On Thursday, January 31, 2019, Attorney General Maura Healey announced final judgment of $5.2 million had entered in the Kilgore Agency hidden fee case.
“Kilgore Insurance and its owners orchestrated a scheme to charge consumers millions in undisclosed, excessive, and illegal agency fees,” Attorney General Healey said. “We are pleased that with this action, overcharged consumers will receive restitution.”
Agency charged hidden fees on excess and surplus policies for small businesses
Under the final judgment, entered in Suffolk Superior Court on January 18, 2019, Andrew W. Crowther, Jr. the Kilgore Insurance Agency, and the agency’s partners, Cyrus A. Kilgore and Jeffrey B. Kilgore, were ordered to pay restitution to agency clients who were charged agency fees in excess of twenty percent of their excess and surplus policy premiums. .
The Attorney General’s suit alleged that Mr. Crowther failed to disclose and actively hid fees that in some cases exceeded three hundred and fifty percent of the policy premium. The hidden fees affected approximately one-hundred insureds involved in the security and guard industry.
The Attorney General alleged that the Kilgores had liability for the actions of Mr. Crowther under apparent authority and vicarious liability legal principles.
Attorney General’s suit over Agency’s hidden fees took nine years to finish
The final judgment, in this case, did not come quickly. The Attorney General filed suit on December 22, 2009, against the partnership of Cyrus A. Kilgore and Jeffrey B. Kilgore, and one of the agency’s producers, Andrew W. Crowther, Jr. over the hidden agency fees being charged insureds.
Nine years and twenty-seven days later the case ended on January 18, 2019, with a final judgment of $5.2 million entered after the Appeals Court denied an appeal of the Superior Court’s judgment.
The jury-waived trial on the issue of whether the fees that Mr. Crowther had charged were actively concealed and were excessive took place before a specially assigned Judge over 22 days in 2012 and 2013.
The Judge found that Mr. Crowther’s practice of actively concealing the agency fee from insureds, considering the size of the agency fee in most instances, was deceptive and gave rise to c. 93A liability.
the Judge hearing the case found that there was no evidence presented “that the Kilgore defendants were aware of Crowther’s active concealment of agency fees until an insured had complained in 2008.” But, she also found their actions had “caused Crowther’s clients to reasonably believe that Crowther was authorized to act on the Kilgore defendants’ behalf in brokering insurance contracts.” Thus, the Judge found that under the legal theory of apparent authority the Kilgore Agency’s partners were jointly and severally liable under chapter 93A with their producer, Mr. Crowther, for the deceptive conduct and, therefore, personally liable to pay the $2.1 million in restitution plus interest.
More than half of the $5.2 million consists of prejudgment and post-judgment interest
The Superior Court Judge hearing the case entered judgment against Mr. Crowther, the agency, and the Kilgores for $2,183,637.30 in restitution for their overcharges to their insurance customers that exceeded a twenty-percent commission.
In Massachusetts, interest on the amount recovered by a lawsuit accrues interest at twelve percent per annum or one-percent a month. In this case, when judgment entered in 2015, the prejudgment interest for the five years and four months the lawsuit had been pending added sixty-four percent in interest to the $2.1 million the court awarded as restitution. The result was a final judgment of over $3.5 million. See Agency Checklists’ article of May 4, 2015, “Court Orders $3.5 Million Restitution From Producer And Agency For Fees Exceeding 20% Of Premiums.”
All parties to the suit appealed the Superior Court’s judgment to the Appeals Court. The Appeals Court affirmed the Superior Court Judge’s findings and rulings in an unpublished decision on November 8, 2018. However, from the time the Superior Court entered its judgment with interest of $3.5 million plus, interest accrued at the same twelve percent rate but on the full $3.5 million and not just the $2.1 million the Superior Court awarded as restitution damages.
During the three years and eight months, the suit was on appeal another forty-two percent in interest accrued on the $3.5 million original judgment. As a result, the final judgment
The Kilgores kept their insurance licenses, but the Division revoked Mr. Crowther’s license
The Kilgores and their agency maintained their producer licenses under a 2017 settlement with the Division of Insurance paying a $20 thousand fine but “…without admitting any wrongdoing or violation of insurance laws.”
In April 2018, Andrew Crowther had his producer license revoked as part of a consent decree with the Division. He did not pay a fine, but the consent decree barred him from working in the Massachusetts insurance industry. See Agency Checklists’ article of May 18, 2018, “Producer involved In Kilgore Hidden Fees Case Has License Revoked Under Consent Agreement.”
The decisions in the Attorney General’s litigation and the charging of fees under Bulletin 2013-09
Since Bulletin 2013-09 permits the charging of fees, any producers or agencies considering charging fees would be well advised to read the Judge’s decisions (Below) in this case and the Bulletin. Also see Agency Checklists October 8, 2013 article “New DOI Bulletin Says Producers May Charge Fees.”
The original decision on adding fees to policies not necessarily violating the law is here: Summary Judgment Decision On Fees And Premium.
The twenty-page Findings and Decision explaining the fee practices in the excess and surplus market is here: Findings of Fact, Conclusions of Law and Order for Partial Summary Judgment.
