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Marsh & McLennan to Pay $2.4M in Settlement with CT AG Over Bid-Rigging Allegations

Source: Hartford Courant

Posted on 07 May 2009

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Connecticut Attorney General Richard Blumenthal said Wednesday that insurance broker Marsh & McLennan Cos. will pay $2.4 million in restitution to settle allegations in a 2005 lawsuit of bid-rigging, price-fixing, and illegal steering of customers in return for kickbacks.

The civil suit was part of a broad investigation of the insurance industry that resulted in a dozen settlements involving Connecticut and $539.7 million of restitution to customers and taxpayers nationwide, Blumenthal said. In addition, Connecticut collected $35.09 million in civil penalties. Marsh contested the allegations and didn't admit wrongdoing in the settlement.

The attorney general had originally sued Marsh and commercial insurer ACE Ltd. in January 2005 in a case concerning a state Department of Administrative Services contract, which Marsh placed with ACE. Marsh was only supposed to get $100,000 in commissions on the $80 million contract, but solicited a secret $50,000 bonus commission from ACE, the suit said. ACE allegedly paid it to ensure it would get similar business from the broker in the future.

ACE settled that suit by paying $40,000 in restitution to the state in September 2005, and Blumenthal filed a broader amended suit against only Marsh. The suit, which went beyond just the state contract, implicated several insurers, cited Connecticut victims, and added allegations of bid-rigging and price-fixing.

Several Connecticut businesses harmed by Marsh's actions were Hubbell, Inc., Kaman Corp., Hexcel Corp., and Bridgeport Hospital, Blumenthal said.

"Marsh masterminded a pay-to-play conspiracy of kickbacks and bid rigging that inflated insurance costs for consumers and injured competition," Blumenthal said Wednesday. "Marsh exploited its massive market muscle in the insurance industry, coercing insurers into secret payments for access to insurance placements."

The kickbacks were "surreptitiously baked into insurance premiums," and customers didn't know it, he added.

In a statement Wednesday, Marsh said it "vigorously contested the allegations against it throughout the course of the litigation," and noted the settlement "makes no findings against Marsh, includes no fines or penalties, and expressly does not include any admission of liability by the company."

The suit says when Marsh customers wanted to purchase or renew insurance, the broker often decided which insurer should be given the business and at what price. Blumenthal said Marsh's quote for insurance was typically higher than the previous year's price -- by as much as 15 to 20 percent.

ACE paid $80 million in 2006 to resolve an investigation -- not a lawsuit -- by Connecticut, New York, and Illinois involving similar allegations of bid-rigging, steering, and hidden commissions. The $80 million included $40 million in restitution to businesses across the nation and $40 million in fines to the three states. Connectic