Insurance brokerage Beecher Carlson will refund over $90,000 to several Massachusetts clients who were not told the firm was receiving commissions from insurers in addition to client-paid fees, as part of a settlement with the Massachusetts attorney general’s office.
Seven clients, including three Massachusetts-based companies, will receive refunds from the settlement. Atlanta-based Beecher Carlson, which has offices in Boston, will also pay $25,000 to the state as a penalty, and has agreed to reform its fee and commission structure and provide written disclosure of all compensation to its fee-based customers.
The case is a follow-up to an investigation of a competing brokerage, William Gallagher Associates (WGA), which allegedly charged customers undisclosed fees by representing those fees as premiums. WGA also allegedly took both client fees and insurer-paid commissions on some insurance policies. The firm reached a consent judgment in 2007 with the state, under which it agreed to return over $3.3 million dollars to its customers, pay over $1 million to the state and adopt transparent compensation practices going forward.
The attorney general’s office began investigating Beecher Carlson after former WGA employees who had been involved in the fee transactions lawsuit began working at Beecher Carlson.
“It is deceptive for insurance agents or brokers to enter into fee agreements with customers and also take undisclosed commission payments from insurance companies,” Attorney General Martha Coakley said. “Such practices unfairly inflate insurance costs for businesses and consumers and will not be tolerated in Massachusetts.
Commenting on the settlement, Steve Denton, president of Beecher Carlson, said the firm “voluntarily conducted two reviews and a comprehensive audit of 1,200 client transactions totaling $150 million in premium over a three-year operating period in Massachusetts. We uncovered instances for seven clients where our documentation did not match our high standards. As a result, we cooperated fully with the Massachusetts attorney general’s office and agreed to return a total sum of $92,000 to seven clients.”
He added: “We remain fully committed to our operating principals of integrity, transparency and accountability, which include complete and precise written disclosure around compensation for work understood to be outside the scope of initial fee agreements.”
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