AIG 2007 Annual Report Download - page 74

American International Group, Inc. and Subsidiaries
ants’’) are also liable for fraud and suppression, misrepresenta-
Item 2.
tion, and breach of fiduciary duty. The complaints filed by the
Properties
plaintiffs and the intervenor-plaintiffs request compensatory dam-
AIG and its subsidiaries operate from approximately 2,100 offices ages for the 1999 class in the amount of $3.2 billion, plus
in the United States, 6 offices in Canada and numerous offices in punitive damages. AIG and its subsidiaries deny the allegations of
approximately 100 foreign countries. The offices in Greensboro fraud and suppression and have asserted that information
and Winston-Salem, North Carolina; Springfield, Illinois; Amarillo, concerning the excess policy was publicly disclosed months prior
Ft. Worth, Houston and Lewisville, Texas; Wilmington, Delaware; to the approval of the settlement. AIG and its subsidiaries further
San Juan, Puerto Rico; Tampa, Florida; Livingston, New Jersey; asser t that the current claims are barred by the statute of
Evansville, Indiana; Nashville, Tennessee; 70 Pine Street, 72 Wall limitations and that plaintiffs’ assertions that the statute was
Street and 175 Water Street in New York, New York; and offices in tolled cannot stand against the public disclosure of the excess
more than 30 foreign countries and jurisdictions including Ber- coverage. The plaintiffs and intervenor-plaintiffs, in turn, have
muda, Chile, Hong Kong, the Philippines, Japan, the U.K., asserted that the disclosure was insufficient to inform them of
Singapore, Malaysia, Switzerland, Taiwan and Thailand are located the nature of the coverage and did not star t the running of the
in buildings owned by AIG and its subsidiaries. The remainder of statute of limitations. On November 26, 2007, the trial court
the office space utilized by AIG subsidiaries is leased. issued an order that dismissed the intervenors’ complaint against
the Lawyer Defendants and entered a final judgment in favor of
Item 3. the Lawyer Defendants. The intervenors are appealing the dismis-
Legal Proceedings sal of the Lawyer Defendants and have requested a stay of all
trial court proceedings pending the appeal. If the motion to stay is
General granted, no further proceedings at the trial court level will occur
AIG and its subsidiaries, in common with the insurance industry in until the appeal is resolved. If the motion to stay is denied, the
general, are subject to litigation, including claims for punitive next step will be to proceed with class discovery so that the trial
damages, in the normal course of their business. See also court can determine, under standards mandated by the Alabama
Note 12(a) to Consolidated Financial Statements, as well as the Supreme Court, whether the action should proceed as a class
discussion and analysis of Reserve for Losses and Loss Ex- action. AIG cannot reasonably estimate either the likelihood of its
penses under Operating Review — General Insurance Operations prevailing in these actions or the potential damages in the event
in Management’s Discussion and Analysis of Financial Condition liability is determined.
and Results of Operations.
Litigation Arising from Insurance Operations — Gunderson. A
Litigation Arising from Operations. AIG and its subsidiaries, in subsidiary of AIG has been named as a defendant in a putative
common with the insurance and financial services industries in class action lawsuit in the 14th Judicial District Court for the
general, are subject to litigation, including claims for punitive State of Louisiana (Gunderson). The Gunderson complaint alleges
damages, in the normal course of their business. In AIG’s failure to comply with certain provisions of the Louisiana Any
insurance operations, litigation arising from claims settlement Willing Provider Act (the Act) relating to discounts taken by
activities is generally considered in the establishment of AIG’s defendants on bills submitted by Louisiana medical providers and
reserve for losses and loss expenses. However, the potential for hospitals that provided treatment or services to workers compen-
increasing jury awards and settlements makes it difficult to sation claimants and seeks monetary penalties and injunctive
assess the ultimate outcome of such litigation. relief. On July 20, 2006, the court denied defendants’ motion for
summary judgment and granted plaintiffs’ partial motion for
Litigation Arising from Insurance Operations — Caremark. AIG summary judgment, holding that the AIG subsidiary was a ‘‘group
and certain of its subsidiaries have been named defendants in purchaser’’ and, therefore, potentially subject to liability under the
two putative class actions in state court in Alabama that arise out Act. On November 28, 2006, the court issued an order certifying
of the 1999 settlement of class and derivative litigation involving a class of providers and hospitals. In an unrelated action also
Caremark Rx, Inc. (Caremark). The plaintiffs in the second-filed arising under the Act, a Louisiana appellate court ruled that the
action have intervened in the first-filed action, and the second-filed district court lacked jurisdiction to adjudicate the claims at issue.
action has been dismissed. An excess policy issued by a In response, defendants in Gunderson filed an exception for lack
subsidiary of AIG with respect to the 1999 litigation was expressly of subject matter jurisdiction. On January 19, 2007, the court
stated to be without limit of liability. In the current actions, denied the motion, holding that it has jurisdiction over the putative
plaintiffs allege that the judge approving the 1999 settlement was class claims. The AIG subsidiary appealed the class certification
misled as to the extent of available insurance coverage and would and jurisdictional rulings. While the appeal was pending, the AIG
not have approved the settlement had he known of the existence subsidiary settled the lawsuit. On January 25, 2008, plaintiffs
and/or unlimited nature of the excess policy. They further allege and the AIG subsidiary agreed to resolve the lawsuit on a class-
that AIG, its subsidiaries, and Caremark are liable for fraud and wide basis for approximately $29 million. The court has prelimina-
suppression for misrepresenting and/or concealing the nature and rily approved the settlement and will hold a final approval hearing
extent of coverage. In addition, the intervenor-plaintiffs allege that on May 29, 2008. In the event that the settlement is not finally
various lawyers and law firms who represented parties in the approved, AIG believes that it has meritorious defenses to
underlying class and derivative litigation (the ‘‘Lawyer Defend-
20 AIG 2007 Form 10-K