Chubb reaches settlement with AG Coakley

John O'Brien Feb. 24, 2009, 3:48pm


BOSTON (Legal Newsline) - The Chubb Corp. has settled claims that it offered improper incentives to a brokerage firm in exchange for business steered toward it.

Chubb, an insurer based in New Jersey, will pay almost $240,000 to settle allegations stemming from a 2007 lawsuit against William Gallagher Associates Insurance Brokers. That suit charged WGA with charging undisclosed fees to customers, as well as deceiving them about their compensation practices.

In the settlement, $182,815 will go to WGA customers and $56,196 to Massachusetts.

"We are pleased that Chubb cooperated during our investigation of WGA and that it has agreed to pay restitution to customers affected by WGA's alleged abuse of these incentives," Coakley said.

Coakley alleged that Chubb loaned WGA more than $3 million but offered to forgive the loan if WGA directed enough business to Chubb. Chubb also had WGA invest in a Chubb-sponsored reinsurance company through which WGA insured a portion of some insurance policies belonging to WGA's clients.

WGA's participation turned WGA into a reinsurer with an interest in keeping its customers' policies with Chubb, Coakley said.

Also, Chubb provided WGA with a "trust fund" that WGA could use to lower Chubb's quoted premiums, Coakley said.

WGA has already agreed to return more than $3 million to its customers and pay $925,000 to Massachusetts.

Both companies agreed to alter business practices.

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