AIG Pays $900K to Reconcile Mass. Workers’ Comp Payout Problems

September 8, 2009

AIG has paid an additional $900,000 to the Central Artery Tunnel (CA/T) Project in Massachusetts as part of an ongoing reconciliation of premiums and residual market payouts stemming from the insurer’s settlement of Big Dig workers’ comp premium issues with the attorney general’s Office.

AIG is the workers’ compensation carrier for the Central Artery Tunnel (CA/T) Project. Under a May 2007 settlement, AIG agreed to pay $58.5 million to the state after a review by the attorney general’s Office uncovered that the company failed to pay the surplus money as required under its contract. AIG also agreed to pay $26 million in losses to the state plus interest. The recovered money, which represents 15 years of unpaid surplus funds, was returned to the Big Dig, minus $40,000 in attorneys’ fees and costs.

Last August, after discussions with the attorney general’s office, AIG paid an additional $200,000 to the state for reconciliations of premiums not yet paid out. This year, per the ongoing reconciliation arrangement, AIG has made a further payment of $900,000.

The worker’s compensation insurance system in Massachusetts is a “residual market system.” This allows high risk employers such as roofing and construction companies 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 state, there was a caveat which stipulated that years when the insurance pool loses money, the state is required to pass that money back to AIG. Similarly, years when AIG experienced an additional pool share, that money should have been passed back to the Central Artery Tunnel Project. The attorney general’s 2007 review showed that AIG failed to both charge the state and pass along surplus monies as agreed in the contract.


Source: Office of Attorney General Martha Coakley

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