NU Online News Service

A federal court's order to American International Group to hand over more than 400,000 documents to insurers is the latest round in a three-year-old dispute over unpaid workers' compensation premiums that one insurer said amounts to more than $1 billion.

U.S. Magistrate Judge Sidney I. Schenkier, sitting in U.S. District Court for the Northern District of Illinois Eastern Division, in Chicago, ordered AIG to complete its review of approximately 400,000 documents by Sept. 1. The court said AIG must present those documents that are not considered privileged by that date and produce a log of those that are withheld because they are privileged by Sept. 30.

AIG has already produced more than 287,000 of pages of documents, the court noted.

Mark Herr, a spokesman for AIG, said in an e-mail statement that the court set out a timetable the company had suggested for documents AIG has agreed to produce.

The action goes back to a settlement reached with the New York Attorney General's office and federal authorities back in 2006, according to court papers.

At that time AIG agreed to a $1.6 billion settlement and paid $42 million to various states for tax evasion allegations related to the underreporting of workers' compensation premiums to avoid paying its total obligation to state residual funds.

The National Council on Compensation Insurance Inc. filed suit in 2007 alleging that other carriers were harmed by AIG's practice because they were forced to pay more than their fair share into the residual plans.

AIG filed counter claims alleging other carriers had underreported their portion workers' compensation obligations.

Last year, the court dismissed NCCI's suit, stating that NCCI lacked jurisdiction. But Liberty Mutual took up the suit on behalf of the NCCI and others.

According to a complaint filed in October, Liberty Mutual accused AIG of racketeering, saying the practice went on for decades and the total harm exceeds $1 billion.

In his statement, Herr said AIG is committed to "a full development of the record" and accused the company's competitors of fighting to avoid producing evidence that shows how much they had underreported on their own workers' compensation premiums.

Special Reports /

Insurers Seek Over $1B From AIG On WC Premium Dispute

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