Chubb Joins in AIG Run-Off Suit

Northwestern Pacific Indemnity Company, an indirect subsidiary of The Chubb Corporation, has joined as a co-plaintiff in an AIG suit filed in December against Insurance Company of North America (INA) and its former parent, the CIGNA Corp. The lawsuit asks the San Francisco Superior Court to order INA to stand behind policies it sold to California consumers and then later transferred to Century Indemnity Company (CIC), a subsidiary created by CIGNA. Many of the transferred insurance policies cover injuries from pollution and asbestos exposure.

The plaintiffs seek no damages, and no harm is alleged to AIG or Chubb. The action was filed to protect California consumers who bought policies from INA and those who may have claims against those policies.

"Chubb joined this suit because we believe the issues raised are important to the consumers and the industry. California policyholders have a right to consent to the transfer of obligations under their policies," said Joanne Bober, senior vice president and general counsel of The Chubb Corporation. "If INA is able to circumvent that right, its policyholders could lose the benefit of the insurance they bought and the public could lose its confidence in the integrity of the insurance industry."

Several years ago, INA policies were transferred to CIC—largely a paper company--to separate ongoing business from run-off business

The plaintiffs say that by disposing of these liabilities, INA obtained a higher credit rating, which allowed it to compete for business with similarly rated companies despite the outstanding claims. In the event INA is held responsible for the claims under the transferred policies, all of its customers who bought policies since the 1996 re-structuring will have done so with an inaccurate representation of INA's financial stability. As such, plaintiffs allege that the defendants violated California's Unfair Competition Law.

In their complaint, the plaintiffs ask the court to find that INA remains liable for the transferred policies because INA did not obtain the consent of California policyholders for the transfer of policies to CIC.

Corrective measures requested in the action include a statement by INA to its California policyholders acknowledging INA's liability under the policies it sold and the publication of notices to that effect in newspapers, the Internet and other media.