CHICAGO—Liberty Mutual Group Inc. said Tuesday likely will appeal a federal judge's preliminary approval of a settlement in the four-year-old legal battle over American International Group Inc.'s alleged underreporting of workers compensation premiums.

On Monday in Chicago, U.S. District Court Judge Robert Gettleman certified a class of commercial insurers that now can either support or object to AIG's offer to settle the litigation for $450 million.

Amount reasonable

The judge also granted preliminary approval of the $450 million settlement amount, finding it is “fair, reasonable and adequate.”

The allegations against New York-based AIG surfaced in 2006, when then-New York Attorney General Eliot Spitzer announced that AIG underreported workers comp premiums over several decades to avoid paying its fair share of residual market assessments.

Then in May 2007, the National Workers Compensation Reinsurance Pool, operated by Boca Raton, Fla.-based NCCI Holdings Inc., sued AIG, alleging it violated the Racketeer Influenced and Corrupt Organizations Act.

The pool argued it was excluded from the 2006 settlement negotiations and alleged that its members paid states more than their appropriate share of residual market assessments because AIG was assigned too small a share of high-risk workers comp policies.

AIG countered with its own lawsuit, alleging among other things that its competitors similarly underreported workers comp premiums.

Judge Gettleman dismissed the NWCRP as lead plaintiff, but the litigation continued when Liberty Mutual units Safeco Insurance Co. of America and Ohio Casualty Insurance Co. sued in 2009 and sought to replace the NWCRP and have the suit certified as a class action.

Class certified

On Monday Judge Gettleman certified the settlement class as consisting of all members of the NWCRP, the New Mexico Workers’ Compensation Assigned Risk Pool.

But Liberty Mutual opposed the proposed settlement as being inadequate.

“We're evaluating our options and in all likelihood will be filing an appeal," Liberty Mutual said in a statement following the judge’s ruling.

The judge also appointed several insurers as class representatives. They are ACE INA Holdings Inc., Auto-Owners Insurance Co., Companion Property & Casualty Insurance Co., FirstComp Insurance Co., The Hartford Financial Services Group Inc., Technology Insurance Co. and The Travelers Indemnity Co.