AIG Wins Approval for $450 Million Workers’ Comp Settlement


A federal judge approved a $450 million settlement between American International Group Inc. and a group of its rivals, which could end a long-running legal fight over alleged underreporting of premiums on workers’ compensation policies.

AIG agreed to make the payments to settle allegations that it incorrectly reported the size of its workers’ compensation business to state insurance regulators during the 1980s and 1990s. The alleged actions resulted in AIG making lower contributions to state-mandated pools covering injured workers without private coverage.

The court ruling, issued on Dec. 21 by Judge Robert W. Gettleman in Chicago, said the settlement was “fair, reasonable and adequate” and a final written order would be issued later.

The settlement was originally reached in January between AIG and seven other insurers, who were representing themselves and others. The proposed deal required court approval. It was opposed by Liberty Mutual Group, which sued AIG in 2009 before other insurers stepped into the case. Liberty mounted legal challenges to the settlement over the past year, saying it was inadequate and detrimental to the interests of hundreds of insurance companies.

On Tuesday, a Liberty Mutual spokesman said the Boston-based firm “is disappointed—but not surprised—with the judge’s order approving the settlement.” He said Liberty Mutual plans to review the final written order, “and anticipates an appeal.”

If the settlement proceeds, the money paid by AIG is to be distributed among hundreds of insurance companies that were affected by its alleged conduct. AIG earlier separately agreed to pay $146.5 million to resolve a multistate probe over the same issue. The state settlement won’t be final until the civil litigation is resolved.

An AIG spokesman said: “We are pleased with the court’s decision and to have put this matter behind us.”