NEW YORK ( TheStreet) -- As if American International Group ( AIG - Get Report) didn't owe U.S. taxpayers enough already, now two California residents are saying the insurer owes them for losses in the Ponzi scheme.

The federal lawsuit was filed in Manhattan federal court by Robert and Harlene Horowitz, who said they lost $8.5 million in the Madoff scandal. In it, they argued that their homeowner insurance-fraud protection entitled them to coverage on losses from Madoff's Ponzi scheme.

They filed the class-action suit on behalf of all policyholders who lost money to Madoff for unspecified damages.

According to the court filing, the Horowitzes alleged that AIG, through its units AIU Holdings and American International Insurance of California, refused to honor AIG Fraud SafeGuard coverage, even though the coverage insures against losses resulting "directly from fraud, embezzlement, or forgery."

-- Reported by Jeanine Poggi in New York.

Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.