Case Details

Year Initiated/Committed


Year Resolved


Settlement Amount

$3.3 million restitution, $1 million penalties and attorneys' fees


Massachusetts Superior Court (Suffolk)

Docket Number


Lead State


Participating States



William Gallagher & Associates

Case Description

State filed a complaint and a Consent Judgment against Boston-based insurance broker William Gallagher Associates Insurance Brokers, Inc. (“WGA”) for billing customers for unauthorized and undisclosed compensation and misleading customers about the brokerage firm’s contingent commission practices and involvement in reinsurance. Contingent commissions, also known as profit sharing commissions, are controversial incentive-based compensation programs offered to brokers by insurance companies. WGA agreed to return $3,017,003 to eleven clients, pay at least $925,000 in sanctions and attorneys fees to the State, and submit to a binding audit of its Energy and Environmental practice group. The Judgment also requires WGA to send statements to over seven hundred customers to correct prior allegedly false representations the company made regarding its employees’ knowledge of contingent commissions and WGA’s participation in reinsurance. Reinsurance is a form of insurance that insurance companies purchase to protect themselves against their policyholders’ claims. Going forward, WGA has agreed to provide enhanced compensation disclosures to customers by providing written notice of all fees and
The State alleged that WGA charged clients undisclosed and unauthorized fees that exceeded customers’ insurance premiums by 20-100% and that the company double-billed certain customers by charging brokerage fees while simultaneously charging undisclosed standard commissions. To deceive customers into paying such charges, the company allegedly altered documents it received from insurance companies, secured misleading premium financing contracts, and kept two sets of accounting records, one to track actual numbers, and the other to generate fictitious records for clients. Through these practices, WGA took millions of dollars in compensation that customers believed were part of their insurance premiums, according to the complaint.
The investigation further uncovered that on several occasions, employees in WGA’s Energy and Environmental practice instructed insurance companies to increase the prices offered to
a WGA customer.
The complaint alleged that in 2004, in an effort to quell customer concerns about contingent
commissions, WGA falsely represented to clients that it did not inform its Account Executives of the details of WGA’s contingent commission plans. According to the complaint, WGA provided
information about these plans to its Account Executives and stressed placing and renewing
business with insurers that paid WGA lucrative contingent commissions. The complaint also alleged that nearly all of WGA’s managing Account Executives were aware that the insurance company The Chubb Corporation (“Chubb”) loaned nearly three million dollars to WGA and that Chubb would forgive this loan and accrued interest under WGA’s contingent commission program with Chubb.
Finally, the complaint alleged that WGA owned an equity interest in a Chubb-sponsored
reinsurance company called Mountain View Indemnity, Ltd. (“MVI”). Through MVI, between 1999 and 2004, WGA reinsured a portion of over one hundred insurance policies that belonged to its clients, thereby creating a conflict of interest that WGA failed to disclose and actively misrepresented to customers.
Pursuant to the Consent Judgment the Attorney General’s Office obtained in December 2007, WGA returned $3,017,003 to its customers, paid $925,000 to the Commonwealth, adopted conduct reforms and submitted to a binding audit. As a result of the audit, which was completed in November, 2008, WGA proffered an additional $330,624 in restitution to customers and paid $80,000 to the Commonwealth.