Law firm Quinn Emanuel Urquhart & Sullivan has invited more councils to join a class action it filed last week against JLT.
The NSW Supreme Court action, supported by litigation funder Harbour, is led by Richmond Valley Council, while the law firm says six other local governments have also expressed interest.
But JLT says it will “vigorously defend” the action, which is open to councils provided with broking services from January 1 2009 to December 3 this year and which obtained cover through membership of the NSW mutual liability scheme.
Leo Demer, JLT’s Global Head Public Sector, says claims in the Quinn Emanuel action are “utter and absolute nonsense”.
“It has absolutely no merit and we will be vigorously defending the action,” he told insuranceNEWS.com.au.
JLT provides insurance services to more than 500 councils across Australia and has highlighted its strong track record in providing cover through mutual schemes.
“Every scheme produces an audited set of accounts that clearly define the significant surpluses sitting in those schemes for the benefit of members,” Mr Demer said earlier this year.
“Mutual schemes were created because councils in Australia could not buy any cover in the open market. The suggestion that councils have paid excessive premiums is not supported by the facts.”
The class action alleges JLT breached general law and contractual obligations, plus fiduciary duties, in its provision of insurance broking and advisory services.
“We believe a vast majority of NSW councils have used JLT’s services and, as a result, may have overpaid on their insurance premiums, some for a number of years,” Quinn Emanuel Managing Partner Michael Mills said.
Mr Mills alleges many councils have made substantial premium savings since leaving JLT, often about 30-50%, indicating the company may not have acted in councils and ratepayers’ best interests.
The law firm has flagged the potential for similar class actions in other states.
Richmond Valley GM Vaughan Macdonald says the council last year put its insurance out to tender and obtained a saving of 53% on the premium it had been paying.
“For that year alone, the saving was $300,000, and this has been going on for many years,” he said.