American International Group Inc. could face numerous lawsuits from employers who say the insurer caused them to pay inflated workers compensation-related costs by underreporting its comp premiums, according to attorneys in two such cases against AIG.

Employers filed three lawsuits on Oct. 8 against New York-based AIG and its subsidiaries in federal courts in California, New Jersey and New York.

Plaintiffs in the suits contend that AIG's “systemic practice of underreporting (workers comp) premium” caused policyholders to “pay improperly inflated state insurance surcharges and to suffer other damage” during a nearly 40-year period.

Each of the lawsuits seeks class-action status and unspecified compensatory and punitive damages for alleged violations of the Racketeer Influenced and Corrupt Organizations Act, as well as claims of common-law fraud, negligent misrepresentation, unfair business practices and unjust enrichment.

Plaintiff attorneys say they're considering taking similar action against AIG in other states.

“We're continuing to look at some other states for some other clients,” said Derek Brandt, an Alton, Ill.-based shareholder and attorney with law firm Simmons Browder Gianaris Angelides & Barnerd L.L.C. “We've been contacted ... since we filed the suit by lawyers in other states who are interested in pursuing actions for their clients.”

The employer lawsuits represent a continued workers comp-related legal burden for AIG. Similar claims surfaced in 2006, when then-New York Attorney General Eliot Spitzer accused AIG of underreporting workers comp premiums over several decades to avoid paying its fair share of state residual market assessments.

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AIG paid $146.5 million in 2012 to state regulators in all 50 states and the District of Columbia to settle claims stemming from the 2006 allegations. It also agreed in 2011 to pay a $450 million settlement to several rival workers comp insurers related to its alleged underreporting.

In a statement to Business Insurance regarding the fresh suits, AIG said “the court filings attempt to recycle allegations of wrongdoing from decades past that AIG has already resolved via settlements with its regulators and with civil plaintiffs. AIG will defend the cases vigorously.” The insurer declined further comment about the lawsuits.

Drew Pomerance, a Los Angeles-based partner with law firm Roxborough, Pomerance, Nye & Adreani L.L.P., contends AIG has not settled claims of underreported comp premiums with employers that bought workers comp policies from AIG and other insurers.

“While they've resolved some of their liability for some of their misconduct, they have never compensated the insured employers for the wrongdoing that we allege in this lawsuit,” Mr. Pomerance said. “I'm certain that we're the first to draw the connection between their misconduct and the damage to insured employers.”

Plaintiffs in the three cases include Jayarvee Inc., operator of the famous Birdland Jazz Club in New York, Franjo Inc., a Fresno, Calif.-based medical clinic operator, and Newark, N.J.-based auto repair shop JPS Collision Inc.

Though most of the named plaintiffs are small businesses, Mr. Pomerance said the proposed litigation class could include “many thousands” of companies ranging from “mom-and-pop” shops to firms with “thousands of employees.”

The three complaints filed earlier this month say that AIG's alleged underreporting of workers comp premiums affected insured employers, including those insured by AIG competitors, in two ways.

First, they allege underreported premiums artificially increased the amount of surcharges that employers paid for special-purpose funds in the states where the lawsuits were filed. That includes New York's special disability fund, New Jersey's second injury fund, and fraud investigation funds in New York, New Jersey and California.

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An example in the New York complaint said the state may assess a 1% surcharge on workers comp policy premiums to cover a theoretical $1 million in costs for its special-purpose fund operations.

The complaint alleges, “If a (workers comp) insurer falsely reported that it collected $25 million less in premium than it actually collected, the state regulators would still need $1 million to operate their guaranty fund; but, incorrectly believing that all private insurers and state insurance fund wrote an aggregate premium of $75 million in the state (rather than the $100 million actually written), the regulators would believe that they needed to impose a surcharge of 1.3%, instead of 1%, to cover the cost of administering the guaranty fund. As a result all policyholders in the state would pay an inflated surcharge that year.”

Additionally, the three suits allege that AIG would have profited by collecting inflated surcharges from its policyholders without paying the full amount to state regulators.

“In this manner, the fraudulent underreporting of (workers comp) insurance premium allowed (AIG) to not only evade premium taxes they otherwise owed but also to unlawfully profit from the state-mandated surcharges that they levied on their policyholders,” according to the suit filed in New York.

Messrs. Pomerance and Brandt said there are no immediate plans for their firms to file additional suits against AIG, but said other attorneys could follow their lead.

“I certainly have no control over whether other lawyers who are now aware of our lawsuits rush to the court to file copycat suits in other states,” Mr. Pomerance said.