NEW YORK--New York regulators can largely move forward with a bid-rigging lawsuit against Liberty Mutual Group Inc., a state Supreme Court has ruled.

The decision this week came in response to Liberty Mutual's motion for a dismissal of bid-rigging and steering charges leveled in May 2006 by then-New York State Attorney General Eliot Spitzer.

In his civil suit, Mr. Spitzer alleged the Boston-based insurer engaged in bid rigging, steering, reinsurance tying and other improper business practices as part of a massive bid-rigging scheme with Marsh & McLennan Cos. Inc.

Marsh in 2005 paid $850 million in client restitution to settle Mr. Spitzer's 2004 suit charging the brokerage with fraud.

Under the ruling handed down Wednesday by Judge Bernard J. Fried, the New York attorney general's case will proceed against nine of Liberty Mutual's subsidiaries--including Wausau Insurance Cos., Liberty Mutual Fire Insurance Co. and Liberty Marine Underwriters Inc.--although the holding company for Boston-based Liberty Mutual has been dismissed from the amended complaint on grounds of personal jurisdiction.

Liberty Mutual was given 20 days to respond to the court order.

In response to the ruling, Liberty Mutual in a statement said it "is both pleased and disappointed with the court's ruling."

"We are pleased that Liberty Mutual Holding Company was dismissed from the matter. We are disappointed that the court did not accept our substantive arguments. We continue to believe that the matter needs to be resolved through the judicial process. This is this first step in that process and we fully expect that we will prevail eventually," the statement said.

Calls to New York Attorney General Andrew Cuomo's office were not returned, nor were calls to the offices of Illinois Attorney General Lisa Madigan and Connecticut Attorney General Robert Blumenthal, who brought similar allegations last year in lawsuits against Liberty Mutual.

Numerous insurers, including American International Group Inc., Zurich Financial Services Group and ACE Ltd., have settled charges alleging their involvement in a bid-rigging scheme with Marsh.

Liberty Mutual is the only insurer that has vowed to battle the charges, saying that its business practices have been lawful and having referred to regulators' settlement demands "excessive and unreasonable" (BI, May 8, 2006).