Biggest Buyers Opt-In To Marsh Settlement

Half of those eligible overall cash in on $850 million clientrestitution fund

By Mark E. Ruquet

Half of all eligible policyholders have elected to participatein an $850 million settlement providing restitution for impropercontingency fee charges at Marsh & McLennan Companies Inc.

MMC said the majority of those accepting the deal were itslargest policyholders.

The New York-based parent of the Marsh brokerage giant said itreceived an "excellent response" from eligible policyholders toparticipate in the compensation fund MMC established as part of itssettlement with New York Attorney General Eliot Spitzer andSuperintendent of Insurance Howard Mills in January.

MMC said that based on preliminary information, nearly 70,000eligible policyholders across the country elected to participate inthe fund. These policyholders will receive approximately $750million of the $850 million settlement.

Barbara Perlmutter, an MMC representative, said there were140,000 clients eligible to participate in the fund. Despite halfnot opting-in, she noted that the company was pleased with theresponse because 90 percent of the largest policyholders didopt-in. Policyholders had until Sept. 20 to sign into the fund andwaive their right to sue MMC.

Payments will be made in four installments–this Nov. 1 and onJune 30, 2006, 2007 and 2008. Ms. Perlmutter said the remaining$100 million would be used for settlement with clients inaccordance with the agreement.

"We are gratified that so many clients have elected toparticipate in the fund," said Michael G. Cherkasky, president andchief executive officer of MMC, in a statement.

"This broad endorsement by our policyholder clients follows onthe heels of the settlement agreement reached with numerous stateinsurance commissioners through the National Association ofInsurance Commissioners," he added. "Completion of this stage ofthe process represents another important step forward forMarsh."

MMC and the NAIC announced last month that state insuranceregulators would accept the New York agreement to conclude actionsby the commissioners.

However, the announcement does not have any bearing on otherlitigation or discussions MMC is having with several otherattorneys general, she said.

Just recently, Connecticut Attorney General Richard Blumenthalannounced he is expanding his lawsuit against MMC to includeallegations of bid-rigging, price-fixing and illegally steeringstate business and consumers to favored insurers in return for"tens of millions of dollars in undisclosed kickbacks."

Mr. Blumenthal said the new allegations, which were previouslylimited to a state contract, could now involve "thousands" of thestate's residents. He said the suit would seek money back forcorporate, nonprofit, government entities and individuals harmed byMarsh's practices.

Among some of those Mr. Blumenthal said were affected by Marsh'salleged wrongdoing were Bic, Timex, Xerox, General Electric, thestate's Department of Administrative Services, several cities andtowns, Yale University, Mystic Seaport, and the Save the ChildrenFederation.

"There were about 1,100 Connecticut policyholders who elected toparticipate in the settlement out of 2,800 [who were eligible],"Mr. Blumenthal told National Underwriter. "Our lawsuit seeks tohelp obtain compensation for the remaining 1,700, or evenadditional compensation for those who participated. So, this[settlement] in no way makes our litigation moot or academic."

MMC settled with New York after officials there filed suitagainst the company, charging Marsh had rigged bids and fixedprices with insurers that paid hidden contingency fees askickbacks.

"We are gratified that so many clients have elected toparticipate in the fund…Completion of this stage of the processrepresents another important step forward for Marsh."

Michael G. Cherkasky,

MMC President & CEO