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Minnesota sued insurer American International Group Inc. last week rather than accept a settlement that could have been worth $1.2 million.

Attorney General Mike Hatch said he estimates the state could be owed as much as $10 million, so he wanted to pursue the lawsuit rather than accept the settlement.

The lawsuit came one week after ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s $1.64 billion settlement with federal and state regulators over allegations of improper accounting and participation in bid-rigging schemes. The settlement included $344 million for states harmed by ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s practices from 1986 to 1995 involving state workers’ compensation funds.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ neither admitted nor denied the accusations.

Hatch said insurers are supposed to pay a 2 percent state tax on the workers’ compensation premiums they collect here. The lawsuit, filed in Ramsey County District Court, alleges that ÌìÃÀÍøÕ¾´«Ã½´«Ã½ underreported its Minnesota premiums, though it’s not clear by how much, Hatch said.

“We just want to get an accounting,” he said.

Hatch said Minnesota’s share of the settlement would have been $1.2 million, with half to be paid right away, and the other half to be paid in a year if the state waives all claims against ÌìÃÀÍøÕ¾´«Ã½´«Ã½. He said the state will still get the first half, or $600,000.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ spokesman Chris Winans declined to comment except to say, “Throughout this whole process, we have made every effort to cooperate with all of our regulators.”

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