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By STEVE TUCKEY, who has written on insurance issues for a decade for several national media outlets

A federal appeals court in Philadelphia this month reinstated some of the bid-rigging allegations against numerous insurance carriers and insurance brokers contained in a nationwide policyholder lawsuit.

Robert Rusbuldt, president of the Independent Insurance Agents and Brokers of America, said the appeals court decision could mean that the repercussions of the alleged actions of some "global mega-brokers" will stay in the spotlight for several years, and he hoped it would not reflect on the thousands of agents and brokers throughout the country.

Philadelphia-based insurance attorney John Ellison, a partner at Reed Smith LLP, said that the court's decision raises the bar, underscoring the severity of the bid-rigging case yet in the future making such allegations harder to claim.

Dozens of carriers now again face federal racketeering allegations after the appellate court ruling. The ongoing bid-rigging suit claims insureds paid inflated commercial premiums between 1994 and 2005 because of the actions of the insurers and intermediaries named in the suit.

Defendants now have the option of continuing to fight the allegations at the district court level or pursuing settlements. One of their lawyers, former U.S. Solicitor General Seth Waxman, declined to comment on the case.

Ellen Meriwether, a Philadelphia attorney for the policyholder plaintiffs, expressed satisfaction that a smaller case could go forward. "I'm pleased to have this modest victory."

A New Jersey federal district judge in 2007 had dismissed all the allegations in the policyholders' suit, some of which were reinstated by the appeals court. The district court at the time said that the plaintiffs lacked specificity in their Sherman and RICO claims.

The three-judge appellate panel took exception, asserting there was enough plausible evidence that the insurance carriers and brokers agreed to divide the market in what would be a "naked restraint of trade."

The judges also took issue with the finding in 2007 by U.S. District Judge Garrett Brown in Trenton that actions of the brokers and carriers were merely "ad hoc."

"Given the alleged existence of Marsh's brokering plan, which designated for each renewal contract, the insurer from which a sham bid would be solicited, we cannot say that the participation in the bid-rigging was completely ad hoc," the panel wrote in its decision released earlier in August.

While the original bid-rigging civil suit was brought against insurance broker Marsh and various insurers, Marsh two years ago settled with the policyholder plaintiffs for $69 million.

A spokeswoman for Marsh said of the circuit court's decision: "This decision has no impact on Marsh. Marsh settled with plaintiffs in this matter in June 2008, and is no longer involved in the lawsuit, which was the subject of the appeal proceeding.''

Ellison said, "One of the ironic things is that Marsh has already settled, and 90 percent of this opinion is about Marsh."

As for a settlement in the remainder of this case, Ellison said it would not surprise him if one was reached.

"I think what the court is not subtly hinting: Somebody ought to be able to work out some sort of arrangement that resolves this thing because this is a massive case that will take a decade or more to get resolved in the courts, and it might be time and money better spent if you negotiated some sort of arrangement," he said.

August 30, 2010

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