UPDATES (PART 2 / 3)

Court rejects AIG appeal

SACRAMENTO, Calif.-A California appeals court has rejected American International Group Inc.'s challenge to a lower court order awarding Golden Eagle Insurance Co.'s business to Liberty Mutual Insurance Co.

The California Insurance Department had initially picked AIG as the winning bidder for the troubled Golden Eagle, but San Francisco Superior Court Judge William Cahill later chose a revised bid from Liberty Mutual instead (BI, July 21; July 14).

AIG appealed the ruling, but the state Court of Appeal last week denied AIG's petition without further comment.

An AIG spokesman would not comment on whether the insurer will ask the court to reconsider its decision.

Meanwhile, Judge Cahill heard arguments for and against the Golden Eagle rehabilitation plan at a hearing last week. He gave interested parties until July 30 to file additional briefs before he rules on the plan.

N.J. allows fear-of-injury suit

TRENTON, N.J.-A woman claiming she suffered emotional distress from the fear of contracting HIV after pricking her finger can seek damages from the doctors who allegedly left the lancet in a trash can, the Supreme Court of New Jersey has ruled unanimously.

In setting a new standard for the state, the high court ruled that a person can recover for emotional distress without demonstrating either actual exposure to or a viable channel of transmission of the virus, if the emotional distress is based on the fears experienced by a reasonable and well-informed person.

The July 21 ruling in Karen Williamson, et al. vs. Leonard Waldman, M.D., et al. affirms an appellate court ruling. The case will now return to the trial court, which must use the new standard.

The case involves Karen Williamson, a cleaning woman who was pricked with a lancet in 1991 while cleaning a trash can in an examining room used by three doctors.

After becoming alarmed at the potential of contracting HIV, she began annual testing.

Despite continually testing negative for HIV, Ms. Williamson became depressed and has suffered lifestyle changes as a result of the incident, according to court papers.

She filed suit against the three doctors in 1993, alleging they breached their duty to use reasonable care to inspect and to make the premises reasonably safe.

The trial court ruled in favor of the doctors, holding Ms. Williamson had failed to demonstrate she was exposed to HIV and that given her negative test results, her continued fear was "idiosyncratic." On appeal, the court reversed and remanded the case, ruling that Ms. Williamson was not required to demonstrate actual exposure to HIV and could recover based on the reasonableness of her fears.

The New Jersey case stands in contrast to a U.S. Supreme Court decision handed down last month in which the justices unanimously ruled that a pipe fitter in New York could not recover damages for his fear of contracting asbestos-related illnesses (BI, June 30).

Insurers sue over Texas refund

AUSTIN, Texas-Texas insurers are suing to stop enforcement of a rule that would require them to refund to employers millions of dollars in surplus from the state's workers compensation residual market.

About 70 insurers filed a complaint July 18 in Travis County District Court in Austin, Texas, seeking a declaratory judgment that the rating rule issued by Insurance Commissioner Elton Bomer exceeds his authority and is unconstitutional. The suit names the commissioner and the Texas Department of Insurance as defendants.

The rule, adopted last month, requires insurers to refund a share of the $718.5 million surplus they received from the Texas Workers' Compensation Insurance Facility for the years 1991 through 1994 (BI, July 14, July 7). The refunds would go to employers who bought retrospectively rated policies during those years. The suit does not contest refunds ordered for the years 1993 and 1994, years the insurers have conceded the payments can legally be ordered.

(contd. part 3)