Is this legal?

[ESI]

What is the name of your state? Alaska



I was heading over to review and renew my insurance with my broker when I received a phone call from another broker with a more appealing offer. I went to the new broker's office reviewed and signed with them.

My old broker has explained to me I entered into a verbal contract and now owe the carrier they apparantly placed me with a 25% premium.

I never instructed them to bind me and am sure I need to sign something for a binding to take effect.

So I tell them I am not paying it as it isn't a legitimate charge.

I am then told that one of several underwriters involved in this binding had brokered a deal with my previous insurance carrier and the new insurance carrier they placed me with. This deal included last year's carrier waiving the right to an audit of my company if I placed myself with the new carrier.

I am told if I do not pay the 25% earned premium they are demanding then I will be aduited by my previous carrier costing me 3x's the amount they are demanding I pay.

My previous carrier certainly has the right to audit me and the figures they are estimating seem correct as we had a stellar year last year we were not expecting.

Logic tells me to pay the lower amount asked and dodge the audit.

But it just seems unethical to me the tactics they are using to force payment from me to pay a charge that isn't legitimate.

While unethical is it legal?

[claimlaw]

It sounds like you don't know what the contract and application said. Did you read them?

Claimlaw

[ESI]

Alaska -

No I didn't read the contract. As I stated I was on my way to the insurance broker when another called with a more appealing offer. I went to thier office instead, reviewed and signed.

I never made it to the original brokers office, so I never had a chance to review the legalities of the contract. But apparantly I am being held to all the fine print I never had a chance to read because I entered into a verbal contract by stating I was on my way to them.

This part of it though is total baloney. They have no case. I know this. But because they have no case they are threatening me to pay what they are demanding or they will go to my previous carrier and convince them to audit me, costing me 3x's the money.

Bottom line as I see it is I am being extorted, but in a legal fashion and I will have to cough up the cash and pay an illegitimate billing to avoid them causing a legitimate audit.

See anything I don't?

BTW, thanks for the reply.

[smalltownsara]

My State = Massachusetts

okay... I am actually taking a class right now on business law, so I am not necessarily a legal expert in this area (and you may have to look this information up in your state's contract laws). it may also be a good idea to at least consult a lawyer that specializes in contract law to get more information.

that being said, it sounds as though you are not bound by any kind of contract YET with the first institution that you spoke with, unless you have already given them some kind of compensation for the services that they have offered to you. a contract, in order to be enforceable and binding must be 'something for something'. in order for the company to require your payment, you must have received something of value from them (like, if they insured you for a month under the promise that you would pay them). the only exception to this general rule that i know of is if they entered into ANOTHER binding contract with a third party because of your promise of doing business with them (like, if you said you would sell them ink and paper so they went out and bought 2 new printing presses), and it doesn't sound like that has happened in this particular case. although you said that you would go to their office and review their policy, they didn't give you anything in return for that promise, which makes the contract void. neither of you lost anything in the process (from the information you've given), and in court it could easily be argued that you wouldn't have signed the paperwork even if you did go to their office. the contract that they are trying to claim that you involved yourself in, from a legal standpoint, never existed.

you may want to go to your state's Better Business Bureau or Attorney General to report this and get their opinion. if you've already made your payment, you may be eligible for a refund.

hope that's helpful!

[InsuranceLadyAZ]

Actually, it depends on what went on in your conversation with the renewing broker. I bind policies all the time based on verbal agreements from customers. Since customers always wait until the last minute to renew, I have to bind based on verbal just because I don't want my customer to have a lapse in coverage.

If your agent called you with the renewal pricing (which you had to have known in order to know the other broker was cheaper) and you said, "Ok, I'm on my way over", then the agent had every reason to bind your coverage. I would have done the same.

What I don't agree with in your agent's actions is his insistance that you're now stuck with this policy. Tell the agent to return the policy to the carrier when it comes in and have it flat cancelled. No harm, no foul.