Marsh & McLennan Settles Connecticut Price-Fixing Claims

By | May 8, 2009

Marsh & McLennan Cos. Inc., the New York-based insurance broker and consulting firm, has agreed to pay $2.4 million to the state of Connecticut to settle claims of bid rigging, price fixing and receiving kickbacks.

State Attorney General Richard Blumenthal announced the deal Wednesday, saying it settles his 2005 lawsuit against the firm. Marsh admits no wrongdoing in the agreement.

Blumenthal accused Marsh of coercing insurers into paying millions of dollars in kickbacks to the firm in exchange for Marsh steering customers to the insurers. He alleged the cost of the kickbacks was secretly folded into consumers’ insurance premiums.

“Marsh masterminded a pay-to-play conspiracy of kickbacks and bid rigging that inflated insurance costs for consumers and injured competition,” Blumenthal said.

The amount that consumers’ allegedly overpaid in insurance premiums wasn’t clear. A spokesman for Blumenthal said he was trying to find that figure Wednesday afternoon.

“We are pleased to have resolved this matter, which relates to events dating back to 2004 and earlier,” Marsh said in a statement. “Marsh vigorously contested the allegations against it … and the state has agreed to withdraw the lawsuit as part of the settlement.”

Blumenthal initially sued Marsh in January 2005 as part of his office’s investigation of insurance industry abuses. He said the probe has yielded 12 settlements with insurers and brokers, nearly $540 million in restitution to consumers and taypayers across the country and $35 million in civil penalties paid to the state.

He initially accused Marsh and insurance provider ACE Financial Solutions Inc. of setting up a scheme in which ACE secretly paid a $50,000 commission to Marsh for steering an $80 million state workers’ compensation contract to ACE.

Blumenthal also sued ACE over the deal. ACE Financial, a subsidiary of Bermuda-based ACE Group of Companies, settled the lawsuit for $40,000.

The attorney general said he later expanded his lawsuit against Marsh when his investigation turned up evidence of the illegal contract-steering and kickbacks.

Blumenthal said several Connecticut companies were harmed by Marsh’s scheme, including Hubbell Inc., Kaman Corp., Hexcel Corp. and Bridgeport Hospital.

In January 2005, Marsh & McLennan agreed to pay $850 million in restitution to end an investigation by New York state officials into bid rigging and price fixing.

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