Georgia Home Builders Association and Its Member Insurer Hammer Away at Each Other

A Georgia association of builders and the insurer that has offered workers’ compensation and general liability insurance exclusively to its members are at odds over the insurer’s attempt to end its exclusive arrangement and affiliate with another association. That move has triggered an attempt by the association to take over the insurer.

Earlier this year, Builders Insurance moved to end its exclusive agreement with Home Builders Association of Georgia and formed an additional relationship with Chesterfield, Missouri-based Contractors’ Benefit Association. Patrick Mitchell, Builders’ president and chief executive officer, says the move was a way to offer builders a lower cost alternative to obtain insurance.

But the HBAG says the move could be illegal and hurts its membership.

The HBAG has also complained that Builders Insurance Group is avoiding disclosure of how much it pays its directors while Builders Insurance is upset that HBAG’s rising membership fees discourages potential insureds from joining.

Builders’ Mitchell said that as HBAG has evolved as an association, its costs have gone up. Mitchell claims that HBAG and local chapter annual fees can now be as high as $675 per year. While policyholders value HBAG’s services, they do not need its entire package, Mitchell claims.

“With dues of only $60 a year, we believe the option of CBA membership — or membership in other associations we hope to offer soon — provides significant financial relief for many policyholders,” Mitchell said. “While Builders Insurance has no preference as to which association our policyholders join, we do strongly believe that they should have a choice.”

Ed Phillips, HBAG executive vice president, maintains that Builders Insurance is in violation of state law that gives his group an exclusive with Builders Insurance.

Phillips said by signing an endorsement agreement with CBA, Builders Insurance is diluting member support and advocacy measures historically offered by HBAG.

“CBA in no way is any kind of trade association like the local and state home builders associations; it’s simply a name-only association with no advocacy at all being done for the membership and the members do not run it,” Phillips said. “It would appear too that the individuals involved with that association are also running about 80 other associations from the same address.”

Phillips dismisses the contention that HBAG dues are too high. “I have not had a single complaint from a member about the cost of dues,” he said.

HBAG has responded to Builders’ expansion with a proxy vote campaign to force the insurer to end its alignment with CBA and to gain control of it by replacing the Builders Insurance board of directors with six HBAG past presidents. This effort is continuing.

Phillips said HBAG created the self-insured fund that the directors later “cut free” when they feared there would be liability and or tax issues for the association.

“That organization later became a mutual captive or an insurance co-op for HBAG members only,” Phillips said. “The two organizations were tied together until Builders Insurance decided to severe the arrangement in one of their acts of what appears to be retribution for questions of accountability and transparency being asked.”

Phillips said installation of six HBAG past presidents — who each agreed to salaries of $1 each for the first year — will regain control of the Builders Insurance Group.

Phillips also said HBAG wants Builders to answer questions about its directors’ fees, which he said have more than doubled from 2006, when the average director fee and other compensation was $165,691 per director.

But Mitchell said Builders disclosed director compensation to the Georgia insurance commissioner’s office, as required by law, and also disclosed compensation in its proxy statement for its annual meeting in February.

“Builders Insurance directors took no compensation during the first five years of the company’s history,” Mitchell said.

Mitchell contends that Builders is simply offering a lower cost alternative to members who are feeling the crunch of the current economic downturn.

“Given the overwhelmingly positive response to this lower-cost alternative, Builders Insurance is looking to provide more options to our policyholders by adding other associations,” Mitchell said. “If HBAG is successful in its efforts, the ability to choose lower-cost alternatives will be eliminated. HBAG initiated its proxy contest only after we terminated its exclusive monopoly.”

But HBAG isn’t willing to let go of its insurance exclusive without a fight.

“It is not clear at this point under Georgia law if they [Builders] even have the right to do so,” Phillips added. “The courts may have to decide.”

North Carolina Insurance Commissioner Jim Long has agreed to allow insurers to raise mobile homeowner’s insurance rates by about 25 percent.

For form MH(C), the industry asked for a 228 percent increase in the 18 coastal counties and a 10.7 percent increase for the rest of the state. Long granted a 24.4 percent increase on the coast and a 2.9 percent increase elsewhere.

For form MH(F), the industry asked for a 260 percent increase in the 18 coastal counties and a 2.9 percent increase for the rest of the state. Long granted a 25 percent increase on the coast and no change in rates elsewhere.

These rates will go into Dec. 1. The insurance department estimates mobile homeowners will save a potential $25 million in premiums over the high rates originally requested.

This is the first mobile homeowners rate case in 26 years, Long said.