AIG's US Life loses Calif. workers' comp appeal

(AP) — An appeals court has upheld an arbitration award requiring American International Group's U.S. Life Insurance Co. unit to pay more than $517 million in reinsurance to certain California workers' compensation insurers in liquidation.

U.S. Life was a reinsurer for five California workers' compensation insurance companies liquidated in 2000.

U.S. Life argued it shouldn't have to pay out the claims, saying Superior National and its affiliates failed to disclose all pertinent information regarding their reserves for paying claims, exposing U.S. Life to substantial losses.

In June 2007, a California court ruled U.S. Life should pay $443.5 million to the insurers. U.S. Life appealed that judgment but a three-judge panel in the 9th U.S. Circuit Court of Appeals upheld it Jan. 4.

California Insurance Commissioner Steve Poizner said Wednesday in a statement that including interest, U.S. Life now owes more than $517 million.

AIG spokeswoman Christina Pretto said the company is "reviewing the 9th Circuit's decision and our possible responses to it."

The California Insurance Guarantee Association has been paying the claims of injured workers whose policies were reinsured by U.S. Life. Once the money is collected from U.S. Life or from the $600 million bond AIG posted as security, it will be distributed to CIGA and other guaranty associations. CIGA will receive about 90 percent of the final amount.