Attorney General Darrell McGraw
CHARLESTON - An assistant attorney general admits that it's hard, even for him, to understand the insurance market.
Allegedly, Zurich American Insurance Co. was banking on most potential clients feeling the same way.
Zurich and the attorneys general of 11 states agreed to a settlement in March that will provide $122 million to be paid back to customers who allegedly were victimized by a bid-rigging scheme in which Zurich was involved. It settles a federal class action lawsuit that was consolidated in New Jersey.
Another $20 million will be spread among the offices of the attorneys general.
West Virginia Assistant Attorney General Douglas Davis worked on the case for state Attorney General Darrell McGraw and filed papers Dec. 4 that call for injunctive measures against some of the company's practices as the second part of the agreed settlement.
"It was a very steep and long learning curve," Davis said. "Trying to get a handle on what's going in the insurance market is not easy."
Zurich was charged in the bid-rigging scheme for its role in creating its own and confirming others' outrageous quotes on premiums, Davis said.
"There was plenty of other steering type of activity, but that was basically it," Davis said.
Davis said Zurich was involved with insurance company Marsh & McLennan, which was the object of a lawsuit filed two years ago by the State of New York. The two, as well as a few other companies, were alleged to have been pushing up quotes for each others' benefit.
Marsh & McLennan, Davis said, was the world's largest insurance broker at the time.
In lieu of paying civil penalties, thereby admitting there was something done that needed penalized, Zurich offered only to a $20 million payment to the 11 attorneys general.
"Some states would've characterized it as civil penalties," Davis said. "As part of the settlement negotiations, we basically agreed this would be a payment in lieu of civil penalties. It helps the insurer say, 'We didn't pay any civil penalties.'"
The attorneys general will divide up the money as compensation for attorneys fees. States participating in the investigation were California, Florida, Hawaii, Maryland, Massachusetts, Michigan, Oregon, Pennsylvania, Texas and Virginia.
Other provisions made by the settlement include injunctive provisions and full disclosure of compensation to customers.
Davis said that he expects 10,600 West Virginia residents to receive some part of the monetary settlement.
"A lot of it depends on who files claims and who doesn't," he said.