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COMMENTARY: Employers must shoulder burden of proof in AIG workers comp suit


American International Group Inc. underreported its workers compensation premiums years longer than previously reported, if new allegations filed by attorneys seeking to represent employers in several new lawsuits are true.

However, the plaintiffs say they don't yet have proof to back that claim. So it will be interesting to see whether these lawsuits advance and if plaintiffs have to prove that allegation.

I also find the employer plaintiffs in these recently filed lawsuits interesting. One of them is tied to Palm Medical Inc. The occupational medical clinic gained attention a few years ago for winning $1.1 million in a lawsuit claiming that the California State Compensation Insurance Fund unfairly excluded it from the insurer's preferred provider networks.

The California Chamber of Commerce opposed that lawsuit, fearing it would undermine insurer and employer ability to reduce costs by selecting network members.

But before proceeding, allow me to background readers unfamiliar with the roots of the topic at hand.

The lawsuits recently filed in California, New Jersey and New York seek to represent employers as a class. They claim employers suffered harm when AIG, over several decades, escaped premium assessments and taxes by allegedly underreporting workers comp premiums to state regulators across the country.

The underreporting allegations first surfaced in 2006, when then-New York Attorney General Eliot Spitzer accused AIG of the activity. But reports back then said the underreporting stopped around 1996.

In 2012, AIG paid $146.5 million to regulators in all 50 states to settle the 2006 allegations. A year earlier, AIG agreed to pay a $450 million settlement to several rival workers comp insurers who also claimed harm from the alleged underreporting.

But now plaintiffs in the new cases claim that employers also should get compensated because AIG harmed them, too.

As I said, the new employer plaintiffs make this lawsuit interesting. One employer is a small, Newark, N.J., body shop that began operations in 1998, about two years after reports said AIG's alleged underreporting stopped. So whether the body shop was substantially harmed by AIG depends on whether the underreporting occurred longer than previously thought.

The New Jersey plaintiffs say allegations that AIG underreporting may have continued into 2007 surfaced in the earlier litigation. But they say evidence pointing to that remains under seal.

The California lawsuit, meanwhile, lists Franjo Inc. as a plaintiff, and Franjo maintains the same Fresno, Calif., address and telephone number as Palm Medical. And the same law firm that represented Palm Medical in its lawsuit against California's SCIF now represents Franjo against AIG.

Following this case will remain interesting for several reasons — among them seeing whether the attorneys and Franjo, or Palm Medical, prevail again.