Aon, according to the civil complaint, was steering business away from AIG even when the insurer was offering more competitive bids for its clients business.

According to the court papers, Aon “actively worked to protect the market share” of two favored insurers that paid the highest contingent commissionsChubb Corp. and Fireman's Fund. But when AIG entered the high-end personal lines market in 2000, Chubb saw it as a threat to its market share and told Aon that “its relationship with Aon would be damaged if Aon established a significant partnership with AIG,” the court papers said.

The complaint suggests that Aon took Chubb's comments seriously. It cites Chubb's internal memorandum dated Aug. 30, 2000 that said, “Aon agreed wholeheartedly that Aon should be very wary of AIGs involvement in the high-end personal-lines business and they would work hard to make sure that the local offices would not entertain AIG approaches.”

Mr. Spitzer also alleged that in 2001, Aon reorganized its personal-lines business and consolidated its high-net-worth clients with Chubb and Firemans Fund. At the time, Aon also tried to enter into a contingent commission agreement with AIG but was rebuffed by the insurer.

In response, the complaint said, Aons director of syndication for personal lines business, Bruce Macbeth, stated in his business plan that, “I would consider [AIG] a minor strategic partner,” and that AIG “would only have the ability to consolidate these clients after Chubb and Fireman's Fund had their opportunity.”

“We do need to develop a relationship with AIGs Private Client Group, but within very limited guidelines,” Mr. Macbeth's business plan stated, according to the complaint. The document said Mr. Macbeth also discouraged the practice of requesting bids from AIG while emphasizing the need to meet Chubb contingency fee goals.

“We need to emphasize that AIG should only be used if there is an underwriting issue with Chubb, which we can address,” Mr. Macbeth said in an e-mail cited in court documents. “If we approach AIG on all submissions, the reason for carrier chosen will always be rate and it will slow submission process.”

“If we submit all risks to [AIG], they will write a majority of them because of their rate flexibility,” Mr. Macbeth allegedly said.

In one conference call with Aon executives, Mr. Macbeth is also alleged to have said around that time that considering Aon's contingent agreements with Chubb and Fireman's Fund, “we need to direct all new business exclusively to them for the next month and beyond. Chubb should be the first choice for any risk, with Fireman's Fund a second thought.”

The complaint alleges that Aon's contingent commission agreements with Chubb had a clear effect on the broker's placement efforts. The court documents show that on Nov. 13, 2001, the former managing director of Aons personal lines unit, Carter Brydon, told his staff in an e-mail: “We need to get $3 million in written premium with Chubb by year's enda daunting task, no doubtbut it means $500,000.”

The e-mail went on to instruct that “when we get a good AIG quote, we should share it with Chubb and [Fireman's] Fund as a last look. They are paying us to be in this position; we need to force them to act.” The e-mail also said that by doing business with AIG, “we may be leaving a substantial sum of money on the table.”

The court papers also show that in addition to getting contingent commissions, Aon had entered into “producer funding agreements” with select insurers around 1999, asking insurers to directly pay for the hiring of Aon personal lines brokers.

The complaint alleges that these individuals held themselves out as Aon employees without disclosing that insurers were paying their salaries as part of an Aon commitment to steer business to those specific insurers. In 1999, 2000 and 2001, the complaint says, Chubb funded half of salary and benefits for certain Aon personal lines brokers for selling Chubb insurance.

Chubb and Firemans Fund declined to comment on Mr. Spitzers allegations or the settlement with Aon.

Aon Chairman and Chief Executive Patrick Ryan said there remained disagreements between Mr. Spitzer's office and his firm over “a number” of the allegations and conclusions in the court documents, but a settlement was reached in the interest of “putting this behind us.” He would not comment on the differences.

An Aon e-mail warned that by doing business with AIG, “we may be leaving a substantial sum of money on the table.”

Reproduced from National Underwriter Edition, March 10, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.