Liberty Mutual Wants to Lead Lawsuit Against AIG

Liberty Mutual Group Inc. is asking a Chicago federal judge to let it act as lead plaintiff in a workers' compensation lawsuit against American International Group Inc.

The 2007 lawsuit -- claiming $1 billion in damages -- had originally been filed in U.S. District Court in Northern Illinois by the National Council on Compensation Insurance, but Judge Robert W. Gettleman dismissed the NCCI's complaint on Aug. 20, deciding the organization lacked the legal standing to sue.

The rejection of NCCI didn't conclude other parts of the case, though. Liberty Mutual filed a motion to realign the parties in the lawsuit, seeking to have its claims "proceed as the 'main' claims" in the case. "The court should realign the parties such that the Liberty Parties are denominated as plaintiffs," the argument read.

The NCCI, which manages the National Workers' Compensation Reinsurance Pool that includes hundreds of insurers, had accused AIG (NYSE: AIG) of engaging in massive fraud to underpay market assessments over a period of decades. It argued unfair exclusion from an AIG agreement with New York state regulators to pay $343 million for alleged underpayment of workers' compensation premium taxes and other related fees and assessments (BestWire, March 26, 2008).

AIG had praised Gettleman's decision to reject NCCI, calling the NCCI case "deficient for several reasons." However, the potential for a continuing class-action suit against AIG remains. Spokeswoman Christina Pretto had said of that possibility, "AIG intends to seek dismissal of that case at the appropriate time."

When asked separately about Liberty Mutual's court filing, AIG spokesman Mark Herr responded: "It is ironic that Liberty filed these claims after the court dismissed the case brought by NCCI, given that we allege Liberty and certain subsidiaries were engaged in misreporting in connection with its workers' compensation business."

After being sued by NCCI, AIG had countersued insurance companies it alleged engaged in under-reporting of workers' compensation premiums. That misreporting to NCCI dates back as far as 1986, when NCCI discussed such conduct in a summary report to pool members, AIG charged (BestWire, March 26, 2008).

Most AIG insurance companies currently have Best's Financial Strength Ratings of A (Excellent). Liberty Mutual's insurance companies also have current ratings of A (Excellent).