Cal. To File Own Broker Fee Suit

California Insurance Commissioner John Garamendi says he will follow New York’s lead and file a civil action against a sector of the insurance industry as part of his campaign against brokerage fee irregularities.[@@]

Garamendi says he will file the lawsuits next week but would not disclose specifics. He made his announcement during a press conference where he proposed new state rules designed to counter illicit fee arrangements,

He also revealed that the National Association of Insurance Commissioners held a conference call today to discuss possible actions they could take to deal with the widening broker-insurer kickback scandal. Garamendi declined to give any details on their deliberations.

An NAIC spokesman referred calls to Oregon Insurance Superintendent Joel Ario, who was not immediately available.

Last Thursday, New York Attorney General Eliot Spitzer filed a civil action accusing Marsh, the world’s biggest brokerage, of rigging bids and fixing prices with major insurers in exchange for payoffs disguised as fees. At the time, California had planned to file a civil action as well, but “hit a speed bump,” Garamendi says.

Garamendi says he had been investigating insurer incentive payments or contingency fees for brokers since February ,when the Washington Legal Foundation, a public interest group in Washington, D.C., had written to suggest there was conflict.

The California investigators have been working with Spitzer, whose investigation of national companies including Marsh, Aon, American International Group, ACE, The Hartford and Munich American Risk Partners. That investigation revealed information about practices in California, Garamendi says. He adds that he “will be working with that information” in his own lawsuit.

The investigation started with broker fee arrangements involving large commercial lines, and according to Garamendi, “as we moved along, we discovered problems in other areas. What’s going to be next? I don’t know.”