Court Dismissal Of Anti-Trust Lawsuit Against Insurers and Brokers Is Good News To Industry

The National Association of Professional Insurance Agents (PIA) praised District Judge Garrett E. Brown Jr.’s dismissal of antitrust and racketeering case accusing 105 insurers and brokers of conniving to fix bids, maneuver customers, and pay or accept inappropriate bonus commissions.
The case was a consolidation of lawsuits filed by businesses, public agencies, and individual across the country initiated by former New York Attorney General Eliot Spitzer.

The judge ruled in favor of the defendants, including the Hartford Financial Services Group, The Travelers Cos. Inc. and Aetna, because the plaintiff’s argument failed to prove any wrongdoings.

On the charges of antitrust violation Brown found no common plan or scheme to illegally divide the market among the alleged conspirators.

The judge wrote, “While there was an exchange of information about these contingent commission agreements, which plaintiffs allege were a method by which the market or customers were allocated among the insurers, plaintiffs have not shown that the insurers colluded to allocate business.”

Brown’s decision was in agreement with the ruling of federal Judge Faith S. Hochberg who denied the same plaintiffs’ request in this action in October 2006. Hochberg said the mere existence of a contingency compensation available and earned by a producer is not an evidence of any illegal activities.

The earlier court opinion declared the compensations, or the right or ability of producers to earn them, is perfectly legal. PIA praised both rulings as “very good news” for its members. PIA is highly critical of moves to curtail the industry’s compensation system.

In an open letter to the insurance industry PIA decried attempts of certain Attorneys General to use the courts to determine how insurers will compensate their producers.

“That’s not fair to producers, and it is not fair to carriers,” PIA wrote. “Adding to the unfairness… some settlement agreements contain a provision requiring them to support laws and regulations to ban contingent commissions…they are being required to sign away their First Amendment rights and support political positions as dictated by the Attorneys General!”

According to PIA insurance carriers, just as any business, must have the freedom to configure their compensation system for optimum growth and profitability. The organization called any move to ban contingent commissions, yearly bonuses, or any form of incentive compensation as “anti-competitive attacks on how our American Free Enterprise System operates.”

PIA vowed to fight for the right of insurance companies to reward their independent agent producers with contingent commissions as part of their compensation and for the right of independent agents to receive such compensation. “We will continue this fight in the courts, through the state legislatures and in the court of public opinion…because that’s the right thing to do.”

Bryan L. Clobes, one of the lead plaintiff attorneys and a partner at Cafferty Faucher is equally determined to continue the fight with “full confidence” in the strength and merit of their complaints. Although Brown gave the plaintiffs 30 days to file an amended complaint, Clobes did not disclose if they were taking Brown’s offer or take their case to the Third Circuit for a possible reversal.

Connecticut Attorney General Richard Blumenthal also expressed his intention to pursue the case. He called Brown’s dismissal as a setback and not a final defeat. Blumenthal declared the unfavorable decision will not prevent or slow down his department’s investigations and actions against illegal and abusive tactics practiced in insurance industry.

From: Insurance News Net (www.insurancenewsnet.com)