Print this article | Return to Article | Return to CFO.com
New York's attorney general says the insurer was rigging insurance bids.
Stephen Taub, CFO.com | US
May 5, 2006
New York State Attorney General Eliot Spitzer announced Friday that he is suing another insurer for participating in what he describes as a widespread bid-rigging scheme.
On Friday he filed a civil complaint against Liberty Mutual, alleging the property-casualty insurer made payoffs to insurance brokers and independent agents to steer their clients to Liberty.
According to a press release from Spitzer's office, Liberty was explicit with brokers and agents about what it expected in exchange for the payments, describing the payoffs as an "incentive to encourage your Agency to place an increased amount of profitable business with our company."
Brokers and agents, in turn, steered their clients to Liberty, and in many cases "violated their fiduciary duty" to assist their clients in finding the best insurance for the lowest price, the AG charged.
The lawsuit also details how Liberty — which is not publicly traded — allegedly repeatedly rigged bids for excess casualty insurance as part of an anticompetitive customer-allocation scheme led by Marsh & McLennan Cos. "It is simply appalling that a major financial institution would rig bids and induce brokers and agents to abuse their position of trust with the insurance-buying public," said Spitzer in a statement.
The lawsuit seeks disgorgement of Liberty's allegedly illegal profits; restitution to injured policy holders; and damages, including punitive and treble damages, for the company's allegedly illegal business practices.
Spitzer credited the attorneys general of Connecticut and Illinois with assisting in the investigation.
In the fall of 2004, the New York Attorney General's Office and the Insurance Department announced a joint probe of misconduct in the insurance industry. So far the investigation has resulted in settlements with six companies, guilty pleas from 20 insurance company executives and officers, and the recovery of approximately $3 billion in restitution and penalties.