Liberty Mutual Opposes Proposed $450 Million AIG Workers' Comp Class Action Settlement
By Meg Green
A.M. Best Co.
April 29, 2011
Liberty Mutual Group subsidiaries Ohio Casualty and
Earlier this year, seven other workers' compensation companies --
"The 'settlement' proposed by seven intervenors ... is in AIG’s self-interest and the interest of several intervenors, but it is detrimental to the class of over 500 insurance companies victimized by AIG’s admitted wrongdoing," Liberty Mutual said in a statement.
AIG has been the center of the federal lawsuit that pits the insurer against several of its workers' comp rivals to answer allegations that it lowballed its workers' comp premiums to dodge premium taxes and substantial residual market charges. In some states, from the mid-1980s to the mid-1990s, there were years when the residual market losses were greater than the residual market premium and voluntary market premium combined. This meant the more voluntary premium a company wrote, the more it had to pay out to cover its share of the residual market losses.
The proposed settlement is based on the assumption that AIG underreported its workers' comp premiums before 1996 by
In the settlement with state regulators, AIG agreed to pay
Liberty Mutual argues AIG's underreporting is
"The proposed settlement agreement...is a byproduct of an improper 'reverse auction' in which AIG asserted its leverage over other defendants eager to negotiate a deal that is favorable to AIG and those conflicted parties, but grossly unfair to the remainder of the class," Liberty Mutual said in its court papers.
"The settlement before the court is fair and reasonable, and Liberty's opposition is the latest in a long line of desperate attempts to derail a settlement supported by the 50 state insurance departments and the other insurance companies in the litigation,"
Claims of underreporting workers' comp claims have been haunting AIG for years.
The state regulators' examination, which lasted just under three years, followed yet another related settlement agreement between AIG and
AIG's legal battle with other insurance companies began in 2007, when the
The suit was filed — on behalf of the pool members — by the
AIG countered in a 2008 lawsuit that other companies had under-reported their premium to NCCI, some going as far back as 1986 when the NCCI discussed such conduct in a summary report to pool members (BestWire,
The original lawsuit brought against AIG (NYSE: AIG) by the NCCI was dismissed in 2009 when a judge found the NCCI and the pool lacked the legal standing to sue on behalf of the hundreds of companies that participate in the pool. However, the possibility of a class-action lawsuit for pool members was left open (BestWire,
AIG's countersuit was allowed to stand, and Liberty Mutual's subsidiaries sought class-action status to continue the case.
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