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A proposed class action against Travelers Property Casualty Corp., which accused the Hartford, Conn. insurer of receiving illegal rebates on annuities purchased to fund structured settlements between the company and personal-injury plaintiffs, met an early demise July 10. In granting Travelers’ motion to strike, Judge Julia L. Aurigemma, who sits on Connecticut’s complex litigation docket in New Britain, found that the two plaintiffs seeking class-action status failed to assert how the partial commissions the company earned on the annuities harmed them financially. Neither plaintiff, both of whom were injured in separate car accidents, claimed that they had received or expected to receive anything less than the settlement amounts they had negotiated with the insurer, Aurigemma noted. The defeat of Macomber v. Travelers Property Casualty Corp. follows Travelers’ recent victories in three nearly mirror-image complaints brought in federal court. KICKBACK SCHEME ALLEGED New Britain attorney John C. Matulis Jr., who represented the plaintiffs in Macomber, could not be reached for this report. His firm, Januszewski, McQuillan and DeNigris, did not return two phone calls by press time. The state-court action against Travelers Group Inc. and its subsidiaries was based on several causes of action, including negligent misrepresentation, unjust enrichment and breach of fiduciary duty. The plaintiffs charged the company with conducting an illegal kickback scheme through which it solicited insurance claimants to enter into structured settlements funded with annuities for the purpose of generating “millions of dollars” in undisclosed rebates for the property-casualty insurer and its affiliates. Insurance brokers utilized by the company, the Aug. 6, 1999 amended complaint in Macomber alleged, routinely paid Travelers a half of the commissions they receive on the sale of annuities in violation of state insurance laws prohibiting the splitting of commissions on annuity sales. In its Feb. 11, 2000 motion to strike, Travelers denounced the plaintiffs’ allegations as a “misguided” attempt to argue that the allegedly reduced cost to purchase such annuities translated into an additional value the plaintiffs were entitled to receive. In contesting the motion to strike in a March 10 memorandum, the plaintiffs contended that the amount of cost savings that Travelers incurred in funding their settlements could have been used by them “to buy a better annuity.” Aurigemma, however, disagreed. “The plaintiffs,” she wrote “argue that they … are entitled to recover the purported ‘rebate,’ yet they never allege how or why they are entitled to any portion of the standard annuity commission paid to the broker by [Travelers Life & Annuity Co.] for arranging the sale of the annuity to [Travelers Property Casualty Corp.]“ Thomas J. Groark and Kevin J. O’Connor, of Day, Berry & Howard’s Hartford office, who defended Travelers, both declined comment. But plaintiffs’ lawyer Robert B. Adelman, of Adelman Hirsch & Newman in Bridgeport, Conn., said it is no secret to the plaintiffs’ bar that insurers receive such incentives from structured settlements funded by annuities. “Any sophisticated client,” Adelman admitted, “could take that money [as a lump-sum settlement] and do better. … Annuities are poor investments.” Still, Adelman’s firm continues to recommend structure settlements for plaintiffs under 35 who are likely to rapidly spend a lump-sum payment, as well as for those with healthcare or other long-term needs. Keeping clients from frivolously blowing their settlement money, Adelman maintained, is important enough that “we’re willing to overlook” the cost-savings technique employed by insurance companies.

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