David L. Eslick, chairman, president and chief executive officer for the Briarcliff Manor, N.Y.-based U.S.I., said the fees are a long-standing practice, and "what many people are missing is that [the fee arrangement] recognizes the relationship between the agent and the insurer and the agent's roles and responsibility as the field underwriter for the insurance company, including binding authority and those sort of items."

Mr. Eslick added, "So it is an item that puts us in the same position with the insurance company, focusing on making sure that business is profitable.

"And, by the way, that is critically important to our clients because, if the business we are placing with the carriers is profitable, that gives us great leverage working with those carriers, and exercising to the best extent possible with our clients, in getting them (the client) the best deals."

Mr. Eslick's remarks came in response to a question during an analyst's conference call reviewing the firm's improved first-quarter results. Company performance during the period was driven in part by higher contingent income, which rose 42 percent to $13.5 million.

Mr. Eslick said U.S.I. has not been among the brokers subpoenaed by the New York Attorney General's Office and has not been contacted by that agency. He noted that contingency fees are fully disclosed by the firm in its annual report and to clients.

"We think it is an important disclosure and we make sure it is properly disclosed to our customers," he said.

Marsh, Aon, Willis and Kaye Associates, a subsidiary of Chicago-based Hub International Ltd., said they were subpoenaed by Mr. Spitzer's office requesting documents related to contingency fees. They have defended the fees as long-standing practice.

Last Thursday Joe Plumeri, the head of Willis Group, said an investigation into contingency fees is not a "big deal" for insurance brokers because the fees are not a significant part of earnings and there are no compliance issues.

The Washington Legal Foundation, a nonprofit law and policy center in Washington, D.C., which characterizes itself as a free-enterprise advocate, wrote Mr. Spitzer, New York Insurance Superintendent Gregory V. Serio and California Insurance Commissioner John Garamendi in February calling for an investigation of the fees, which it said "infringe on businesses' right to compete in a free marketplace."

Contingency fees previously came under fire in the late 1990s. The payment arrangements with insurance companies are in addition to commissions that brokers receive. The fees are based upon the amount of business or the quality of business that a broker places with an individual company.

In 1998, the activity was the subject of a letter from the New York Insurance Department warning brokers that undisclosed contingency fees might be illegal. After pressure from commercial buyers via the Risk and Insurance Management Society, Chicago-based Aon, New York-based Marsh and London-based Willis all agreed to disclose fees. A California public interest lawsuit in 2000 that was filed against the three brokers over the fees was quietly settled out of court.