Alliance Responds to Lawsuit Aimed at Agent/Broker Contingency Commissions

February 2, 2005

  • February 11, 2005 at 7:59 am
    Sharon says:
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    The following is a testimony I was to give before the California Senate Insurance Subcommittee regarding AB1297 and the harm inflicted on the public from this deceit. The bill was pulled the night before it was to be heard.

    Good afternoon. My name is Sharon Kramer. I live in Escondido, California.

    My husband and I have two daughters. Our eldest daughter, Erin, has Cystic Fibrosis, a potentially fatal genetic disease. She also suffers from a life-threatening reaction when overexposed to the fungus, aspergillus. In 2002, in order to save our daughter’s life, we were forced to flee from our home of 14 years. It contained aspergillus throughout.

    Our insurance company, Mercury Insurance, and their independent broker, Paulson Insurance, played a large part in the nightmare that forced us to leave our home with virtually only the clothes on our back.

    In 1993 we switched our homeowner’s insurance from our State Farm agent to Kevin Paulson, an independent broker. We wanted an independent broker because we believed he would better act in our family’s best interest. At Mr. Paulson’s recommendation, our homeowner’s policy was placed with Mercury. It was never disclosed to us that Mr. Paulson’s business was dependant on Mercury for leads, advertising and other in-kind services. Nor was it disclosed that Mr. Paulson was obligated to follow Mercury’s direction in order to sell their policies.

    We had a leak in the ice-maker line. We called Mr. Paulson for direction. He told us to call RPD Construction. RPD was recommended not because of their skill and expertise. Mercury would be footing the bill. RPD bids work for insurance companies at an amount below their competition. We later learned both RPD and the lab they hired had untrained workers, no insurance for mold abatement, and between the two of them, no less than seven lawsuits brewing for shoddy, cheap workmanship.

    After RPD supposedly addressed the leak and eradicated the mold growing around it, HM Pitt Labs (the company RPD hired and Mercury approved) supposedly tested the house for mold. They assured us it was safe for reoccupancy. All were aware of Erin’s condition.

    Within a week of returning to our home, Erin began to have breathing difficulties and sinus headaches. Pitt Labs’ clearance of our home was knowingly false. It was a fox watching the hen house situation. Our family’s safety was never the priority. Saving money and furthering business relationships was the priority. Subsequent testing showed that there was now twice as much aspergillus in the air of our home as there had been prior to RPD’s botched remediation. They had stirred up mold, made it airborne and inhaleable. Our entire home was now contaminated.

    To make a very long, very terrifying story short, Erin was in the emergency room three times in the weeks following the false clearance. She has since had to have two sinus surgeries and has been hospitalized three times for fungal related illness. She is now on antifungal medication for the remainder of her life. It has been a living nightmare for our daughter and our entire family.

    During this whole fiasco, Mercury attempted to cancel our policy. I had contacted Mr. Paulson several times, literally crying for help. He claimed as an independent broker, he couldn’t get involved. The Department of Insurance stepped in. The cancellation was stopped.

    Throughout litigation, Mercury claimed they were not responsible for RPD and Pitt Labs’ negligence. They had not directed us to hire RPD. The independent broker, Mr. Paulson had. After lengthy litigation, we settled with Mercury with the mutual agreement that we would later file suit against Mr. Paulson. In December of 2003, we did just that.

    Originally, Mr. Paulson told us he was an independent broker. During the first suit, he claimed under oath that he was acting as an agent of Mercury. When we filed the second suit, he turned back into an independent broker, whose company should have been named in the first suit. But, in our prior release of Mercury it had been agreed Mr. Paulson was an agent of their company. Now, apparently for today’s purposes, Mr. Paulson and all others who push Mercury Insurance are once again independent brokers.

    It has been intentionally confusing and very frustrating to say the least. The way that my family and other have been sold Mercury Insurance deceptively lulls one into a false sense of security of believing our best interest is being represented. In reality, Mercury Insurance’s best interest is always the priority.

    Whether Mr. Paulson is a broker or an agent seems to vary with whichever job title best limits Mercury’s responsibilities to its insureds on any given day. Because of this intentionally ambiguous relationship Mercury has with its brokers slash agents, I can tell you that trying to get a fair claims settlement from Mr. Joseph’s empire has felt like trying to win a shell game against a sly old carnie.

    This is not a game. Its people’s lives.

    AB 1297 has absolutely nothing to do with the good of the people of California. Mercury Insurance simply wants to limit the expense of employing agents; limit its responsibility to its insureds for these agents’ actions – and at the same time, stealthily maintain control over these exact same agents. The only true purpose of Assembly Bill 1297 is to allow greed to continue to thrive at the expense of unsuspecting families.

    I do not want to see any other family put through what my family has been through. Please, for the safety and well being of the citizens of California, vote no on Assembly Bill 1297.

  • March 23, 2005 at 5:52 am
    John says:
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    Should be illegal in California, if they are based on an broker/agency loss ratio.

    I worked for a large Mercury agency and was instructed by the owner/manager to not phone quote or write certain Prop. 103 good driver risks into Mercury’s best tier (MIC), because these prospects/applicants were either too old (over age 72) or did not carry prior insurance. Mercury’s compensation plan actually induces some of the greedier Mercury brokers to turn away certain Prop. 103 good drivers from Mercury, whom the broker feels has a greater chance to contribute to a higher loss ratio and will thus contribute to lowering the brokers overall commision level from Mercury. So the broker ends up quoting these Prop. 103 good drivers into an insurance company other than Mercury, that isn’t the best deal for the consumer/prospect/applicant.

    What other Auto Insurance companies doing business in California has a commision structure set up thats contingent upon the Broker/Agency loss ratio performance?

  • June 4, 2005 at 2:00 am
    Franklin B says:
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    This stuff goes on all the time in the industry. Brokers in California constantly steer business to insurance companies that don’t have the lowest rate/best coverage for their client. I know because I used to be one of them and learned the practice from some of the oldest players in the business. These days, I have moved on to a more repectable line of work where I’m not forced to cheat my clients.

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