American International Group and C.V. Starr & Co. Inc. have agreed to some form of arbitration to settle the dispute that began when Maurice Greenberg was ousted as AIG chairman.

At a hearing yesterday, New York Supreme Court Justice Herman Cahn urged the parties to take the mediation path and set a hearing for Monday at 11 a.m. to monitor progress and hear continuing arguments on both sides as to his previous restraining orders.

Mr. Greenberg, who was forced out as AIG chairman and chief executive officer amid an investigation of the insurer's accounting irregularities, has been using the Starr brokerage and managing general agent entities, which were once inextricably linked with AIG, as his new industry flagship in the aftermath of his ouster.

Since Mr. Greenberg's departure current AIG board members have sold their stock in Starr, which has served in the past as a vehicle providing AIG executive compensation and bonuses, and the insurer has tried to buy Starr, which holds a substantial portion of AIG stock.

In the recent court battle between the two companies, AIG accused Starr of trying to steal business using longstanding relationships developed when Starr and the company were seen essentially as one unit.

Starr has sought to enter into insurance and reinsurance agreements on behalf of its clients with companies other than AIG, including National Indemnity Company, a unit of Berkshire Hathaway.

On Monday Judge Cahn issued a temporary restraining order prohibiting Starr from going after existing AIG business, but allowed the agency to seek new clients for NICO insurance.

Yesterday Judge Cahn kept that order in place along with one that bars AIG from preventing Starr employees from entering offices that are housed within AIG premises in Atlanta.

The proceedings, which have already seen AIG call a Starr unit a "rogue agent" and Starr accuse AIG of trying to destroy the business, were not without some acrimony in the courtroom yesterday.

Tempers flared as Starr attorney David Boies and his AIG counterpart, Michael Carlinksy, both based in New York City law firms, parsed the unique nature of the relationship between AIG and Starr and the consequences of the split of the once inseparable entities.

Mr. Boies took particular exception to Mr. Carlinsky's claim that somehow Starr representatives were still feigning a relationship with AIG.

"Nobody who has read the papers in the past couple of weeks believes the Starr agencies and AIG are one now," he said. Mr. Carlinsky, for his part, was frequently gesticulating and red-faced during the course of the arguments.

Special Reports /

Judge Tells AIG, Starr To Mediate Divorce

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