California Lawsuit Against AIG Dismissed

Copyright 2009 A.M. Best Company, Inc.All Rights Reserved BestWire

December 16, 2009 Wednesday 02:47 PM EST

332 words

California Lawsuit Against AIG Dismissed

Meg Green

LOS ANGELES

A California Superior Court has dismissed a lawsuit that accused American International Group Inc. of acting as an "unregulated hedge fund."

Los Angeles Superior Court Judge Yvette M. Palazuelos dismissed the case, which was brought by policyholder and financial planner Linda M. Harris. However, Palazuelos will allow Harris 30 days to amend and resubmit the complaint.

In the lawsuit, Harris, who had recommended that her clients purchase AIG annuities, was seeking an injunction to "stop AIG's ongoing unlawful, deceptive and unfair business practices" (BestWire, Nov. 2, 2009).

The plaintiffs in the case purchased annuities with death benefits from AIG's SunAmerica Annuity and Life Assurance Co.

However, in her ruling, Palazuelos said that "other than recommending products affiliated with AIG, [Harris] alleges no relationship -- such as a contract -- with AIG. No specific injury to the corporate plaintiff has been alleged."

Also, Palazuelos said Harris was asking for "the court to make a determination about the propriety of various AIG business practices, such as its investment decisions. An extensive regulatory framework in California already exists to address policyholders' problems caused by a carrier's business decisions and investments, and to fashion suitable remedies."

"We are pleased that court granted our motion and accepted our arguments," AIG spokesman Mark Herr said in an e-mail.

AIG (NYSE: AIG) was saved from failing last fall when the federal government offered it up to $182.3 billion in federal aid. The bailout works like a credit card with a $182.3 billion limit. AIG said it's only used $120.7 billion, and has begun to pay the government back (BestWire, Oct. 5, 2009).

Most AIG insurance companies have current Best's Financial Strength Ratings of A (Excellent) with a negative outlook.

Shares of AIG's stock were trading at $29.10 a share midday on Dec. 16, up 0.59% from the previous close.

(By Meg Green, senior associate editor, BestWeek: [email protected])

December 17, 2009

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