Arthur J. Gallagher is no longer the broker of record for Gainesville, Fla., after a scandal over commissions caused the city to reevaluate its contract with the insurance broker.
A city spokesman said last week that the commissioners for the city of Gainesville chose the brokerage firm Marsh on the recommendation of city staff and a consultant, Waters Risk Management of Pinellas Park, Fla.
Robert L. Woods, Gainseville's interim public information officer, said the choice was made after an open bidding process from which four insurance brokerage firms were ranked by qualification.
The broker would be responsible for the placement of $4 million in premium in insurance contracts for the city, said Mr. Woods.
The replacement of the Itasca, Ill.-based broker came about after Gallagher discovered one of its employees had overcharged the city $1.3 million in commissions over a 14-year period. Gallagher returned the money to the city in June. However, the city's commissioners felt it was necessary to bring in a consultant to review the relationship, which led to the change.
The insurance placements include coverage for city property and boilers, police professional liability, excess workers' compensation, public officials employment practices liability, and other miscellaneous items. The broker would also be responsible for placements covering the city's municipal utilities authority, Gainesville Regional Utilities, which includes auto, excess liability and telecommunications.
The city commissioners also determined it would move from a commission-based schedule to a fee-based schedule. The fee would be capped at more than $160,000, Mr. Woods said.
Under the terms of the bidding process, if a contract with Marsh cannot be finalized with the broker, Mr. Woods said, the city would turn to the next qualified candidate on the list, which is Gallagher. However, the commissioners instructed the city's professional staff to consult with the board before beginning any negotiations with Gallagher.
Mr. Woods indicated that it appeared certain a contract would be reached with Marsh.
The other two brokers, ranked third and fourth respectively, were Hilb, Rogal & Hobbs Company, based in Glen Allen, Va., and Wachovia Insurance Services Inc., a subsidiary of Wachovia Corporation, based in Charlotte, N.C.
Mr. Woods said Gallagher would remain the broker of record until a contract is completed with Marsh. He added that the city's own review of the account with Gallagher by the city's auditor would be completed soon.
In a statement from a Gallagher spokeswoman, David Marcus, Southeast Regional Manager for Arthur J. Gallagher Risk Management Services Inc., said, "Gallagher has enjoyed its 17-year relationship with the city of Gainesville and looks forward to the opportunity to partner with them again in the future."
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