AIG is sued for refusal to cover on losses from Madoff’s Ponzi scheme

As it became known Wednesday, American International Group was sued by two Californians, Robert and Harlene Horowitz, who alleged they lost $8.5 million in the Madoff scandal. They claim their homeowner insurance policies entitled them to coverage on losses from Bernard Madoff's Ponzi scheme. 

Thus, Horowitzes filed the federal lawsuit in Manhattan, seeking class-action status on behalf of Madoff investors who also had policies with the Fraud SafeGuard coverage.

Horowitzes’ interests are represented by a securities class-action specialist Milberg. 

According to the lawsuit, the Horowitz Family Trust had a more than $8.5 million balance on its November. 30, 2008 account statement from Bernard L. Madoff investment Securities.

As the The Horowitzes alleged that AIG refused to honor AIG Fraud SafeGuard coverage in policies they get from subsidiaries of the insurer, even though the coverage insures against losses resulting "directly from fraud, embezzlement, or forgery." 

This case adds to legal problems for New York-based AIG, which is trying to sell assets to help repay the government after getting roughly $180 billion of federal bailouts.