The Small Laws: Eliot Spitzer and the Way to Insurance Market Reform
![handle is hein.journals/flr74 and id is 3057 raw text is: THE SMALL LAWS: ELIOT SPITZER AND THE
WAY TO INSURANCE MARKET REFORM
Sean M Fitzpatrick*
For when you break the great laws, you do not get liberty; you do not
even get anarchy. You get the small laws.'
INTRODUCTION
In 2004, the property-casualty insurance industry was roiled by a scandal
unparalleled in its history, with the world's largest insurance broker, Marsh
& McLennan, accused of defrauding customers by rigging bids to
maximize its own profits. New York State Attorney General Eliot Spitzer's
suit against Marsh in October 2004 was the first salvo in a continuing
challenge to long-established insurance market practices,2 and has set in
motion a process of regulatory scrutiny and proposed legal reform whose
ends are impossible to predict. Indeed, not since another ambitious New
York governor-to-be, Charles Evans Hughes, cut a swath through the life
insurance industry as chief counsel to the renowned Armstrong
Committee-almost exactly a century ago-has the insurance community
faced so fundamental a challenge to its structure and ethics.3 In a curious
historical twist, that earlier scandal had its genesis in a grand party thrown
* Lecturer in Law, University of Connecticut School of Law; Senior Vice President and
Special Counsel, The Chubb Corporation. In his capacity as Special Counsel at Chubb, Mr.
Fitzpatrick has participated in Chubb's response to Attorney General Eliot Spitzer's
investigation of insurance industry practices and ensuing investigations by other state and
federal regulators. Prior to assuming his current position, Mr. Fitzpatrick was chief
underwriting officer of Chubb's specialty division from 1999 through 2002. In 2005, Mr.
Fitzpatrick also served as president of the Professional Liability Underwriting Society
(PLUS), the leading trade group in the executive and professional liability insurance
industry. The author is indebted to John Degnan, Tom Baker, David Robinson, and Dino
Robusto for their helpful comments on early drafts of this Article; the opinions expressed are
the author's alone.
1. G.K. Chesterton, Charles Dickens 197 (Schocken Books 1965) (1906).
2. See Complaint, State v. Marsh & McLennan Cos., No. 04403342 (N.Y. Sup. Ct. Oct.
14, 2004), available at http://www.oag.state.ny.us/press/2004/oct/octl4a 04 attachl.pdf
[hereinafter Marsh Complaint]
3. See Mark J. Roe, Foundations of Corporate Finance: The 1906 Pacification of the
Insurance Industry, 93 Colum. L. Rev. 639, 656-74 (1993); Adam Winkler, Other People's
Money : Corporations, Agency Costs, and Campaign Finance Law, 92 Geo. L.J. 871, 887-
91 (2004). More recent insurance scandals, such as the Lloyd's of London spiral in the
1980s, pale in significance beside the challenge posed to the industry by Spitzer's
investigation. See Adam Raphael, Ultimate Risk: The Inside Story of the Lloyd's
Catastrophe (1995).
3041](ViewImageLocal?handle=hein.journals/flr74&div=97&collection=&method=preview&ext=.png&size=3)
What Is HeinOnline?
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most
The Small Laws: Eliot Spitzer and the Way to Insurance Market Reform
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most