January 23, 2005 by Canadian Underwriter
In what promises to be the first of several civil charges filed against insurance companies and brokers, Connecticut Attorney General Richard Blumenthal has filed suit against Marsh & McLennan’s brokerage operation and ACE Financial Solutions. Blumenthal alleges ACE paid Marsh a "secret" US$50,000 commission to steer a US$80 million state contract to the insurer.
In a statement, the AG’s office alleges: "Marsh never told the Department of Administrative Services (DAS), which paid the company $100,000 to act as its advisor on the contact, about the $50,000 or any additional payments. Marsh solicited and accepted the $50,000 commission, even though the DAS clearly expected the company to accept no additional fees."
Blumenthal also alleges Marsh never told the DAS that ACE Financial was in "serious financial difficulty" when it placed the contract.
Of the suit, Blumenthal says, “this lawsuit the first of a series anticipated against insurance abuses shows particular arrogance and avarice in victimizing the state and its taxpayers. Whatever name they are called bonuses, commissions, overrides the effect of these concealed kickbacks is to steer contracts, corrupt competitive bidding, inflate costs and deceive customers."
The suit follows another against Marsh for alleged "bid-rigging" and conflict of interest due to the acceptance of contingent commissions filed by New York Attorney General Eliot Spitzer. Spitzer has also procured guilty pleas by employees of Marsh and certain insurance companies to the bid-rigging activities. The Connecticut case does not however include bid-rigging charges and no criminal charges related to any such action have been filed at this time.
Neither ACE nor Marsh have released responses to the civil suits at this time, although Marsh had already discontinued the practice of accepting contingent commissions late last year.