AIG vindicated in 'ill-conceived' class action suit
AIG is accused of giving the plaintiffs refunds in the middle of the case as a “contrived” move to resolve the legal claims.
Despite already refunding his clients, attorney Kip Richards gave one final shot at trying to convince a federal judge that he still had valid claims against AIG over refunds owed to its consumers whose trips were canceled by the COVID-19 pandemic. That didn’t sit well in front of Senior Judge Kathryn Vratil of the District of Kansas.
“This is one of the most ill-conceived class actions I have ever seen,” said Vratil, according to a transcript of a May 12 hearing, “and I’ve given you a chance to try to rectify that and come up with a manageable class with a legitimate path forward, and you don’t seem to be interested in doing that.”
She granted judgment the following day.
The case against AIG is one of dozens brought over refunds for canceled flights and cruises tied to the pandemic. Unlike most lawsuits, however, the case delved into accusations of “gamesmanship” and acts that were “contrived.”
“I did my best to convince her otherwise in the argument, but she wasn’t budging,” said Richards of Walters Renwick Richards Skeens & Vaughan in Kansas City, Mo. “We didn’t even get it off the ground. These guys did a great job.”
AIG’s lead counsel, William Burck, a Washington, D.C., partner at Quinn, Emanuel, Urquhart & Sullivan, declined to comment. A former federal prosecutor and special counsel to President George W. Bush, Burck briefly represented Steve Bannon, former chief strategist for President Donald Trump, against charges of fraud and money laundering last year related to a crowdfunding campaign to build the wall on the border between the United States and Mexico.
Refunds don’t appease the plaintiff’s lawyer
Richards filed his case a year ago, alleging that Travel Guard Group Inc., part of AIG, failed to refund unearned premiums on travel insurance, particularly for coverage after the trip began, such as lost baggage or illness. His clients, Kansas couple Paul and Debra Gustafson, paid $410.27 for travel insurance coverage on the cruise trip, which was set to begin with a flight to Alaska on Aug. 25, 2020.
Princess Cruise Lines canceled the plaintiffs’ trip on April 15, but Travel Guard refused to refund the prorated premiums, Richards said.
“This happened with the Gustafsons, who are really pissed off about the whole thing when their trip canceled and everyone gave their money back except Travel Guard,” Richards said. “They contacted the agent; I contacted the agent and said they can’t hold that money; it’s an unearned premium. When the insurance company takes money from someone as a prepaid premium, and the risk doesn’t attach, they have to return it,” meaning the travel-related risks in the policy did not exist because the trip never happened.
AIG said it would offer the plaintiffs a voucher to be available for the next two years.
But after receiving a refund request from a Kansas customer, AIG realized it had made a mistake. Unlike most other states, which have a 15-day window for policyholders to cancel their travel insurance, AIG’s policy language allowed Kansas customers to cancel any time. AIG reached out to the Kansas Insurance Department to identify all policyholders in Kansas, according to a declaration by Richard Gallagher, head of U.S. and Canada for AIG Travel. He wrote that AIG planned to provide full refunds of premiums on travel insurance to Kansas policyholders by Dec. 31, 2020.
Among them were the Gustafsons.
That gave AIG new grounds on which to toss the case. In a Dec. 17 motion to dismiss, AIG’s lawyers argued that, because of the refund, the plaintiffs now lacked standing to sue. AIG also filed a companion motion to strike the class claims given that the Gustafsons couldn’t adequately represent unrefunded class members in other states anymore.
“Although plaintiffs’ counsel was informed in multiple communications of defendant’s intention to comply with their Kansas refund obligations, and although the Gustafsons have already received a refund, they persist with their class-action lawsuit,” they wrote in the dismissal motion, also filed by local counsel at Shook, Hardy & Bacon in Kansas City. “In so doing, plaintiffs and their attorneys refuse to admit the obvious: they have no case.”
Richards doubled down, opposing both motions and insisting that AIG’s refunds did not moot his case, which was a nationwide class action based on a claim that the insurer had kept money it shouldn’t have, not that it breached its contracts with its consumers.
Richards also accused AIG of giving refunds to his clients in the middle of the case as a “contrived” move to resolve the legal claims, according to a Jan. 7 opposition to the motion to strike.
“Despite what they think, defendants cannot simply decide to end this properly commenced class action by issuing credits and sending out checks months after the lawsuit was filed and before the court has a chance to decide certification,” Richards wrote in a Jan. 14 opposition to the motion to dismiss.
And AIG hadn’t proved that all Kansas policyholders had received refunds, he added. Moreover, Richards insisted his clients, who did not request to cancel the policy, would not accept the refund.
A ‘lawyer-driven’ case
AIG, in a reply brief, called that “gamesmanship,” and Burck, referring to the lawsuit as a “plaintiffs’ lawyer-driven case, not a plaintiffs’ driven case,” told the judge at the May 12 hearing that the Gustafsons had mailed their refund back just five days earlier.
That put Richards in the hot seat.
“I mean, what are you doing?” Vratil asked Richards. “Why are you seeking a remedy other than what you’re entitled to under the contract?”
Vratil found that the Gustafsons, under Kansas contract law, had the right to cancel the policy and get their money back but chose to turn down a refund.
“This is not a money grab,” Richards told the judge, according to the transcript. “We’re doing this— we filed this lawsuit for one reason: We think under the law what they are doing is wrong.”
After she questioned whether his actions deserved sanctions, Richards responded that he was “emotionally hurt.”
“I’ve never had anything like that said about my ability,” he said. “How can we win? And with your view that this is a contract action and solely a contract action governed by the Kansas contract, I don’t know how we can.”
Still, Richards hasn’t given up. He said he would consider his options, including petitioning the U.S. Court of Appeals for the Tenth Circuit.
“We’ll do whatever we have to right this,” Richards said.
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