JLT has rejected suggestions that local councils should pursue a class action over premium levels paid for cover provided through mutual schemes administered by the company.

Law firm Quinn Emanuel Urquhart & Sullivan (QE) says investigations into a potential class action on behalf of local councils are well advanced and litigation funder Harbour Fund will provide financing if a case proceeds.

But JLT says there is no basis for such an action.

“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 unsupported by the facts,” JLT Global Head Public Sector Leo Demer told insuranceNEWS.com.au.

JLT says some 54 councils went to public tender or obtained other quotes during the renewal season last June, with 50 continuing to receive insurance through the schemes at rates lower than the alternatives, while four changed their cover.

Mr Demer says four councils in one state that left a mutual last year due to the offer of lower premiums later returned to the scheme.

“A few weeks before the renewal date these four councils returned to the mutual scheme as the broker providing the lower terms could not actually place the council insurance at the premiums it offered,” he said.

Mr Demer’s comments contradict claims by QE Managing Partner Michael Mills, who says “a number of local councils” have made substantial savings on premiums since leaving JLT.

“[This] indicates that JLT may not have acted in the best interest of local councils or their ratepayers, who really are the ones ‘paying the cost’ for these insurance schemes,” he said.

QE says it is exploring class action proceedings on behalf of councils nationwide, starting with Victoria, NSW and WA. The firm has invited councils to register their interest if they were advised by JLT on insurance, or were members of schemes from June 30 2006.

Mr Mills told insuranceNEWS.com.au that there had been a high level of preliminary interest from councils and a decision on going ahead was likely in the near-term.

JLT provides insurance services to more than 500 local councils.

More details in our regular bulletin on Monday.