A New York appeals court has tossed out one of the civil charges against Liberty Mutual brought by the New York Attorney General's Office, which is suing the insurer for misconduct related to its payment of contingent commissions.

On Thursday the New York Supreme Court, Appellate Division, in New York, ruled that the insurer could not be held responsible for failing to disclose payment of contingent commissions to brokers. However, the court did uphold the portion of the suit dealing with charges of bid-rigging.

In its ruling the court dismissed those sections of the case dealing with the payment of contingent commissions, saying the payments "are not illegal" and the insurer was under no obligation to reveal those payments because "no special relationship" existed between the parties.

However, the court did rule that the Attorney General's Office has the authority to pursue charges of bid-rigging, saying the office has an "interest in securing an honest marketplace for all consumers."

The decision comes after New York State Supreme Court Justice Bernard Fried ruled last year that the case against nine Liberty Mutual subsidiaries could proceed, but the case against the parent, Liberty Mutual Holding Company, was dismissed on jurisdictional grounds.

A spokesman for Liberty Mutual said, in a prepared statement, that "Liberty Mutual is pleased but not surprised by the appellate court's decision." He would not elaborate further.

A call to New York Attorney General Andrew Cuomo's office was not returned.

The suit dates back to May, 2006 when then New York Attorney General Eliot Spitzer sued the Boston-based insurer, alleging the company engaged in a bid-rigging scheme with some of its top brokers.

The suit alleges the company conspired with Marsh and other brokers in a scheme to steer business the insurer's way in return for volume-based contingent commissions.

Shortly after the suit was filed the Connecticut and Illinois attorneys general joined the action against the carrier.

The insurer is accused of furnishing "B-quotes," or fake bids, that were intentionally higher or otherwise less favorable to the customer with the aim of supporting the quote from a favored carrier.

When settlement negotiations broke down, Liberty said it tried to resolve the issue with the Attorney General's Office but failed to do so. The company said it would not agree with the terms of settlement, finding the demands "excessive and unreasonable--both in terms of magnitude and demands that would change legitimate business practices in states outside their legal jurisdictions."

In August 2005, a former Liberty Mutual executive, Kevin Bott, pleaded guilty to criminal charges in connection with his bid-rigging conduct while with the insurer.

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