American International Group has negotiated a $450 million settlement with seven of its competitors in the protracted litigation over its questionable reporting of workers’ compensation premiums. But even with that settlement it doesn’t appear the long-running battle over under-reported premiums is over for AIG. That’s because the key party representing the class of insurers in the legal action — Liberty Mutual and its affiliates Safeco and Ohio Casualty— are refusing to go along with the settlement. Liberty Mutual says it will continue with litigation against AIG on its own.
The settlement with the seven workers’ compensation writers comes on the heels of AIG agreeing to pay $146.5 million in fines and additional taxes to state insurance regulators over similar charges of under-reporting of premiums. The under-reporting shortchanged states on taxes and companies that support residual markets on fees that are assessed based on premiums. The seven insurers that are willing to accept the $450 million agreement from AIG are ACE INA Holdings, Auto-Owners Insurance Co., Companion Property & Casualty Insurance Co., FirstComp Insurance Co., The Hartford Financial Services group, Technology Insurance Co. and Travelers Indemnity Co.
These insurers have asked U.S. District Judge Robert Gettleman to let them accept the agreement for themselves and on behalf of the class of more than 500 other insurers affected, even though Liberty Mutual’s Safeco and Ohio Casualty, the carriers that have taken the lead representing the class, want to continue with the litigation. State regulators, the examiners they appointed for this case, and insurers representing the majority of the board of the National Workers Compensation Reinsurance Pool, all support the settlement, according to AIG. This matter is pending in the Northern District of Illinois.
It should be noted that AIG has a long history of under-reporting its workers’ compensation premiums. In 2006, in a case led by New York officials, AIG agreed to pay states $343 million for under-reporting premiums. In 2007, the industry’s National Workers’ Compensation Reinsurance Pool and its administrator, the National Council on Compensation Insurance, sued AIG, claiming it was due assessments lost because of under-reported premiums. But the trial judge ruled that the pool itself did not have standing to bring the suit. That left it up to insurers to sue on their own.
AIG says that three of its competitors in the suit — ACE, Hartford and Travelers — are also guilty of having under-reported in the past. The seven insurers told the judge that Safeco and Ohio Casualty should be allowed to pursue litigation on their own, but that they and the other hundreds of insurance companies “should not be compelled to have their claims pursued through years of additional litigation when a fair compromise has been reached.” But Safeco and Ohio Casualty maintain that the settlement is premature because it would end the litigation before the full extent of AIG’s wrongdoing has been revealed.
Source: Insurance Journal
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