The following is a summary of information presented in more detail in the Notice of Proposed
Class Action Settlement, Settlement Hearing and Right to Appear (the “Notice”), which Settlement
Class Members should have received in the mail. Since this is just a summary, you should see the
full Notice for additional details.
Please read this information carefully. If you are a Settlement Class Member (as defined below),
your rights will be affected by these proceedings and you may be entitled to receive benefits under
a proposed settlement.
IF YOU ARE AN INSURANCE COMPANY AND YOU PARTICIPATED IN THE NATIONAL WORKERS COMPENSATION REINSURANCE POOL (THE “NWCRP”) OR THE NEW MEXICO WORKERS
COMPENSATION ASSIGNED RISK POOL (THE “NMWCARP”) AT ANY TIME DURING THE PERIOD
FROM 1970 THROUGH THE PRESENT (THE “SETTLEMENT CLASS”), YOU MAY BE ELIGIBLE TO
PARTICIPATE IN A $450 MILLION CLASS ACTION SETTLEMENT.
If you believe that you are eligible to participate in the class action settlement described in this
Court-Ordered Legal Notice but did not receive in the mail the detailed Notice describing the Settlement, please visit www.WCPoolSettlement.com, where you can obtain the Notice, or contact the
Court-approved Administrator as set out below to request a copy of the Notice.
SUMMARY STATEMENT BY THE SETTLEMENT CLASS REPRESENTATIVES
The Settlement - A settlement consisting of $450 million in cash, plus interest as it accrues (the
“Settlement”), has been reached with American International Group, Inc. (“AIG”) in a class action
lawsuit (the “Class Action”) alleging, among other things, claims for fraud, breach of contract,
accounting, violation of the federal anti-racketeering statute and other theories in connection with
the alleged underreporting of workers compensation premium to the NWCRP and the NMWCARP
from 1970 to the present (the “Class Period”). If approved, the Settlement will create a Class Fund
to pay the claims of insurance companies that participated in the NWCRP and/or NMWCARP during the Class Period that qualify for distributions under a Plan of Allocation which must be approved
by the Court. The Settlement, if approved, would be a final resolution and release of the claims
brought on behalf of the Settlement Class against AIG and of every Settlement Class member’s
claims by reason of any matter whatsoever arising out of the underreporting of workers’ compensation premium in any of the 50 States or the District of Columbia for all years from the beginning of
time through January 28, 2011, against every other member of the Settlement Class.
The Settlement has the support of the Board of Governors of the NWCRP and the Board of
the NMWCARP, and the settlement amount has been endorsed as reasonable by the Examiner-in-Charge appointed by the Lead States of the Multistate Targeted Market Conduct Examination conducted pursuant to the National Association of Insurance Commissioners’ (“NAIC”) Market Regulation Handbook (the “Multistate Examination”). The Lead States are Delaware, Florida, Indiana,
Massachusetts, Minnesota, New York, Pennsylvania and Rhode Island. The other 42 states and
the District of Columbia were Participating States in the Multistate Examination which concerned
AIG’s writing and financial reporting of workers compensation insurance. The Examiner-in-Charge,
pursuant to confidentiality agreements with AIG and the NWCRP, also facilitated the settlement
discussions that ultimately led to the Settlement.
The Class Action - The Class Action complaint, captioned Safeco Insurance Company of America,
et al. v. American International Group, Inc., et al., No. 09-CV-2026 (N.D. Ill.), alleges, among other
things, that during the Class Period, AIG underreported its workers compensation premiums in connection with its participation in the NWCRP and NMWCARP and, as a result, underpaid its taxes
and assessments, including residual market assessments.
