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TheStreet Open House

Insurance Broker Sues AIG Over Business Practices

LOS ANGELES (AP) ¿ A California insurance broker is suing American International Group, accusing the nation's largest insurance and financial corporation of engaging in unfair business practices.

Insurance broker Linda Harris, president of the Independent Financial Planning Group, filed the lawsuit Thursday in Los Angeles Superior Court.

The lawsuit accuses AIG of using funds from its California insurance companies to support its financial services business and telling brokers and policy holders that the insurance business is insulated from its losses in the financial derivatives market.

Harris' attorney says such practices put policyholders at risk of losing their savings. Harris and her company bought and sold more than $15 million of AIG life insurance.

AIG has received $182.5 billion in financial support from the government since September. AIG was devastated not by its traditional insurance operations, but by its financial products business, which underwrote risky credit derivatives contracts known as credit default swaps. The swaps are essentially insurance contracts protecting an investor against default on an underlying investment, such as mortgage-backed securities.

A message left Thursday with an AIG spokeswoman wasn't immediately returned.

Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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