U.S. District Judge Claire Cecchi of the District of New Jersey. Photo by Carmen Natale

A Newark, New Jersey, federal judge has approved a $21.95 million partial settlement of a price-fixing class action with a group of 13 syndicates of underwriters affiliated with Lloyd's of London insurance company.

The settlement resolves claims that the Lloyd's syndicates maintained a facade of competition in which brokers represented to insureds that they would seek coverage for risks in a market of independent contractors, while in fact the organization was dedicated to maximizing volume and profits for entities that function like divisions of a single corporation. The suit brought claims for violations of the Racketeer Influenced and Corrupt Organizations Act, civil conspiracy and unjust enrichment.

The settlement, which was approved by U.S. District Judge Claire Cecchi on Thursday, also calls for the syndicates to enact a series of reforms to their business model over a five-year period. Cecchi also approved a fee award of $7.32 million and expenses of $1.85 million, both of which will be drawn from the settlement fund. The settlement was reached under the auspices of court-appointed special master Layn Phillips of Corona Del Mar, California, a former Oklahoma federal judge.

The suit was filed in the Southern District of Florida in 2007. Certain defendants tagged the case to multidistrict litigation 1663, a group of insurance brokerage antitrust suits. The case was stayed from 2007 until 2011.

Ten other syndicates that were named as defendants in the case are not parties to the settlement, and litigation with respect to those entities is ongoing.

According to the suit, Lloyd's syndicates purportedly compete for business. Lloyd's syndicates may be insurance companies, limited partnerships, individuals or other entities. But the suit claims the syndicates made secret payments to Lloyd's brokers, in excess of normal brokerage commission and often exceeding 40% of premiums.

The suit was brought by two purchasers of Lloyd's policies: Lincoln Adventures, a holding company that owns a 68-foot yacht, and Michigan Multi-King, an operator of fast-food restaurants.

The revised business practices that the settling defendants must follow for five years include complying with any regulatory requirements of Lloyd's or any U.K. regulatory authority on competition law, compensation to producers, or anti-bribery and corruption compliance, including treating customers fairly and paying due regard to their interests and managing conflicts of interest fairly.

The practices that are terms of the settlement also include adhering to applicable regulations regarding whistleblowing as set by the appropriate U.K. regulatory authority, including maintenance of internal procedures for handling reports made by whistleblowers. Settling defendants also will designate a senior-level employee or director to oversee the integrity, independence and effectiveness of each of the defendant's policies and procedures on whistleblowing.

In addition, each settling defendant will follow the requirements of the U.K. Bribery Act applicable to it. Settling defendants also will adhere to all regulatory and legal requirements relating to the information they are permitted to share with any other syndicate regarding the placement of insurance in the Lloyd's market by U.S. policyholders.

Robbins Geller Rudman & Dowd in San Diego represented the plaintiffs and the class along with Cohn, Lifland, Pearlman, Herrmann & Knopf in Saddle Brook, and Zwerling, Schachter & Zwerling in New York. Rachel Jensen of Robbins Geller and Peter Pearlman of Cohn Lifland did not return calls about the case.

Marc Haefner and Liza Walsh of Walsh Pizzi O'Reilly Falanga in Newark, who represent the Lloyd's of London syndicates, did not respond to requests for comment about the ruling.