Brown & Brown settlement with Florida: no charges, no guilt, no fines

After being the target of state investigations for more than two years, giant Florida insurance agency Brown & Brown Inc. admitted no guilt and faced no charges but opted to pay $5.8 million to bring the probes to a halt.

The state was investigating Brown & Brown’s compensation disclosure practices but no charges were brought or levied.

“We’re just glad to have this investigation come to an end,” Corey Walker, senior vice president and company spokesman, said. “This wasn’t about contingent commissions — this was about disclosure statements, and the disclosure statement we were ordered to use under the settlement agreement is basically the same one we have been using for the past two years.”

The head of a state’s agent association termed the whole matter “unfortunate” and defended the insurance agency as having done nothing wrong.

The settlement itself stated, “Brown denies any wrongdoing but desires to resolve this investigation to avoid the further expense and burden of a protracted investigation or litigation; and the parties agree that this agreement is a fair and reasonable resolution of the investigation.” It clearly states that the monies Brown paid are not a fine or penalty.

The investigation, according to the settlement document, began as “a result of reports of undisclosed compensation” defined as “any form of compensation, including but not limited to contingent compensation, which was not specifically and explicitly disclosed to the policyholder prior to the binding of coverage for that policyholder.”

The settlement requires Brown & Brown to utilize a compensation disclosure statement. But Walker maintained that the disclosure statement is essentially the same document with a few modifications that the agency has been showing clients for years. His company established a statement of disclosure two years ago when New York State Attorney General Eliot Spitzer began investigations into several large brokerage houses for paying contingent commissions, making false price quotes and bid-rigging, he said.

A decentralized company with 150 offices in 34 states, Brown & Brown was required to gather documentation from each of it offices: “It is a very laborious process,” Walker said.

To settle the case, Brown & Brown paid a portion of the settlement amount — $1 million — to the Attorney General, the Department of Financial Services and the Office of Insurance Regulation for legal fees incurred. It paid another $1.8 million for affected customers to be disbursed through the Department of Financial Services. According to the settlement agreement, the remaining $3 million is to be “distributed in the public interest” directly to the Preferred Governmental Insurance Trust, a local government self-insurance fund.

In an interesting twist of fate, Brown & Brown is the administrator of the PGIT funds, and by handing over the $3 million, the agency will in effect be administering its own settlement to the organization.

Jeff Grady, president of the Florida Association of Insurance Agents, said the situation is “very unfortunate.” He said ever since Spitzer began investigating and prosecuting large brokerage companies for bid-rigging and price fixing, other states have jumped on the bandwagon in hopes of garnering similar forms of recompense for their constituents.

“Brown & Brown didn’t do anything wrong,” Grady said. “I think there is some ‘me-too-ism’ going on in regard to what Spitzer initiated. Florida is not a brokerage state; every state can’t start equating to what goes on in New York. This is a completely different set of circumstances. In an effort to make financial gains, other states are drawing upon what Spitzer did.”

Grady said a news release issued by the Florida Department of Financial Services on Dec. 8 was misleading because it claimed that Brown & Brown agreed to reimburse up to 400 cities and counties in Florida approximately $4.8 million. Brown & Brown will hand the money over to the state and the state will take it from there, Grady said.

Walker said, “We cut three checks.”

Florida Insurance Commissioner Kevin McCarty, through his communications director, Bob Lotane, said he is pleased about the monetary award and believes that the enhanced disclosure statements are better for the consumers.

The Florida Department of Financial Services was unavailable for comment.

Topics Florida Agencies