A federal judge has dismissed part of a class-action suit brought against insurance brokers and carriers that claimed the industry conspired to control the insurance market.

U.S. District Court Chief Judge Garrett E. Brown Jr. in Newark, N.J., tossed out claims by over three-dozen commercial lines clients that insurance brokers conspired to control and allocate customers among them. The suit also alleges insurers participated in the scheme.

“Plaintiffs have not shown that the insurer defendants colluded among themselves in the broker-centered conspiracies, and thus it is improbable that they colluded to further this global agreement as well,” the judge wrote.

“We are certainly very pleased that Judge Brown has dismissed the antitrust allegations for the third time,” said Mitchell Auslander, an attorney with Willke Farr & Gallagher, LLP, in New York representing Marsh & McLennan, the parent company of insurance broker Marsh–one of the defendants in the case.

The class action–Insurance Brokerage Antitrust Litigation/Employee-Benefit Insurance Brokerage Antitrust Litigation–is the consolidation of a number of suits filed beginning in 2004 against more than 20 insurance brokers, companies and their subsidiaries, alleging the defendants conspired to manipulate the allocation of clients among them and protect marketshare.

Judge Brown ruled that the plaintiffs did not provide sufficient evidence to back up their claims that the defendants engaged in a conspiracy to control the markets and restrain trade under the Sherman Act.

Mr. Auslander said while this is a significant victory for the industry–especially insurance brokers–the defendants are still waiting for the judge to rule on charges the plaintiffs brought under the Racketeer Influenced and Corrupt Organizations Act. He said the judge has dismissed the RICO allegations twice, and he is hopeful Judge Brown will dismiss the charges for a third time.

While dismissal of federal cases would leave violations of state laws to be resolved, he said the federal questions are more significant. “The state violations are different and much smaller issues for the defendants,” he explained, adding that if all the federal allegations are dismissed and the state allegations remain, the state issues “are not of the same magnitude.”

Judge Brown dismissed both antitrust and RICO suits twice, but allowed the plaintiffs opportunities in both cases to amend their allegations. His Aug. 31 ruling completely dismissed the antitrust allegations. When a decision on the RICO portion of the suit will be rendered is not known, said Mr. Auslander.

If all of the federal allegations are dismissed, Judge Brown would then have to decide if all the state violations are to be heard by him as one matter or returned to the individual state courts, Mr. Auslander added.

In a separate decision on Aug. 31, Judge Brown approved a settlement between the plaintiffs and insurance broker Arthur J. Gallagher for close to $37 million.

The agreement, which was reached in April of this year, allocates $20 million to be paid into a fund and distributed to the plaintiffs. Another $8.9 million will go to attorneys' fees, litigation expenses and incentive awards to 25 named plaintiffs.

According to court documents, the settlement affects 288,182 class members, of whom 209 requested exclusion and two objected to the settlement.

Special Reports /

Federal Judge Dumps Antitrust Charges In Class Action Against Brokers, Insurers

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