The Class Action claims stem from the New York Attorney General and Department of Insurance’s
(the “New York Authorities”) 2005 investigation of, and subsequent settlement with, AIG regarding
AIG’s historic reporting of workers compensation premium. As part of its settlement with the New
York Authorities in January 2006, AIG established a $301 million workers compensation fund (the
“WCF”) to compensate any other insurance companies and states that were harmed by AIG’s alleged
underreporting and to resolve all of AIG’s liability with respect to these claims. The NWCRP, which
through an agent administers the residual market in many states on behalf of its approximately 500
Participating Companies, asserted that the settlement was not binding on it and its members and
maintained that the amount of the WCF was insufficient to redress the harms to the Participating
Companies caused by AIG’s alleged underreporting. In May 2007, the NWCRP Board, through NCCI
as its Attorney-in-Fact, commenced an action in the United States District Court for the Northern
District of Illinois against AIG that eventually became consolidated with the Class Action.
The “AIG Parties” are the following companies: American International Group, Inc.; 21st Century Security Insurance Company; 21st Century Pacific Insurance Company; AIU Insurance Company; American Home Assurance Company; Granite State Insurance Company; Chartis Casualty Company; Chartis
Specialty Insurance Company; Chartis Property Casualty Company; Commerce and Industry Insurance Company; Illinois National Insurance Co.; The Insurance Company of the State of Pennsylvania;
National Union Fire Insurance Company of Pittsburgh, Pa.; and New Hampshire Insurance Company.
The term “AIG” is used throughout this Court-Ordered Legal Notice to include some or all of these
entities, depending on the context in which it is used.
The insurance companies that seek to represent the class in settling this action (“Settlement
Class Representatives”) are: ACE INA Holdings, Inc.; Auto-Owners Insurance Co.; Companion Property & Casualty Ins. Co.; FirstComp Insurance Co.; The Hartford Financial Services Group, Inc.;
Technology Insurance Co.; and The Travelers Indemnity Company.
Reasons for the Settlement - The Settlement is the result of detailed arm’s-length negotiations
among AIG, the Board of Governors of the NWCRP, and the Settlement Class Representatives, and
was facilitated by the Examiner-in-Charge. By agreeing to a Settlement, both the Settlement Class
Representatives and AIG avoid the costs and risks of further litigation. By accepting the Settlement,
Settlement Class Members will be compensated for the Class Action claims, in accordance with
a Plan of Allocation to be approved by the Court, immediately after the Court’s approval becomes
final. In light of the risks, costs, and delay of litigation, the amount of the Settlement, the immediacy
of recovery to the Settlement Class, the support of the Settlement by the Board of Governors of the
NWCRP and the Board of the NMWCARP, and the endorsement of the settlement amount as reasonable by the Examiner-in-Charge, the Settlement Class Representatives believe that the proposed
Settlement is fair, reasonable, and adequate, and in the best interest of Settlement Class Members.
Settlement Class Representatives and their counsel believe that the claims asserted against AIG
have merit. However, they recognize the risks and delay associated with the continued prosecution
of the claims against AIG in the Class Action. AIG has denied and continues to deny allegations
of liability or wrongdoing or damage to the Settlement Class or any member thereof, including in
particular any basis for punitive or other exemplary damages. Settlement Class Representatives
and their counsel have taken into account the issues that would have to be decided by a jury.
Settlement Class Representatives and their counsel have also considered the uncertain outcome
and trial risk in complex lawsuits like this one, and specifically the length of time it will take to
resolve the case, and the substantial financial burden the litigation is imposing on the NWCRP as a
result of reimbursable defense costs being incurred by Participating Companies in the NWCRP who
have been sued by AIG. Settlement Class Representatives believe that a recovery when the Court’s
order approving the Settlement (if that occurs) becomes final will provide an immediate benefit to
Settlement Class Members, which is superior to the risk of proceeding with the claims against AIG.
By this settlement, AIG will be releasing claims against all Settlement Class Members for alleged
underreporting, which have been denied by all companies who have been accused of wrongdoing
by AIG, and the Settlement Class Members will be releasing all claims against AIG for underreporting, which have been denied by AIG. In addition, all Settlement Class Members will be releasing all
potential claims against all other Settlement Class Members for alleged underreporting in what has
been described as a “360 release”. The purpose of these mutual release provisions is to achieve
peace among all Settling Parties.
