Agents Seek Delay in Approval of Zurich Compensation Settlement

October 13, 2006

The National Association of Professional Insurance Agents has asked the U.S. District Court for the District of New Jersey to delay preliminary approval of a class settlement with Zurich Insurance until what agents say are flaws in a mandatory disclosure statement are corrected.

In a reply brief filed with the court on October 6, 2006, PIA National answered the objections of 10 state attorneys general who are formally opposing PIA’s effort to get the court to consider its brief of amicus curiae that the association filed on September 15, 2006.

“Main Street insurance agents did not commit the alleged abuses that led to these proposed settlements,” said PIA National Executive Vice president and CEO Len Brevik. “But this settlement agreement attempts to impose a remedy for wrongdoing on Main Street agents, who did nothing wrong. That’s just not right.”

“Agents were shut out of the negotiating process that led to these proposed settlements, and now the attorneys general don’t want the court to hear our concerns,” Brevik said. “That is unfair and unconscionable.”

Agents object to the proposed settlement because they say it would create disparate impact on agents by prohibiting the payment by carriers of certain contingency payments.

State attorneys general claim that PIA’s effort to file an amicus brief in the settlement is without merit and is premature.

But PIA maintains that agents were unfairly shut out of all negotiations and now, the attorneys general “seek to silence the agents and brokers most directly affected” by provisions of the proposed settlement.

PIA also noted that the plaintiffs in the case “want to have it both ways” by asking the court to ignore that insurance is regulated primarily by the respective states and thereby approving a purported “nationwide” settlement, while at the same time asking the court to defer PIA’s objections until after provisions it objects to are approved.

As part of the proposed settlement of the class action, which was prompted by investigations of alleged bid-rigging conducted by several states, insurance agents would be required to use a court-mandated mandatory disclosure statement. Agents maintain that this form violates existing state and common law and is rife with flaws.

According to PIA, the disclosure form not only would affect the legal rights and interests of PIA members, but also would mislead class members regarding the legal relationships of agents to insurance carriers.

While these 10 attorneys general contend that the issues being decided by the court are few and limited in scope, agents assert that the court is being asked to approve of a global settlement that folds all details of existing proposed agreements into a comprehensive settlement, including a selective ban on the payment of certain contingent commissions.

“It would appear that the settling AGs exceeded the considered judgment of most state regulators,” notes the PIA reply. “AGs are not the primary insurance regulators in their states – the insurance commissioners and supervisors are – and the vast majority of insurance commissioners have refused to join the multi-state agreement.”

Source: PIA National

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