Policyholders suing American International Group (AIG) over alleged excessive workers' compensation rates can continue to do so, the Supreme Court of South Carolina has ruled.
The U.S. District Court for the District of South Carolina had asked the state Supreme Court to determine if a state rate doctrine prohibited the lawsuit against AIG filed by Temporary Services Inc. and Charleston Steel and Metal Company.
The rate doctrine states that because a state agency has the authority to determine rates, courts cannot judge what a reasonable rate should be in a collateral lawsuit, according to court records.
However, the state Supreme Court ruled the policies at issue in the case were exempt commercial policies--part of the state's assigned risk program--and therefore the doctrine does not apply.
The companies allege AIG fraudulently charged excessive workers' compensation premiums, according to court documents. The insurer underreported premiums to the assigned risk pool, the suit alleges.
AIG could not be reached for comment.
The plaintiffs in the case originally filed their suit in 2008 in federal court and are asking for class-action status for other policyholders.
According to the federal court filing, the plaintiffs alleged that for decades AIG may have filed incorrect financial reports about its workers' compensation business and misclassified the business as general liability or other lines of insurance. AIG allegedly used the reports to justify increasing its lost-cost multipliers and charging more premiums, the suit states.
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