Attorney General Laxalt Sues Subsidiary Insurance Company of AIG for Breach of Contract and Bad Faith for its Refusal to Pay Claim to State of Nevada

July 7, 2016

Carson City, NV -   Today,   Nevada Attorney General Adam Paul Laxalt announced the filing of a bad faith lawsuit against The Insurance Company of the State of Pennsylvania, a subsidiary of AIG. AIG is an insurance company that serves commercial, institutional and individual customers in more than 100 countries and jurisdictions. AG Laxalt's suit-filed on behalf of Nevada-claims that AIG's subsidiary unlawfully put its interests above those of the State by admitting that coverage potentially existed, but denying it anyway through one-sided, and incorrect, interpretations of policy exceptions.

In 2013, the City and County of San Francisco filed a class action lawsuit alleging that individuals discharged from the Rawson-Neal Psychiatric Hospital received transportation subsidies enabling them to travel to cities in California, including San Francisco. Nevada denied all claims in that lawsuit, but eventually settled the matter after determining that-even if Nevada succeeded on all counts-simply defending the lawsuit would cost more than settling. Although Nevada submitted this claim to AIG's subsidiary, the insurance company refused to defend Nevada and now refuses to reimburse the State.

"People know that some insurance companies do everything they can to avoid paying valid claims," said Laxalt. "Even so, I find it incredible that a company owned by AIG-a recipient of billions of dollars in taxpayer bailout funds-would attempt to side-step its obligations to the State. After years of receiving millions of dollars in policy premiums, AIG refuses to uphold its end of the bargain. Today, my Office brings this bad faith lawsuit not only on behalf of the State of Nevada, but also for every Nevadan who has ever been stiffed by an insurance company."

The complaint explains that the insurance company promised it would defend Nevada against any claim or suit even if such claim or suit was groundless, false or fraudulent. The complaint also details how Nevada complied with all policy provisions and timely paid more than $5.4 million in insurance premiums for the last 13 years. AIG has never paid a claim on this policy. As a result, Nevada seeks all damages caused by the insurance company's actions, including punitive damages and attorney's fees for breach of contract, bad faith, unfair claims practices and declaratory relief.

Steven Shevorski, Head of Complex Litigation, and Deputy Attorney General Donald Bordelove are representing Nevada in this matter.

To view the filed complaint, click here .