BOSTON (Legal Newsline) - Massachusetts Attorney General Martha Coakley announced a $42,000 settlement Tuesday with a Colorado-based premium financing provider that allegedly prematurely cancelled the financed auto insurance policies of close to 50 Massachusetts consumers.
Flatiron Capital allegedly issued cancellation requests to insurance companies with an effective date that was the same as the notice. A Massachusetts state insurance statute requires that premium finance providers give at least a 20 day notice to the insurance company that issues the policy. The statute helps ensure that customers have adequate time to bring their accounts current before their policies lapse.
"We allege that Flatiron failed to provide enough time to Massachusetts customers to seek replacement coverage before canceling their auto insurance," Coakley said. "It is important that these providers play by the rules and give customers adequate time to bring their accounts current before they face costly interruptions."
Flatiron provides loans that allow people to pay their insurance premiums as installments. The providers use the unearned premium on the policy as loan collateral. If a customer misses a payment, the premium financing provider may look to cancel the policy.
Under the terms of the settlement, Flatiron will pay more than $32,000 to approximately 50 Massachusetts customers, pay $10,000 to the state and agree to modify its auto insurance cancellation policies to bring its practices into compliance with state law.
Coakley's office started looking into illegal cancellation practices by premium financing providers in 2011. That year, Coakley's office reached an $82,000 settlement with IPFS Corporation to settle similar allegations.
Coakley's office is currently looking into the practices of several other premium finance companies.