The Town of Orchard Park uses a committee of local brokers to decide where it is going to buy its liability insurance, a practice that has proved lucrative for the committee members.
Once the committee decides who should get the town's insurance business -- and the insurance has gone through a member's agency for decades -- the other committee members then collect their commissions.
Between 1995 and 2005, the committee members received more than $170,000 in commissions. That doesn't include three years for which there are no records.
There is nothing illegal about the practice. In fact, that's how many towns and school districts used to handle their insurance, in order to steer business to local brokers, area insurance experts say.
But Town Supervisor Mary Travers Murphy charges the town may be overspending by as much as $125,000 a year on insurance because of the process. Her position, laid out in an "executive memo," has sparked a battle between her and Town Board members.
"What's most troubling to me is the process by which the town purchases this insurance," Travers Murphy said, calling it "an impossible conflict of interest."
Council members reacted angrily to Travers Murphy's memo.
"I'm really kind of appalled at the comments," said Councilman David Kaczor. "They border on slanderous. These individuals, they're highly regarded. They're basically the heads of the top five insurance companies in our community."
The members of the Insurance Committee are Donald Litwin, Herman Sapio, Thomas Michaels, Ray Stromecki and Richard Gernold, whose company handles the town's liability insurance.
Gernold said the other four members receive their commissions, typically between $3,500 and $5,300 a year each, through his agency.
"That's the common method of compensation for insurance agencies across the world," Gernold said. "Real estate brokers get commissions, lawyers charge you a fee . . . in the insurance industry, it's usually a percentage of the premiums."
Most towns have moved to insurance consultants who put together insurance specifications, which are then put out for bid.
The town, village and school district in Orchard Park are three of the last governmental bodies using the committee system.
Travers Murphy said her interest in insurance started during her fall election campaign, when she heard from Orchard Park residents who are also insurance brokers, who told her it was almost impossible to bid on the town's account.
"It's literally impossible to break into Orchard Park," she said. "A lot of residents are insurance agents who work with big agencies that specialize in municipalities. The files are full of letters from these people who say, 'I would love to come in and look at your policies. Give us at least a crack at trying to break in. "
"They say they've been completely closed out of the process -- 100 percent," she added.
Last May, six agents for Lawley Service, a company that handles municipal insurance, sent a letter to then-Supervisor Toni Cudney suggesting the town was paying too much for its insurance and asking for a chance to make a quote.
All six of the agents are Orchard Park residents.
Cudney allowed Lawley's Paul Powell to examine the town's insurance policy and attempt to design a comparable policy.
Powell returned with the policy in January, Travers said. His quote was $160,000 lower than the $505,360 the town is paying for its current fiscal year.
Travers Murphy said her estimate that the town might be paying $125,000 too much is a conservative estimate based on those numbers.
Kaczor questions whether the supervisor should have been getting quotes.
"One of the things Mary should have had in going to an insurance company was a broker of record authorization, which can only be given by the board," Kaczor said. "So we're not sure how she managed to give that to an outside company.
"There appears to be some impropriety, and it could be an ethics violation."
Travers Murphy said she didn't put out a bid, and the insurance policy was a public record that Lawley was entitled to see.
Councilman Stanley Jemiolo Jr. said he wants to summon the Insurance Committee to a Town Board work session soon to discuss the situation.
"This board will do whatever it can do to save money for the town," he said. "That's everybody's goal. But the ways things happened is disturbing to me."
Lawley's Powell said he was driven to act by frustration over the town's failure to seek outside bids.
"The ultimate question is why the committee never 'remarketed' the insurance with other carriers, with alternate proposals on the table," Powell said.