Insurance Brokerage Abruptly Closes Amid Allegations of Converted Premiums

On March 7, 2024, the clients of BL Insurance Brokerage, LLC, a Massachusetts insurance agency located at 270 Huttleston Avenue, Fairhaven, received an email from the agency’s manager, Brendan Lawler. The email from Brendan Lawler read:

“Hello,

I am emailing to infirm (sic) you that I have permanently closed BL Insurance Brokerage, LLC, effectively (sic) 3/1/24. All of your policies will be transferred to another agent or broker by the insurance company who writes your policy. If you have any questions regarding your policy or coverage, please contact the insurance company directly or the wholesale agent listed on your policy. They will be able to assist you. I would like to thank you for all of your years of patronage, it was truly appreciated. Please be advised that any phone calls or emails to our office will not be returned, since I am no longer in business. I am sorry for any inconvenience.

Sincerely,

Brendan Lawler.”

The sudden closure of BL Insurance Brokerage left many questions unanswered, as the agency did not undergo a sale or merger, and there was no apparent transfer of renewal rights and expirations to a successor agency.

Multi-state, multi-company agency

According to BL Insurance Brokerage’s advertising, it was a full-service insurance agency licensed in multiple states, including Arizona, Connecticut, Florida, Maine, Massachusetts, North Carolina, New Hampshire, New Jersey, Rhode Island, and Washington.

The Division of Insurance website, as of March 1, 2024, listed the agency and its manager, Brendan Lawler, as having agency appointments from at least fifteen different carriers, including Great American, Harleysville, The Hartford, Philadelphia Indemnity, Travelers, and Twin City Fire.

Large book of legal malpractice policies, including bar advocate lawyers

The agency reportedly had a significant book of legal malpractice policies, with many of these policies covering bar advocate lawyers who specialized in criminal law as court-assigned counsel under the rules of the Committee for Public Counsel Services (CPCS).

Attorneys accepting assignments to represent indigent defendants under various Bar Advocate Programs overseen by CPCS must maintain continuous professional liability insurance with specific minimum coverage amounts and deductibles. The CPCS rules stipulated that coverage should not lapse or be canceled, as this could void coverage for claims made before the start of any new policy. In the event of an insurance lapse or cancellation, the bar advocate attorneys are required to notify their Bar Advocate Program(s) and/or CPCS in writing and promptly obtain a new policy with a “prior acts” date covering at least the preceding six years or from the date they began accepting case assignments, whichever was more recent.

Insureds start receiving cancellations and direct bills for paid policies

For several weeks before BL Insurance Brokerage’s March 7 email, a program manager specializing in legal malpractice insurance received more than twenty-five calls from distressed lawyers, all sharing similar experiences.

Each caller had purchased their legal malpractice insurance through BL Insurance Brokerage and had paid their policy premiums to the agency. Despite making these payments, some of these lawyers were now receiving cancellation notices from their insurers, indicating that their policies were being canceled due to nonpayment of premiums. Others were now receiving direct bills from their insurance companies seeking premiums they had already paid to BL Insurance Brokerage.

Compounding the issues faced by these lawyer-insureds was the inability to contact BL Insurance Brokerage or Brendan Lawler for assistance or clarification. Calls and emails to the agency went unanswered, leaving the affected lawyers in a precarious position concerning their professional liability coverage. For the Bar Advocate lawyers, the cancellation of their malpractice coverage could result in termination of participation in the Bar Advocate program and nonpayment of their outstanding program billings under the CPCS rules.

The lawyers, however, were not alone, as a social media post dated February 6, 2024, from a customer of BL Insurance Brokerage shows. The post complains:

“3 months spent trying to get a response on an allegedly cancelled policy that we set up with BL to be a monthly payment plan. All payments have been made to the third party [premium finance company], however, the carrier, Travelers, indicates the policy was cancelled in September due to nonpayment. So there is NO insurance policy and yet we have made all the payments. BL has not returned emails or telephone calls for 3 months.” (Emphasis in original).

Presumably, BL Insurance Brokerage received the full premium from the premium finance company and never paid the policy premium to Travelers.

Insurer Sues BL Insurance Brokerage for Premium Conversion

On January 3, 2024, Attorney Protective (AttPro), a subsidiary of MedPro Group/Berkshire Hathaway, filed a lawsuit against BL Insurance Brokerage, LLC, and its manager, Brendan Lawler, in Allen County, Indiana. The complaint alleges that the defendants collected $165,145.80 in premiums from AttPro’s insureds but failed to remit payment to the insurer despite repeated demands.

According to the lawsuit, AttPro and BL Insurance Brokerage entered into an Insurance Agency Agreement on July 15, 2015, for BL Insurance Brokerage to market legal malpractice policies for a 12.5% commission. The agreement outlined two billing arrangements: “agency” billing, where BL Insurance Brokerage collected premiums from insureds and held them in trust before remitting to AttPro, and “direct” billing, implemented on August 1, 2023, which required insureds to pay AttPro directly.

The complaint asserts that BL Insurance Brokerage collected $136,479.10 in agency-billed premiums and $28,666.70 in direct-billed premiums after August 1, 2023, but failed to remit these funds to AttPro. The lawsuit alleges claims for conversion, breach of contract, statutory fraud, and breach of fiduciary duty against both BL Insurance Brokerage and Brendan Lawler personally.

Neither BL Insurance Brokerage nor Brendan Lawler have answered the complaint, and AttPro has filed a verified application for default judgment, which is scheduled to be heard on March 20, 2024. The insurer seeks a judgment of $165,145.80, trebled to $495,437.40 under Indiana’s Crime Victims Relief Act, along with reasonable attorneys’ fees of $16,151, for a total judgment of $511,588.40.

Payment to an Agent or Broker Is Payment to the Insurer

Although it is not entirely clear, it seems most insurers reinstate policies once they receive proof of payment from the insureds to the agency. However, it is possible that carriers who may have dealt with BL Insurance Brokerage on a brokerage basis may take a different position. The common law is that an insurance broker is an agent of the insured and not of the insurance company.

That common law rule would likely not apply to any insured who can demonstrate that they have paid their premiums to BL Insurance Brokerage.

Massachusetts General Laws Chapter 175, § 169 states:

An insurance agent or broker acting for a person other than himself in negotiating, continuing or renewing any policy of insurance or any annuity or pure endowment contract shall, for the purpose of receiving any premium therefor, be held to be the agent of the company, whatever conditions or stipulations may be inserted in the policy or contract.

In essence, this statute means that payment to an agent or broker constitutes payment to the insurance company as a matter of law. Therefore, insureds who have paid their premiums to BL Insurance Brokerage for the continuation or renewal of their policies are considered to have made payment directly to their insurers whether BL Insurance Brokerage had an agency agreement with the carrier or not.

Agency Checklists will keep you posted on this situation as it develops…