South Carolina Says Feds Can Hear Case Against AIG

The federal courts can hear a case alleging that American International Group (AIG) Inc. submitted fraudulent data to South Carolina so that it could charge inflated premiums for workers’ compensation insurance policies, the Supreme Court of South Carolina decided late last month.

The suit, that will now go forward, alleges that AIG fraudulently underreported premiums to the assigned risk pool when it petitioned the state for rates, and that allowed AIG to charge excessive premiums. The suit has been brought by Temporary Services Inc. and Charleston Steel and Metal Company, as a class action suit.

The question before the state Supreme Court was whether the state’s filed rate doctrine prevented the U.S. District Court for the District of South Carolina from hearing the case and deciding. The filed rate doctrine says that because the state Department of Insurance is vested with the authority to determine fair and reasonable rates, courts cannot come along later and undermine the Department’s regulatory authority by deciding what a reasonable rate might be by itself.

The state Supreme Court ruled that workers’compensation policies are exempt commercial policies in South Carolina and do not fall under the authority of the Department of Insurance.

Topics South Carolina AIG