Massachusetts Settles Bid-Rigging Suit against Great American Insurance

May 15, 2009

Massachusetts Attorney General Martha Coakley says her office has settled a bid-rigging lawsuit lodged against Ohio-based Great American Insurance Co.

The suit resolves allegations the insurer submitted a fake and intentionally uncompetitive insurance quote to Analog Devices Inc. of Norwood, Mass. as part of a scheme to ensure AIG won Analog Devices’ 2004 insurance renewal.

“Rigging insurance bids is a serious offense that unfairly inflates insurance costs for consumers,” Coakley said. “We believe this settlement will deter similar unfair behavior in the future.”

Under the terms of the settlement, Great American will pay $60,000 to Analog Devices and $116,000 to the commonwealth. The agreement also requires Great American to undertake conduct reforms aimed at preventing insurance bid-rigging in excess casualty insurance. The insurer will also be required to retain certain records concerning its bidding practices.

The suit, which was filed in January 2008, alleged that in 2004, at the request of insurance broker Marsh & McLennan Cos., Great American submitted the fake quote to make AIG’s bid appear to be competitive.

In return, Marsh allegedly steered another one of Analog Devices’ insurance policies to Great American at a pre-determined price. Insurers such as Great American and AIG paid Marsh & McLennan lucrative contingent commissions based on the volume of business Marsh placed with them. In January 2009, the Attorney General, along with eight other states, reached a $7 million settlement with Marsh, resolving a four-year investigation by the states into Marsh’s role in the nationwide bid-rigging scheme.

Source: Massachusetts Attorney General’s Office

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