Liberty Mutual has lost a legal effort seeking dismissal of abid-rigging suit brought against the insurer by the New York StateAttorney General's Office.

New York State Supreme Court Justice Bernard Fried issued aruling last week that will permit the case to proceed against nineLiberty Mutual subsidiaries including Wausau Insurance Cos.,Liberty Mutual Fire Insurance Co. and Liberty Marine UnderwritersInc.

But charges against Boston-based Liberty Mutual Holding Companywere dismissed on grounds of personal jurisdiction.

Liberty Mutual issued a statement expressing satisfaction thatcharges against the holding company were dismissed.

“We are disappointed that the court did not accept oursubstantive arguments. We continue to believe that the matter needsto be resolved through the judicial process. This is the first stepin that process, and we fully expect that we will prevaileventually,” the statement said.

Last May, New York Attorney General (and now governor) EliotSpitzer filed an action in New York Supreme Court charging that inmany instances brokers and agents responded to Liberty Mutual'sexplicitly stated incentives, steering their clients to the carrierand in many cases violating their fiduciary duty to assist infinding the best insurance for the lowest price.

In the complaint, Mr. Spitzer said that from 2001 through 2004Marsh brokerage repeatedly solicited from Liberty Mutual and otherinsurers' fake bids–so-called “B quotes”–that were intentionallyhigher or otherwise less favorable to the customer to “support” or“protect” the bid of the favored insurer.

In August of 2005, a former Liberty executive, Kevin Bott, pledguilty to criminal charges in connection with his bid-riggingconduct while employed with the carrier.

In a statement last spring after the suit was filed against it,Liberty said that it had been negotiating with the attorney generalbut found his demands “excessive and unreasonable.”

Liberty is the lone insurer contesting the charges brought as aresult of the investigation of Marsh activities. Carriers includingAmerican International Group, Zurich Financial Services and ACEhave paid large penalties to settle bid-rigging and price-fixingallegations.