DAN REYNOLDS, senior editor, and ERIN GAZICA, associate editor
The state workers' compensation board in New York finds itself administering a bit of a mess these days. Nine self-insured groups that were formed in New York state to fund workers' comp claims have gone under since 2006.
Now, in 2008, the board, until it can find a way for the employers in those self-insured groups to collectively foot the bill, has had to set aside $66 million to cover the claims of employees whose employers formed the failed groups--"an amount many times greater than that needed in the past," according to a regulatory impact statement the board released over the summer.
"In 2006, the first private group self-insurer became insolvent and defaulted. Since then, another eight private self-insurers have been deemed insolvent and defaulted," the board said in the statement it released in conjunction with amendments it made to the state's workers' comp law in June 2008.
"When a private self-insurer is insolvent and defaults on the payment of its obligations, the chair is responsible for ensuring the claims continue to be paid," the statement reads.
And the brutal truth is that so are the businesses that formed the self-insured groups in the first place, under the dictates of New York statutes. At least that's the way the workers' comp board in New York looks at it.
But a good number of those businesses disagree, arguing that the failure of the whole shouldn't necessarily bind them to even a portion of the collective exposure.
The board has been sending quarterly assessments to the involved self-insurers, and as of midsummer, 13 out of the 58 group self-insurers refused to pay the assessments.
They've sought legal protection from the Albany County Supreme Court.
In that case, which goes by the name of Held et. al. v. Workers' Compensation Board et. al., Acting Albany County Supreme Court Judge Kimberly O'Connor ruled that assessing the employers was proper but that the board didn't appropriately determine whether the groups were truly insolvent before making the assessments.
The board has stated that, in keeping with is primary purpose--making sure the claims of injured workers are paid--it will pay those claims for all nine self-insured groups until the legal wrangling has concluded.
Bermuda-based CRM Holdings Ltd., a subsidiary of which managed at least seven of the self-insured groups, won't comment on the situation other than to say in a second-quarter SEC filing that it is continuing to administer claims for three of the self-insured groups until the board can assign another third-party administrator.
The company maintains in its SEC filings that it is no longer collecting fees from that work.
December 1, 2008
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