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Group sues AIG over comp settlement


NEW YORK--American International Group Inc.'s troubles stemming from its nationwide underreporting of workers compensation premiums continues, despite the $1.64 billion settlement reached with New York and federal authorities in 2006.

The National Workers Compensation Reinsurance Pool, which represents 600 insurers, sued AIG Thursday in U.S. District Court for the Northern District of Illinois seeking additional funds from AIG. The organization says that it was not allowed to participate in the settlement process that resulted in AIG agreeing to pay states more than $300 million for its underpayment of workers compensation premium taxes and residual market assessments.

The NWCRP says its member companies had to pay states more than their appropriate share of residual market assessments because AIG was assigned an improperly small share of responsibility for high-risk workers comp policies.

NWCRP participating companies provide reinsurance for a large portion of the high-risk workers compensation policies issued to employers that cannot find coverage in the voluntary insurance market.

The $1.64 billion AIG agreed to pay in 2006 settled civil fraud charges leveled by former New York Attorney General Eliot Spitzer. That amount included the more than $300 million settlement for its admitted underpayment of workers comp premiums and residual assessments.

The NWCRP claims the more than $300 million is inadequate, and said in a statement that the amount should have been as much as $1 billion. Its lawsuit seeks to uncover "the full extent of the AIG companies' wrongdoing and obtain full and fair restitution, as part of the NWCRP's due diligence for its participating companies," the statement said.

An AIG spokesman said the insurer does not comment on pending litigation. But New York-based AIG filed its own suit against NWCRP Thursday in New York claiming, among other things, that it is not responsible for any amount in excess of its 2006 settlement.

AIG's suit also alleges that the NWCRP refused to seek compensation from the settlement monies the insurer agreed to in 2006. It says that the settlement agreement created a specific mechanism for the NWCRP to recover any losses.