Zurich Totaling Customer Paybacks

Zurich American has begun assessing which excess casualty insurance customers are due restitution under a multi-million dollar bid-rigging settlement that requires complete calculations by July 10, a company spokesman said.

The insurer recently completed a settlement with New York, Connecticut and Illinois that provides $88 million for policyholders, as well as a second, separate agreement with nine other states providing $151 million in refunds.

While the tri-state agreement calls for customers in those states to be paid by Feb. 7, 2007, according to a Zurich spokesman, Steven McKay, the restitution timetable for the larger agreement is up in the air.

He noted the company's previous statement that until Zurich negotiates a final settlement for a class-action suit, “the attorneys general review the plan for allocating the settlement, and the class-action settlement is approved by the court, we will not know who will be eligible to receive restitution, or the timing or mechanics for the distribution of the restitution funds.”

Mr. McKay said various units of the insurer are already at work making calculations as to how much individual policyholders may be owed.

The tri-state agreement calls for a report to be made to the New York, Illinois and Connecticut attorney generals on July 20 listing policyholders by name and address and how much they are eligible for under a pro rata share of the settlement fund.

The share would be calculated by multiplying the $88 million by the ratio of the policyholder's premium divided by gross written premium for all eligible policies.

Policies included are for the period from Jan. 1, 2000 through Sept. 30, 2004. Policyholders are supposed to get a notice of what they are due on July 24, including a notice that the amount might increase if there is less than full participation by eligible policyholders.

Policyholders who elect not to participate will have their share used by Zurich to settle other claims “asserted by policyholders relating to the excess casualty bid-rigging or excess casualty steering allegations,” according to the agreement.

Meanwhile, for customers covered in the agreement for California, Florida, Hawaii, Maryland, Massachusetts, Oregon, Pennsylvania, Texas and West Virginia there are no dates yet for restitution as the multi-state group is still working out a plan of distribution, according to a source with one of the attorney generals involved.

The one firm date in that agreement is for Zurich to pay the nine states $20 million in investigative costs by the second week in May.