Florida Premium Finance Company Settles With Massachusetts Attorney General
Nov 21, 2011
The following news release was issued by the Maryland Attorney General’s Office on November 21, 2011:
Attorney General Martha Coakley announced today that her Office had settled with two premium finance companies that allegedly facilitated a scheme orchestrated by the Peabody-based Kilgore Insurance Agency (Kilgore) to overcharge businesses and consumers by padding insurance premiums by millions of dollars.
Premium Assignment Corporation (PAC), a subsidiary of SunTrust Banks, Inc. headquartered in Florida, and FIRST Insurance Funding Corp. (FIRST), a subsidiary of Wintrust Financial Corporation headquartered in Illinois, allegedly assisted Kilgore in its long-running scheme to overcharge policyholders by padding insurance premiums with hidden “agency fees.”
PAC and FIRST provide premium loans to businesses and consumers paying for insurance. The affected clients were serviced primarily by Kilgore agents Andrew Crowther and Kathy Burke, with assistance from Kilgore’s owners, Cy Kilgore and Jeff Kilgore.
“We allege that PAC and FIRST took advantage of unsuspecting small businesses by aiding the Kilgore Insurance Agency in its scheme to pad insurance premiums with hidden fees,” said Attorney General Martha Coakley. “We must work to ensure that the small businesses in our communities are able to thrive and grow, rather than be strangled by unnecessary concealed costs.
“Kilgore allegedly would recommend PAC or FIRST to clients who could not fund their insurance costs upfront and would then create premium finance contracts, authorized by PAC and FIRST, that purposefully hid so-called “agency fees” that were folded into clients’ insurance premiums.
These fees were added in on top of the standard commissions offered to Kilgore by insurance carriers and typically added 40% to 50% to clients’ insurance costs. In numerous instances, Kilgore clients paid double or triple the true cost.Today’s settlements require that PAC and FIRST disclose the details of all charges imposed on all Massachusetts premium finance contracts, and re-word their contracts to eliminate any misleading terms.
Additionally, the companies will repay $340,000 to the Attorney General’s Office, the majority of which will be distributed to victims of the Kilgore scheme.PAC and FIRST profited from their partnership with Kilgore: PAC took in approximately $214,000 in finance charges from unwitting Kilgore clients in a 5-year period, while FIRST garnered approximately $30,000 in a 3-year period.
Over a 10-year period, Kilgore secretly charged its clients, mostly small, family-owned businesses, millions of dollars in “agency fees,” deceptively hiding those fees by a variety of means – including applying “white out” to erase figures on premium finance contracts and insurance policies. Kilgore’s hidden fees averaged close to 50% of the related premium, while industry standard compensation is about 10% of premium and takes the form of a commission paid by the insurance carrier.
Kilgore had agreements with both companies whereby Kilgore would reveal the true premium information to PAC or FIRST, but never to clients. The Attorney General alleges that PAC and FIRST treated Kilgore in a manner far different from its other insurance agency partners, permitting these acts in order to facilitate Kilgore’s deception.The Attorney General’s December 2009 lawsuit against Kilgore and its owners and agents is still pending in Suffolk Superior Court, where the court has largely frozen the defendants’ assets and forbidden the defendants from imposing any “agency fees” whatsoever.
The Attorney General contends that the court’s order extends also to defendant Andrew Crowther’s new business entity, Strategic Resource Group, LLC located in Wakefield, MA.
This matter was handled by Assistant Attorneys General Claire Masinton and Pallavi Chintapalli, and Investigations Supervisor Arwen Thoman, all of Attorney General Coakley’s Insurance & Financial Services Division. For any query with respect to this article or any other content requirement, please contact Editor at email@example.com