A federal judge in Newark, N.J., has dismissed a massive policyholders' class-action accusing brokers and insurers of anti-trust and racketeering activity, saying plaintiff's need to show a more complete scheme was in place.
U.S. District Court Judge Garrett E. Brown Jr., however, gave the plaintiffs 30 days to revise their complaint, writing that he was doing so "because so much time has been invested in this case by all parties, and because courts should construe plaintiff's allegations liberally at this stage of the proceedings…"
The case combines class actions alleging bid-rigging and price-fixing in both the commercial property-casualty insurance market, as well as the market for employee benefits insurance plans.
Those allegations were also made in civil suits brought by state attorneys general in various states. Those legal actions led the nation's major insurance brokers to agree to forego commercial insurance contingent commissions that allegedly served as hidden payoffs for participation in bid-rigging schemes.
In addition to obtaining millions in settlement monies from brokers and insurers who were sued, the New York Attorney General's Office has secured guilty pleas from more than a dozen brokerage and insurance executives.
Judge Brown's ruling Thursday was the second time he has found against the plaintiffs. In October, he ruled that their complaints lacked "insufficient particularity" and let them file a supplemented statement.
The plaintiffs, in their statement, describe seven broker-centered conspiracies in the commercial case and three broker-centered conspiracies in the employee benefits case, with the brokers serving as hubs and insurers as spokes.
However, the judge found that while plaintiffs claimed the insurers were the scheme's ringmasters, "it is not clear whether the insurers themselves were collaborating or agreeing in some way to further this per se illegal market or customer allocation scheme."
Rather than a vertical restraint of trade between parties at different levels of the distribution system, there must be a showing of a horizontal conspiracy among competitors, Judge Brown ruled.
The policyholders' complaints, the judge wrote, must come up with "conduct which constitutes market or customer allocation, and not just the steering of business to preferred partners."
At this point, the judge wrote, the complaints lack a showing of a "common plan or scheme to divide the market among the alleged conspirators in some unlawful manner."
Plaintiffs in the case involve dozens of large commercial customers, municipalities and individuals who did business with the brokers and insurers between 1994 and 2005. The defendants include major brokers, insurers and reinsurers with a national presence.
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