Liberty Mutual ‘Disappointed’ at AIG Workers’ Comp Settlement

Liberty Mutual said it will continue its legal fight even after a federal judge formally approved a $450 million workers’ compensation class-action settlement between AIG and its rival companies.

The class action alleged that American International Group (AIG) and its subsidiaries had intentionally under-reported workers’ comp premiums to state regulators for decades, in an attempt to pay smaller premium taxes and residual market charges before 1996. In the class action, insurers said AIG’s scheme hurt them financially because AIG, with its under-reporting, was allowed a smaller share of the high-risk residual market assessments.

According to the settlement, formally approved by U.S. District Court Judge Robert Gettleman on Feb. 28, AIG will pay $450 million, which will be divided up among commercial insurers that were affected by AIG’s alleged scheme.

The settlement class was certified in July 2011 by Judge Gettleman and the $450 million settlement was given preliminary approval last December.

But Liberty Mutual, one of the insurers in the class action, argues that the settlement is inadequate. The current settlement assumes that AIG under-reported its workers’ comp premiums by $2.1 billion, an amount that the opponents of the settlement are calling too small.

“Liberty Mutual is disappointed — but not surprised — with the Judge’s final written order. Liberty Mutual has filed an appeal,” Liberty Mutual spokesman Richard Angevine told Insurance Journal.