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Gallagher Announces $8 Million in Restitution

3/19/2006

CONTACT: Tami Torres
(850) 413-2842
 
Zurich American Insurance Co. agrees to refund customers in Florida
 
 TALLAHASSEE - Tom Gallagher, Florida's chief financial officer, announced today that his department, as part of a multi-state coalition, has entered into a settlement with Zurich American Insurance Company in response to bid-rigging and price-fixing allegations. Florida victims – businesses, non-profit organizations and governmental entities – will receive nearly $8 million under the settlement.
 
 "Bid-rigging and ‘pay-to-play' schemes will not be tolerated in Florida," said Gallagher, who oversees the Florida Department of Financial Services.  "Insurance companies and brokers will not get away with deceiving their customers, inflating prices and corrupting the insurance marketplace." 
 Zurich allegedly paid undisclosed contingent commissions to insurance brokers and conspired with certain insurance brokers in a "pay-to-play" scheme to overcharge customers for commercial insurance policies.  In addition, Zurich allegedly submitted fake bids in order to create the illusion of a competitive bidding process, when in fact the broker had pre-designated another insurer as the winner at an inflated price.  Zurich was allegedly rewarded for submitting fake quotes by receiving protection from competition on other lucrative accounts.
 
 The multi-state coalition did an extensive investigation of Zurich's conduct.  Zurich is one of the first insurance companies to agree to reimburse customers, disclose future contingent commission payments, and implement conduct reforms that change the way the company does business. The multi-state settlement provides $171.7 million in restitution to nine participating states, including Florida.
 
 Gallagher launched an investigation into insurance broker activities in November 2004.  His office is still investigating the conduct of other insurance brokers and insurance companies.  "Insurers and brokers that engage in unacceptable conduct will be held accountable," Gallagher said. 
 
 The attached settlement will be enforced through a judgment in state court, as well as through a multidistrict federal action in New Jersey.  It is still subject to court approval.