Zurich finalizes multistate pact over practicesPosted On: Dec. 5, 2006 12:00 AM CST
SCHAUMBURG, Ill.--Zurich American Insurance Co. has finalized settlements with 11 states and the District of Columbia, agreeing to pay at least $141.8 million to resolve allegations of bid rigging, price fixing and misuse of finite risk products.
The settlements reached this week formalize an earlier multistate agreement that the U.S. arm of Swiss insurer Zurich Financial Services Group signed earlier this year with California, Florida, Hawaii, Maryland, Massachusetts, Oregon, Pennsylvania, Texas, Virginia and West Virginia (BI, March 27). That agreement was this week also adopted by Michigan and the District of Columbia.
In a statement, Schaumburg, Ill.-based Zurich noted that the latest settlements "do not impose any new payments, penalties, reforms or prohibitions on Zurich beyond that which has already been agreed to in the multistate agreement."
Under the finalized settlements, Zurich will be required to distribute at least $121.8 million in refunds to commercial policyholders nationwide as part of a pending class action suit in a New Jersey District Court, in which plaintiffs allege that Zurich and numerous other insurers and brokers violated federal and state antitrust laws by conspiring together to increase premiums for insurers and commissions for brokers.
Zurich is also required to pay $20 million to the states for past and future attorney fees and investigation costs, along with the possibility of an additional $29.9 million that Zurich could be required to fund clients, depending upon policyholders' participation in other settlement funds.
The settlements bar Zurich from engaging in any of the abusive practices alleged by the states for a period of 10 years, and the company is now required to fully disclose all compensation to agents and brokers.
Zurich in a separate statement noted that class action settlement eligibility notices will be mailed to 3.5 million current and former Zurich policyholders between Dec. 5 and Dec. 12.
Members of the proposed class include all Zurich policyholders who between Aug. 24, 1994, and Sept. 1, 2005, used any independent agent or broker for the purchase or renewal of commercial insurance or reinsurance, with the exception of life insurance polices, Zurich said. Policyholders will obtain relief in connection with the multistate agreement unless they opt out before Jan. 11, 2007.Approximately 173,000 policyholders in Pennsylvania will be eligible for a portion of the $121.8 million settlement, the state's attorney general, Tom Corbett, said in a statement.
Texas policyholders are expected to receive a total of $9 million, while $3.2 million is anticipated to go to Michigan policyholders, the states' attorneys general--Greg Abbott and Mike Cox, respectively--said in statements.
Zurich's promised restitution and fees of at least $141.8 million are in addition to funds already pledged as part of settlements with other states.
In April, Zurich agreed to pay $153 million in fines and restitution to Connecticut, Illinois and New York (BI, April 3), and the insurer in October agreed to $7 million in fees to resolve similar charges of noncompetitive business practices and improper use of finite insurance products leveled by Ohio insurance regulators (BI, Oct. 30).