What do you do when the trust you place in a carrier is violated? You assume your producer's agreement is in place to protect you. Think again. When we send carriers a request for proposal, we are trusting them to act in good faith. Sadly, I found out not all are trustworthy.

I have been in the employee benefits business for more than 26 years. Everyone that knows me would say I know my stuff, am ethical and 100% trustworthy. I am a Life and Qualifying MDRT member with Court and Top of the Table qualifications.

To be violated by a carrier that I trusted was especially disturbing. My story should disturb you too, but may make you smarter and save you from the same fate.

I was the incumbent broker on a mid-market group with approximately 200 employees and growing. They got hammered on renewal and I did a complete market analysis. One carrier, I'll call them "Carrier X" (to be referred hereafter as CX) declined to quote (said they were not competitive) based on poor claim history. I went back to them on three occasions after the DTQ and asked them to reconsider and even release a quote on any plan design that might be competitive. They repeated they would not quote. I therefore had a renewal meeting with my client without quotes from CX.

A month later, my client met with a nationally recognized benefits consulting firm, provided them all the information needed along with additional claim history not available to me at the time I sent out my RFPs. This broker received a quote from CX, presented it, my client accepted it, notified me and formally applied to CX. I contacted my sales rep and the VP of Sales of CX and in a conference call asked how this could happen? The answer was, "Sorry, we screwed up."

I said that was not acceptable and wanted them to assign me a "house case." This way, I would earn my commission by servicing this new account. I was told they would look into that as solution and I never heard back from them.

I reviewed my producer's contract and according to that contract, filed a first level grievance. Shortly afterward, I received a letter from the associate chief counsel of CX who said, "The quote was so non-competitive that CX determined that any further quotes would not be competitive and declined to quote on any other product." He also stated that their decision to work with this nationally recognized broker was "entirely proper" and "appropriate" considering "updated claim information."

Anyone in our business would immediately think the additional claims information was very favorable, hence CX was able to release a quote. I was able to get a copy of the additional claims information and it was the worst period by far to date. So how could CX release a quote to this broker based on worse claim history and ultimately take over the business? My next course of action according to the producer's agreement was binding arbitration. I looked into the very cumbersome and lengthy process and felt this was a fraud situation.

So for the first time in my career, I took legal action and filed a complaint with my state's court. CX hired a very large law firm that filed a counter motion to move the complaint to a federal jurisdiction where there was a greater likelihood the motion was dismissed. Our motion sighted fraud. After months of legal fees, headaches and waiting, the federal judge ruled to dismiss the motion since there must be malicious intent to say it's "fraud" and we didn't sufficiently prove that. I lost a client, compensation, paid legal fees and my reputation was hurt.

How do we prevent this? The producer's agreement didn't protect me. If a carrier wants to favor a larger broker, I discovered there really is nothing we can do to prevent it. The best recourse is to boycott carriers that would break this vital ethical code. Without trust between broker and carrier, we have nothing.

Shame on you, CX. If you did it to me, you've done it to others. Word will get around.

Reach Gaelick, CLU, ChFC, of PSI Consultants at (201) 445-5013. This article originally appeared in Insurance Advocate; insurance-advocate.com.

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