Laying to rest antitrust claims that have embroiled dozens of insurance companies and the nation’s largest insurance brokers for well over two years in In re Insurance Brokerage Antitrust Litigation, MDL 1663 (D.N.J.), Chief Judge Garrett Brown dismissed claims by putative class plaintiffs that the U.S. insurance industry was riddled with unlawful conspiracies to restrain trade.  On the third round of motions to dismiss in the case, the Court found that the plaintiffs — despite two years of discovery — had failed to allege facts sufficient to support an inference of unlawful horizontal agreements among competitors.
 
Plaintiffs had alleged two different types of conspiracies:  First, five “hub and spoke” broker-centered conspiracies pursuant to which (a) the broker “hub” allocated the bulk of its business to the participating insurer “spokes” in exchange for contingent commission payments, and (b)  the broker and participating insurers engaged in various incumbent protection devices designed to reduce or eliminate competition among the participating insurers on renewal placements.  Second, a single global conspiracy pursuant to which industry participants agreed not to compete with each other by collectively refusing to disclose the true nature and effect of the parties’ contingent commission arrangements and the premium price impact of those arrangements to insureds. Relying on the Supreme Court’s recent decision in Bell Atlantic Corp. v. Twombly, the Court held, with respect to the broker-centered conspiracies, that it was not persuaded that the facts, as alleged, “satisfy the requirement that the alleged conspiracy be plausible and not just a series of vertical agreements between brokers and insurers, or a series of acts taken without a common scheme in place.”  (Slip Op. at 35)  In other words, the plaintiffs had failed to allege the requisite “rim” connecting the insurer “spokes.”  The Court further held that the plaintiffs failed to allege a plausible theory of market allocation.  With respect to the purported global conspiracy, the Court held that “adoption of similar disclosure policies and the opportunity to collude through various industry methods is not enough to infer that such a large group of participants engaged in a conspiracy.”
 
The Court has not yet issued a ruling on the plaintiffs’ RICO or state law claims.  A copy of the antitrust opinion is available here.