not cover:

• Storage of the insured’s merchandise, except as the regulation provides
• Merchandise in course of manufacture on the manufacturer’s premises
• Furniture and fixtures, and improvements and betterments to buildings
• Money or securities in safes, vaults or on premises, except while in transit

Two specific tests. An equipment dealer’s stock is marine when equipment of the kinds 211 CMR 10.02 lists, with its accessories, makes up 75% of the annual average value of the dealer’s entire stock (211 CMR 10.04). Inland marine policies may cover the following when owned and used for pleasure, not business, hire or commercial use: outboard motors, rowboats, canoes and boats not over 16 feet designed exclusively to be propelled by outboard motors, and their equipment and trailers (211 CMR 10.05).

For example, a contractor’s bulldozer that moves from job site to job site can be insured on a mobile equipment floater, an inland marine form. The furniture in the contractor’s office cannot, because furniture and fixtures are excepted.

Lesson summary

• The Lead Law requires an owner to abate or contain lead when a child under six lives there (a new owner has 90 days). An owner with a letter of full compliance or interim control is not strictly liable.
• A liability policy on premises with a letter must cover lead injury (except gross or willful negligence), with no special limits. Without a letter, the insurer may exclude lead but must offer buyback of at least $100,000 (personal lines) or $300,000 (commercial lines) per occurrence. An owner-occupied single-family policy must include lead coverage.
• A lender may not require flood insurance on 1- to 4-unit residential property above the principal balance, with contents coverage, or with a deductible under $5,000. The producer gives the Division’s notice and acknowledgement form at application and keeps the signed copy.
• The MPIUA (FAIR Plan) is the property market of last resort: a joint underwriting association every basic property insurer must join, not a state agency. Producers may not be penalized for using it, may not refuse an eligible applicant’s inspection request (unless the applicant owes premium or will not arrange payment), are paid by commission only, and denials may be appealed to the Commissioner within 10 days.
• 211 CMR 10.00 lists what may be written as marine or inland marine insurance, such as transit, bridges and pipelines, personal and commercial floaters, and builders risk, and excepts merchandise in manufacture, furniture and fixtures, and money on premises.