NU Online News Service, April 22, 3:31 p.m.EDT

Although none of its clients were harmed financially, Acordiainsurance brokerage should pay a penalty for failing to tell themit had a special compensation arrangement with certain carriers, ajudge has ruled.

Connecticut Superior Court Judge Kevin G. Dubay, in Middletown,ruled Monday after a non-jury civil trial, that Acordia, now WellsFargo Insurance, was guilty of deceptive trade practices for notdisclosing to its clients an agreement it had with five insurers.The case was brought by Connecticut Attorney General RichardBlumenthal

A company spokesperson noting that its customers suffered noharm from the practice at issue, said the firm plans to appeal.

Judge Dubay did not determine any monetary damage, but orderedthe broker to determine how much it made in non-disclosedMillennium Partnership Program commissions from purchases made bythe state's residents in order to determine what the penalty shouldbe.

In a 25 page decision, he wrote that "Acordia should not beallowed to claim that it is not liable for the unfair tradepractices that it directed its subsidiaries to put in motion. Toaccept Acordia's position is to accept that revenue flows up butfiduciary obligations do not."

Attorney General Blumenthal declared the decision a"first-in-the-nation court victory" because the broker "broke thelaw when it failed to tell consumers about the arrangement."

"This case is a significant victory for insurance consumers--andhonest, competitive businesses that were illegally shut out of themarket by Wells Fargo's exclusive pay-to-play club," said Mr.Blumenthal in a statement.

"This victory is the first of its kind in the country--aresounding message to insurance brokers about their legal duty tobe open and honest with clients," Mr. Blumenthal added.

Kathryn Ellis, a spokeswoman for San Francisco-based bank WellsFargo, which owns the former Acordia, said the company plans tochallenge the verdict, contending that the court misinterpreted thelaw and adding that the attorney general mischaracterized thecourt's decision in his statement.

"We plan to appeal and are confident it will be reversed," shesaid, adding that "no customer was hurt or suffered monetaryloss."

In 1999, Acordia set-up the Millennium Partnership Program topay for its investment in a new agency management system, AMSSegitta. Under the program, participating insurers would pay anadditional 1 percent of the total value of the premiums in the formof contingent commissions in return for preferential treatment overa three year period.

Five insurers ultimately joined the program, Travelers, TheHartford, Chubb, Atlantic Mutual and Sun Alliance.

According to the judge's ruling, an Acordia memo showed theprogram would be a bonus for the broker and would pay "over andabove, and incentive or profit sharing we receive on a local orregional level." Acordia's offices were instructed to givepreferential treatment on new and renewal business to the fiveinsurers.

During the trial, client testimony showed that individualbrokers working for Acordia acted in the best interests of theirclients, in one case placing business for a client with a carrieroutside of the MPP that would cost Acordia $500,000.

The individual brokers did not know of the MPP or knew so littlethat it had no bearing on their business, the court said. The courtalso found that clients paid no more for insurance than they wouldhave if the MPP was not in effect.

However, the judge said Acordia did have a fiduciary obligationto inform clients of the MPP because it "constituted a conflict ofinterest between Acordia and its clients."

"Acordia cannot hide behind its corporate form when it directsits wholly owned subsidiaries as its agents to carry out its unfairand deceptive business practices," the judge said, adding thatunder the Connecticut Unfair Trade Practices Act, the firm'sactions were "'deceptive or misleading' as those terms areused."

Ms. Ellis noted that Wells Fargo Insurance voluntarily disclosesall its commissions to clients. She said two cases brought in NewYork and Illinois stemming from the MPP are still pending.

She said in an e-mail that the Illinois case has not movedforward in some time and that Wells Fargo won the case in New Yorkand the attorney general is appealing it to the New York Court ofAppeal, the state's highest tribunal.