Another chapter has closed on the contingent-commission kickback saga with an agreement reached between a group of insurers and insurance brokers—and their clients who alleged the industry tried to manipulate the business.
A settlement was reached in a U.S. District Court of New Jersey class-action suit dating back to 2004 that involved accusations of bid-rigging, price-fixing and steering of commercial insurance contracts in exchange for lucrative contingent commissions.
In a settlement agreement reached through mediation, American International Group Inc., Liberty Mutual, Travelers and XL will pay plaintiffs a total of $27 million. The four insurers will be responsible for paying $6.75 million plus other fees.
In addition, insurance brokers Aon, Willis (which acquired HRH) and insurers Crum & Forster, CNA and The Hartford will collectively pay $9.75 million to plaintiffs.
In a statement, AIG says, "We are pleased to have reached an agreement to resolve this matter. Through this settlement, AIG brings an end to another long-standing lawsuit about events from many years ago, allowing AIG to continue to focus its efforts on paying back taxpayers and restoring the value of our franchise for the benefit of all our stakeholders."
Aon and Willis had no comment.
The case goes back to 2004 when then-N.Y. Attorney General Eliot Spitzer accused insurance broker Marsh of taking kickbacks from insurers and steering certain business to insurers on its excess-casualty business in exchange for lucrative contingent commissions.
The top four insurance brokers—Marsh, Aon, Willis and Arthur J. Gallagher—agreed not to accept contingent commissions and paid substantial penalties to the states as part of legal settlements with state attorneys general.
The ban on contingents was lifted last year, but Marsh and Aon have placed limits on what they will accept while Willis says it will not accept contingents at all, stating that they create a conflict of interest.
Regarding additional settlements stemming from this particular case, according to a filing with the Securities and Exchange Commission, Arthur J. Gallagher in 2006 reached a settlement of $36.9 million in payments to plaintiffs and attorneys fees.
In 2009, Marsh & McLennan, the parent company of insurance broker Marsh, paid a total of $83.5 million in settlement and legal fees.
Insurer Zurich paid more than $120 million in settlement.
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