AIG Wins Claim in Coventry Life Settlement Scheme Suit

American International Group has won the initial phase of a lawsuit against Coventry First life settlement company that alleged Coventry purchased life insurance policies for AIG at low prices, then sold the policies to AIG at inflated prices.

A summary decision July 10 by Judge Jed S. Rakoff in Federal District Court in Manhattan backed AIG’s claim that Coventry “engaged in an illegal and sophisticated scheme” that ultimately defrauded AIG out of more than $150 million.

Rakoff issued a three-page summary decision, adding that, “an opinion stating the reasons for these rulings will issue in due course.”

Rakoff set a trial date for Aug. 27 on other claims by AIG in a lawsuit filed last September that was the outcome of a dispute that has been going on since 2010 and intensified in 2013. The trial will deal with claims by AIG that Coventry violated a 2006 deal whereby Coventry was hired to help an AIG affiliate acquire life policies in the then-booming life settlement market.

The AIG suit alleged that its Lavastone Capital LLC unit was defrauded by Coventry, as well as people associated with Coventry, including its president, Alan Buerger, and related businesses.

Rakoff’s decision did remove Constance Buerger as a defendant in the case. She is a corporate officer at Coventry.

These claims include whether Coventry breached the agreement with AIG by overcharging for broker fees and breached the servicing and confidentiality agreements that were part of the deal.

“The alleged scheme involved Coventry use of AIG confidential pricing information to secretly mark up the purchase price of life policy investments,” the suit said.

The suit makes breach of contract, breach of fiduciary duty and other common law claims against Coventry, and also seeks triple damages through a Racketeer Influenced and Corrupt Organizations Act (RICO) claim.

The suit seeks more than $1.5 billion in compensatory, statutory and punitive damages. “AIG is pleased that the Court has granted it summary judgment on its core claim that Coventry breached its contract with Lavastone and looks forward to proceeding to trial on its additional claims, including its claim under the federal RICO statute seeking treble damages,” an AIG spokesman said.

In reaction to the Rakoff decision, Alan Buerger said that, “We are gratified that AIG’s inappropriate attack on Mrs. Buerger has been rejected pre-trial.”

He said the court's ruling pertained to part of one claim against Coventry First only, requiring a trial on both the remainder of that claim and all others.

“The factual record does not support AIG’s revisionist history and spurious claims,” Buerger said. “And we look forward to that factual record being presented at trial.”

InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].

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InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].