Marsh & McLennan sued

Florida authorities have sued Marsh & McLennan, the nation's largest insurance brokerage, for manipulating insurance markets.

The Miami Herald
March 15, 2006

The nation's largest insurance brokerage, Marsh & McLennan, held itself out as ''a trusted expert'' but was actually involved in bid-rigging and illegal kickbacks that ended up costing clients money, Florida authorities charged in a lawsuit filed Tuesday.

Attorney General Charlie Crist and Tom Gallagher, Florida's chief financial officer, filed the civil complaint against the New York insurance brokerage for allegedly manipulating insurance markets in the state from 1998 to 2004. One of the deals involved Miami-Dade County.

The investigation of Marsh & McLennan and several other insurers and brokers was carried out by the Department of Financial Services, the Office of Insurance Regulation and the Attorney General's Office. Investigations into the other companies are continuing, the joint statement said.

Marsh & McLennan dismissed the lawsuit as a rehash of a 2004 complaint filed by New York Attorney General Eliot Spitzer. In that case, the company said it paid $850 million to settle, including $21 million to be distributed to its Florida clients.


''These allegations have been cut and pasted from a 2004 lawsuit that Marsh resolved with the New York attorney general and superintendent of insurance in January 2005,'' said a statement from Barry Richard, attorney for Marsh & McLennan.

Richard charged that the new complaint ``distorts the facts, disregards the events of the past 18 months and ignores releases signed by the state of Florida itself.''

But JoAnn Carrin, a spokeswoman for the attorney general, said that the settlement was only with some private companies. ''The state [of Florida] has not settled in any way with Marsh & McLennan,'' Carrin said.

In 2004, Spitzer sued the company for accepting large contingent commissions from insurers in exchange for steering business their way and rigging the bidding process. Last September, another eight former Marsh & McLennan executives were indicted on charges related to the price-fixing scheme.

The Florida complaint alleges that Marsh & McLennan would pledge to take a flat fee or a capped commission and then obtain additional compensation causing clients to end up paying inflated insurance premiums.

'Marsh was not giving unbiased advice or acting in its clients' best interest,'' the lawsuit said, adding that the insurance brokerage 'sacrificed its clients' interests'' by refusing to use insurers that didn't pay undisclosed compensations.


The complaint alleges that Marsh & McLennan would request fictitious bid quotes from other companies to create the appearance of competition, but the quotes were inflated to make sure the company Marsh selected would obtain or keep the business.

The Florida complaint cited a company e-mail stating information would be forthcoming on ``who whe [sic] are steering business to and who we are steering business from.''

The lawsuit charged that Marsh & McLennan had undisclosed agreements with at least a dozen big insurers to obtain the extra commissions.

The insurance brokerage has admitted that it received more than $1.2 billion from the contingent commissions in 2003 and 2004.

In one case cited by the lawsuit, Miami-Dade County said that while its insurance premium would rise, Marsh's commission would freeze at $32,000. However, the court papers stated that Marsh was paid $75,000 in undisclosed commissions.

The lawsuit also cited the case of The Chubb Companies, which lost millions of dollars in potential business when it refused to go along with Marsh's demands for kickbacks.

Copyright © 2006 by The Miami Herald

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