RICO Claim Against AIG for Workers’ Comp

CHICAGO (CN) - American International Group underreported workers' compensation premiums for decades, causing employers to pay inflated premiums and state surcharges, a medical marketing group claims in a federal class action.

Beach Medical Marketing sued AIG and 12 subsidiaries; it's the fourth such class action against AIG this fall.

It follows on the heels of three coordinated lawsuits filed in San Francisco, Manhattan, and Newark federal courts one month ago. All the lawsuits contain similar allegations of fraud, unjust enrichment, and racketeering.

Insurance companies that offer workers' compensation coverage are required to report the workers' comp premiums they receive yearly to state insurance departments, which set certain financial obligations on the insurance careers based on the share of premiums collected.

But since the 1970s, AIG has conspired "to evade and/or reduce their financial obligations, defendants engaged in a scheme to underreport the amount of WC [worker's compensation] insurance premiums they collected. As a result, WC insurance policyholders were overcharged for certain surcharges and fees assessed by the states," according to the new lawsuit.

Beach Medical, a California business required to purchase workers compensation insurance, seeks to represent employers in California, Maine, Minnesota, Missouri, Montana, New Jersey, New York and West Virginia.

"By engaging in a systematic underreporting of WC premiums written, defendants not only wrongly enriched themselves, but also caused plaintiff and other WC policyholders in the relevant states to pay improperly inflated state insurance surcharges and to suffer other damage," the complaint states.

An internal memorandum uncovered in 2005, written by AIG's general counsel Michael Joye in 1992, shows AIG was aware of its illegal activity, and strove to continue it, while concealing its deception from government authorities by keeping more than one set of books and records, according to the complaint.

AIG has since admitted its false-premium reporting, and paid billions to settle related claims.

But businesses have not been compensated for the higher premiums they paid for decades due to AIG's illegal underreporting, the complaint states.

Beach Medical seeks disgorgement and punitive damages for RICO violations, negligent misrepresentation and unjust enrichment.

It is represented by Elizabeth Fegan with Hagens, Berman, Sobol & Shapiro, of Oak Park.

Former CEO Maurice Greenberg is also a defendant.

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