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Liberty Mutual Pays $928,042 in Fines

The Hartford Courant – March 25, 2009

Liberty Mutual companies are paying $928,042 in fines and restitution for overcharging customers, settling claims improperly and other violations of state law, the Connecticut Insurance Department said Tuesday.

The total is one of the largest amounts Connecticut has collected from an insurance company.

Fines for violations totaled $296,000. Liberty Mutual also was ordered to pay $632,042 in restitution. Most of it — $628,875 — was returned to 3,595 policyholders who were overcharged for premiums on auto insurance. The remaining restitution went to seven people because surcharges were wrongly levied on their policies, the department said.In some cases, the company’s mistakes resulted in undercharging customers.

It is imperative that consumers are treated fairly,” said Insurance Commissioner Thomas Sullivan. “I am pleased that my staff was able to identify these violations, work with the company to provide restitution, and make a difference for policyholders.”

Glenn Greenberg, a spokesman for Boston-based Liberty Mutual, said the company regrets the errors and that “this is not systemic of any improper and irresponsible behavior and the errors cited have been rectified.” Greenberg said the company identified many of the errors itself and reported them to the Insurance Department in 2006 and 2007.

The order results from a routine “market conduct” exam by the department, which checked how Liberty Mutual was treating its customers and following laws during 2006. Regulators say Liberty Mutual discovered an error in 2006 in the way its “safe driver” discount was programmed into its computer system, informed the department, and took corrective action. In mid-2007, the company discovered a problem with how a separate “preferred class” discount was applied, resulting in overcharges. But the company didn’t inform the Insurance Department until January 2008 when the exam was under way, the agency said.

Another problem involved how Liberty Mutual figured payments on liability claims for damage to vehicles. In some cases, the company apportioned blame to both drivers when only one was at fault. The company felt its staff relied too much on a software program to assess negligence, and should have given more consideration to police reports, witness statements and “actual facts of the loss,” the department said.

The department also found violations in the company’s licensing and appointment of agents, and licensing of adjusters and appraisers.