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Liberty Mutual has vowed to continue its court fight against charges begun by former New York Attorney General Eliot Spitzer that it engaged in anti-competitive bid-rigging and broker compensation practices after a judge declined the insurer’s bid to dismiss the attorney general’s suit.
New York Supreme Court Judge Bernard Fried ruled late last month that the state’s suit could go forward against Liberty Mutual subsidiaries that do business in New York, although he did agree that Spitzer’s office had no jurisdiction over Liberty Mutual’s Boston-based holding company and dropped that entity from the suit.
“Liberty Mutual is both pleased and disappointed with the court’s ruling,” John Cusolito, Liberty Mutual vice president and manager for external relations, said in a statement. “We are pleased that Liberty Mutual Holding Co. was dismissed from the matter. We are disappointed that the court did not accept our substantive arguments.”
Cusolito said the court case will continue. “We continue to believe that the matter needs to be resolved through the judicial process. This is the first step in that process and we fully expect that we will prevail eventually.”
Unlike American International Group, Zurich, ACE and other insurers that have settled similar charges, Liberty Mutual Insurance Group decided last May to fight allegations of anti-competitive practices brought against it by the attorneys general of New York and Connecticut.
The Boston-based insurer has maintained that charges regarding improper commissions and bid-rigging are untrue and overblown and has refused to settle with the states. Last May, Liberty Mutual said it had been unable to reach a resolution and believed the states’ settlement demands were excessive.
The insurer took its stand following the filing of complaints by then-New York Attorney General Eliot Spitzer and Connecticut Attorney General Richard Blumenthal. The complaints described alleged cooperation of Liberty Mutual employees from 2001 through 2004 in a bid-rigging scheme.
The complaints also found fault with Liberty Mutual for paying contingent commissions — or what the attorneys general call “kickbacks” and “payoffs” — to insurance brokers and independent agents.
The case is now being pursued by Spitzer’s successor as attorney general, Andrew Cuomo.
A number of other insurers agreed to alter their commission payment practice to settle with the states. But Liberty Mutual has defended its compensation practices as appropriate and lawful. As for the bid-rigging charges, Liberty Mutual has not denied that former employees engaged in bid-rigging but insists it is not a common practice as alleged.
Topics Lawsuits New York Legislation
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