Opinion ID: 1225642
Heading Depth: 4
Heading Rank: 2

Heading: Industry Publications

Text: The industry newsletters submitted by Appellees date back to 1997. The articles that appeared in these niche publications also focused on the allegations against brokers, not insurance companies. An October 13, 1997 article in Business Insurance discussed the possibility that consolidation of insurance brokerages might result in brokers using their clout to extract larger commissions. Though The Hartford was not mentioned, the article did name a broker (Marsh) and an insurer (Chubb), noting that the business placed with Chubb through [Marsh's] Global Broking Centers is subject to a `placement services agreement' ... [which] grants [Marsh] an additional commission for the placement of large volumes of business through the centers. The article went on to say: Other U.S. brokers have commission agreements with insurers providing for the payment of contingent commissions based on the profitability of the business they place with insurers. (J.A. 238.) It did not identify those brokers or insurers. An April 27, 1998 article in Business Insurance concentrated on the behavior of brokers abroad: Recent U.K. media reports have implied that large brokers, unbeknownst to their policyholder clients, have been using size and market share to strong-arm insurers into entering incentive commission arrangements. Citing the potential conflict of interest for brokers, the article noted that U.K. risk managers echo concerns voiced by their U.S. counterparts over whether some forms of contingent commissions could lead to brokers placing their business with an insurer that is not necessarily providing the best coverage for their exposures. (J.A. 242.) The May 11, 1998 Business Insurance article submitted by Appellees highlighted some of the issues that were discussed at the Risk and Insurance Management Society (RIMS) annual conference. The article stated that the issue of contingent commissions had come to a head with the consolidation of the brokerage industry and concomitant increased clout for the largest brokers. But the article also quoted brokers who argued that placing a large volume of business with a certain insurance company actually benefited policyholders, because it led to a strong relationship between the brokerage and the insurance company, allowing brokers to solve their policyholders' problems. (J.A. 246-48.) A June 15, 1998 National Underwriter article discussed the increased attention to contingency fees in the U.K., noting a proposal which called for a code of conduct that would make payment of incentives to brokers illegal in that country. But the article also included a statement by the Chief Executive of the British Insurance and Investment Brokers Association, who said: There is no evidence, no suggestion, no clients coming forward saying, `We think brokers are abusing their positions of power, their size, their leading position in the marketplace, to our detriment.' (J.A. 250.) Several of the articles submitted by Appellees appeared in industry publications in the first half of 1999. Although they discussed the controversy surrounding the contingent commissions received by brokers, these articles also emphasized brokers' efforts to respond to calls for disclosure of their contingent commission arrangements. The January 18, 1999 National Underwriter article stated that recent industry attention ... has focused on the issue of disclosing [contingency fee] arrangements.... [T]he New York State Department of Insurance issued a circular letter recommending that brokers allow clients access to this information as well. (J.A. 254-55.) The article discussed the possibility of a market solution to contingency fee arrangements, noting that broker Willis Corroon had negotiated carve-out arrangements with certain clients who asked to take their premium out of the contingency fee equation. Id. Appellees also submitted an article titled RIMS, Broker in Deal to Reveal Commissions, which appeared in Business Insurance on February 1, 1999. This article, which focused on Marsh but also mentioned brokers Aon and Willis, noted that contingent commissions were not necessarily a problem, although they should be disclosed. According to the article, Risk managers have voiced concerns that the commissions, which are paid by insurers to brokers based on volume targets and the profitability of the business, may create a conflict of interest. (J.A. 257-59.) Another Business Insurance article, from February 22, 1999, discussed Aon's efforts to notify clients of the potential contingent commissions it received based on the volume of business it placed with insurers. (J.A. 262.) Likewise, the March 1999 Canadian Underwriter article submitted by Appellees noted that [Marsh had] agreed to reveal contingency commission arrangements to clients on request. The article quoted a senior vice president of Willis Corroon, who emphasized the brokerage's transparency with clients: We don't consider contingencies a huge issue, it accounts for less than 2% of our total revenues. So we have nothing to hide from our clients and are willing to negotiating [sic] unique deals. According to the article, however, Risk managers ... [were] disappointed it ha[d] taken the weight of the industry to compel disclosure. (J.A. 265.) Five industry newsletters from 2000 mentioned or alluded to the Turner I lawsuit. One of those articles also referred to the Daniel suit. Not a single industry publication (at least, none included in the record in this case) picked up on the Turner II lawsuit, in which The Hartford's subsidiaries