Summary
Arthur J. Gallagher & Co. (AJG) has filed an 8-K report detailing an Assurance of Voluntary Compliance (AVC) with the Attorney General and Director of Insurance of the State of Illinois, dated May 18, 2005. This agreement resolves issues stemming from investigations by the State Agencies concerning certain business practices. The core of the agreement involves AJG paying $27.0 million into a fund by January 16, 2006, to compensate eligible policyholder clients. These payments are a comprehensive settlement and are not considered fines or penalties. The AVC outlines a clear process for identifying and notifying eligible policyholders, who retained AJG's U.S. offices for insurance placement, renewal, consultation, or servicing between January 1, 2002, and December 31, 2004, where contingent commissions or overrides were involved. Participating policyholders will receive funds and must release claims related to the investigated matters. The company is also mandated to implement significant business reforms, including enhanced transparency in compensation, specific fee structures, and improved corporate governance, to be completed by December 31, 2005.
Key Highlights
- 1Arthur J. Gallagher & Co. entered into an Assurance of Voluntary Compliance (AVC) with Illinois State Agencies to resolve investigations.
- 2AJG will pay $27.0 million into a fund by January 16, 2006, for distribution to eligible policyholder clients.
- 3These payments are in full satisfaction of obligations and are not classified as fines or penalties.
- 4Eligible policyholders are those who used AJG's U.S. offices for insurance services between January 1, 2002, and December 31, 2004, involving contingent commissions.
- 5Participating policyholders must tender a release of claims to receive compensation from the fund.
- 6AJG is required to implement significant business reforms, including enhanced disclosure of compensation and new fee structures, by December 31, 2005.
- 7The company also agreed to specific practices to avoid, even without evidence of prior engagement, such as not accepting inflated quotes or seeking indemnification for AVC payments.