The insured plaintiff, Office Depot, Inc., generally alleges in its Complaint that broker defendant Marsh acted in concert with the insurer defendants to manipulate the “market for insurance by creating and executing an elaborate bid rigging scheme.” Office Depot alleges that “Defendants created the illusion of a competitive market for insurance when, in fact, the insurance products were selected, priced and placed through collusive conduct.” As a result, Office Depot alleges that it purchased insurance “at prices in excess of what should have been charged in a fair and efficient marketplace,” and that the insurer defendants received “increased insurance premiums in excess of what should have been charged in a competitive marketplace.” Office Depot further alleges that Marsh “received and retained kickbacks for insurance placements” that created an “undisclosed conflict of interest that adversely impacted Marsh’s objectivity … thereby breaching the fiduciary obligations owed by Marsh to Office Depot.”
The Complaint asserts 13 causes of action, which are briefly discussed in order, as follows:
· In Count I, the breach of contract claim, Office Depot alleges that a written contract
with Marsh required Marsh to “disclose any remuneration, including commission,
received from the Insurers regarding the insurance coverages specified in Appendix
A, and all such remuneration … will be credited against the annual fee.” Office
Depot contends that the portion of “contingent commissions” Marsh received that
are allocable to Office Depot’s premiums for the Appendix A insurance coverages
should have been credited back to Office Depot pursuant to the contract. Marsh
contends that the contract exempts the contingent commissions it received from
being credited back to Office Depot. The Court was reluctant to construe the
contract language to bar Office Depot’s claim as a matter of law at this stage in the
case.
· In Counts II, IV and VI, the common law tort claims, Office Depot alleges that two
Marsh senior vice presidents and a Marsh managing director who were “actively
engaged in placing Office Depot’s casualty insurance” pled guilty to participating in
bid rigging and to engaging in “deception and intentionally causing non-competitive
quotes to be conveyed to Marsh clients under false and fraudulent pretenses.”
Office Depot also alleges that Marsh, acting in concert with the insurer defendants,
engaged in fraudulent conduct by failing to disclose the precise nature of the
commissions Marsh received. The Court noted that Office Depot set forth specific
amounts of contingent commissions Marsh received from defendants AIG, St. Paul
Travelers, ACE, and Zurich as a result of premiums paid by Office Depot. The
Court also noted that Office Depot’s allegation that “[t]here is very likely other
evidence of Marsh’s and the Insurer Defendants’ wrongful and fraudulent conduct
with respect to Office Depot, which is exclusively in Defendants’ possession,
custody, or control,” was consistent with Office Depot’s allegations of concealment.
The Court found that these allegations, when coupled with other specific allegations
in the fraud and breach of fiduciary duty Counts, state viable causes of actions under
Florida law.
Marsh argued that under Florida’s economic loss rule the proposition that “[t]he
prohibition against tort actions to recover solely economic damages for those in
contractual privity is designed to prevent parties to a contract from circumventing the
allocation of losses set forth in the contract by bringing an action for economic loss in
tort.” Judge Stern noted that the economic loss rule “has not eliminated causes of
action based upon torts independent of the contractual breach even though there
exists a breach of contract action.”
· In Count VII, restraint of trade, the Court found that the Complaint properly alleges
a per se claim. The Court also found that the McCarran-Ferguson Act does not bar
Office Depot’s claim. The Court noted that McCarran exempts the “business of
insurance” not the “business of insurance companies.” The Court perceived that
there was a difference between engaging in the “business of insurance,” as defined
by the United States Supreme Court, and engaging in other activities that affect
policyholders but have nothing whatsoever to do with “spreading a policyholder’s
risk.” The Court agreed with Office Depot’s arguments that the bid rigging practices
alleged are not an “integral part of the policy relationship” between the insurers and
their insured and do not fit within either of the first two prongs of the Supreme
Court’s “business of insurance” test. As such, the Court held that since the practices
alleged do not constitute the “business of insurance,” Office Depot’s allegations are
not exempted from the Florida Antitrust Act by virtue of McCarran or Florida
statute section 542.20.
· Count VIII asserts a claim under Florida’s Deceptive and Unfair Trade Practices
Act (“FDUTPA”). The Court found this analysis to be similar to the analysis of the
“business of insurance” element under McCarran, and noted that the insurer
defendants cannot rely on this statute because their alleged misconduct does not
constitute “regulated insurance.”
· Count X asserts a RICO claim. Judge Stern noted that Office Depot alleges an
enterprise consisting of Marsh, acting as a broker and in violation of its fiduciary
duties to its client, Office Depot, and the insurer defendants, acting in contravention
of their putative position as horizontal competitors and instead submitting fictitious,
non-competitive bids on policies sold to Office Depot. Judge Stern noted that the
facts sufficiently allege an actionable “enterprise” under Florida RICO.
· Under Count XII asserting a claims for bad faith, Office Depot alleges that by
“knowingly collecting from Office Depot a sum in excess of the premium applicable
to the insurance policies they issued, the Insurer Defendants violated” Florida
statute. The Court found that these allegations, when coupled with the other factual
allegations of the Complaint, are sufficient to withstand defendants’ motions to
dismiss.
· Counts III, V, IX, XI, consist of Office Depot’s remaining common law claims for
conspiracy, aiding and abetting, unjust enrichment and commercial bribery on
various grounds. The Court concluded that Office Depot adequately alleges that the
contingent commissions paid by the insurer defendants to Marsh are tantamount to
kickbacks or commercial bribes for steering Office Depot’s insurance business to
defendants and otherwise are payments made in consideration for illegally and
improperly rigging bids for insurance in breach of Marsh’s fiduciary duties. As such,
the Court found that the allegations are sufficient to show that the insurer defendants
acted with knowledge of Marsh’s status as Office Depot’s broker and fiduciary.
· Count XIII seeks punitive damages and was denied without prejudice to renew
after an appropriate showing supporting the claim.
