AIG 2011 Annual Report Download - page 337

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On January 5, 2011, AIG executed a term sheet with a group of intervening plaintiffs, made up of seven
participating members of the NWCRP that filed a motion to intervene in the class action for the purpose of
settling the claims at issue on behalf of a settlement class. The proposed class-action settlement would require
AIG to pay $450 million to satisfy all liabilities to the class members arising out of the workers’ compensation
premium reporting issues, a portion of which would be funded out of the remaining amount held in the Workers’
Compensation Fund less any amounts previously withdrawn to satisfy AIG’s regulatory settlement obligations, as
addressed above. On January 13, 2011, their motion to intervene was granted. On January 19, 2011, the
intervening class plaintiffs filed their Complaint in Intervention. On January 28, 2011, AIG and the intervening
class plaintiffs entered into a settlement agreement embodying the terms set forth in the January 5, 2011 term
sheet and filed a joint motion for certification of the settlement class and preliminary approval of the settlement.
If approved by the Court (and such approval becomes final), the settlement agreement will resolve and dismiss
with prejudice all claims that have been made or that could have been made in the consolidated litigations
pending in the Northern District of Illinois arising out of workers’ compensation premium reporting, including the
class action, other than claims that are brought by any class member that opts out of the settlement. On April 29,
2011, Liberty Mutual filed papers in opposition to preliminary approval of the proposed settlement and in
opposition to certification of a settlement class, in which it alleged AIG’s actual exposure, should the class action
continue through judgment, to be in excess of $3 billion. AIG disputes and will defend against this allegation. The
Court held a hearing on the motions for class certification and preliminary approval of the proposed class-action
settlement on June 21 and July 25, 2011.
On August 1, 2011, the Court issued an opinion and order granting the motion for class certification and
preliminarily approving the proposed class-action settlement, subject to certain minor modifications that the Court
noted the parties already had agreed to make. The opinion and order became effective upon the entry of a
separate Findings and Order Preliminarily Certifying a Settlement Class and Preliminarily Approving Proposed
Settlement on August 5, 2011. Liberty Mutual sought leave from the United States Court of Appeals for the
Seventh Circuit to appeal the August 5, 2011 class certification decision, which was denied on August 19, 2011.
Notice of the settlement was issued to the class members on August 19, 2011 advising that any class member
wishing to opt out of or object to the class — action settlement was required to do so by October 3, 2011. RLI
Insurance Company and its affiliates, which were to receive less than one thousand dollars under the proposed
settlement, sent the only purported opt-out notice. Liberty Mutual, including its subsidiaries Safeco and Ohio
Casualty, and the Kemper group of insurance companies, through their affiliate Lumbermens Mutual Casualty,
were the only two objectors. AIG and the settling class plaintiffs filed responses to the objectors’ submissions on
October 28, 2011. The Court conducted a final fairness hearing on November 29, 2011. On December 21, 2011,
the Court issued an order granting final approval of the settlement, but staying that ruling pending a forthcoming
opinion. On January 19, 2012, Liberty Mutual and Safeco and Ohio Casualty filed notices of their intent to appeal
the Court’s order granting class-action settlement approval.
The $450 million settlement amount, which is currently held in escrow pending final resolution of the class-
action settlement, was funded in part from the approximately $191.5 million remaining in the Workers’
Compensation Fund, after the transfer of the $146.5 million in fines, penalties, and premium taxes discussed in the
NAIC Examination of Workers’ Compensation Premium Reporting matter above into a separate escrow account
pursuant to the regulatory settlement agreement. In the event that the proposed class action settlement is not
approved, the litigation will resume. As of December 31, 2011, AIG has an accrued liability equal to the amounts
payable under the settlement.
AIG 2011 Form 10-K 323