AG Coakley Reaches Settlement With Insurance Company

June 30, 2008

BOSTON– Today, Attorney General Martha Coakley’s Office reached a settlement with Rhode Island-based Factory Mutual Insurance Company (“FM Global”) resolving allegations that FM Global’s premium reporting practices enabled Boston-based insurance broker William Gallagher Associates Insurance Brokers, Inc. (“WGA”) to pad its customers’ insurance premiums with undisclosed fees.

“We are pleased that FM Global was so cooperative during our investigation of WGA and that it has agreed to reforms that will go a long way towards preventing this type of broker fraud in the future,” said Attorney General Coakley.

The Attorney General’s Office filed a lawsuit against WGA on December 19, 2007, in Suffolk Superior Court, alleging that WGA defrauded its customers by charging undisclosed fees. According to the complaint, at WGA’s request, FM Global confirmed premium amounts to premium finance companies that included WGA’s undisclosed fees. These confirmations enabled WGA to obtain financing agreements that hid over $2 million in unauthorized fees from WGA’s customers. A premium finance company is a lending institution that finances insurance premiums for policyholders, allowing policyholders to pay annual premiums on a monthly basis.

Under the terms of the settlement reached with FM Global, which was filed today in Suffolk Superior Court, FM Global will not report premium amounts to premium finance companies that include brokerage fees, will make premium information available to customers, and will pay $28,000 to the Attorney General’s Local Consumer Aid Program. 

Under the terms of the Consent Judgement the Attorney General’s Office obtained in December 2007, WGA agreed to return over three million dollars to customers, pay $925,000 to the Commonwealth, submit to a binding audit, and adopt transparent fee practices.  The audit is expected to be completed this summer. 

This matter was handled by Assistant Attorney General Glenn Kaplan and Investigations Supervisor Arwen Thoman of Attorney General Coakley’s Insurance & Financial Services Division. 

Emily LaGrassa/Melissa Karpinsky 
(617) 727-2543