$3.1 Million in Motorcycle Insurance Refunds Distributed to Over 9,000 Massachusetts Policyholders
Refunds stem from Attorney General Coakley's investigation of Liberty Mutual for alleged motorcycle insurance overcharges
"We are pleased that Liberty Mutual cooperated with our investigation and that policyholders are now receiving their refunds, particularly in this economy when every penny counts," said Attorney General Coakley. "We will continue to work to achieve more transparency in the auto insurance industry. We encourage consumers with questions about their policies to contact our Insurance & Financial Services Division."
Under the terms of the settlement, Liberty Mutual must complete the process of issuing refunds to affected policyholders by May 1, 2010. The average refund that Liberty is paying to consumers is $334. Pursuant to the settlement:
- 740 Massachusetts residents will receive refunds between $1,000 and $9,200;
- 1,136 Massachusetts residents will receive refunds between $500 and $999;
- 1,560 Massachusetts residents will receive refunds between $250 and $499;
- 5,851 Massachusetts residents will receive refunds that are less than $250.
In order to be eligible for a refund from Liberty, a consumer must have purchased either comprehensive or collision coverage for his or her motorcycle between January 1, 2002 and March 30, 2009 and his or her motorcycle must have been overvalued by Liberty Mutual for the purpose of calculating premiums. Consumers who have questions about the settlement should visit the Attorney General's Frequently Asked Questions webpage about the motorcycle insurance settlements at www.mass.gov/ago/motorcycles. Consumers may also call the Attorney General's Insurance & Financial Services Division at 1-888-830-6277 with their Liberty Mutual policy number to see if they are owed a refund and how much they are owed.
The Attorney General's Insurance & Financial Services Division began its investigation into motorcycle rating practices in the fall of 2008 after receiving a consumer complaint about the way in which Safety Insurance Company had valued a motorcycle. The Attorney General's investigation ultimately found that many of the insurance companies operating in Massachusetts between 2002 and 2009 were using inflated motorcycle book values to calculate premiums for their customers and that tens of thousands of Massachusetts residents had been overcharged.
For example, one of the insurance companies had overcharged a couple from Lynnfield, Massachusetts by more than $1,500 by valuing the couple's 1999 Harley Davidson Road King Classic at $20,000 in each year between 2003 and 2008. In fact, the motorcycle's book value was significantly less than $20,000 in 2003, and by 2008 the motorcycle's book value had fallen to less than $11,000. When the consumer's motorcycle was stolen in 2008, rather than paying $20,000 for the loss of the motorcycle, the insurer attempted to settle the couple's claim for less than $11,000 and tried to refund over $1,500 in premium overcharges to the couple.
To date, the Attorney General's Office has reached settlements with Safety Insurance Company, Plymouth Rock Assurance, Pilgrim Insurance Company, Metropolitan Property & Casualty, USAA, and Quincy Mutual to resolve similar allegations. In total, the seven insurers are expected to return $20 million to over 50,000 consumers and pay over $1 million to the Commonwealth. Liberty Mutual is the first of the settling insurance companies to send refunds to affected policyholders. While Liberty Mutual has already sent refunds, the remaining insurers are expected to send refunds to consumers in the fall of 2010.
These cases are being handled by Assistant Attorney General Glenn Kaplan of Coakley's Insurance & Financial Services Division, Investigations Supervisor Arwen Thoman, Mathematician Burt Feinberg, and Economist Bryan Lincoln.