Settlement Class Representatives and their counsel have also considered the Multistate Examination Report and Regulatory Settlement Agreement (described in the Notice) and the Examiner-in-Charge’s endorsement of the $450 million settlement amount as reasonable in particular. Considering these factors and balancing them against the certain benefits that most of the Settlement
Class will receive as a result of the Settlement, Settlement Class Representatives and their counsel determined that the Settlement described herein is fair, reasonable, and adequate, and that it
is in the best interests of the Settlement Class to settle the claims against AIG on the terms set
forth in the Settlement Agreement and the Notice.
Opposition to the Settlement - Safeco Insurance Company of America (“Safeco”) and The Ohio
Casualty Insurance Company (“Ohio Casualty”) have also sued AIG making similar allegations in a
purported class action. Safeco and Ohio Casualty oppose the Settlement because they believe that
the amount of compensation that the class would receive in settlement of its claims against AIG
is far below the fair value of those claims. In addition, Safeco and Ohio Casualty oppose the Settlement provision that requires the class to release other parties that AIG alleges underreported
their workers compensation premium. Among the parties that AIG has accused of underreporting
their premium are three of the Settlement Class Representatives, ACE, Hartford and Travelers, as
well as Liberty Mutual and Sentry Insurance. AIG has stated that its claims against those parties,
which are brought only on AIG’s behalf and do not stand to benefit the Class, have merit and value.
Under the Settlement, Safeco and Ohio Casualty contend, class members would be releasing those
Settlement Class Representatives from all underreporting claims, in return for no payment or other
consideration from any of them. In addition, certain members of the NWCRP and the NMWCARP
will receive no cash consideration under the Settlement, even though their claims against AIG and
all other premium underreporters will be released. For these reasons, and others, Safeco and Ohio
Casualty believe the Settlement is unfair, unreasonable and inadequate to the Settlement Class.
Safeco and Ohio Casualty urge the members of the Settlement Class to reject the Settlement and
continue the Class Action. The bases for their position are outlined in summary form in Section 10
of the Notice, and Safeco’s and Ohio Casualty’s previously-filed objections to the Settlement are
available on the Court’s website as Docket #370. Settlement Class Representatives’ and AIG’s
responses to those objections are available on the Court’s website as Docket #386 and 387,
respectively. Further information about the grounds upon which Safeco and Ohio Casualty oppose
the settlement can be accessed at www.aig-objectoptout.com.
Terms of the Settlement - In exchange for the releases set forth in the Settlement Agreement, as
amended (the “Releases”), AIG has agreed to fund a $450 million “Class Fund” to be allocated,
after deduction of Court-awarded attorneys’ fees and expenses, possible incentive compensation
payments not to exceed $175,000 in the aggregate to the Settlement Class Representatives,
Notice and administrative expenses, and any applicable taxes (the “Distribution Amount”), among
all eligible Settlement Class insurance companies (the “Settlement Class Members”), provided that
such Settlement Class Members do not submit a valid and timely request for exclusion from the Settlement Class in accordance with the procedures set out in Section VI of the Settlement Agreement.
If approved by the Court, the Distribution Amount will be allocated to the Settlement Class
Members pursuant to a Plan of Allocation prepared by the National Council on Compensation Insurance, Inc. (the “NCCI”) in its capacity as administrator of the NWCRP and the NMWCARP. A copy
of a summary of the Proposed Plan of Allocation is attached to the Notice and available by visit-ing www.WCPoolSettlement.com, and a full copy of the Plan of Allocation may also be obtained
by contacting the Court-approved Administrator or by logging into www.WCPoolSettlement.com.
If any Settlement Class Members “opt out” of the Settlement Class (as described below), the
Distribution Amount will be reduced by the amount allocated to those excluded parties by the
Plan of Allocation.
