Minn. comp organizations sue AIG, say years of premiums misreported

ST. PAUL, Minn.—The Minnesota Workers' Compensation Reinsurance Assn. and the Minnesota Workers' Compensation Insurers Assn. last week sued American International Group Inc., seeking damages related to the insurer'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 then-New York Attorney General Eliot Spitzer and other officials--is inadequate. That pact 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 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 paid, and investment income they would have earned from such premiums.

The suit, which charges fraud and violations of the federal Racketeer Influenced and Corrupt Organizations Act, seeks more than $100 million in damages.

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 alleged underreporting of workers comp premiums. The National Workers Compensation Reinsurance Pool, which represents about 600 insurers, filed suit in May (BI, May 28).

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.