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By DAN REYNOLDS, senior editor of Risk & Insurance®

New Jersey Gov. Chris Christie has vetoed a resolution that the Delaware River Port Authority (DRPA) hire outside counsel to investigate its insurance brokering arrangements.

The bistate authority, which manages toll bridges that span the Delaware River and a light-rail commuter line that runs between Pennsylvania and New Jersey, has come under fire for its business practices, with allegations of nepotism and improper use of authority funds making frequent news.

Under what's been referred to as a "true-up" relationship, Willis of New Jersey and the Graham Co. of Philadelphia have operated since 2004 under an oral agreement with the Delaware River Port Authority to split the broker commissions of the authority.

Willis has handled such port authority lines as excess workers' comp, public officials' liability and marine liability. The Graham Co. has handled other lines, including the authority's owner-controlled insurance program, its excess property program and its excess liability coverage.

Since 2004, according to William Graham IV, the CEO of the Graham Company, his firm has paid $514,530 to Willis to ensure a 50-50 split on insurance commissions, an arrangement with which Graham isn't happy.

"I think that it is improper for public-entity officials to force two competitors from two different states to send checks to each other so that each company earns the same amount of money, regardless of the scope or complexity of the work they each perform," Graham wrote, in e-mailed responses to Risk & Insurance®.

In requesting that the authority hand over all documentation of its insurance brokering arrangements to the New Jersey state comptroller, Christie said that the authority shouldn't be spending money on outside counsel when its judgment in handling its finances is coming under such intense scrutiny. Christie called the true-up arrangement "allegedly improper."

THE TRUE-UP DEAL

Graham said this is the first true-up agreement he's been involved in and the first he's heard of.

"In my 47 years of business experience, I've never seen anything like it," Graham said. "I'm glad that someone is finally looking into it."

Graham told Risk & Insurance® that Mike Tiagwad, now the president and CEO of Marlton, N.J.-based insurance broker Conner Strong, was an employee of the Graham Co. and was present in meetings in 2003 when the Graham Co. was forced into the true-up arrangement.

In an e-mailed response to Risk & Insurance®, Tiagwad said he didn't recall being in such a meeting.

According to Willis, the practice of splitting commissions itself is neither illegal nor uncommon.

"We are not aware of anything illegal or inappropriate about licensed insurance brokers splitting commissions," said Colleen McCarthy, a New York-based spokesperson for Willis in an e-mailed response to questions.

"We followed the instructions of the DRPA to share commissions with Graham," McCarthy said. "Willis has been a broker for the DRPA since 2003, and we're proud of the risk management work we've done on its behalf. Of course, we will cooperate fully if we are asked to supply further information."

In response to an audit done by TransTech Management Inc. of Greeneville, N.C., the authority has begun to change the way it does business. According to a port authority spokesman, the authority issued four requests for proposals for brokering work since May for its owner-controlled insurance program, its health and welfare benefits plan, its bridge property/casualty and its pollution legal liability program.

The DRPA's website lists four brokerages on a short list from a request for qualifications for the authority's owner-controlled insurance program. Those brokerages are Marsh, Willis of New Jersey, the Graham Co. and Conner Strong.

Anand Poola, a spokesman for Marsh, said on Sept. 13 that, despite that company's presence on that published short list, it is no longer competing for that business and did not submit a request for proposal after it had made the short list for requests for qualifications.

Tiagwad confirmed that his company had responded to the RFQ along with CR Solutions, but said in an e-mail that he "wasn't certain of the status of that initiative."

September 14, 2010

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