MASS. INSURER SUES OVER HIGH RISKS:

Hanover Insurance Co, a unit of Allmerica, has upped the stakes in the battle over high risk auto business in Massachusetts by suing for $20 million it says it has suffered in losses plus damages because of an alleged unfair scheme by a competitor to dump unwanted auto policies. The suit is against Arbella Mutual Insurance Co., along with Rapo & Jensen Insurance Services and Insurance Management Associates Inc. and its owner, Paul V. Brennan Jr. The complaint alleges that the defendants cooperated in a civil conspiracy to force certain Arbella high risk agents (known as exclusive representative producers) to sell their agencies so that losses from their books of business would be transferred from Arbella to Hanover. Hanover said that Arbella pressured certain ERPs to sell their businesses to Rapo & Jenson, a Boston insurance agency, using the services of IMS and Brennan. Hanover alleges that in 2000 Arbella paid $1.4 million to Rapo & Jensen to in turn buy six high risk agencies that Arbella had designated as “problematic.” The purchases resulted in about 13,000 high loss policies being transferred from Arbella to Hanover, according to the complaint. Hanover said it has lost an estimated $20 million on these policies alone since it was forced to assume them under the rules of the state’s private passenger residual market, Commonwealth Auto Reinsurers (CAR). Hanover said it “continues to suffer” an estimated loss of $8 million a year on these risks alone. The suit was filed in Superior Court on Jan. 28. Hanover has been battling over this issue with CAR and the Division of Insurance administratively and in the courts for years before resorting to this latest lawsuit. Arbella spokesman James DiNatale declined extensive comment but did say that Hanover is seeking to “relitigate” an issue that has been decided by the commissioner in Arbella’s favor as not being an unfair business practice.