News Focus - Liberty Mutual hit by Spitzer lawsuit.

(From Reinsurance)

New York Attorney General Eliot Spitzer has filed a lawsuit against Liberty Mutual, alleging that the firm participated in a bid-rigging scheme.

The civil complaint, filed in the State Supreme Court in Manhattan, details how Liberty Mutual made payoffs to insurance brokers and independent agents to steer their clients to Liberty Mutual.

Liberty Mutual was explicit with brokers and agents about what it expected in exchange for the payments, describing the payoffs as an "incentive... to encourage your agency to place an increased amount of profitable business with our company." Brokers and agents responded to these incentives, steering their clients to Liberty Mutual and in many cases violating their fiduciary duty to assist their clients in finding the best insurance for the lowest price.

The lawsuit also details how Liberty Mutual repeatedly rigged bids for excess-casualty insurance as part of an anti-competitive customer-allocation scheme led by Marsh & McLennan Companies.

"It is simply appalling that a major financial institution would rig bids, and induce brokers and agents to abuse their position of trust with the insurance-buying public," said Mr Spitzer.

In its lawsuit, New York seeks disgorgement of Liberty Mutual's illegal profits; restitution to injured policyholders; and punitive and treble damages for the company's illegal business practices.