The fallout from New York’s insurance scandals continues for American International Group with a federal lawsuit filed by two Minnesota workers’ compensation programs seeking as much as $150 million in damages from the carrier.

Their action alleged the insurer was guilty of civil violations under the Racketeer Influenced and Corrupt Organizations Act, under which the plaintiff can collect three times the alleged damage.

The suit by the Workers’ Compensation Reinsurance Association (WCRA) and Minnesota Workers’ Compensation Insurers Association Inc. (MWCIA), both in St. Paul, Minn., accused AIG of submitting false and fraudulent data in order to avoid paying the proper premium over a 22-year period.

The groups filed their complaint in U.S. District Court in St. Paul.

The WCRA was created in 1972 by the state of Minnesota to provide reinsurance workers’ comp and self-insured programs, according to court documents. The insurer pays excess claims above a pre-established retention limit. The MWCIA, a nonprofit corporation, collects the data used by WCRA. Any insurer writing workers’ comp in the state is required to be a member of both.

The suit charges that AIG underreported the aggregate premium it collected in the state in order to avoid paying what it owed in reinsurance premium beginning in 1985.

An AIG attorney, General Counsel Michael Joye, reported the practice to AIG executives in a memo in 1992 when the insurer was still headed by Chairman and Chief Executive Officer Maurice Greenberg.

Despite the report, the practice continued until 2005 when it was uncovered by then New York Attorney General Eliot Spitzer during investigations into industry bid-rigging and steering of insurance contracts. AIG later entered into an agreement with Mr. Spitzer to reimburse policyholders for fraudulent business practices out of a $1.64 billion fund.

According to Randy Holmberg, actuarial vice president for the WCRA, the two organizations would have received $1.2 million out of the fund, a small amount of what the fund feels it is owed.

Mr. Holmberg said the organizations calculate they are owed $50 million, the combination of premium not paid and investment earnings. New York’s settlement, which was reached without any input from either the WCRA or MWCIA, does not come close to satisfying the loss, he said.

After two years of negotiation with AIG, the WCRA and MWCIA decided to sue, he said. The stumbling block was the price of the settlement.

Until Mr. Spitzer’s investigation, the WCRA and MWCIA were unaware of AIG’s practice, Mr. Holmberg admitted.

“Mr. Spitzer’s investigation unearthed a lot of documents,” said Mr. Holmberg. “We had no idea [AIG] was doing this.”

The lawsuit does not call for a set amount of money but does seek triple damages for AIG’s practice. Mr. Holmberg pointed out the lawsuit gives attorneys the opportunity to look more closely at AIG’s books, which could result in initial damages above the $50 million they were originally negotiating.

With the discovery of AIG’s practice the WCRA and MWCIA plan to ratchet up their auditing process, Mr. Holmberg said. But for an insurer the size of AIG, “if someone wants to hide something, it is going to be difficult to find.” He added the organizations are confident the numbers being reported to the bureau are valid.

Joe Norton, a spokesman for AIG, said the company does not comment on ongoing litigation.