Marsh Opt-In Deal Requires Consideration

Although they made no specific recommendation that risk managers should settle, members of a panel at the annual conference of the Risk and Insurance Management Society Inc. here warned that not doing so would mean there would be no assurance of recovery. Anyone pursuing litigation must prove liability and damages, the experts said.

Paul Sugarman, with the law firm of Heller Ehrman LLP in San Francisco, said those who are eligible to settle with Marsh are mostly Fortune 1000 companies who retained the services of Marshs New York global broking department between Jan. 1, 2003 and Oct. 19, 2004. He noted that the Davis Polk report commissioned by Marsh confirmed that bid-rigging was centered within the New York office, on a regular basis, and that the practice was confirmed by company e-mails.

While settling has its benefits, like being paid faster and avoiding legal bills, risk managers opting into the settlement must make sure that settlement amounts adequately cover their damages.

Sharon Siegel Voelzke, managing director of Navigant Consulting Inc. in Princeton, N.J., said risk managers who opt in need to collect internal documentation, compiling all policies and files on the placement and underwriting process. They also need to compile billing and internal premium allocation information, and to identify any competing bids received and disclosures on broker commissions.

The second step, she said, includes obtaining and reviewing publicly available guidance such as that of the National Association of Insurance Commissioners, the state attorney general, the state insurance department and RIMS.

Next, she said, risk managers need to review the settlement letter and any documentation from Marsh. She advised risk managers to determine if the documentation provided adequately supports the settlement offer. Has the broker included appropriate policies? Are there any specific lines or layers not included in the settlement?

Ms. Voelzke added that risk managers need to review the settlement amount to determine whether it meets expectations, whether there is information explaining the basis of the calculations, and whether information about the years of the policies is included.

She told National Underwriter that risk managers especially need to be cognizant of their own state insurance departments enforcement rules with respect to doing any kind of independent audit or review of Marshs calculation.

Its a significant amount of data were talking about, she said.

Mr. Sugarman told NU that although risk managers he has talked to are upset by the bid-rigging and steering accusations, ironically, they take comfort from the fact that all three brokers may have been doing similar things.

Most risk managers also, he said, value their ongoing relationships with their brokers and are willing to see if they can put this behind them and begin again with their brokers in a new and squeaky clean world.

Risk managers are willing to put issue of fees and bid-rigging behind them but face near-term decisions like whether to opt in to Marsh's settlement.

Reproduced from National Underwriter Edition, April 15, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.