Undisclosed Commissions Settlement Costs Brokerage $90,000

NU Online News Service, Feb.24, 4:00 p.m. EST

Beecher Carlson brokerage has agreed to refund $90,000 to Massachusetts customers settling allegations it placed coverage with insurers without telling clients that carriers were paying the firm a commission in addition to client fees, it was announced.

Massachusetts Attorney General Martha Coakley said in a statement that this involved allegations that Atlanta-based Beecher Carlson accepted the hidden payments from carriers after Beecher had already negotiated fee-based compensation agreements with its clients.

"It is deceptive for insurance agents or brokers to enter into fee agreements with customers and also take undisclosed commission payments from insurance companies," said Attorney General Coakley, in a statement.

Such practices, she said, "unfairly inflate insurance costs for businesses and consumers and will not be tolerated in Massachusetts. However, we remain pleased that Beecher Carlson cooperated from the outset with our review and agreed to make restitution payments to affected customers."

Under the terms of the settlement, filed in Suffolk Superior Court, Beecher will refund over $90,000 to seven customers, including three Massachusetts-based companies, and pay $25,000 to the state.

Additionally, Beecher will reform its fee and commission practices so as to provide written disclosure of all compensation to its fee based customers.

The Attorney General's Office disclosed that it began its review of Beecher Carlson after some former employees of William Gallagher Associates joined Beecher.

Those employees had been involved in the hidden fee transactions that were part of the attorney general's December 2007 lawsuit against William Gallagher Associates Insurance Brokers Inc.

The AG's lawsuit against William Gallagher Associates alleged that the company had charged its customers undisclosed fees by misrepresenting those fees as insurance premiums, and that it had taken both fees and commissions on certain insurance placements.

The lawsuit was resolved in 2007 by a consent judgment that required the company to return over $3.3 million to its customers, pay over $1 million to the Commonwealth, and adopt transparent compensation practices going forward.

In the past three years, the AG's office noted it has brought nearly a dozen cases relating to unfair and deceptive insurance compensation practices.