NU Online News Service

Liberty Mutual reached an agreement with two state attorneys general to pay a total of $7.5 million to settle allegations it engaged in a bid-rigging and kickback scheme with insurance brokers.

A spokeswoman for the Boston-based insurer confirmed the settlements, saying that the company would pay the state of Connecticut $2 million and New York a total of $5.5 million. Under the agreement, reached last week, the company neither admits nor denies any wrongdoing.

In a statement, the insurer said, "We've always maintained Liberty had done nothing wrong. At this stage we think it better to pay these relatively small amounts and put the matter behind us."

For his part, Connecticut's attorney general throughout the investigation, Richard Blumenthal, called Liberty's "conduct reprehensible, illegally increasing insurance premiums for consumers and businesses and undermining the free market. The company brazenly broke the law, using underhanded, unethical and illegal 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 insurance industry that began back in 2005

The suit goes back to a kickback scheme unearthed at insurance broker Marsh, when it was discovered that executives at one of its units worked with insurers to produce phony bids and steer insurance contracts to certain insurers in exchange for lucrative contingent commissions.

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

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

Insurers were not spared, paying significant settlement dollars over the years. Among the most significant: American International Group paid $1.64 billion to state and federal authorities in 2006; Zurich paid $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 the bid-rigging scandal. A New York State Judge found in a civil trial that the company was not obligated to inform customers about the payment of contingent commissions to producers.

In New York, the Attorney General's Office also announced an agreement where four insurers would pay close to $120 million in excess funds to the state for excess fees charged to policyholders covering workers' compensation insurance.

The companies are ACE, Zurich, Pennsylvania Manufacturers and CNA.

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

Special Reports /

Liberty Mutual Settles Kickback Allegations

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