Trial For 2 Marsh Execs Goes Into Fourth Month

NEW YORK–The fraud trial of two former Marsh insurance brokerage executives ground into its 14th week today with testimony focusing on the relationship between a client and his broker.

The proceedings concluded this afternoon by going into a two-week recess until July 30.

On trial before New York Supreme Court Judge James A. Yates, who is hearing the case without a jury, are William Gilman and Edward McNenny. They are accused of scheming to defraud, restraint of trade and competition, and grand larceny.

Marsh is a subsidiary of New York-based services firm Marsh & McLennan Companies. They are accused of rigging bids for commercial insurance while working for the brokerage.

In April, an attorney representing Mr. Gilman, Robert J. Cleary, told National Underwriter that the case was expected to last only until June.

In today's action, Assistant Attorney General William Gurin presented testimony from Michael Ward, the chief financial officer for Ozark Trucking Inc., in Sacramento, Calif., concerning Marsh's placement of a $25 million umbrella policy with Zurich Insurance after the presentation of a bidding process to Ozark.

The trucking company, which hauls goods to grocery stores in California, Nevada and parts of New Mexico, worked with Marsh executive Gregory Wessel, identified in court documents as vice president of risk management casualty, out of the broker's San Francisco office.

Mr. Ward testified that Mr. Wessel presented him with a proposal showing that of 13 carriers Marsh offered the business to, only four were willing to give quotes.

Of the four, Zurich gave the best quote at $175,000. Two others–St. Paul and American International Group–made offers that were higher, over $200,000. The fourth, Great American, offered a $25 million excess policy over the $25 million for $68,000, which would have equaled the $50 million coverage Ozark Trucking previously had.

Mr. Ward said his company was seeking to replace the expiring Jan. 1, 2002 $50 million umbrella policy it had with Fireman's Fund because it was going to be too expensive to retain. The premium for the expiring policy was $61,994.

According to the testimony, Mr. Wessel advised Mr. Ward well ahead of the renewal that hard market conditions after Sept. 11, 2001 were driving up the cost of insurance. Mr. Wessel advised Ozark that it should cut the coverage to $25 million to reduce the cost of the premium, Mr. Ward related.

When asked by Mr. Gurin what was the overriding consideration in making the final determination on placement, Mr. Ward said it was price.

Under cross examination, defense attorney Richard Spinogatti asked Mr. Ward about his expertise as a risk manager and if he would have been able to make the insurance placements without Mr. Wessel's expertise.

Mr. Ward said he was not trained as a risk manager and what experience he did have was from on-the-job training. He said that he would not have known where to go if he did have to place the insurance himself.

“I relied on [Mr. Wessel] to do it for me,” said Mr. Ward.

He said that Marsh was the insurance broker for Ozark since 1989, before he arrived in the CFO position, and continues to be a broker on some lines today.