Judge Certifies Class Action On Broker Fees
Aon Corp. said it will appeal a ruling by a Chicago judge to give class-action status to a lawsuit alleging that contingent commissions paid by insurers amounted to hidden "kickbacks."
Rick Stone, an attorney for the plaintiffs, said the fees involved were huge totaling $200 million a year and encompassed more than a decade of activity. The fees are under scrutiny by New York Attorney General Eliot Spitzer, who earlier this year subpoenaed Aon and other large brokers for information concerning the practice.
Al Orendorff, director of public relations for the Chicago-based Aon, said the brokerage has been "in regular communication" with Mr. Spitzer's office, but he could not reveal the subject of the discussions. "We are complying with all of their requests and things are moving forward," he said.
He passed on a company statement that called the class certification of the Chicago case purely procedural, adding that the development "says nothing about the merits of the case. Aon strongly disagrees with the decision and will seek to have it overturned on appeal. We believe that plaintiffs' claims are completely without merit."
Brokers, in response to the New York subpoenas, have said their acceptance of bonus fees in return for delivering a certain volume and/or quality of business to insurers is a long-standing practice, involves no conflict of interest, and is disclosed to customers.
Mr. Stone said his suit seeks to either have Aon stop taking the fees or "get actual consent" from customers before they accept them, rather than merely alert them to the practice. The suit was filed on behalf of Alan S. Daniels, an independent New Jersey insurance agent, and Williamson County Agricultural Association, an Illinois not-for-profit that sponsors county fairs.
Cook County Circuit Judge Julia M. Nowicki, in her opinion finding for the plaintiffs, said "there is great potential for the everyday practices of Aon to have a direct or indirect effect on a vast number of individuals and entities. As such, this lawsuit presents an issue of public concern."
She added that in her opinion it is to Aons benefit to have the issues in the case decided as a class action in Chicago, "in a single forum and at a single time, rather than in the forums of 50 states or by way of the filing of thousands and thousands of individual cases"
Reproduced from National Underwriter Edition, August 5, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.