Mass. AG: Insurance Agency Cheated Customers (CLARIFICATION)

Dec. 31--PEABODY -- The state attorney general has sued a Peabody-based insurance company for overcharging its customers.

Attorney General Martha Coakley's office alleges in a lawsuit recently filed in Suffolk Superior Court that Kilgore Insurance Agency of 5 Centennial Drive billed undisclosed agency fees to customers totaling more than $3.4 million by misrepresenting those fees as insurance premiums.

The undisclosed fees were often 50 percent to 100 percent or more of the actual premiums charged by insurance companies, according to the attorney general's office. Normal agent commissions on such policies are around 10 percent.

"We allege in our complaint that these defendants have repeatedly taken advantage of their customers -- many of which are small, family-owned local businesses -- by hiding their undisclosed and excessive agency fees," Coakley said in a press release announcing the lawsuit.

Among the examples highlighted in the suit is the experience of Security III, a security business with nine employees that provides unarmed patrols to neighborhood associations in Boston's South End. The company was billed $18,553 in 2004-2005 for a general liability policy premium that was actually $4,138, the suit claims. Over a six-year period, Kilgore charged Security III illegal fees totaling $46,161 -- nearly half -- of the total $100,456 it billed the company, the suit alleges.

In order to conceal the agency fees, Kilgore would routinely "white out" premium figures on actual insurance policies and replace them with inflated numbers that included the agency's undisclosed agency fees, according to the attorney general office's press release. The company would also manipulate financing agreements to hide fees, the release said.

The suit also asserts that Kilgore allegedly forged their customers' signatures on documents that revealed an insurance policy's true premium, including affidavits that were filed with the Massachusetts Division of Insurance.

Insurance agents Andrew W. Crowther Jr. and Kathleen J. Burke were named in the lawsuit along with Kilgore's owners, Cyrus A. Kilgore and Jeffrey B. Kilgore. Cyrus Kilgore could not be reached for comment yesterday.

The attorney general is seeking restitution, civil penalties, repayment of ill-gotten profits and attorneys' fees.

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