AG orders motorcycle insurance refunds

LYNNFIELD – In a crackdown on insurance companies that overcharge customers, the state attorney general’s office has leveraged a settlement in which the Liberty Mutual Insurance Co. must refund $3.1 million in premiums to approximately 9,000 Massachusetts motorcycle policyholders.Attorney General Martha Coakley unveiled the details Wednesday that Liberty Mutual allegedly overcharged for collision and comprehensive motorcycle insurance coverage. The settlement was the latest in a string of enforcement actions by Coakley’s General Insurance and Financial Services Division, which 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 probe 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. A Lynnfield couple was among the victimized consumers.One of the insurance companies had overcharged the couple 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.Liberty Mutual, the latest insurance company targeted by Coakley’s “overcharge initiative,” must issue refunds to affected policyholders by May 1.The average refund that Liberty Mutual is paying to Massachusetts resident consumers is $334. Under terms of the settlement, 740 residents will receive refunds between $1,000 and $9,200; 1,136 residents will receive refunds between $500 and $999; 1,560 residents will receive refunds between $250 and $499; and 5,851 residents will receive refunds that are less than $250.In order to be eligible for a refund from Liberty Mutual, a consumer must have purchased either comprehensive or collision coverage for their motorcycle between Jan. 1, 2002 and March 30, 2009, and the motorcycle must have been overvalued by the insurance company for the purpose of calculating premiums, according to Coakley spokesman Amie Breton.Consumers may also call the attorney general’s Insurance and Financial Services Division at 888-830-6277 with their Liberty Mutual policy number to see if they are owed a refund and how much they are owed, Breton said.”We’re pleased that Liberty Mutual cooperated with our investigation and that policyholders are now receiving their refunds, particularly in this economy when every penny counts,” Coakley said Wednesday. “We will continue to work to achieve more transparency in the auto insurance industry.”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 state, Breton said.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.