AIG Sued by Workers' Compensation Group

Christina Cole

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American International Group Inc. may have to pay out more than the $317 million it has set aside to settle claims they shortchanged state workers' compensation programs.

Filed Thursday, in U.S. District Court by the National Workers Compensation Reinsurance Pool, the lawsuit estimates the world's largest workers' comp insurer may owe over $1 billion. AIG, in a separate lawsuit filed Thursday, asked a judge to declare they aren't responsible for payments beyond the fund they set up last year as part of a settlement with the former New York Attorney General.

In most states, companies that sell workers' compensation insurance must fund pools that serve as insurers of last resort to cover worker injuries at employers that pose unattractive risks. AIG misstated the premiums used in calculating its contributions, triggering a settlement fund for underpayment between 1985 and 1996.

The group, which represents 600 insurers in 40 states, said AIG underpaid for 35 years.

In its own lawsuit, AIG said it "believes that the amount it actually owes" is "significantly less" than $317 million. The suit, in New York Supreme Court in Manhattan, also said the number in the settlement was "subject to multiple analyses both by experts at AIG and independent experts retained by and reporting to the attorney general."

Companies' contributions to the pools are based on how much workers' compensation coverage they sell in the regular market, and the lawsuit said AIG misrepresented those amounts. AIG apologized in its settlement last year, saying it regretted the conduct that led to the suit.