Liberty Loses Bid To Dismiss Price-Fixing Case

Liberty Mutual has lost a legal effort seeking dismissal of a bid-rigging suit brought against the insurer by the New York State Attorney General's Office.

New York State Supreme Court Justice Bernard Fried issued a ruling last week that will permit the case to proceed against nine Liberty Mutual subsidiaries including Wausau Insurance Cos., Liberty Mutual Fire Insurance Co. and Liberty Marine Underwriters Inc.

But charges against Boston-based Liberty Mutual Holding Company were dismissed on grounds of personal jurisdiction.

Liberty Mutual issued a statement expressing satisfaction that charges against the holding company were dismissed.

“We are disappointed that the court did not accept our substantive arguments. We continue to believe that the matter needs to be resolved through the judicial process. This is the first step in that process, and we fully expect that we will prevail eventually,” the statement said.

Last May, New York Attorney General (and now governor) Eliot Spitzer filed an action in New York Supreme Court charging that in many instances brokers and agents responded to Liberty Mutual's explicitly stated incentives, steering their clients to the carrier and in many cases violating their fiduciary duty to assist in finding the best insurance for the lowest price.

In the complaint, Mr. Spitzer said that from 2001 through 2004 Marsh brokerage repeatedly solicited from Liberty Mutual and other insurers' fake bids–so-called “B quotes”–that were intentionally higher or otherwise less favorable to the customer to “support” or “protect” the bid of the favored insurer.

In August of 2005, a former Liberty executive, Kevin Bott, pled guilty to criminal charges in connection with his bid-rigging conduct while employed with the carrier.

In a statement last spring after the suit was filed against it, Liberty said that it had been negotiating with the attorney general but found his demands “excessive and unreasonable.”

Liberty is the lone insurer contesting the charges brought as a result of the investigation of Marsh activities. Carriers including American International Group, Zurich Financial Services and ACE have paid large penalties to settle bid-rigging and price-fixing allegations.