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AIG will pay $450 million to a class of insurance companies to resolve a lawsuit that alleged the company fraudulently under-reported premiums on workers' compensation policies, after U.S. District Judge Robert Gettleman (Northern District of Illinois) issued a Memorandum Opinion and Order, and final judgment, approving a settlement between the parties.

Goldberg Kohn was certified as Settlement Class Counsel to represent approximately 1300 insurance companies to effectuate a class-wide settlement with AIG. The firm represents seven insurance companies who intervened in a class action lawsuit filed against AIG in the United States District Court. 

Frederic Klein, a principal in the firm's Litigation Group, was lead counsel to the Settlement Class Plaintiffs. Mr. Klein worked closely with counsel to the National Workers Compensation Reinsurance Pool ("NWCRP") Board of Governors and other counsel for the Settlement Class Plaintiffs to effectuate the settlement. Other members of the Goldberg Kohn team included William Meyers and Kerry Nelson.

Judge Gettleman’s order lauded the efforts of the attorneys, writing that "the court has had extensive opportunities to evaluate Settlement Class Counsel's competence and has found its representation of the settlement class to be exemplary.” In an earlier opinion, Judge Gettleman stated that Goldberg Kohn has "extensive experience in complex litigation and with class action lawsuits" and "the credentials of [Goldberg Kohn] this court regards as excellent."

In approving the settlement, Judge Gettleman overruled objections to the settlement lodged by Liberty Mutual Insurance Company and two of its subsidiaries, stating:  "In comparison to the uncertain and unknowable benefits of litigation, the benefits of this settlement agreement are significant."  Liberty Mutual and two of its subsidiaries have appealed to the United States Court of Appeals for the Seventh Circuit.

“This ruling is a victory for our clients and the entire workers compensation insurance industry,” said Klein. “The credit goes to these insurance companies and the NWCRP Board of Governors who had the courage to see this hard-fought case through to a fair settlement with AIG.”

The terms of the settlement provide that AIG will pay $450 million to participating companies in the NWCRP who suffered damages due to AIG's conduct, as well as appropriately adjust AIG's share of future residual market payments. The seven Settlement Class Plaintiff companies are: ACE INA Holdings, Inc., Auto-Owners Insurance Co., Companion Property & Casualty Ins. Co., FirstComp Insurance Co., The Hartford Financial Services Group, Inc., Technology Insurance Co., and The Travelers Indemnity Company. Their efforts to settle this complex and important case were actively supported by the Board of Governors of the NWCRP on behalf of the industry.

"The settlement agreement is a fair and reasonable compromise of these complex and disputed claims between the Settlement Class Plaintiffs, the class they represent, and AIG," said Klein. "The settlement is in the public interest because of the positive impact the settlement is likely to have on the relationships between hundreds of workers compensation insurers and the regulatory bodies in virtually every state, and also because of the stability this will bring to the national pool, generally called the NWCRP."


The underlying lawsuits were filed in 2007 and 2009 in the wake of an investigation in 2005 by then-Attorney General Eliot Spitzer in New York into various practices of AIG. Some of the fodder for the New York investigation (and ultimately the Chicago cases) was a detailed 1992 memo by the then-General Counsel of AIG who concluded that AIG had been engaged in a multi-year conspiracy to defraud other insurance companies and state taxing bodies, who were wrongfully deprived of hundreds of millions of dollars in payments. 

On January 13, 2011, United States District Court Judge Robert Gettleman allowed Goldberg Kohn's seven clients to intervene in the longstanding case, over the objection of Liberty Mutual and its subsidiaries, the original named plaintiffs in the lawsuit. Accordingly, Goldberg Kohn's clients filed a motion to certify a settlement class and for preliminary approval of this $450 million class action settlement with AIG. After many months of briefing and numerous lengthy oral arguments before the court, the motion to certify a settlement class and for preliminary approval of the settlement was granted on July 26, 2011. Thereafter, notice of the proposed settlement was sent to more than 1300 insurance companies who had the right to join in, opt out of, or object to the settlement. The notices informed the class members of their shares of the settlement, which ranged from $0 to $99 million. Of the 1300 companies, only one with a distributable share of $458 opted out, and ultimately only the Liberty Mutual companies (who will receive $99 million under the Plan of Allocation) objected to the settlement based on their belief that the case should have settled for no less than $3 billion, with Liberty Mutual itself receiving more than $700 million. 

On December 21, 2011, Judge Gettleman granted final approval of the $450 million settlement and overruled all of Liberty Mutual's objections, and the Court's February 28, 2012 Memorandum Opinion and Order reflected the Court's reasoning. As Judge Gettleman noted at a number of hearings, this case involved more lawyers than a typical Multi-District Litigation because here, according to the judge, usually 70 lawyers representing dozens of insurance companies attended most hearings. The United States Court of Appeals for the Seventh Circuit will likely decide the case in 2013.