NU Online News Service

Liberty Mutual reached an agreement with two state attorneysgeneral to pay a total of $7.5 million to settle allegations itengaged in a bid-rigging and kickback scheme with insurancebrokers.

A spokeswoman for the Boston-based insurer confirmed thesettlements, saying that the company would pay the state ofConnecticut $2 million and New York a total of $5.5 million. Underthe agreement, reached last week, the company neither admits nordenies any wrongdoing.

In a statement, the insurer said, "We've always maintainedLiberty had done nothing wrong. At this stage we think it better topay these relatively small amounts and put the matter behindus."

For his part, Connecticut's attorney general throughout theinvestigation, Richard Blumenthal, called Liberty's "conductreprehensible, illegally increasing insurance premiums forconsumers and businesses and undermining the free market. Thecompany brazenly broke the law, using underhanded, unethical andillegal methods to rip off its customers."

Mr. Blumenthal becomes a Connecticut U.S. Senator this week.

He added that this was the last suit from his investigation of the insuranceindustry that began back in 2005

The suit goes back to a kickback scheme unearthed at insurancebroker Marsh, when it was discovered that executives at one of itsunits worked with insurers to produce phony bids and steerinsurance contracts to certain insurers in exchange for lucrativecontingent commissions.

The 2005 investigation by then-New York Attorney General EliotSpitzer resulted in the banning of contingent commission paymentsto Marsh, Aon, Willis and Arthur J. Gallagher for a period ofseveral years. The ban was just lifted in 2010.

The brokers also paid millions of dollars to compensateconsumers harmed by the alleged practice, with Marsh paying thelargest agreement of $850 million.

Insurers were not spared, paying significant settlement dollarsover the years. Among the most significant: American InternationalGroup paid $1.64 billion to state and federal authorities in 2006; Zurichpaid $171.7 million that same year; and The Hartford paid $115 million in 2007.

Liberty Mutual did win one victory in 2008, fighting charges stemming from thebid-rigging scandal. A New York State Judge found in a civil trialthat the company was not obligated to inform customers about thepayment of contingent commissions to producers.

In New York, the Attorney General's Office also announcedan agreement where four insurers would payclose to $120 million in excess funds to the state for excess feescharged to policyholders covering workers' compensationinsurance.

The companies are ACE, Zurich, Pennsylvania Manufacturers andCNA.

The Attorney General's Office said the companies fullycooperated with the investigation.