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ITEM 8 / NOTE 16. CONTINGENCIES, COMMITMENTS AND GUARANTEES.....................................................................................................................................................................................District of Illinois) against us with respect to the underpayment by AIG of its residual market assessments forworkers’ compensation insurance. The complaint alleged claims for violations of RICO, breach of contract, fraud andrelated state law claims arising out of our alleged underpayment of these assessments between 1970 and thepresent and sought damages purportedly in excess of $1 billion.On April 1, 2009, Safeco Insurance Company of America (Safeco) and Ohio Casualty Insurance Company (OhioCasualty) filed a complaint in the Northern District of Illinois, on behalf of a purported class of all NWCRP participantmembers, against AIG and certain of its subsidiaries with respect to the underpayment by AIG of its residual marketassessments for workers’ compensation insurance. The complaint was styled as an ‘‘alternative complaint,’’ shouldthe Northern District of Illinois grant our motion to dismiss the NCCI lawsuit for lack of subject-matter jurisdiction,which motion to dismiss was ultimately granted on August 23, 2009. The allegations in the class action complaint aresubstantially similar to those filed by the NWCRP.On February 28, 2012, the Northern District of Illinois entered a final order and judgment approving a class actionsettlement between us and a group of intervening plaintiffs, made up of seven participating members of the NWCRP,which would require AIG to pay $450 million to satisfy all liabilities to the class members arising out of the workers’compensation premium reporting issues, a portion of which would be funded out of the remaining amount held in theWorkers’ Compensation Fund. Liberty Mutual filed papers in opposition to approval of the proposed settlement and inopposition to certification of a settlement class, in which it alleged our actual exposure, should the class actioncontinue through judgment, to be in excess of $3 billion. We dispute this allegation. Liberty Mutual and itssubsidiaries Safeco and Ohio Casualty subsequently appealed the Northern District of Illinois’ final order andjudgment to the United States Court of Appeals for the Seventh Circuit (the Seventh Circuit). On January 10, 2013,AIG and Liberty Mutual entered into a settlement under which Liberty Mutual, Safeco and Ohio Casualty agreedvoluntarily to withdraw their appeals. In furtherance of such settlement, AIG, the Liberty Mutual parties and thesettlement class plaintiffs submitted an agreed stipulation of dismissal that is currently under review by the SeventhCircuit.The $450 million settlement amount, which is currently held in escrow pending final resolution of the class-actionsettlement, was funded in part from the approximately $191 million remaining in the Workers’ Compensation Fund. Inthe event that the settlement between AIG and Liberty Mutual is not approved, the appeal of the order and judgmentapproving the class action settlement may resume. As of December 31, 2012, we had an accrued liability equal tothe amounts payable under the settlement.Litigation Matters Relating to AIG’s Insurance Operations..............................................................................................................................................................................................Caremark. AIG and certain of its subsidiaries have been named defendants in two putative class actions in statecourt in Alabama that arise out of the 1999 settlement of class and derivative litigation involving Caremark Rx, Inc.(Caremark). The plaintiffs in the second-filed action intervened in the first-filed action, and the second-filed action wasdismissed. An excess policy issued by a subsidiary of AIG with respect to the 1999 litigation was expressly stated tobe without limit of liability. In the current actions, plaintiffs allege that the judge approving the 1999 settlement wasmisled as to the extent of available insurance coverage and would not have approved the settlement had he knownof the existence and/or unlimited nature of the excess policy. They further allege that AIG, its subsidiaries, andCaremark are liable for fraud and suppression for misrepresenting and/or concealing the nature and extent ofcoverage.The complaints filed by the plaintiffs and the intervenors request compensatory damages for the 1999 class in theamount of $3.2 billion, plus punitive damages. AIG and its subsidiaries deny the allegations of fraud and suppression,assert that information concerning the excess policy was publicly disclosed months prior to the approval of thesettlement, that the claims are barred by the statute of limitations, and that the statute cannot be tolled in light of thepublic disclosure of the excess coverage. The plaintiffs and intervenors, in turn, have asserted that the disclosurewas insufficient to inform them of the nature of the coverage and did not start the running of the statute of limitations.On August 15, 2012, the trial court entered an order granting plaintiffs’ motion for class certification. AIG and theother defendants have appealed that order to the Alabama Supreme Court, and the case in the trial court will bestayed until that appeal is resolved. General discovery has not commenced and AIG is unable to reasonably estimatethe possible loss or range of losses, if any, arising from the litigation...................................................................................................................................................................................................................................AIG 2012 Form 10-K 299