Fla. AG Launches Widespread Anti-Trust Probe, 10 Subpoenas Issued

By | November 6, 2004

Florida Attorney General Charlie Crist has issued subpoenas seeking documents and records from 10 firms and anticipates sending six more subpoenas out next week as insurance industry investigations widen.

Crist is investigating arrangements between insurers and brokers commercial group accounts for property and casualty insurance, life and health policies. The investigation stems from a complaint from a Florida resident approximately two weeks ago.

The 10 firms receiving subpoenas are: AON, Inc., The Willis Group, Inc., Brown & Brown, Inc., Arthur J. Gallagher & Company, Acordia, Inc. doing business as Acordia Southeast, Inc., Heath Lambert Group doing business as Heath Lambert Miami, LLC, Hilb Rogal & Hobbs of Vero Beach, Inc., USI Holdings Corp. doing business as USI Insurance Services of Florida, Inc., HUB Investment Corporation and Marsh & McLennan Companies.

Additional firms, which could soon receive subpoenas include ACE Ltd., American International Group, Inc. (AIG), Chubb Corporation, The Hartford Financial Services Group, Inc. Munich American Reinsurance Co., and Zurich American Insurance Company.

Insurance Journal Southeast obtained copies of the subpoenas, which state they are an “antitrust civil investigation demand.” They give companies receiving them until Dec. 13 to respond.

“At this point we are investigating the brokers and insurance companies for possible violations of anti-competitive activities,” said Crist. “The subpoenas are part of a larger effort to ascertain whether insurance practices are being conducted lawfully, with no conflict, with insured citizens’ best interest at the forefront.”

The attorney general seeks to determine the current manner in which brokers and insurers use contingency commissions and arrangements. Crist said there are indications that insurance brokers have improperly steered business to insurers who pay the brokers the highest fees rather than seeking the best deals for their customers. There are also indications that companies may have engaged in bid-rigging.

The alleged practices could be in violation of Florida’s antitrust laws, Chapter 542, Florida Statutes. Penalties allow fines of $1 million for corporate violations, $100,000 for individuals and for three times the amount lost due to illegal activities.

Crist said the State Attorney General’s looks forward to working with the task force established by Tom Gallagher, Florida’s Chief Financial Officer. The Florida Attorney General is among several state attorney’s general, including New York, Massachusetts, California, Connecticut and Ohio, that have opened investigations into insurance industry practices.

“We are investigating brokers and insurance companies for possible violations of anti-competitive activities,” Crist said. “The subpoenas are part of a larger effort to ascertain whether insurance practices are being conducted lawfully, with no conflict, with insured citizens’ best interest at the forefront.”

The inquiry came three weeks after New York attorney general Eliot Spitzer filed a lawsuit against the biggest insurance broker in the US, Marsh & McLennan. He alleged that the broker was taking kickbacks in return for directing business to certain firms and was also involved in bid-rigging to set higher costs for customers. The suit also implicated several other firms.

Since the New York suit was filed, Marsh has fired four executives and suspended six others. The insurance firm Ace has fired two and suspended three, and two AIG workers have pleaded guilty to criminal charges in court.

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