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$1 Billion Fraud and Conspiracy Case Against AIG Dismissed
The American Lawyer
August 24, 2009
In the wake of that whole bringing-the-world-financial-system-to-the-brink-of-collapse thing, we had all but forgotten that a few years ago, AIG was on the hot seat with New York and federal authorities for shortchanging workers compensation funds. And even after it made peace with regulators, it faced a $1 billion fraud and conspiracy case by a big group of insurers making similar claims. But now it's off that particular hook as well: On Thursday, Chicago federal district court Judge Robert Gettleman dismissed the suit (pdf), finding that the plaintiff, an organization called the National Council on Compensation Insurance, does not have standing to bring the case against AIG.
In 2006, AIG agreed to pay $343 million to settle regulators' workers comp claims, as part of the broader $1.6 billion accounting scandal settlement that sent CEO Hank Greenberg packing. But NCCI -- which administers a pool that serves as a payer of last resort for injuries at companies that can't acquire insurance on the open market -- believed the workers comp portion of the settlement was insufficient. It refused to allow any state to tender a release on its behalf, then in 2007 sued AIG on behalf of 600 insurers that contribute to the workers comp insurance pool. NCCI, represented by a Locke Lord Bissell & Liddell team led by Rowe Snider, claimed that AIG's false reports shortchanged the other insurers to the tune of at least $1 billion.
Gettleman, however, ruled that the NCCI, as the administrator of the pool, does not have standing to sue. The complaint alleged that NCCI relied upon AIG's false reports and misrepresentations in carrying out its duties. It did not, however, allege that either NCCI or the pool was harmed as a result of AIG's actions, the judge said. "This defect in the complaint is not a mere technicality, but compromises the underlying premise of NCCI's theory of the case," Gettleman concluded. "Merely assigning a case to an attorney to prosecute the claim does not confer standing." Scoring the win for AIG was Quinn Emanuel Urquhart Oliver & Hedges, whose team was led by Michael Carlinsky and Jennifer Barrett.
If the 600 insurance companies NCCI represented want to continue to pursue claims against AIG, they will have to do so individually. It's unclear whether the bulk will sue, but several have filed putative class actions and Liberty National has filed an individual suit. Safeco Insurance Co. of America filed a lawsuit on April 14, which was reassigned to Gettleman. Also pending before Gettleman is AIG's counterclaim against Liberty Mutual, Hartford Financial Services and Travelers (among others), which claims that AIG's rivals also misled regulators.
Gettleman ordered the parties to appear on Sept. 4 for a hearing on the Safeco case and other matters involving the litigation against AIG.
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.
Associated Press reports contributed to this article.
