AIG in Settlement Talks Over Duke Lacrosse Rape Case

American International Group Inc. is negotiating a deal with Duke University regarding the school's settlement of the lacrosse rape case legal disputes. AIG's National Union Fire Insurance Company of Pittsburgh, Pa., was the Duke insurer when the school was struck by the controversy, but the university sued the AIG subsidiary when it refused to cover settlement costs, having accused Duke of failing to consult with the insurer during the process.

According to a new filing in that legal clash in U.S. District Court for the Middle District of North Carolina, the two sides asked for an extension of the proceedings because "settlement discussions are ongoing in this case." The court documents said the university and the insurer have gone through one day of mediation and will continue with another early next month.

Chief Judge James A. Beaty Jr. approved the request, writing that "the parties have shown good cause for extending the time."

Duke had sought payment from AIG (NYSE: AIG) after settling with the lacrosse team players who had been accused of raping an exotic dancer at a party, though the players were later exonerated. The amount of that settlement was not disclosed. The university also sought finances for its ongoing legal defense in the matter. The lawsuit Duke filed against National Union said the insurer acknowledged several times that defense and settlement costs potentially were covered by the claims-made, not-for-profit individual and organization policies it wrote for Duke for two years, from December 2005 to December 2007. However, the company said the school had violated its contract when it made settlement and legal decisions without the company's knowledge (BestWire, Jan. 21, 2009).

Three Duke students had been charged in March of 2006, but those charges were subsequently dropped by the state's attorney general after an investigation into the year-long controversy (BestWire, Dec. 1, 2008).

AIG stock traded at $41.94 on the afternoon of Oct. 12, up 2.19% from the previous close. National Union Fire Insurance Company of Pittsburgh, Pa., currently has a Best's Financial Strength Rating of A (Excellent), as do most of AIG's insurance units.

(Jesse A. Hamilton, Washington bureau manager: [email protected])