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AIG Seeking to End Massive Work Comp Lawsuit Via $450 Million Settlement

In recent workers' compensation defense news, American International Group (AIG), subject of a massive federal class action lawsuit involving over 500 insurers, has recently sought to bring an end to this complex litigation by offering a settlement of $450 million to seven intervening class members.

(To clarify, the underlying class action lawsuit against AIG alleges that the insurance giant intentionally underreported insurance premiums in the workers' compensation market for many years and that this underreporting resulted in class members having to contribute a disproportionate share to industry-funded pools designed to insure injured workers. )

The $450 million settlement offer was accepted by seven class members, including Travelers, The Hartford Financial Services Group, FirstComp Insurance Co., ACE INA Holdings, Auto-Owners Insurance Co., Technology Insurance Co., and Companion Property & Casualty Insurance Co.

While AIG and these seven insurers are hoping the settlement will bring an end to the litigation, Liberty Mutual affiliates Ohio Casualty and Safeco - who have emerged as the primary leaders in the class action lawsuit - have indicated that  any settlement would be premature.

The seven insurers, however, have already asked presiding judge Robert Gettleman to let them accept the settlement offer on behalf of all class members, and allow both Safeco and Ohio Casualty to move forward on their own.

"[The seven insurers and remaining class members] should not be compelled to have their claims pursued through years of additional litigation when a fair compromise has been reached," read court papers submitted to Judge Gettleman. "[Safeco and Ohio Casualty] have done a fine job of prosecuting this lawsuit, and they would be fully qualified to continue the battle through verdict, judgment and appeal. It is time, however, for this fight to end."

As previously stated, Safeco and Ohio Casualty expressed that the acceptance of any settlement would be premature, ending the class action lawsuit before the full extent of AIG's alleged malfeasance is revealed via the discovery process.

"The 'settlement' proposed by the seven intervenors and AIG is an act of self-interest and is detrimental to the 600-member class because it fails to consider previously undisclosed documented evidence of under-reporting that extends the scope and duration of the class' claim," said Gary M. Elden, attorney for Safeco and Ohio Casualty in a released statement.

It is worth noting that AIG recently agreed to pay upwards of $146 million in taxes and fines to state regulators regarding the underreporting of work comp premiums.

Stay tuned for further developments in the area of workers' compensation defense ...

This post was provided for informational purposes only and is not to be construed as legal advice.

Related Resources:

Liberty Mutual Continues Fight with AIG As Other Insurers Settle (Insurance Journal)

AIG Agrees to Pay In Workers' Compensation Settlement (Bloomberg Businessweek)

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