The Boston Globe Reports:
High court lets Fair Plan's rate increases stand
Coastal homeowners could see 25% hike in insurance cost
By Kimberly Blanton, Globe Staff
January 4, 2008
Massachusetts' highest court yesterday affirmed record-breaking rate increases levied last year by Massachusetts Fair Plan for homeowners' insurance, rejecting arguments by the attorney general that the insurer of last resort charges too much.
The Supreme Judicial Court upheld a 2006 decision by the state insurance commissioner to approve Fair Plan rate increases of 25 percent on Cape Cod and the islands and in other coastal areas, and 12.4 percent elsewhere.
Historically, Fair Plan rate increases have been 6 percent or less.
About 150,000 policyholders covered by Fair Plan have been assessed the higher rates so far.
Fair Plan is a program designed in the 1960s to help homeowners in coastal areas and in some low-income urban neighborhoods who can't afford regular coverage sold by private insurance companies.
On average, the 2007 increases added $112 to the $900 cost of an annual policy.
Policies for waterfront homes rose $450, on average, pushing them as high as $2,250.
Fair Plan cited the risk of hurricanes to justify the higher rates.
The attorney general's office had appealed the rate increases, arguing that the state insurance commissioner at the time, Julianne Bowler, had made procedural errors and had misinterpreted the extent of her authority under a 2004 law that ended rate caps in Fair Plan's largest territories.
But the Supreme Judicial Court said Bowler acted correctly. The court also supported the commissioner's decision to accept the models Fair Plan used to assess the risk from hurricanes.
"The court's decision will make it harder to ensure that consumers get a fair deal from the Fair Plan," Attorney General Martha Coakley stated in a release.
Fair Plan officials could not be reached for comment yesterday.
Coakley's office said the steep rate increases set the stage for even higher prices. Fair Plan currently is seeking an additional increase of 25 percent for coastal areas and 13 percent elsewhere for 2008 policies.
Bowler's interpretation of the 2004 legislative change effectively eliminated state-mandated caps on Fair Plan premiums, paving way for the higher rates.
Paula Aschettino, the chairwoman of the Citizens for Homeowners Insurance Reform, which represents about 4,000 property owners, said she was "extremely disappointed" with the court decision.
"The commissioner is supposed to review the affordability of a rate hike to the people who are affected and that was not done, and the citizens on the Cape and coastal areas are suffering with these rates," she said.
Consumer groups said the Fair Plan's rate increases were based on hurricane models that reflect weather patterns in Florida and on other parts of the Eastern Seaboard, but do not fairly represent the relatively small insurance claims and low risks of storm damage on Cape Cod.
The decision "creates the possibility that the insurance commissioner would again give a large increase to the Cape, which is something we're very concerned about," said Stephen D'Amato, a consultant to the Center for Insurance Research in Cambridge D'Amato vowed to find a way to reinstate the state caps. "The first thing I'm going to look for is a way around this."
Kimberly Blanton can be reached at blanton@globe.com.
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