American International Group Inc. yesterday dismissed as “without merit” a lawsuit filed by two investors who claim the insurer should have covered the losses they suffered because they invested with Bernard L. Madoff.
Robert and Harlene Horowitz filed suit against the New York-based carrier in the U.S. District Court for the Southern District of New York on Wednesday.
Mr. Horowitz was the trustee of The Horowitz Family Trust, which had some $8.5 million in an account with Bernard Madoff as of Nov. 30 — just days before the fraudster’s Dec. 11 arrest — according to the suit.
The Horowitzes also held homeowner’s insurance policies with
AIG, which included fraud safeguard coverage.
The Horowitzes, who now seek class-action status for their suit, allege that
AIG refused to cover the Madoff losses because the company determined that there was more money in the family
trust account than the Horowitzes had initially invested and the lost funds that had accrued aren’t covered, according to the suit.
As a result, the two are now suing for breach of contract, breach of implied covenant of good faith and fair dealing, and unjust enrichment, and are seeking as restitution.
AIG brushed off the complaint. “We believe these claims are without merit,” wrote
AIG spokeswoman Christina Pretto, in an e-mail.
“While we do offer products that cover certain losses that are the result of fraud, they apply only to the extent that the policyholder experienced an actual net loss.
“In this case, we declined the plaintiffs’ claim because they received more money from Madoff through withdrawals from their account than they had deposited,” she wrote.
Thus far, the Private Client Group, which recently became a subsidiary of Chartis Insurance, the property/casualty unit of
AIG, has paid eligible policyholders about $10 million in claims stemming from Madoff-related losses. The private Client Group and Chartis are located in New York.
