Goldberg Kohn

AIG to Pay $450 Million to Settle Lawsuit Alleging Under-Reporting of Insurance Premiums

Judge Issues Final Order in High-Stakes Litigation

AIG will pay $450 million 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. To view Judge Gettleman?s February 28, 2012 Opinion click here.

Goldberg Kohn was certified as Settlement Class Counsel to effectuate a class-wide settlement with AIG. 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, Kerry Nelson, and Lindsay Hagy. 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."

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 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 clients to intervene in the longstanding case, over strenuous objections. 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.

On December 21, 2011, Judge Gettleman granted final approval of the $450 million settlement and overruled all objections, and the Court's February 28, 2012 Memorandum Opinion and Order reflected the Court's reasoning. The matter is on appeal before the United States Court of Appeals for the Seventh Circuit. A decision is expected sometime in 2013.

March 28, 2012

If you have any questions with respect to this Client Alert, please contact:

Frederic Klein

William Meyers

Lindsay Hagy

Kerry Nelson

If you do not wish to receive information from Goldberg Kohn, please reply to this email with "REMOVE" in the subject line.