AIG, Caremark to pay millions for alleged coverage misrepresentationReprints
American International Group Inc. units and Caremark RX Inc. have reached a $310 million settlement on charges they misled plaintiffs in connection with a 1999 settlement by failing to provide information about an excess liability policy.
In January 1990, MedPartners Inc., which is now known as Woonsocket, Rhode Island-based Caremark, had reached a $56 million settlement on then pending securities and derivative litigation after a failed merger with Nashville, Tennessee-based PhyCor Inc., according to court papers in John Luariello v. Caremark RX Inc.; American International Group Inc., et al. , which was filed in state Circuit Court in Birmingham, Alabama.
Plaintiffs in the case charged that during negotiations that led to that settlement MedPartners and AIG represented there was only $50 million in available insurance.
In fact, said plaintiffs, before the settlement, AIG had sold to MedPartners an excess insurance policy that provided for unlimited insurance coverage and provided that “AIG would pay any judgment or settlement, no matter how large.” The premium on this coverage was $22.5 million, according to court papers.
The litigation was initially filed in October 2003, and a class action in the matter was certified in August 2012.
“Defendants wrongfully withheld information relating” to the excess policy, according to the first amended class action complaint filed with the court in June 2004.
“The defendants deny that they engaged in any wrongdoing of any kind,” according to the notice of proposed settlement.
Under terms of the latest settlement AIG has agreed to pay $230 million, while Caremark has agreed to pay $80 million. Recipients of the settlement will include shareholders who bought MedPartners stock from Oct. 30, 1996 through Jan. 7, 1998.
The court granted preliminary approval to the settlement on June 1. A hearing on a final settlement is scheduled for Aug. 8 in Birmingham.