Conn. Broker Settles Compensation Charges

R.C. Knox & Co. insurance brokerage has paid Connecticut more than $750,000 to settle allegations the firm placed coverage for state agencies while accepting hidden fees from insurers, officials said.

The agreement with the Hartford, Conn.-based company was announced last week by Connecticut Attorney General Richard Blumenthal.

According to Mr. Blumenthal, the broker accepted undisclosed contingent commissions in placing state insurance business while assuring officials there was no other compensation involved.

He said the firm paid $754,804 in settlement.

Knox was used by Connecticut to place insurance for the State Insurance Risk Management Board (SIRMB) and the Connecticut Development Authority for the period 1997 to 2004.

The Attorney General's Office said state law allows the SIRMB to determine if the broker should be paid either through a fee or commission.

In this case, the broker was paid an upfront fee. Knox, Mr. Blumenthal said, repeatedly assured the state that it received no commission payments for insurance placements. Contrary to the assurances, Knox accepted $415,058 in commissions from carriers.

The settlement covers the commission payments and $339,746 in interest to compensate the state.

"The state relied on R.C. Knox for the best insurance deal for taxpayers--not the best secret commission deal for R.C. Knox," said Mr. Blumenthal in a statement.

He said the agreement with Knox is the sixth settlement of insurer or broker abuses with Connecticut and "sends a consistent, insistent message: We will eradicate concealed illegal payments and bid-rigging in this industry."

The settlement also requires Knox to stop accepting contingent commission payments in exchange for placement of state business.

In August Mr. Blumenthal announced a settlement agreement with insurance broker Hilb, Rogal & Hobbs, based in Richmond, Va., over steering of insurance contracts in return for profitable contingent commissions.

The agreement arranged for a $30 million HRH client reimbursement fund. Unique to that agreement, HRH was allowed to keep contingent commissions based on the profitability of the business with the carrier, while abandoning contingent commissions based on the volume of business done with a carrier.

Mr. Blumenthal said the investigation of Knox is continuing and the company agreed that the settlement did not release it from any future claims the state could make. The company is continuing to cooperate in the investigation.

In a statement, People's Bank of Bridgeport, Conn., the parent company of R.C. Knox, said: "R.C. Knox believes its receipt of contingent commissions was entirely lawful. R.C. Knox agreed to resolve this matter, without admitting any wrongdoing, on the terms the attorney general presented in order to avoid the uncertainty and expense of contesting possible claims the attorney general may have raised in connection with this issue."