Tuesday, July 1, 2008

Massachusetts AG Settles with Insurer

Massachusetts Attorney General Martha Coakley’s Office has reached a settlement with Rhode Island-based Factory Mutual Insurance Company (FM Global) resolving allegations that FM Global’s premium reporting practices enabled Boston-based insurance broker William Gallagher Associates Insurance Brokers Inc. to pad its customers’ insurance premiums with undisclosed fees.

The Attorney General’s Office filed a lawsuit against WGA on Dec. 19, 2007, in Suffolk Superior Court, alleging that WGA defrauded its customers by charging undisclosed fees.

According to the complaint, at WGA’s request, FM Global confirmed premium amounts to premium finance companies that included WGA’s undisclosed fees. These confirmations enabled WGA to obtain financing agreements that hid over $2 million in unauthorized fees from WGA’s customers. A premium finance company is a lending institution that finances insurance premiums for policyholders, allowing policyholders to pay annual premiums on a monthly basis.

Under the terms of the settlement reached with FM Global, which was filed Monday in Suffolk Superior Court, FM Global will not report premium amounts to premium finance companies that include brokerage fees, will make premium information available to customers, and will pay $28,000 to the Attorney General’s Local Consumer Aid Program.

Under the terms of the Consent Judgement the Attorney General’s Office obtained in December 2007, WGA agreed to return over three million dollars to customers, pay $925,000 to the Commonwealth, submit to a binding audit, and adopt transparent fee practices. The audit is expected to be completed this summer.

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