Opinion ID: 1225642
Heading Depth: 4
Heading Rank: 1

Heading: Mainstream Publications

Text: On February 14, 1999, the New York Times ran an article titled Insurers Pay the Brokers, Making Customers Wary. (J.A. 229-31.) This article appeared on the fourth page of the business section. It began by describing the controversy surrounding brokers' receipt of contingent commissions from insurance companies: The rapid consolidation of the brokerage industry is making contingency fees even more controversial. Two giant brokers, [Marsh and Aon,] now dominate the field. And risk managers ... have become increasingly concerned that brokers, less restrained by competition, could concentrate their business with insurers that offer the biggest incentives rather than those that provide the best service and lowest prices. According to the article, these contingency fee arrangements were not generally known until recently, in part because brokers downplayed their importance: Many corporate executives said they had been unaware of contingency fees until recently. State regulators in New York say they, too, were in the dark.    The brokers acknowledge that they have not called attention to contingency fees but say they have always been willing to discuss them in general terms, if asked. They say that the payments from the insurers are a small part of their total revenueno more than 5 percentand that the fees do not influence their choice of carriers. The article also presented the insurance companies' point of view regarding contingency fees, implying that the insurers were at the mercy of the brokerage firms that had come to dominate the industry: But the insurance companies that pay the fees see them differently. Though some insurers do not pay contingency fees, many others consider them a necessary tool for making sure they get a slice of the pie. The article concluded by noting regulators' emphasis on disclosure, but also mentioning that there was no proof customers had suffered financially because of the practice. [L]ast summer, after becoming aware of the controversy, the New York State Department of Insurance issued a formal reminder that according to state law insurance buyers should be informed of all compensation arrangements between insurer and broker so they can `understand the costs of coverage and the motivation of their broker.'.... The New York regulators and the risk managers were unable to cite cases in which brokers had arranged coverage that might have been bought for less or had steered customers to insurers that failed to meet clients' needs in other ways. The Hartford was not mentioned in the articlea particularly important omission, since the writer acknowledged that not all insurers paid contingency fees to get business.
The Financial Times ( FT ) ran articles on the contingent commissions story: Aon Set to Disclose Fees, March 16, 1999; and Consolidation at Relentless Pace, April 28, 2000. (J.A. 233-36.) The March 1999 article appeared at page thirty-three. (J.A. 233.) This article noted that both Marsh and Aon took steps to disclose to clients their contingent commission revenue after brokers had come under fire for receiving millions of dollars in fees and incentives from insurance underwriters in addition to the payments they receive from clients. According to the article, Marsh and Aonwhich had become the dominant brokerages as a result of consolidation in the global broking industrywere clearly anxious to avoid criticism from regulators, especially after the New York State Insurance Department [in 1998] said lack of transparency over broker remuneration could be construed as a violation of the state's insurance law. The April 2000 articlewhich appeared at page threeis similar to the FT article discussed above, to the point of repeating verbatim many of the same phrases. The article also referred to brokers' receipt of incentive payments as double dipping, which, according to the article, called into question the principle that customers should receive `best advice' and raised doubts over conflict of interest. (J.A. 235-36.) The Hartford was not mentioned in the article.
As noted already, on September 23, 2000, an article on page five of the Chicago Tribune discussed the Village of Orland Hills lawsuit, which focused on the practices of broker Arthur J. Gallagher & Co. The article did not mention The Hartford or any of its competitors.