NU Online News Service, Sept. 8, 1:22 p.m. EDT
American International Group as a result of ongoing settlement negotiations has now paid $85.6 million related to its workers' compensation coverage for Boston's Central Artery Tunnel (CA/T) "Big Dig" project, it was announced.
The latest payment as part of a settlement action commenced in 2007 was $900,000, Massachusetts Attorney General Martha Coakley's office said. Completed in 2003, the 7.5 mile underground undertaking is estimated to have cost more than $20 billion.
According to the attorney general's announcement, the payment is part of an ongoing reconciliation of premiums and residual market payouts.
The Attorney General's Office said a review uncovered that the company failed to pay surplus money as required under its contract. Under the May 2007 settlement, AIG agreed to pay $58.5 million to the Commonwealth and also agreed to pay $26 million in losses to the state plus interest.
The recovered money, Ms. Coakley's office said, represents 15 years of unpaid surplus funds.
Last August, after discussions with the Attorney General's Office, AIG paid an additional $200,000 to the Commonwealth for reconciliations of premiums not yet paid out.
The Attorney General's Office explained that the workers' compensation insurance system in Massachusetts is a "residual market system" allowing high-risk employers to obtain insurance from a common pool of funding drawn from all insurers in the market place.
As part of the final contract between AIG and the Commonwealth, there was a caveat which stipulated that years when the insurance pool loses money, the Commonwealth is required to pass that money back to AIG, the Attorney General's Office said.
When AIG experienced an additional pool share, that money should have been passed back to the Central Artery Tunnel Project, but the Attorney General's Office said its 2007 review showed that AIG failed to both charge the state and pass along surplus monies as agreed in the contract.
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