Lawyers for a majority of the 15 insurance company and broker defendants in a long-running suit accusing them of bid-rigging are scheduled to be in court today outlining a proposed settlement that will cost them about $36.7 million.
The antitrust class action is one of numerous cases that grew out of investigations and allegations by former New York Attorney General Eliot Spitzer more than six years ago into whether brokers had conspired with insurers to fabricate bids to make commercial buyers believe their accounts were shopped around for the best deal and whether they hid some of the contingent commissions and fees paid to brokers.
Lawyers for the plaintiffs advised Justice Garrett Brown in the U.S. District Court for the District of New Jersey on March 18 that they had reached an agreement in principle with brokers Aon, Willis and HRH (now owned by Willis) and with insurers American International Group, CNA, Crum & Forster, The Hartford, Liberty Mutual, Travelers and XL.
According to the proposed settlement, AIG, Travelers, Liberty Mutual and XL will collectively pay $27 million into a fund for customers that purchased excess casualty insurance policies from them through the named brokers between 1998 and 2004.
Separately, CNA, Crum & Forster, The Hartford and brokers Aon and Willis/HRH will collectively pay a smaller sum, a total of $9.7 million, to purchasers of commercial insurance for the same years.
The almost $37 million settlement must still be approved by the court.
The case in federal court in New Jersey is a consolidation of several class actions brought in 2004 by commercial insurance customers including Eagle Creek of California, OptiCare Health Systems, of Connecticut, QLM Associates of New Jersey and Accent on Eyes Corp. of New York against various brokers and insurers. The suits alleged that the brokers and carriers engaged in unlawful practices n the placement of insurance and the collection of contingent commissions. They alleged violations of federal antitrust and racketeering laws.
The charges were dismissed by a court three years ago but then reopened in 2010. Insurance broker Marsh, an original defendant, previously settled its role in the case on its own.
Settlement talks have been underway since last fall.
AIG said it is pleased to put the issue to rest.
“Through this settlement, AIG brings an end to another long-standing lawsuit about events from many years ago, allowing AIG to continue to focus its efforts on paying back taxpayers and restoring the value of our franchise for the benefit of all our stakeholders,” spokesman Mark Herr said in a statement.
Other insurance parties either declined to comment or could not be reached.