Plaintiffs Represented by Robbins Geller Overcome Defendants’ Motion to Dismiss in Lloyd’s of London Multidistrict Litigation

August 25, 2017

On August 22, 2017, the Honorable Claire C. Cecchi of the United States District Court for the District of New Jersey issued an Opinion denying defendants’ motion to dismiss and upholding plaintiffs’ RICO complaint in a long-running action against insurance giant Lloyd’s of London (“Lloyd’s”) and 28 of its insurance syndicates. In denying the motion to dismiss, Judge Cecchi ruled that the plaintiffs adequately pleaded elements of racketeering under the RICO statute, civil conspiracy and unjust enrichment.

Plaintiffs allege that Lloyd’s is not a single insurance company, but an insurance market, in which insurers, called syndicates, purportedly compete for business. The complaint alleges that these syndicates made secret payments to Lloyd’s brokers, far in excess of normal brokerage commission, sometimes exceeding 40% of premiums. The various syndicates also allegedly enter into subscription agreements where a lead underwriter sets the price and terms under which a policy will be issued. These syndicates then “follow the leader,” aligning their pricing and terms with the leader, instead of competing fairly. This practice allows the syndicates to charge premiums higher than they would have otherwise, causing damage to insurance purchasers.

The case claims that Lloyd's syndicates maintain a false facade of competition where brokers represent to insureds that they will seek coverage for insurance risks in a market of independent competitors. However, the organization is actually dedicated to maximizing volume and profits for entities that function like divisions of one corporation.

The court found plaintiffs had adequately alleged a scheme to defraud based on two types of misrepresentations. First, by claiming that the various Lloyd’s syndicates competed for business, despite allegations that the various syndicates “collaborate to set uniform pricing and terms through collective agreements with brokers and coverholders on standard pricing and terms for similar risks, agreements to ‘follow the leader’ and sharing sensitive information.” Second, the court found that defendants “have each represented to some degree to the public and/or Plaintiffs in particular that brokers act in their clients’ best interest with respect to insurance price and terms and/or without conflict of interest. . . . However, pursuant to agreements between one or more syndicates and brokers and/or coverholders, brokers and coverholders received sizable commissions.”

The case is part of a multidistrict litigation, dating back to 2004, accusing insurance companies of conspiring with competitors to fix prices. In the Opinion, Judge Cecchi noted that contrary to defendants’ claims, “[t]he scheme is not based on Defendants’ failure to disclose information to insurance customers that it had a duty to disclose. Rather, . . . the alleged scheme is based on Defendants’ affirmative misrepresentations . . . .”

“We are pleased with the court’s well-reasoned opinion and look forward to litigating the case on behalf of insureds who vastly overpaid for coverage,” said Robbins Geller partner Rachel L. Jensen, one of the lead lawyers in the action. In addition to Jensen, Robbins Geller attorneys Patrick J. Coughlin, Alexandra S. Bernay and Carmen A. Medici helped obtain this result for insureds. The Firm is serving as co-lead counsel in this case.

Lincoln Adventures, LLC v. Certain Underwriters of Lloyd’s of London, No. 2:04-cv-05184-CCC-JAD, Opinion (D.N.J. Aug. 22, 2017).

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