6 03-22-88 06:54 pes (1grafadd x x x any price _ allstate
denies wrongdoing) By JERRY BERGER United Press International
Eight states filed suits Tuesday charging four major U.S.
insurance companies and Lloyd's of London manufactured a 1984-85
liability insurance crisis that forced small police forces to
disband and threatened cancellation of San Francisco's Chinese
New Year parade.
Attorneys general in seven states filed suit in U.S. District
Court in Northern California and a similar suit was filed in the
Texas state court system charging violation of state and federal
anti-trust laws by collusion to restrict the availability of
liability coverage used by most businesses, public agencies and
The complaints charged the actions created a ripple effect in
thousands of communities across the nation that found themselves
with skyrocketing insurance premiums or no protection at all.
The tiny town of Cleveland, Ala., was forced to park its only
police car and fire its two police officers for lack of
insurance, and San Francisco's traditional Chinese New Year's Day
parade faced cancellation until last-minute arrangements were
"Our investigation revealed the so-called liability insurance
crisis of 1984 and 1985 was in great part created by the
insurance industry itself," Massachusetts Attorney General James
Shannon charged in one of a number of news conferences across the
"In an elaborate conspiracy, these companies agreed to
severely restrict the amount of coverage available to consumers
of commercial general liability policies," he said.
Companies named in the 68-page complaint include the Hartford
Fire Insurance Co., Allstate Insurance Co., Aetna Casualty and
Surety Co. and the Cigna Corp.
Also named was Lloyd's of London, the internationally known
firm that provides protection to the insurance companies
themselves and the Insurance Services Office, a trade group for
1,400 companies that write 95 percent of the casualty insurance
in the United States.
"We consider the allegations unfounded and without merit,"
said ISO spokesman David Ostwald in New York.
Cigna spokesman David Willis said from Philadelphia the
company would not comment on pending litigation, but that it was
company policy to obey anti-trust laws.
States bringing the federal action included Massachusetts, New
York, California, Minnesota, Wisconsin, West Virginia and
A similar state suit was filed in Texas although that state
and Arizona were expect to join the federal case within 24 hours,
said California Attorney General John Van de Kamp.
"The conspiracy began when Allstate and Hartford joined forces
to create a new CGL policy with more restrictive terms" that
changed coverage periods, excluded pollution coverage and
required the inclusion of legal fees within the policy limits,
He charged the defendants used "backroom deals, secret
communications and thinly veiled threats" to expand the scheme to
companies such as Lloyd's of London, which "threatened to boycott
the American market if they didn't get their way."
Shannon said the suits do not list specific monetary damages
or the number of busisnesses and communities affected.
"We're looking for an end to the kind of collusive behavior
... that denies people the coverage that they deserve, he said.
"What we're saying is that they should play by the same rules
that everybody else in a free market economy is supposed to play
West Virginia Attorney General Charlie Brown, chairman of the
Antitrust Committee of the National Association of Attorneys
General, said, "We believe these discoveries of manipulation are
helping to unravel the mystery of the continuous and the
troubling liability insurance crisis.
"As a result of this conspiracy, some kinds of coverage _ such
as protection against pollution risks _ became virtually
imposible to obtain at any price."
In Washington, Robert Brandon, vice president of Citizen
Action, a 1.6 million-member public interest group, hailed the
"It will expose the collusive anti-competitive practices of
major insurance companies," Brandon said, "and demonstrates the
need for greater disclosure and regulation of the insurance
A spokesman for Allstate, based in Northbrook, Ill, said the
company had not seen the specific allegations contained in the
lawsuits, but said Allstate "is not now, and never has been
involved in a conspiracy to fix prices or constrain the market.
Any suggestions to the contrary are patently false."