AIG wins dismissal of $34.4 mln award for AXA

By Jonathan Stempel

NEW YORK (BestGrowthStock) – American International Group Inc won the dismissal of a $34.4 million judgment in a lawsuit accusing it of fraudulently inducing an AXA SA affiliate to enter two reinsurance contracts.

While rejecting AIG’s claim that the case should have been arbitrated, the U.S. 2nd Circuit Court of Appeals on Monday said AXA waited too long to sue — more than five years after being put on notice that something might be amiss. It directed a lower court to enter a judgment in favor of AIG.

The ruling frees additional money for New York-based AIG as it tries to repay taxpayers after a series of bailouts that left the government owning a nearly 80 percent stake in the insurer.

AXA had no immediate comment. AIG spokesman Mark Herr declined to comment.

AXA Versicherung AG sued AIG on December 2, 2005, claiming that AIG units in 1997 and 1998 fraudulently induced a predecessor into entering the contracts, which concerned energy risks.

A jury found that AXA could not have learned of the alleged fraud before December 2, 2003, meaning its lawsuit complied with a New York law requiring a claim be filed within two years of the discovery of a fraud, or within six years of a fraud’s taking place.

The appeals court, however, agreed with AIG that AXA had signed documents putting it on notice of a possible problem as early as August 1998, and no later than September 2000. This, it said, made the December 2005 lawsuit untimely.

“AXA was confronted with a clear ‘storm warning,'” the court said in an unsigned opinion.

“Had AXA actually read the 1998 wordings, as the law expects, AIG’s concurrent and future misrepresentations should have only served to heighten AXA’s awareness that something was amiss,” it went on. “AXA’s failure to carefully read the wordings is legally irrelevant.”

Also on Monday, AIG said it had paid back nearly $4 billion of U.S. loans, reducing the size of a federal credit facility by that amount to about $30 billion.

AIG stock was up 32 cents at $35.49 in afternoon trading.

The case is AXA Versicherung AG v. American International Group Inc et al, U.S. Second Circuit Court of Appeals, No. 08-2521.

(Reporting by Jonathan Stempel; Editing by Lisa Von Ahn and John Wallace)

AIG wins dismissal of $34.4 mln award for AXA