MMC Seeking Settlement Fees

By Mark E. Ruquet

NU Online News Service, Nov. 2, 2:25 p.m.EST?The probe of contingency fee arrangements continues togrow with more subpoenas and investigations, while Marsh &McLennan said it is seeking to collect contingency fees owed foruse in a settlement offer.[@@]

New York-based MMC is currently at the center of New YorkAttorney General Eliot Spitzer's probe and was charged in a civilsuit with price-fixing, bid-rigging and manipulation of theplacement of insurance contracts. Marsh, its insurance brokeragearm, is "taking steps to collect all amounts owed to it byinsurance markets under Market Service Agreements" prior to Oct.15, when it ceased its MSA program, according to MMC.

The amount?MMC estimated $230 million as of Sept. 30?would beplaced into a segregated account to be used in any restitutionagreement with Mr. Spitzer's office, the company said.

Press reports have suggested that the settlement agreement couldexceed $500 million.

Insurance broker U.S.I. said it has received a subpoena from Mr.Spitzer's office requesting documents and seeking information inthe ongoing investigation. The announcement came as no surpriseafter U.S.I. revealed last week, during its earnings announcement,that it received a subpoena from Connecticut Attorney GeneralRichard Blumenthal and expected to receive one from New York.

The attorney general in California and the National Associationof Insurance Commissioners also officially entered the fray,announcing their own actions in the contingency fee probe. Plansfor their involvement were reported in National Underwriter'sDaily News on Oct. 27.

California Attorney General Bill Lockyer said he is launching aformal investigation into possible antitrust violation and fraud bycarriers and brokers. The initial focus will be on bid-rigging andother anti-competitive conduct in the industry.

He noted his office's investigation is in response to thecontinuing scandal that has gripped the industry. He added that hisoffice is consulting with California Insurance Commissioner JohnGaramendi, who is conducting his own investigation, and that thetwo would continue to work together.

Mr. Lockyer said he has established a whistleblowers hotline forcomplaints and information by calling 888-451-6298 or 916-323-8500,for out of state, or online at [email protected].

Steve Young, general counsel for the Insurance Brokers &Agents of the West, said the organization is not surprised by Mr.Lockyer's action. He said its members would cooperate fully in theinvestigation, but doubted that the attorney general would findwidespread wrongdoing in the industry.

"We remain convinced the allegations made by New York AttorneyGeneral Eliot Spitzer, which fueled the other state actions, willprove isolated to a very small number of people in the industry,"he said in a statement.

"Unfortunately," he added, "this scandal is tainting the entireindustry, which we believe operates with integrity and in the bestinterests of consumers and the businesses we serve."

The Kansas City, Mo.-based NAIC officially announced thecreation of its "Executive Task Force on Broker Activities" tocoordinate multistate interests and inquiries. The aim of the13-state task force will be to develop model acts for disclosure ofbroker compensation, standardize the conduct of investigations andactions to be taken, and launch an online fraud reporting mechanismfor anonymous tips on unscrupulous activity.