WASHINGTON, June 30, 2008 — The National Association of Professional Insurance Agents is hailing a ruling by the 1st Appellate Division of the New York Supreme Court which declares that contingent commission agreements are not illegal.

“This is a resounding victory for Main Street insurance agents across the nation and the American Free Enterprise System,” said PIA National President-elect Kenneth R. Auerbach, Esq. “It is also a vindication of the actions taken by PIA to turn back the attacks on a compensation system that has always been legal and ethical, despite Eliot Spitzer’s incorrect assertions to the contrary.”

The court’s action throwing out all claims relating to contingent commission agreements came June 19, 2008 in a case that stemmed from a May 2006 fraud and bid-rigging suit originally filed against Liberty Mutual by former New York Attorney General Eliot Spitzer. While other insurers and mega-brokers faced investigations of similar allegations since 2004 and opted to settle with Spitzer and other state authorities, Liberty Mutual vowed to fight the allegations in court. Some of the settlements banned the payment of contingent commissions, while others mandated the use of a disclosure form that was legally flawed and would place agents at risk of errors and omissions claims.

“Contingent commission agreements between brokers and insurers are not illegal, and, in the absence of a special relationship between the parties, defendant(s) had no duty to disclose the existence of the contingent commission agreement,” the court said in its ruling. Several other court decisions in 2007 also found to be baseless allegations that carriers’ contingency compensation programs constituted a conflict of interest and are illegal.

“This marks the end of the Spitzer era,” Auerbach said. “Common sense is finally beginning to prevail. The court has stated unequivocally that being compensated with commission, contingent or otherwise, is neither illegal nor unethical and has thrown out as baseless all claims to the contrary. We are hopeful that the certainty of this ruling will serve to deter any further attempts by ambitious and misguided state Attorneys General from targeting the legal compensation of those who never engaged in wrongdoing.”

Auerbach added that PIA appreciates the fact that Liberty Mutual decided not to enter into a settlement as other carriers did, opting instead to fight in court. “PIA agents are grateful to Liberty Mutual for remaining steadfast, being our allies in support of common sense and fighting for what is right.”

On September 19, 2006 PIA filed an amicus brief with the United States District Court for the District of New Jersey, in opposition to one of the proposed settlements. In its brief, PIA noted that the settlement attempted to create a remedy for alleged wrongdoing and then impose it on those who were not involved in any wrongdoing – retail Main Street insurance agents.
 
The PIA filing also noted that several of the original settlements reached in 2004 were subsequently amended by state attorneys general to liberalize earlier prohibitions against contingency earnings -- while such changes were not made for Main Street agents, who had never been accused of any wrongdoing.
 
PIA provided the most comprehensive legal briefs on behalf of independent insurance agents in the that case, speaking to the legally incorrect disclosure form being imposed on agents by the settlement actions, as well as the litany of unfair and adversely disparate treatments PIA agencies were being subjected to by being denied due process through the misuse of the settlement process, which was conducted in secret and from which independent insurance agents were excluded.

“In light of all of these court rulings, we believe it is time for state attorneys general to revisit settlement agreements that impose these adverse effects indiscriminately on all producers, specifically those who never had anything to with alleged wrongdoing, and give them back their rightful earnings,” said PIA National Senior Vice President Patricia A. Borowski.

“These rulings represent vindication of PIA’s position,” Borowski said. “PIA National included and argued these same (and now prevailing) fundamentals of insurance law in our amicus filing. We have been proven correct.”

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses. PIA members are Local Agents Serving Main Street America (SM). PIA’s web address is www.pianet.com.