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Insurance seller settles case with AG

Pays $760,000 in restitution, fines

By Robert Weisman
Globe Staff / April 26, 2011

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A unit of American International Group, the New York-based insurance giant, agreed to pay restitution and a fine totaling $760,000 for selling faulty health insurance products in Massachusetts, under a settlement reached with state Attorney General Martha Coakley.

United States Life Insurance Co., an AIG subsidiary known as U.S. Life, sold products in Massachusetts that didn’t cover state-mandated benefits such as mental health, maternity care, infertility care, mammography, pap test screening, and preventive care for children up to age 6, according to the attorney general’s office.

Under the settlement, U.S. Life agreed to set aside $500,000 to refund premiums and pay claims denied to Massachusetts residents for the mandated services. It will also pay a $260,000 fine to the state.

In a statement yesterday, Coakley said her office will continue to monitor the marketing and payment practices of health insurers to assure residents receive benefits to which they are entitled. “When Massachusetts consumers buy health insurance,’’ Coakley said, “they should be able to feel confident that the coverage complies fully with Massachusetts law.’’

AIG did not admit to wrongdoing in the settlement. In a statement, Mark Herr, an AIG spokesman, said, “We remain committed to providing leading products and services to our customers and have agreed to remediate the issues raised by the attorney general for affected policyholders.’’

Herr said AIG will continue to do business in Massachusetts, though it has stopped selling certain products, which he did not specify.

Coakley’s office filed a civil complaint in Suffolk Superior Court charging that U.S. Life violated the Massachusetts Consumer Protection Act. Over the past few years, the office has brought five or six such cases against national carriers that sell policies without state-mandated benefits, Coakley spokeswoman Amie Breton said.

Robert Weisman can be reached at weisman@globe.com.