California charges Hartford with illegal fees

April 10, 2006
Posted April 12, 2006

NEW YORK, April 10 (Reuters) - California Insurance Commissioner John Garamendi said on Monday he had begun legal proceedings against units of Hartford Financial Services Group Inc. (HIG.N), claiming the company had charged illegal fees.

Garamendi said one of Hartford's agents, Irvine, California-based Superior Access Insurance Service, added unapproved fees, typically around $100 per policy, to the price Hartford was allowed to charge by law, and that this was done with Hartford's knowledge. Hartford denied wrongdoing.

"Superior Access charged these fees without authorization from Hartford," said Joshua King, a spokesman for Hartford. "We are in discussion with the California Department of Insurance to resolve this matter." He declined further comment.

The California commissioner said thousands of commercial and personal line policyholders likely paid the illegal fees on workers' compensation and business owner package policies.

Garamendi's order to show cause said Superior Access, an independent agent that sells products from Hartford, had collected fees from policyholders since 2002.

By law a producer may not charge a fee in addition to the premium, Garamendi's order said, and property and casualty premium rates must be approved by the insurance department.

The premium rates must not discriminate, and when one agent collects a fee and another agent of the same insurer doesn't it is discriminatory, according to the order.

Also, insurance premiums are taxable, and, when not reported, insurers fail to pay their full tax, the order stated.

California wants Hartford to stop permitting its agents to charge a fee, reimburse the department for its costs, refund all fees illegally collected, and file amended tax returns, according to the order.

Copyright © 2006 Reuters

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