Arbitration Award Involving U.S. Life Insurance Co.
The U.S. Court of Appeals for the Ninth Circuit has upheld an arbitration award requiring U.S. Life Insurance Co. to pay reinsurance of more than $500 million to Superior National Insurance Companies. Superior is now in the process of liquidation but served as the workers’ compensation insurer. U.S. Life is a division of AIG and insured over 4 California workers’ compensation insurance companies that were shut down in 2000. U.S. Life contended that Superior National and its affiliates failed to disclose to U.S. Life all pertinent information regarding the adequacy of its outstanding reserves for payment of claims, and exposing U.S. Life to substantial losses. In 2007, an original judgment was filed against U.S. Life for $443.5 million in a district court. U.S. Life appealed the judgment to the Ninth Circuit. The original judgment was unanimously upheld by the federal three-judge appeals panel. The judgment now exceeds over $517 million, which includes post-judgment interest. The money will be allocated to CIGA and other guaranty associations once it has been collected from U.S. or from the AIG bond.