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AIG Asks Judge to Deny Class-Action Status in Lawsuit

Source: WSJ

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Posted on 11 Oct 2010

American International Group (AIG) asked a federal judge to deny class-action status to a lawsuit brought against it by other insurance companies for alleging underreporting of premiums on workers-compensation policies.

In documents filed in a federal district court in Illinois on Friday afternoon detailing its opposition to the case, lawyers for AIG accused two insurers that are plaintiffs in the case of acting "at the behest of" Liberty Mutual Insurance Co., a rival that AIG alleges under-reported its own workers-compensation premiums.

AIG, which was bailed out by the U.S. government in September 2008, has been embroiled in a long-running fracas with its rivals over the reporting of workers-compensation policies. In many states, insurers are required to contribute funds to a pool to help cover payments to injured workers. The contribution amounts are determined from the size of each insurer's workers-compensation business.

AIG has been accused by rivals and others in court filings and other venues of underreporting the size of its workers-compensation business for decades. The company has, in court documents, in turn accused some of its competitors of understating their own workers-compensation insurance premiums and contributing less than they should have to the pool.

In Friday's court filing, AIG said Liberty and several other large insurers "are alleged to have engaged in the very same conduct that is at the core of the putative class action complaint—the underreporting of workers compensation premium—thereby making class certification particularly inappropriate."

A Liberty Mutual spokesman said the company had no comment. Liberty Mutual is involved in separate litigation against AIG over the workers-compensation issue.

In 2006, AIG agreed to set aside over $300 million in a settlement with New York insurance regulators and the New York Attorney General over allegations that the company understated its workers compensation premiums from the mid 1980s to the mid-1990s, without admitting or denying wrongdoing. Most of that settlement money, which is sitting in a fund, is slated to be distributed among various states or players that were hurt by AIG's alleged conduct and have legitimate claims against the company.

Last year, Safeco Insurance Company of America and Ohio Casualty Insurance Co. filed a lawsuit against AIG on behalf of a group of insurance companies and have sought class action status for the case, in which they alleged a $1 billion under-reporting scheme at AIG.

AIG in its Friday filing noted that Liberty Mutual is the ultimate parent of Safeco and Ohio Casualty. It added that "discovery has confirmed" that the five of the largest members in the putative class "engaged in much the same underreporting conduct of which AIG is accused in this case."
Spokespeople for Safeco and Ohio Casualty said their companies do not comment on pending litigation matters. Ohio Casualty "looks forward to addressing all of the issues on behalf of the class in court," a spokesman added.

Michael Carlinsky, a lawyer representing AIG, said, "We have presented the court with a significant amount of actual evidence showing underreporting by other companies, including Liberty and certain of its subsidiaries."


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