AIG and Other Insurers Face Legal Challenge from Prudential
American International Group (AIG) and several other insurers are embroiled in a legal case filed by Prudential Financial. The lawsuit, lodged in the New York Supreme Court on June 18, revolves around prolonged delays in resolving a coverage dispute concerning Prudential’s acquisition of Assurance IQ. At issue is whether the insurers will fulfill their coverage obligations related to this acquisition.
In 2019, Prudential acquired Assurance IQ for $2.35 billion, securing representation and warranties insurance as part of the deal. This insurance coverage amounted to $300 million, comprising a primary layer and additional excess layers to protect against misrepresentations by Assurance IQ. The lawsuit alleges that Assurance IQ misrepresented its financial health by relying on outdated financial data to falsely present itself as profitable.
Prudential began filing claims for coverage in July 2020. However, the complaint outlines that the insurers have allegedly delayed giving a coverage decision by inundating Prudential with numerous information requests and subjecting senior management to exhaustive questioning. This has occurred despite contractual obligations to respond within 60 days.
The legal proceedings seek redress for breach of contract, a declaratory judgment, and a breach of the implied covenant of good faith and fair dealing. Prudential is pursuing damages of at least $135 million, encompassing the remaining policy limits, plus interest, attorney fees, and a court order affirming their right to full indemnification under policy limits.
This scenario follows Prudential’s decision to phase out Assurance IQ by 2024, after bearing substantial write-downs exceeding $2 billion due to the acquisition. Furthermore, Prudential previously settled a $100 million resolution with the U.S. Federal Trade Commission over allegations of misleading marketing practices by Assurance IQ.
AIG is detailed in the complaint as having issued a $30 million primary policy and a $15 million sixth-layer excess policy. It is noted that AIG fulfilled its primary policy obligations for another claim but has not yet approved payment for the excess coverage regarding Prudential's financial statement claim.
The complaint also names other insurers, including Everest Indemnity Insurance, PartnerRe Ireland Insurance DAC, National Fire & Marine Insurance of Berkshire Hathaway, QBE Specialty Insurance, and Great American E&S Insurance. As of now, none have publicly commented on the ongoing legal matter.