Acordia faces West Virginia compensation suit

Sally Roberts
Business Insurance
May 23, 2005


CHARLESTON, W.Va.óWest Virginia Attorney General Darrell V. McGraw Jr. sued Acordia Inc. and its Acordia of West Virginia Inc. subsidiary last week, alleging that the brokerage violated state antitrust and consumer protection laws by accepting contingent commissions from insurers for steering business their way.

The action against the Chicago-based brokerage comes in the wake of settlements by the world's four largest brokerages with various state authorities over compensation practices.

In the civil suit, filed in the Circuit Court of Hancock County, West Virginia, Mr. McGraw alleges that contingent commission contracts, which Acordia has been entering into since at least 1999 and continuing until the present, constitutes "unreasonable restraints of trade and commerce in the market for insurance services and coverage in the state."

By entering into such contracts, Acordia has caused West Virginia insureds to "purchase insurance and insurance services at prices higher than they would have paid, and on terms less favorable than would have been available, in a competitive market," Mr. McGraw alleges.

Acordia also "repeatedly and willfully" engaged in unfair methods of competition and unfair and/or deceptive practices by, among other things, steering customers to insurers paying it the highest contingent commissions, manipulating bids for insurance contracts and fixing prices of insurance and insurance services, the suit alleges.

Unlike Marsh & McLennan Cos. Inc., Aon Corp., Willis Group Holdings Ltd., and Arthur J. Gallagher & Co., which voluntarily announced they would cease collecting contingent commissions last year following New York Attorney General Eliot Spitzer's blockbuster suit against MMC, Acordia continues to collect them.

"The world's largest insurance brokers have already sworn off secret payments. I expect Acordia to be next," said Mr. McGraw in a statement announcing his lawsuit.

"It's not our practice to comment on matters of litigation that are in litigation," an Acordia spokeswoman said. She noted, however, that "Acordia does not condone or tolerate improper or unethical behavior."

Combined with sister company Wells Fargo Insurance Inc., Acordia's ultimate parent, Wells Fargo & Co., is the world's fifth largest brokerage with $800.5 million in 2003 brokerage revenue (BI, July 19, 2004).

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