were named as defendants and allegations approximating those asserted here were made. Only one of the so-called storm warnings from the industry/niche press mentioned The Hartford: an article that appeared in National Underwriter on February 14, 2000. Referring to the Turner I complaint, the article picked up on the mention of The Hartford in the complaint: The three top brokers are being sued by an attorney who alleges that the firms ... deceived policyholders in the state of California by their failure to disclose contingency fee arrangements.... These contingency fee contracts were made with insurers including The Travelers Insurance Group, The Chubb Group of Insurance Companies, The Hartford Insurance Group, and possibly other major property-casualty insurers, according to the suit. (J.A. 212.) The same day, an article about Turner I appeared in a publication called Business Insurance. (J.A. 213-15.) The Business Insurance article, however, did not mention The Hartford or any other insurer, and focused entirely on the alleged misconduct by brokers. In an effort to compel brokers to disclose contingent commissions they earn, a law firm known for battling commercial insurers on behalf of policyholders is suing the world's three largest brokers, the article said. The [ Turner I ] suit names Aon Corp., Marsh Inc., Willis Group Ltd., their units, and other companies the brokers have acquired or merged with. The plaintiff is a California attorney associated with Anderson, Kill. The article summarized the Turner I complaint's allegations as follows: The suit arises from some brokers' practice of collecting contingent commissions from insurers with which they place business. These fees, which may be paid to the broker without a policyholders' knowledge, can be rewards for the volume of business placed with an insurer, as well as compensation for services the broker performs on the insurer's behalf. The article noted, however, that the lawsuit is not supported ... by [RIMS], the largest organization of commercial insurance policyholders, and that the president of RIMS was taken aback by the lawsuit, saying that the issue of contingent fees was not even on my radar screen right now. (J.A. 213.) Like several of the other articles from industry newsletters, this article mentioned that brokers had agreed to reveal some of their commission arrangements. It noted that RIMS focused attention on the issue of contingent commissions at its annual meeting in 1998, resulting in the negotiation of a voluntary policy of disclosure with Marsh and later Aon. Again indicating that brokers, not insurers, were the target of the lawsuit, the article cited an industry source as saying, The brokers named in the complaint have united to defend against it. The Turner I suit was identified in the article as the first lawsuit over contingent fee arrangements of which industry sources were aware, and the article quoted the senior litigation counsel of Aon Corp. as saying, Let everybody draw their own conclusions from the fact that a lawyer was the named plaintiff. (J.A. 214.) Two weeks later, on February 28, 2000, another article appeared in National Underwriter. This article, which was written in the style of an editorial, mentioned the legal challenge to brokers' contingency fee arrangements but questioned the viability of the lawsuit: The question now is whether a legal challenge to the contingencyfee system will hold up in court, and if it does, what impact this will have on the brokerage community financially and operationally.    [ National Underwriter ] has taken brokers to task a number of times for the way in which contingency fees have been kept from policyholders.... We applauded the fact that after much arm-twisting, the major brokers seemed to come clean about contingency fees.    However, while we stand squarely with the consumer on this issue, we are frankly skeptical about this lawsuit's merits.    Bottom line, as outspoken as we were about the need to disclose contingencyfee arrangements to clients, we believe this is an ethical, rather than a legal issueunless the plaintiffs can actually prove individual instances of conscious malpractice by brokers. (J.A. 217-18.) Similarly, a May 1, 2000 National Underwriter article expressed skepticism about the Turner I lawsuit, describing it as an attempt to revisit the [contingent commissions] issue, and noting that the lawsuit does not name specifically any of the defendant-broker's clients who were injured by the fee arrangements. The article also quoted the president of RIMS as saying that, because the three major brokers had agreed to disclose their fee policies, the issue of contingent commissions was over and lawsuits were a waste of money and time. (J.A. 220-22.) Again, The Hartford was not mentioned in the article. The most recent piece from a niche publication appeared in National Underwriter on October 2, 2000. After discussing Turner I and Daniel (without mentioning The Hartford or other insurers), it suggested that the contingent commissions issue had been resolved, noting that the storm appeared to be over in early 1999. According to the article, representatives from RIMS and the brokerage firms said that there had been little talk about contingency fees since the disclosure policies were announced. Nevertheless, the article noted, the announcements of the disclosure agreements did not stop suits from being filed in California and Illinois. In both cases ... the suits claim that the brokers should have disclosed the fees to their clients earlier and that the fees should have been passed onto their clients. (J.A. 224-25.)