MMC Seeking Settlement Fees

MMC Seeking Settlement Fees

By Mark E. Ruquet

NU Online News Service, Nov. 2, 2:25 p.m. EST?The probe of contingency fee arrangements continues to grow with more subpoenas and investigations, while Marsh & McLennan said it is seeking to collect contingency fees owed for use in a settlement offer.[@@]

New York-based MMC is currently at the center of New York Attorney General Eliot Spitzer's probe and was charged in a civil suit with price-fixing, bid-rigging and manipulation of the placement of insurance contracts. Marsh, its insurance brokerage arm, is "taking steps to collect all amounts owed to it by insurance markets under Market Service Agreements" prior to Oct. 15, when it ceased its MSA program, according to MMC.

The amount?MMC estimated $230 million as of Sept. 30?would be placed into a segregated account to be used in any restitution agreement with Mr. Spitzer's office, the company said.

Press reports have suggested that the settlement agreement could exceed $500 million.

Insurance broker U.S.I. said it has received a subpoena from Mr. Spitzer's office requesting documents and seeking information in the ongoing investigation. The announcement came as no surprise after U.S.I. revealed last week, during its earnings announcement, that it received a subpoena from Connecticut Attorney General Richard Blumenthal and expected to receive one from New York.

The attorney general in California and the National Association of Insurance Commissioners also officially entered the fray, announcing their own actions in the contingency fee probe. Plans for their involvement were reported in National Underwriter's Daily News on Oct. 27.

California Attorney General Bill Lockyer said he is launching a formal investigation into possible antitrust violation and fraud by carriers and brokers. The initial focus will be on bid-rigging and other anti-competitive conduct in the industry.

He noted his office's investigation is in response to the continuing scandal that has gripped the industry. He added that his office is consulting with California Insurance Commissioner John Garamendi, who is conducting his own investigation, and that the two would continue to work together.

Mr. Lockyer said he has established a whistleblowers hotline for complaints and information by calling 888-451-6298 or 916-323-8500, for out of state, or online at insurancewhistleblower@doj.ca.gov.

Steve Young, general counsel for the Insurance Brokers & Agents of the West, said the organization is not surprised by Mr. Lockyer's action. He said its members would cooperate fully in the investigation, but doubted that the attorney general would find widespread wrongdoing in the industry.

"We remain convinced the allegations made by New York Attorney General Eliot Spitzer, which fueled the other state actions, will prove isolated to a very small number of people in the industry," he said in a statement.

"Unfortunately," he added, "this scandal is tainting the entire industry, which we believe operates with integrity and in the best interests of consumers and the businesses we serve."

The Kansas City, Mo.-based NAIC officially announced the creation of its "Executive Task Force on Broker Activities" to coordinate multistate interests and inquiries. The aim of the 13-state task force will be to develop model acts for disclosure of broker compensation, standardize the conduct of investigations and actions to be taken, and launch an online fraud reporting mechanism for anonymous tips on unscrupulous activity.