Nevada sues AIG unit for bad faith after it wrongly refused to help pay legal defense and settlement costs
by | Jul 08, 2016
Nevada officials filed a lawsuit this week against an insurance company that they say wrongly refused to help pay legal defense and settlement costs in a psychiatric patient busing case brought by San Francisco.
The Nevada Attorney General’s Office filed the lawsuit in Las Vegas against The Insurance Company of the State of Pennsylvania, a subsidiary of the multinational insurance company AIG that received government bailout funds during the financial crisis. Nevada spent about $2.5 million defending itself and paying out a settlement, and the state argues its insurance carrier should help out with legal costs above a $2 million deductible.
“After years of receiving millions of dollars in policy premiums, AIG refuses to uphold its end of the bargain,” Nevada Attorney General Adam Laxalt said in a statement. “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.”
A spokesman for AIG said the company declined to comment. No court date has been set in the case.
San Francisco sued Nevada in 2013, saying the state bused psychiatric patients to California after they were discharged from a Las Vegas hospital without confirming whether they had a support structure at their destination. The city and county wanted to recoup the costs of caring for about two dozen people, which they pegged at $500,000, but they ultimately settled with Nevada last year for $400,000.
The state admitted no wrongdoing. But it did revamp its policies on psychiatric patient transport, fire several employees and add more than $30 million to the mental health services budget when the allegations came to light in The Sacramento Bee.
Nevada officials say they’ve paid more than $5.4 million in premiums toward the insurance policy over the past 13 years and have never received a payout. The attorney general’s office says the carrier is wrongly invoking an exception to deny the state coverage.
Associated Press