Two ongoing industry legal battles saw recent developments, as an appeals court vacated the convictions of former General Reinsurance Corp. and American International Group executives; and Liberty Mutual Group says it likely will appeal the preliminary approval given to a $450 million settlement between AIG and other companies stemming from a workers' compensation program dispute.
A panel of judges in the U.S. Second Circuit Court of Appeals in New York ordered a new trial for Ronald Ferguson, former CEO of GenRe; Elizabeth Monrad, former CFO of the company; Christopher Garand, former senior vice president; and Robert Graham, former assistant general counsel.
Christian Milton, former vice president at AIG, also won a new trial.
The group was convicted in 2008 after a six-week trial for their roles in an alleged bogus reinsurance deal that helped AIG inflate its loss reserves by $500 million.
The appeals court says the trial judge should not have allowed prosecutors to show the jury a chart of AIG's plummeting stock price after it became known regulators were looking into the alleged 2001 finite reinsurance transaction with GenRe, a unit of Warren Buffett's Berkshire Hathaway.
The mere suggestion that the reinsurance transaction caused AIG's stock to dive was “without foundation,” and since AIG's role in the collapse of the financial market in 2008 was well known, the charts “prejudicially cast the defendants as causing an economic downturn that has affected every family in America,” says the ruling.
The case against the former executives was the result of an investigation by the U.S. Securities and Exchange Commission and former New York Attorney General Eliot Spitzer.
Meanwhile, in a separate case, Liberty Mutual says it will “in all likelihood” appeal a settlement between AIG and a handful of companies that allege AIG cheated a workers' comp program.
AIG announced at the start of the year that it agreed to pay a group of companies—ACE, Auto Owners, Companion, FirstComp, Hartford, Technology and Travelers—$450 million to settle a lawsuit filed by Liberty Mutual's Ohio Casualty and Safeco subsidiaries in April 2009 on behalf of a pool of insurers alleging that AIG underreported workers' comp premiums over at least a 20-year period.
Liberty Mutual has worked to stop the settlement, saying it comes nowhere near the true extent of AIG's underreporting and that it was made because AIG also agrees to release the companies from a lawsuit it filed against them.
The case history goes back to 2007, when the National Council on Compensation Insurance (NCCI) originally filed the suit on behalf of a pool of insurers, but the case was dismissed because NCCI lacked jurisdiction. Liberty Mutual then took up the case and filed another lawsuit alleging AIG had underreported workers' comp premiums to residual insurer National Workers' Compensation Reinsurance Pool, which has spent an average of $2 million per month over the last year on legal fees.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