If you are a Settlement Class Member and you do not wish to participate in the settlement, you
must request exclusion from the Settlement Class by no later than October 3, 2011.
Under Paragraphs I.A 49-50 of the Settlement Agreement, all parents, predecessors, successors,
subsidiaries and affiliates are treated as a single Settlement Class Member for purposes of inclusion or exclusion from the class.
The Legal Effects of the Settlement - If the Court approves the Settlement, AIG and the Settlement Class Representatives will seek the entry of an Order Approving Settlement and accompany-ing Judgment that, among other things, will (a) find that the Settlement is fair, reasonable, and
adequate; (b) enter a final order certifying the class for settlement purposes; (c) dismiss with
prejudice all claims and counterclaims in the Litigations between AIG, the NCCI, the NWCRP, and/
or the Settlement Class Members, meaning that no member of the Settlement Class including you
(unless you timely exclude yourself) will be able to bring another lawsuit or proceeding against any
of the Releasees (as that term is defined in the Settlement Agreement) based upon the claims that
have been raised or that could have been raised in the Litigations; (d) incorporate the Releases as
part of the Order Approving Settlement; (e) permanently bar members of the Settlement Class from
filing or participating in any lawsuit or other legal action against any or all Releasees arising from
or relating to any and all claims that have been raised or that could have been raised in this Class
Action; (f) enter a bar order that will: (i) prevent any person or entity from commencing, prosecuting, or asserting any claim (including any claim for indemnification or contribution or otherwise
denominated, including, without limitation, claims for breach of contract and for misrepresentation) against any Releasee where the alleged injury to the barred person or entity is based upon
that person’s or entity’s alleged liability to any or all of the Settlement Class and other Settlement
Class Members; and (ii) prevent any Releasee from commencing, prosecuting, or asserting any
claim (including any claim for indemnification or contribution or otherwise denominated, including,
without limitation, claims for breach of contract and for misrepresentation) against any person or
entity where the Releasee’s alleged injury is based upon the Releasee’s alleged liability to any or
all of the Settlement Class and other Settlement Class Members.
As noted, if the Court approves the Settlement, the Releases will be incorporated into the
Court’s Order Approving Settlement. The Releases describe the claims that Settlement Class
Members will give up, as well as a description of the Releasees — i.e., the people and entities that
will be released. The full text of the Releases (as well as the text of relevant definitions) are attached as Appendix A to the Notice. YOU ARE ENCOURAGED TO REVIEW CAREFULLY THE TERMS
OF THE RELEASES AND THE DEFINITIONS.
The Rights of Settlement Class Members - If you are within the definition of Settlement Class
Member (see Notice Section 6), you may either (1) participate in the Settlement (and receive
settlement relief if the Court approves the Settlement, and such approval becomes final); (2)
request exclusion from the Settlement; or ( 3) object to the Settlement.
If you want to object to any term of the Settlement Agreement, you must submit an objection
to the Court. If you object to the Settlement but your objection is overruled by the Court, you will
be bound by the Settlement. The procedures for requesting exclusion from the Settlement or for
objecting to it are described in the Notice in detail at Section 22 (requesting exclusion) and at
Section 21 (objecting).
If you want to participate in the Settlement Agreement and have no objection to any of its terms,
you need not do anything at this time. If you are within the definition of Settlement Class Member,
you may be eligible to receive a settlement payment under the terms of the Settlement Agreement
if the Settlement and the Plan of Allocation are finally approved, and if the Plan of Allocation provides that a payment will be made to you.
The Settlement Fairness Hearing - The Court will hold a hearing in this case on November 29, 2011
at 10:00 a.m. in Courtroom 1703, in the United States Courthouse located at 219 South Dearborn
Street, Chicago, Illinois 60604, to consider, among other things, whether to approve the Settlement and the Plan of Allocation. If you file an objection, you may appear at this hearing and ask to
be heard by the Court, but you do not need to do so. If you (or an attorney hired at your expense)
intends to appear at the hearing, you (or your attorney) must file a notice of intention to appear.
