Massachusetts Gov. Deval Patrick has signed into law a bill that requires the Massachusetts Property Insurance Underwriting Association (MPIUA) — also known as the Massachusetts FAIR Plan — to have liability coverage included in its Non-Owner Occupied Dwelling policy for one-to-four residential units.

The bill, S-465 (“An Act Relative to Liability Coverage under the Massachusetts Property Insurance Underwriting Association”), was signed by the governor on Oct. 9 and is now Chapter 346 of the Acts of 2014. The legislation will go into effect Jan. 8, 2015.

Until now, if a property owner — who owns as an investment a small family home of one-to-four residential units — for whatever reason could not get the Non-Owner Occupied Dwelling policy in the standard voluntary market, the only option was to go to the Massachusetts FAIR Plan — the market of last resort. But the FAIR Plan’s Non-Owner Occupied Dwelling policy for one-to-four residential units would cover the property but not liability. To obtain liability coverage in this case, the property owner had to purchase the liability policy separately in the surplus lines market.

Daniel J. Foley, vice president of government affairs and general counsel at Massachusetts Association of Insurance Agents (MAIA), said the new legislation is a good consumer piece of legislation. “It provides important liability coverage for property owners while at the same time saving property owners three to four times the cost of insurance premiums if they had to buy a separate liability policy in the surplus lines market,” said Foley. MAIA has been an active supporter of this bill.

“We think this is a good consumer piece of legislation, it will save people money,” said Foley. When the legislation goes into effect, those purchasing FAIR Plan’s Non-Owner Occupied Dwelling policy for one-to-four residential units will have all the coverage they need in one policy, without having two separate policies.

“A separate liability policy in the excess market is three to four times more. It’s a separate application, inspection fees, a 4-percent tax on the premium that is paid,” he said.

“Basically if you had a policy that, for example, was $1,500 that you bought through the Massachusetts FAIR Plan, if you wanted the additional liability policy by having to go to the excess market, you would probably end up paying an additional $400 or $500 for that as a separate policy,” said Foley.

“By allowing the the Massachusetts FAIR Plan policy to include liability coverage, the $1,500 might go up obviously because of the additional coverage,” said Foley. “But the premium, instead of being $1,500, maybe it’s going to be $1,600 to $1,700 — but you are still saving money because when you have two policies, you are probably out $2,000 in total.”

“Everything will be just one policy,” he said. “That’s why we believe it will really benefit the consumers who need this type of coverage.”