Two Big Insurers Agree to Pay Fines, Testify in Texas Suit
AUSTIN, Texas (AP) _ Two major insurance companies agreed Thursday to pay $500,000 each and testify in Texas’ antitrust lawsuit against other of the nation’s largest insurers, Attorney General Jim Mattox said.
Mattox said Travelers Insurance Co. and St. Paul Fire and Marine Insurance Co. also agreed to stop certain industry activities in a settlement agreement signed by state District Judge Pete Lowry of Austin.
In the agreements, both companies denied any wrongdoing or liability. The pacts say each $500,000 payment is for investigative and legal costs and ″does not represent a fine or penalty.″
″In essence, these companies have entered a nolo contendere (no contest) plea and have agreed to testify for the state as the lawsuit continues against the other defendants,″ Mattox said.
The state accuses the insurance industry of seeking to create a phony ″insurance crisis″ several years ago in which insurers claimed that an increase in lawsuits was forcing them out of the commercial liability field.
Mattox in March 1988 sued eight major insurance companies and other insurance groups, accusing them of illegally conspiring to boycott, coerce and intimidate insurance consumers in order to drive up rates, cut back coverage and create a false insurance crisis in the commercial liability field.
Several other states joined a similar suit filed in federal court in California.
″We fully intend to proceed with our legal action against all these other defendants. As a prosecutor, I can explain it to you like this: Sometimes you cut a deal with one member of a gang in order to put the entire gang out of business,″ he said.
″We are asking the court to set us a trial date as soon as possible for the rest″ of the defendants, Mattox said.
The state’s lawsuit seeks civil penalties and restitution for consumers.
The civil penalties could range up to $1 million for each violation of the state’s antitrust law by corporate defendants and up to $100,000 for each violation by individuals.
Spokesmen for both Travelers and St. Paul Fire and Marine said their companies believe they would have won but decided to settle because of the costs involved.
″We look at this as a very cost-effective way for the company to avoid further legal expense, a lot of inconvenience and a lot of burden on our shareholders,″ said St. Paul spokeswoman Suzi Hagen.
″We feel confident that if it would have gone to its conclusion, there would have been a ruling in our favor. But the costs of doing this would have far outdistanced the benefits we would have been getting,″ said Travelers spokesman Dan Kaferle.
Mattox recalled a television advertising campaign in which the insurance industry contended that the crisis would hinder everything from high school football games to fire protection.
When his suit was filed, Mattox charged the insurance industry with ″the most insidious consumer fraud perpetrated upon the American public in decades.″
Mattox’s investigation began with a letter from the Austin suburb of Westlake Hills, which was notified in 1985 that its liability coverage was being canceled.
″After years with the same liability carriers, Westlake’s coverage was suddenly canceled despite the fact that the city had only one minor claim since becoming a city in 1953,″ he said.