Marsh & McLennan Settlement Notices Sent to Clients
May 20, 2005
In recent months, there have been numerous published reports concerning alleged misconduct by major U.S. insurance brokers in the placement of various types of insurance and the collection of undisclosed fees from insurance companies. The following information is provided to inform institutions of recent events, including some pressing deadlines over the summer, and to underscore the significance of correspondence colleges and universities may receive from their insurance broker(s) in the near future.
On Monday, January 31, 2005, a settlement was announced between Marsh & McLennan Companies, Inc. and the New York Attorney General's Office and the New York Superintendent of Insurance. Marsh has agreed to create a restitution fund of $850 million for its domestic policyholder clients. In addition, Marsh has promised to continue to cooperate with the ongoing investigations. Significantly, Marsh was not required to admit or deny liability in the settlement agreement regarding the allegations in the New York Attorney General complaint. While Marsh apologized for its behavior, the apology was carefully crafted in a manner that limited any acknowledgement of responsibility to a few former employees. Marsh also promised that within 60 days of the date of the agreement, it would undertake various business reforms, as detailed in the settlement agreement. For background information, refer to the press release, the settlement agreement and some FAQs explaining the settlement agreement.
Details regarding the restitution fund are as follows:
The AG's office has approved a formula that has allowed Marsh to calculate each eligible policyholder's share of the $850 million settlement fund. A U.S. policyholder client will qualify for a share if it used Marsh to place, renew, consult on or service insurance between January 2001 and December 2004 that resulted in contingent commissions or overrides to Marsh during the same time period.
On May 20, 2005, Marsh will send a notice to each eligible client identifying the client's insurers, product lines and policies, what the client paid in premiums or consulting fees, the amount of contingent commission recorded by Marsh attributable to each policy, and the amount each client is eligible to receive from the settlement fund. The actual payment amount may increase if there is less than full participation in the fund. Marsh will make payments into the fund over a four-year period, beginning in June of this year and ending in June 2007. Payments to policyholders will also be made over a four-year period, on or before November 1, 2005, June 30, 2006, June 30, 2007 and June 30, 2008.
Clients eligible to receive a distribution have until September 20, 2005 to file a claim. Those who elect to receive a cash distribution must release all their claims against Marsh.
If your institution receives a notice from Marsh, you may have questions about whether to participate in the restitution fund. The decision will be based on the individual facts and circumstances of each member's insurance coverage program. In addition, institutions may receive similar notices from other insurance brokers, including Aon Risk, Willis Corroon, and Gallagher, as a result of their obligations under similar legal settlements. NACUBO cannot provide a recommendation to member institutions about their participation in these settlement funds, or the effect of their inclusion in various class-action lawsuits pending around the country, in which they may already be a class member without knowledge of the class' existence. Member institutions may wish to better understand their rights and consider their options with respect to significant claims they may have against their brokers and/or insurance companies.
The American Council on Education and NACUBO have retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP, which has expertise in insurance coverage and complex litigation, to provide guidance to ACE and NACUBO regarding these matters. NACUBO is not eager to see institutions damage relationships with their brokers or insurance companies, rather we offer this information to help inform the decisionmaking process on your campus. The law firm has not been hired to represent individual members, but if colleges or universities wish to retain counsel to advise them with respect to the restitution fund or related matters, the contacts at Dickstein Shapiro Morin & Oshinsky are Elaine Metlin at firstname.lastname@example.org, Kent Withycombe at email@example.com, or Mark Kolman at firstname.lastname@example.org.
- Financial Responsibility Scores Released for FY13
- IRS Publishes Guidance on "Cadillac" Health Coverage
- 2014 NACUBO-Commonfund Study of Endowments Now Available Online
- ON-DEMAND: How to Build, Develop, and Support a Compliance Program at Your Institution
- ON-DEMAND: Strategic Tuition Assessment and Tuition Restructuring
- ON-DEMAND: Are Shared Services Right for Your Organization – The KU Journey
- ON-DEMAND: VIRTUAL: 2014 Annual Meeting
- ON-DEMAND: VIRTUAL: Student Financial Services Conference
- ON-DEMAND: VIRTUAL: Higher Education Accounting Forum
- A Guide to College and University Budgeting: Foundations for Institutional Effectiveness, 4th ed. - by Larry Goldstein
- NACUBO's Guide to Unitizing Investment Pools - by Mary S. Wheeler
- Managing and Collecting Student Accounts and Loans - by David R. Glezerman and Dennis DeSantis