The Liquidation of Worcester-based Insurance Agency Network, LLC
Insurance Agency Network, LLC (IAN), the Massachusetts-based insurance agency aggregator, is in receivership and has been since a late November order of the Worcester Superior Court.
On February 28, 2013, the receiver will file a report with the Superior Court listing the company’s assets and liabilities. Sometime thereafter, the receiver will decide on whether to sell the company as a whole or to sell off the company’s assets piecemeal in preparation for the prospect of having to pay any creditors as well as in distributing any net proceeds to IAN’s equity owners.
The receivership came about as part of an ongoing lawsuit between two of the founders of IAN, Paul Brennan and Stephen Kicinski.
IAN formed in 2008 to capitalize on the arrival of Managed Competition in Massachusetts
IAN, formed in 2008 by Brennan, Kicinski and Mark D. Vallucci, was created in order to capitalize upon the introduction of Managed Competition in the Massachusetts automobile insurance marketplace. Originally, the three founders functioned as the three managers of IAN with the members being the companies owned by each of the gentlemen: Insurance Management Associates (IMA), owned by Mr. Brennan, Global Insurance Services, Inc., owned by Mr. Kicinski and D&D Insurance Agency Inc. (D&D), owned by Mr. Vallucci.
Insurance Agency Network had twenty-eight agency members with nine insurance carriers
The IAN network had 28 agencies as members and markets access agreements for its agency members with approximately 10 insurance carriers when the lawsuit was filed in April, 2012.
IAN’s role as an aggregator was to act as an intermediary between independent insuance agencies and insurance companies. While the term “aggregator” is used in different places with different meanings, in the case of IAN it apparently meant combining the customer bases of agencies joining IAN to obtain market access through the IAN’s agency agreements with various insurance carriers.
The IAN website identifies in various places the network’s insurance carriers and wholesalers as: The American European Insurance Group, The Concord Group, Encompass Insurance, Foremost Insurance, Hull & Company, MetLife, Pilgrim Insurance, Plymouth Rock Assurance and Travelers.
IAN’s website appears functional and still focuses on the original business model of the company to capitalize on the 2008 changeover in the Massachusetts auto insurance market to Managed Competition. Its home page states that IAN, “… is an organization of “Agents helping Agents” to compete in the “Managed Competition” auto insurance market place….”
The website’s value proposition goes on to state that, “We supply agents with the partnerships, expertise, and tools essential to deliver unparalleled customer service. If you are a Massachusetts insurance agent who values independence and is concerned with the new “Managed Competition” system within the insurance industry, discover the many value-added services and opportunities that the IAN can deliver…”
Acrimonious lawsuit between remaining founders results in liquidation order
In late 2011, Mr. Vallucci and his company, D&D Insurance resigned from IAN, and, with the two remaining corporate members, Global and IMA, purchasing his company’s interest. As discussed in an Agency Checklists article, Mr. Vallucci’s agency was subsequently acquired by the Boston-based Risk Strategies Company.
Approximately six months after D&D’s departure from ownership in the venture, Mr. Brennan and his company, IMA, filed a lawsuit against Mr. Kicinski and his company Global Insurance Services.
The complaint leveled charges of fraud, fraudulent concealment, conversion, negligent misrepresentation involving Mr. Brennan’s company, IMA, Mr. Kicinski’s agency, Global, and the certified public accountant Mr. Kicinski had brought in to manage IAN’s finances.
Mr. Kicinski counterclaimed against Mr. Brennan and filed a detailed affidavit as to Mr. Brennan’s alleged breaches of fiduciary duty and conflict of interest that were detrimental to IAN.
Mr. Brennan sought a preliminary injunction that was opposed by Mr. Kicinski and denied by Court. Mr. Brennan next moved for the appointment of a liquidating receiver. Mr. Kicinski did not oppose the motion for a receiver and the Court granted the request.
Dispute over ownership of proprietary programs to be determined by receiver
One area of dispute that the receiver will have to determine relates to Mr. Brennan’s sworn allegations that IAN had “developed unique and proprietary software programs” that included “a highly user-friendly Internet-based insurance quote system for consumers which allows consumers to complete an application online for insurance and obtain a quote in a fraction of the time allowed by other similar programs.”
Apparently at least one insurer had indicated “a strong interest in the acquisition of the technology and capabilities from IAN.” This promising acquisition allegedly disappeared when Mr. Kicinski emailed the carrier “as a quick clarification” that: “all the tools that we have been introducing to [the carrier] for the last three weeks, …are the property of Global Insurance as they were exclusively developed for Global Insurance Services….”
Receiver to report on liquidation on February 28th
The next event in the case is for the receiver to report to the Court on February 28th on the assets of the Network preparatory winding down the affairs of the company over the course of a year.
