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Margaret Embry
Margaret Embry
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$1 Billion Workers’ Compensation Lawsuit Against AIG Dismissed

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Judge Robert Gettleman of the U.S. District Court in Chicago dismissed a federal lawsuit against American International Group Inc (AIG) on August 20th, according to Reuters. The lawsuit accused AIG of fraudulently shortchanging state workers’ compensation pools out of more than $1 billion.

The lawsuit was dismissed due to the National Council on Compensation Insurance Inc. (NCCI’s) lack of standing to sue AIG on behalf of hundreds of insurers in its National Worker Compensation Reinsurance Pool.

Many states require firms that sell workers compensation insurance to also fund pools to cover injuries for workers at companies that cannot obtain coverage on the open market, in some cases because their jobs are too risky.

Citing a New York state investigation and an internal AIG probe, Judge Gettleman said that for several years the insurer had understated workers compesation premiums to evade required payments, which resulted in at least $60 million of unlawful annual benefits.

Even with the dismissal, Judge Gettleman did not absolve AIG of potential claims by insurers that take part in such pools. Because of this, many are pursuing claims that seek class-action status in a separate lawsuit.

A spokesperson for the board of the National Workers Compensation Reinsurance Pool, said the insurers plan to keep pursuing their claims "to remedy AIG’s admitted wrongdoing (and) to obtain a full and fair accounting by AIG."

The case is National Council on Compensation Insurance Inc v. American International Group Inc et al, U.S. District Court, Northern District of Illinois (Chicago), No. 07-2898.