BY DANIEL HAYS
NU Online News Service, Jan. 7, 3:41 p.m. EST
The Massachusetts Attorney General’s Office has filed a lawsuit against Cincinnati-based Great American Insurance Group, alleging it rigged an insurance bid with a broker to defraud a Norwood, Mass.-based technology firm.
Reacting to Friday’s action--filed at Suffolk Superior Court in Boston against Great American and its Chicago-based subsidiary, Professional Risk Brokers--the insurer said it denied wrongdoing and would fight the charges.
The announcement of the action by Attorney General Martha Coakley said she was seeking a court order prohibiting the company from engaging further in unfair and deceptive business practices, along with restitution, attorneys’ fees and civil penalties up to $5,000.
The state’s complaint charges that in 2004, at the request of insurance broker Marsh Inc.--part of Marsh & McLennan Companies--Great American submitted a fake and intentionally uncompetitive quote to semi-conductor manufacturer Analog Devices.
According to the attorney general’s statement and complaint, Great American allegedly submitted a fake $450,000 bid to make a $400,000 bid from American International Group for a $25 million layer of insurance look competitive, and Marsh reciprocated by steering another one of Analog Devices’ insurance policies to Great American at a pre-determined price of $60,000.
The lawsuit cited as evidence internal Marsh e-mails, and e-mails between Marsh and Great American’s PRB unit.
Great American is the latest in a long list of insurance carriers accused of rigging bids with Marsh and paying the brokerage off with hefty commissions for business that was sent its way.
In 2005, the New York-based brokerage, following investigation by the New York Attorney General’s Office into Marsh’s commercial insurance business practices, agreed to pay $850 million into a restitution fund to repay injured clients and stop taking contingent commissions, which allegedly served as kickbacks.
Ms. Coakley’s office said insurers such as Great American paid Marsh lucrative contingent commissions based on the volume of business placed with them.
The state’s suit is being handled by attorneys for the attorney general’s Insurance and Financial Services Division and Health Care Division.
Great American representatives said the carrier was “disappointed” a suit was filed over “one quotation for insurance coverage made in the spring of 2004 and contingent commission payments made to the producer for the account.”
“Great American's conduct in issuing that quote was lawful,” the carrier added. "The Company has cooperated with the Attorney General's investigation and has tried for an extended period of time to reach resolution of the issue without litigation.”
The firm said it had “resolved and been released from any potential issue” with Analog Devices. However, the state’s complaint said the monies involved in that settlement “do not represent the full harm suffered by Analog Devices, nor the full ill-gotten-gains of Great American.” The settlement amount was not disclosed.
Great American said it “believes that the demands of the Attorney General's Office have been unreasonable. Thus, the Company intends to vigorously defend itself against the Attorney General's allegations."
Members of the Great American Insurance Group are subsidiaries of American Financial Group Inc., based in Cincinnati.
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