The Notice provides details (at Section 21) about filing a notice of intention to appear and serving
it on counsel for AIG and the Settlement Class Representatives by no later than October 3, 2011.
The Notice also provides details about filing requests for exclusion or objections and serving them
on counsel for AIG and the Settlement Class Representatives by no later than October 3, 2011.
The Court may choose to change the date and/or time of the hearing without further notice of
any kind. If you intend to attend the hearing, you should confirm the date and time with the Court-approved Administrator prior to going to the Courthouse.
Further Information - The Settlement Agreement sets out the details of the Settlement, including
the terms of the Releases by which Settlement Class Members (who do not exclude themselves
from the Settlement) will be bound if the Settlement is approved. Copies of the Summary of the
Plan of Allocation and the Releases are appended to the Notice. The Settlement Agreement and the
Notice are available at the Court-approved Administrator’s website, www.WCPoolSettlement.com,
and can also be obtained by calling 1-800-716-1520, Monday through Friday from 9:00 a.m. to 5:00
p.m. CST, by writing to Safeco v AIG Settlement Administrator, c/o Kurtzman Carson Consultants,
P.O. Box 6177, Novato, CA 94948-6177, or by sending an e-mail to Info@WCPoolSettlement.com.
You may also visit the following websites of Settlement Class Representatives: www.acegroup.
com, www.auto-owners.com, www.companiongroup.com, www.firstcomp,com, www.thehartford.
com, www.technologyinsurance.com, www.travelers.com and AIG’s website, www.aig.com, as well
as the websites of Safeco and Ohio Casualty, www.ohiocasualty-ins.com, www.safeco.com.
If you wish to communicate with or obtain information directly from Settlement Class Counsel,
you may do so by contacting the attorneys listed below: Frederic R. Klein, Esq., William C. Meyers,
Esq., Kerry D. Nelson, Esq., and Nury R. Agudo, Esq., Goldberg Kohn Ltd., 55 East Monroe Street,
Suite 3300, Chicago, Illinois 60603, Telephone: (312) 201-4000, Facsimile: (312) 332-2196,
E-mail: frederic.klein@goldbergkohn.com, william.meyers@goldbergkohn.com, kerry.nelson@gold-bergkohn.com, nury.agudo@goldbergkohn.com.
If you wish to communicate with or obtain information directly from counsel to AIG, you may do so
by contacting the attorneys listed below: Michael B. Carlinsky, Esq., Kevin S. Reed, Esq., Jennifer
J. Barrett, Esq., Quinn Emanuel Urquhart & Sullivan, LLP, 21 Madison Avenue, 22nd Floor, New
York, New York 10010, Telephone: (212) 849-7000, Facsimile: (212) 849-7100, Email: michael-carlinsky@quinnemanuel.com, kevinreed@quinnemanuel.com, jenniferbarrett@quinnemanuel.com.
If you wish to communicate with or obtain information directly from Counsel to Safeco and Ohio
Casualty, you may do so by contacting the attorneys listed below: Gary M. Elden, Esq., Gary M.
Miller, Esq., Grippo & Elden, LLC, 111 South Wacker Drive, Chicago, Illinois 60606, Telephone:
(312) 704-7700, Facsimile: (312) 558-1195, Email: gelden@grippoelden.com, gmiller@grip-poelden.com, Michael A. Walsh, Esq., Nutter, McClennen & Fish, LLP, Seaport West, 155 Seaport
Boulevard., Boston, Massachusetts 02210, Telephone: (617) 439-2000, Facsimile: (617) 330-
9775, Email: mwalsh@nutter.com.
You may also examine the Settlement Agreement, Court orders, and the other papers filed in the
Class Action at the Office of the Clerk, United States District Court for the Northern District of
Illinois, Eastern Division, Everett McKinley Dirksen United States Courthouse, 219 South Dearborn
Street, Chicago, IL 60604 from 9:00 a.m. to 4:00 p.m. CST.
