Illinois Attorney General Lisa Madigan has joined the New York and Connecticut attorneys general in suing Liberty Mutual, alleging the Boston-based insurer engaged in bid-rigging and steering of insurance contracts.

The suit, filed in Cook County Circuit Court last Thursday, alleges that Liberty Mutual and seven affiliates violated the state's consumer fraud and deceptive business practices act by paying undisclosed contingent commissions to insurance brokers and agents.

Ms. Madigan's complaint also accuses the carrier of making those payments to influence the brokers and agents to steer clients to the insurer.

The company is accused of working with other insurers and insurance brokerage firm Marsh, a subsidiary of New York-based Marsh & McLennan Companies, to rig bids for excess casualty insurance.

"It is of great concern that one of the country's largest insurance companies would rig bids and induce brokers and agents to breach their duties to their clients in the ways we have alleged in this lawsuit," said Ms. Madigan in a statement.

In response, John Cusolito, vice president and manager-external affairs, said in a statement that the insurer is "disappointed" by Ms. Madigan's decision and that the allegations are "incorrect."

"Liberty Mutual's legitimate and standing industry practices were appropriate and lawful," he said.

He said the company has worked with the Illinois Attorney General's Office but has been unable to come to a resolution. He said the company would vigorously defend itself against the allegations and "allow the judicial process to work."

As part of the complaint, Ms. Madigan said an employee with Liberty International Underwriters, one of Liberty Mutual's companies, pleaded guilty to criminal charges in New York in August 2005 related to bid-rigging and steering of contracts. The employee, Kevin Bott, described how brokers at Marsh instructed him in the submission of false quotes in order to control the market and protect incumbent insurers who held contracts.

For its part, Mr. Cusolito said two former employees at the company violated the company's standards and trust. One of the employees left the company in 2001 and a second resigned in the course of an investigation in 2005.

"Liberty Mutual has a culture not just of compliance but also of 'doing the right thing,'" Mr. Cusolito said.

Ms. Madigan said she has worked cooperatively with the offices of the attorneys general in both New York and Connecticut, which sued Liberty Mutual on May 5 over similar allegations.

Attorney General Eliot Spitzer of New York and Connecticut's Richard Blumenthal simultaneously announced the filing of civil lawsuits against Liberty Mutual, citing evidence gained through the investigation of Marsh over contingent commissions.

That investigation resulted in Marsh discontinuing the taking of contingent commissions and payment into an $850 million settlement fund in January of 2005 to be paid to customers.

Special Reports /

Ill. Joins N.Y., Conn. In Suing Liberty Mutual

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