International Group Inc. were turned down by the Supreme Court yesterday in their fight to escape terms of a $419 million settlement with W.R. Grace & Co.

The high court refused to hear the AIG companies' argument that an out-of-court settlement with W.R. Grace over asbestos lawsuits against the company should not be enforced because it was never signed by all parties.

Grace has spent years fighting thousands of lawsuits filed by people and businesses who claimed personal injuries or property damage from asbestos products manufactured by Grace subsidiaries.

Between 1965 and 1984, Grace held liability insurance policies, worth more than $500 million, from a number of insurance companies affiliated with AIG.

In 1991, fighting a lawsuit by a group of Texas school districts that installed asbestos fire-proofing material in their buildings, Grace filed a suit seeking to force its insurers to pay up to the $500 million policy amounts for lawsuit costs and damages.

In November 1992, Grace and the insurers reached an agreement in principle, which called for the insurers to pay as much as $419 million. In June and again in August 1993, the insurers made $15.3 million payments to Grace under terms of the settlement, even though it had not yet been formally signed by all of the parties.

In September 1993, a federal appeals court, in a different case, issued an opinion that the insurance companies said could cut their potential liability to $60 million, far less than the full $500 million value of the policies. The insurers responded by seeking to rescind the out-of-court settlement, saying it was not final because it had not yet been formally signed by all parties.

A Texas federal judge, however, said the insurers, by making partial payments in June and August, showed that their oral agreement had been accepted by all sides, and should be enforced.

The judge ordered the insurers to pay $13.2 million under the settlement terms for their share of Grace's costs in the lawsuit by Texas school districts. A New Orleans-based federal appeals court upheld the ruling. The insurers appealed to the Supreme Court, which rejected the appeal without comment.

The insurance companies involved in the dispute are: AIU Insurance Co., American Home Assurance Co., Birmingham Fire Insurance Co. of Pennsylvania, Granite State Insurance Co., National Union Fire Insurance Co. of Pittsburgh, New Hampshire Insurance Co., The Insurance Company of the State of Pennsylvania, and Lexington Insurance Co.