AIG to Refund $14 Million in Florida Settlement

By | September 27, 2006

Under a consent order issued by Florida Insurance Commissioner Kevin McCarty, AIG Insurance Company will be required to refund or credit approximately $13.6 million in workers’ compensation, and approximately $100,000.00 in non-workers’ compensation lines, plus interest, to policyholders in the state.

McCarty charged that AIG failed to justify rates or used excessive and unfairly discriminatory rates on coverage required by the federal Terrorism Risk Insurance Act.

“This is truly a victory for Florida’s consumers and businesses,” McCarty said. “Regardless of whether it is a small carrier or an industry giant like AIG, we will remain vigilant to assure that Floridians are not charged improper insurance rates.”

The excessive charges were for workers’ compensation, fire and allied lines, commercial property, surety, commercial automobile and general liability terrorism insurance coverage. The overwhelming bulk of the settlement came from the workers’ compensation terrorism coverage.

AIG will pay $300,000 to the Florida Office of Insurance Regulation for costs and fees related to the settlement.

Bob Lotane, OIR communications director, said his team’s work began in January 2003. “There was significant legal and staff time put into this,” Lotane said. “We operated in front of two different judges.”

Lotane said the settlement that was finalized this month and signed Tuesday was attained after “a lot of legal filing.” He said the money will be enough to cover the cost of staff time and office incidentals that were expended throughout the proceedings.

The refunds and credits will accumulate from the date AIG started charging the rates filed with the OIR (a period beginning January 2003 through March 2004) through the date in which a credit or refund is issued plus interest. All refunds must be made within one year from the date of issuance of the order.

The filings subject to the order were all made under the use-and-file provisions under Florida statute which allows the company to begin collecting premiums prior to and while the filing is being reviewed by the OIR and while it is being challenged. If the filing is ultimately disapproved any improperly collected premium must be refunded.

The OIR ultimately issued notices of intent to disapprove the filings or disapproved the filings, with the exception of the second surety filing and a general liability and commercial automobile filings which were pending before the insurance department during settlement discussions. In all of the other cases, AIG requested formal hearings before an administrative law judge.

Evidentiary hearings were held before the Division of Administrative Hearings on the burglary/theft and workers’ compensation rate filings. Following these full evidentiary hearings, two judges separately concluded that AIG had failed to justify its intended terrorism charge. A final order was issued by the OIR in July 2005 upholding the judge’s disapproval of the burglary/theft rate filing. A final order has not yet been issued in the workers’ compensation rate filing pending settlement discussions.

McCarty’s order further requires that AIG dismiss all remaining administrative hearings on filings in which orders have not been handed down. A copy of the OIR’s consent order can be viewed at:


Topics Workers' Compensation Florida Abuse Molestation AIG

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