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Minnesota comp groups sue AIG

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ST. PAUL, Minn.--The Minnesota Workers' Compensation Reinsurance Assn. and the Minnesota Workers' Compensation Insurers Assn. filed suit against American International Group Inc. on Tuesday for AIG's alleged underreporting of premiums over a 22-year period.

The two organizations claim that an estimated $1.2 million earmarked for Minnesota--as part of a $1.64 billion settlement agreement AIG reached in 2006 with New York's former attorney general, Eliot Spitzer, and the New York State Insurance Department--is inadequate.

AIG's agreement with New York settled allegations of fraud and bid rigging and included about $300 million to compensate states for an alleged misreporting of workers comp premiums and related assessments.

Minnesota's WCRA and MWCIA claim in their lawsuit, filed in the U.S. District Court for the District of Minnesota, that they suffered substantially more than $1.2 million in losses since 1985 from underpaid assessments, reinsurance premiums, and investment income they would have earned from those premiums. They seek more than $100 million in damages for fraud and violations of the Federal Racketeer Influenced and Corrupt Organizations Act.

The WCRA provides reinsurance to insurers and self-insured employers, while MWCIA provides the state's workers comp insurers with ratemaking information.

They are not alone in suing AIG over claims related to the underreporting of workers comp premiums. The National Workers Compensation Reinsurance Pool, which represents about 600 insurers, filed suit in May.

While AIG countersued the national reinsurance pool claiming it is not responsible for any amount in excess of its 2006 settlement, the insurer declined to comment about the Minnesota suit.