Court revives part of insurer bid-rigging suit

NEW YORK (Reuters) - A federal appeals court has restored part of a nationwide class-action lawsuit accusing dozens of insurers and brokers of conspiring to rig the insurance market.

The ruling is a partial victory for policyholders, including employee benefit plan sponsors, that had accused the insurance industry of scheming to drive up prices. However, only portions of the case will be allowed to move forward.

In a 200-page opinion, the U.S. Third Circuit Court of Appeals in Philadelphia reinstated antitrust and racketeering claims over alleged bid rigging centered on Marsh & McLennan Cos Inc. It also reinstated racketeering claims against some brokerages, as well as some claims under New Jersey law.

The three-judge panel upheld the rest of a September 2007 decision by U.S. District Judge Garrett Brown in Trenton, New Jersey, dismissing the lawsuit, which originally involved several alleged conspiracies and more than 20 defendants.

The lawsuit involved allegations brokers colluded with their insurer partners to steer clients to particular insurers in exchange for payments or kickbacks.

It followed an October 2004 civil lawsuit by then-New York Attorney General Eliot Spitzer accusing Marsh of rigging the market.

The original defendants in the part of the class-action case centered on Marsh included 13 insurers such as American International Group Inc, Chubb Corp, Hartford Financial Services Group Inc, Liberty Mutual Group and Travelers Cos Inc, court records show.

In that part of the case, the plaintiffs "plausibly suggest an unlawful horizontal conspiracy not to compete" for business, Judge Anthony Scirica wrote in the Third Circuit ruling.

"This agreement to divide the market, if proven, would be a naked restraint of trade subject to per se condemnation," he added.

Marsh agreed in February 2009 to pay $69 million to settle its part of the class-action case. It agreed in January 2005 to pay $850 million to settle Spitzer's charges,

"The court is permitting, with certain modest caveats, a smaller case to go forward," said Ellen Meriwether, a partner at Cafferty Faucher LLP in Philadelphia representing the plaintiffs. "I'm pleased to have a modest victory."

Seth Waxman, a partner at WilmerHale in Washington D.C. and former U.S. solicitor general who argued the case for the defendants, did not immediately return a call seeking comment.

The case is In re: Insurance Brokerage Antitrust Litigation, U.S. Third Circuit Court of Appeals, No. 07-4046.

(Reporting by Jonathan Stempel in New York; editing by Andre Grenon)