Gallagher settles class action on contingents

ITASCA, Ill.--Brokerage Arthur J. Gallagher & Co. on Friday said it will pay nearly $37 million to end charges that it participated in an industrywide contingent commissions scheme.

The allegations came as part of a federal multi-district class action lawsuit pending in a New Jersey district court, in which plaintiffs said Itasca, Ill.-based Gallagher and several other brokers and insurers breached federal antitrust rules by conspiring to increase premiums for insurers and commissions for brokers.

Gallagher did not admit to any wrongdoing, but in a statement said it was opting to "conclude its involvement, rather than prolong what could be a costly and burdensome lawsuit."

Under the settlement, which is subject to court approval, Gallagher agreed pay a total of almost $36.9 million, including $28 million to eligible clients and $8.85 million in plaintiffs' attorney fees.Policyholders eligible for restitution include "current and former clients and others that used a broker to purchase retail insurance from 1994 to 2005," Gallagher said in its statement.

The company said it will record a fourth-quarter 2006 pretax charge of between $5 million and $10 million to boost its reserves for administrative expenses necessary to conclude the class action settlement, and to reserve for other pending regulatory and civil litigation matters.

"We are pleased to put this matter behind us," J. Patrick Gallagher Jr., Gallagher's chairman, president and chief executive officer, said in the statement.

Earlier this month, Schaumburg, Ill.-based Zurich American Insurance Co. finalized settlements of bid-rigging and finite risk-related charges with 11 states and the District of Columbia, under which it is required to distribute at least $121.8 million in refunds to commercial policyholders nationwide as part of the same class-action suit in New Jersey.