Connecticut Supreme Court Allows State’s Damages Suit against Marsh

April 11, 2008

Connecticut’s Attorney General Richard Blumenthal can attempt to recover damages from Marsh & McLennan Inc. for harming the economy of the entire state, the state’s Supreme Court ruled.

The ruling stems from a still-pending 2005 suit against Marsh that alleges the mega-brokerage rigged bids and colluded with insurers in a “pay to play” scheme in which it set prices for commercial insurance in the state.

Connecticut is one of only a handful of state’s that allows regulators to seek damages for anti-competitive business practices that harm generally the economy of the state.

Blumenthal contends that Marsh’s unfair business practices raised the prices of insurance for all consumers and harmed both policyholders and non-policyholders.

Major corporations in Connecticut who were or remain policyholders with Marsh include Kaman Corp., Bic Corp., United Technologies Corp., Xerox Corp. and General Electric Co.

The Supreme Court ruling overturns part of a ruling by a lower trial court, which halted Blumenthal from recovering damages to the general economy.

In court, lawyers for the AG’s office argued that “Connecticut is the
home of many insurance companies as well as other large private employers,” which have “a substantial impact on the general economy of Connecticut.”

The state argued that the insurance industry plays a considerable role in Connecticut’s economy, employing approximately 70,000 and representing 7 percent of the state’s gross product.

Marsh has paid $850 million to policyholders as part of a massive regulatory settlement stemming from the allegations — a settlement with which auditors in New York recently said the company has complied.

A copy of the decision can be found here.

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