Ace may face legal challenge
NEW YORK (Bloomberg) - Ace Ltd., the Bermuda-based business insurer, may face litigation after Connecticut's attorney general found the company "probably" was paid too much to handle 660 of the state's workers' compensation claims.
Richard Blumenthal said on Friday in a statement that he blames MRM Consulting Inc., a paid adviser for Connecticut, for faulty advice that led to an $80 million price tag on the 2001 deal. Connecticut may seek to recover some of the money spent, Mr. Blumenthal said in an interview.
"We're exploring potential action against MRM and others, including Ace," Mr. Blumenthal said. "We're not ruling anyone out."
MRM recommended the transaction, a so-called loss portfolio arrangement, and the $80 million price after estimating the state's potential liability could be $150 million, Mr. Blumenthal said in a report released on Friday on the state's website. Connecticut considered the transaction a way to cut annual expenses and funded the transfer with a bond, Mr. Blumenthal said.
After assuming liability, Ace settled many of the claims faster than MRM forecast, Mr. Blumenthal said. The state will incur a total cost of more than $95 million, including transaction expenses, fees and the interest on the bonds, Mr. Blumenthal said.
Mr. Blumenthal declined to comment on the nature of the possible probe into Ace and said he was not in talks with the insurer.
Ace spokesman Robert Grieves said he had not seen Mr. Blumenthal's statement and that he had no immediate comment. Attempts to contact Adrien Theriault, cited in Mr. Blumenthal's statement as CEO of MRM, were not immediately successful.
