Wall Street bear
With this last weekend’s bankruptcy of Lehman Brothers investment bank and the bargain sale of Merrill Lynch, there are questions as to whether the Wall Street crisis will affect insurance and accident cases?
The newspapers have speculated that American International Group (AIG) is the next giant in trouble. AIG is the biggest commerical insurance company in the U.S.A., and it is a major international insurance company. It is headquartered in New York.
AIG is a big player in commercial insurance, such as construction insurance. During this year we have settled two significant cases with AIG totalling almost $1,000,000.
As attorneys for people injured in accidents and people suing insurance companies for their benefits, our concern is whether AIG is financially stable? Will AIG be able to pay settlements and judgments in accident and insurance cases?
I think that AIG’s insurance companies are stable. It is noteworthy that AIG, a financial services company, has many wide and varied businesses and investments outside of insurance. One of these businesses, an airplane leasing company, has been mentioned as troubled and being for sale. I have read nothing to suggest that AIG is looking to sell its core business of commercial insurance or that its insurance business is in trouble.
Also, it is noteworthy that AIG is not an insurance company. It is a holding company of various insurance companies, such as National Fire Insurance Company of Pittsburgh, PA, and Lexington Insurance Company. Theoretically, each company should stand and fall on its own. Theoretically, each insurance company is regulated by its state of domicile.
In the event of an AIG meltdown, AIG companies, such as National Fire, would have to file for either rehabilitation or liquidation in its state of incorporation. In that event, if such insurance company is licensed in New York, then the injured parties and insured will be covered by the New York State Insurance Department’s Liquidation Bureau to the extent of $1,000,000. However, if such insurance company is not licensed in New York, then New York State will not step-in to provide coverage. This may be a problem if a defendant is insured with a non-admitted AIG company. This can occur in the commercial and construction areas.
The final conclusion: wait and see.
Mark E. Seitelman, 9/15/08, www.seitelman.com.