State of R.I. may forge own Workers Comp settlement|
With AIG Filing False Financial Statements
The R.I. Providence Journal (KRT)
May 2, 2006
May 2--PROVIDENCE -- As insurance companies' objections hold up Rhode Island's portion of a national settlement, the state is considering pursuing its own separate settlement.
Lawyers representing American International Group -- the insurance giant that agreed in February to pay more than $1.6 billion in restitution and penalties for filing false financial statements -- visited Rhode Island last week, the state superintendent of insurance said yesterday.
Rhode Island's portion of the AIG settlement, $97.7 million, is being blocked by the workers' compensation insurance companies that wrote policies in Rhode Island during the period the settlement covers, the insurance superintendent, Joseph Torti III, said.
Rather than split the settlement money with the insurers, the state is investigating whether AIG would be willing to come to a separate agreement with Rhode Island, which stands to receive the largest portion of the $343 million AIG agreed to pay to states. (The rest of the settlement amount represents fines, penalties, and payments to investors who lost money in AIG stock and former customers who paid too much for AIG's policies.)
If AIG decides against settling directly with Rhode Island, or does not communicate willingness within three or four weeks, Torti said the Department of Business Regulation would initiate an administrative action against AIG.
That means the department would call AIG in for its own hearing on the charges of filing false financial statements. In that case, Torti said, the department would allege a number of violations of insurance law and regulations, and seek penalties of $50,000 per violation. "We would be looking for a penalty in the hundred-million-dollar range," Torti said.
His comments came during the revenue estimating conference, a semi-annual event that brings together fiscal advisers for the House, Senate and the governor to update state budget projections.
The state has already received a smaller payment, $2.9 million, that represents premium taxes Rhode Island would have collected if AIG had not underreported the amount of workers' compensation business it was doing in this state.
With regard to the larger payment, the settlement -- which came out of an investigation by New York Attorney General Eliot Spitzer, in conjunction with federal regulators -- requires the states and the insurers to sign off, and thereby agree not to pursue further redress from AIG regarding actions during the settlement period. The deadline to sign on is March 1.
Torti said the workers' compensation insurers who made up the residual risk pool -- in other words, who insured high-risk companies unable to get conventional coverage -- claim the $97.7 million, as well as other states' portions, actually belongs to the insurance companies because the companies lost money when they paid workers' compensation claims from the residual pool and states did not allow them to increase premium rates enough to cover those losses. (The law firm representing the insurers, Chicago-based Lord, Bissell & Brook, declined comment.)
Torti said the insurers might agree to share the money with states, but so far, they've indicated "they aren't going to bend -- it's their money and they want all of it."
States that do sign on -- necessarily with the insurers' blessing -- will get the entire $343 million, and so will split Rhode Island's portion if Rhode Island opts out, Torti said.
Whichever path the state takes -- a decision that ultimately rests with DBR Director A. Michael Marques -- Torti urged against factoring the settlement money into next year's budget. "If we do see something" from the settlement, he said, "it's a long way off."
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