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Appellate Court OKs Assessments on Healthy Self-Insured Trusts
(April 22, 2011) — A New York appellate court said yesterday that the state Workers' Compensation Board may assess solvent group self-insured trusts to cover the obligations of involvent trusts. The decision reversed a ruling that a trial court judge in Albany issued one year ago.
The trusts, which voluntarily dissolved in 2008 rather than face new assessments authorized by a reform law the State Legislature enacted that year, argued that the assessments violated their rights under the U.S. and New York constitutions. The New York State Supreme Court Appellate Division's Third Department rejected those arguments. Writing for the court, Judge Robert S. Rose concluded that the economic impact of the assessments on the trusts was not severe enough to violate the trusts' constitutional rights. He also found that the language of the reform law merely clarified that the board's assessment power applied to group self-insured trusts and did not create a new power. "Plaintiffs, as voluntary participants who have elected to exercise the privilege of self-insurance," he wrote, "cannot now complain that the assessments imposed to administer the self-insurance program consistently with the purpose and goals of the workers' compensation system is an unexpected taking of their property."
A representative of a trust administrator told IIABNY this morning that the ruling "is not the end of the world." He noted that the trusts have been operating with these assessments for years now and have been able to manage them in ways that do not affect their solvency. Also, the newly-enacted New York State budget gives the WCB new enforcement powers to force employers that were in the insolvent trusts to meet their “joint and several liability” obligations. To the extent that these powers work, there should be less pressure on the solvent trusts to pay assessments.
The trusts have not publicly said whether they will appeal the ruling to New York’s highest court, the Court of Appeals.
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Elite Contractors Trust of NY: What To Tell Your Insureds
(July 15, 2009) — Former members of the Elite Contractors Trust of New York, a group self-insured trust for workers’ compensation, have received bills totaling $37 million to close the trust’s deficit. Trust administrator FCS Administrators began issuing assessment notices to affected employers on June 30. FCS assumed management of the trust last year after the original administrator, Compensation Risk Managers, LLC, forfeited its license under pressure from the New York Workers’ Compensation Board. IIABNY members have reported that their clients have received bills for assessments ranging from a few thousand dollars up to six figures.
Many IIABNY members have asked how they should respond to inquiries from their affected clients. After consulting with the attorneys at Keidel, Weldon & Cunningham, we recommend that members do the following:
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Tell clients to respond quickly to the notices; ignoring them will not make them go away.
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Suggest that clients ask FCS for payment plans in addition to those described in the assessment notices. The notices offered plans for up to 36 months, even for those employers that owe hundreds of thousands of dollars.
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Clients who have questions about their legal options should consult a qualified contract law attorney. Such an attorney can analyze the trust agreement that the employer signed and will be able to advise the employer on any recourse available.
IIABNY members with additional questions should contact Tim Dodge, Jamie Deapo or Jim Keidel.
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Attn. Members of Trust Receiving State Summons: Respond!
(May 19, 2008) — Recently, businesses who participated in the Manufacturing Self-Insurance Trust, which closed effective Aug. 31, 2006, received a Summons with Notice from the New York Attorney General. The trust was administered by New York Compensation Managers. The Summons with Notice seeks to recover $1 million in previously billed and uncollected assessments, as well as further assessments in an amount estimated to be no less than $25 million. The assessments were for the years 1997 through 2006.
If you represent a business named in the Attorney General’s Summons, you should advise your client to respond to the Summons as soon as possible. Additionally, your client should have a lawyer or law firm with knowledge of contract law respond on their behalf.
IIABNY will continue to monitor the situation relative to this closed trust and will offer additional information and advice when available. If you have any further questions concerning this latest lawsuit by the Attorney General’s Office, please call us at (800) 962-7950.
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State Trial Judge Stops Emergency Assessments on Trusts
(May 6, 2008) — Acting New York Supreme Court Justice Kimberly O’Connor in the Albany-based Third District has temporarily blocked emergency payments ordered by the state Workers’ Compensation Board. Judge O’Connor was responding to a request from 13 self-insured trusts seeking to prevent the WCB from collecting $10 million in their annual assessments for 2008 and beginning retaliatory action if the trusts refused to pay, reported the online news service. Board Chairman Zachary Weiss, who is also seeking additional money on an emergency basis to cover the costs of claim related to trusts it has terminated and assumed control, had threatened to seize more than $14 million in security bonds and revoke the authorization of the 13 trusts if the payments were not made.
Justice O’Connor, however, ruled the trusts must pay the $10 million annual assessment but are not obligated to make the emergency payments, according to workcompcentral, and the workers’ compensation board could not retaliate against the trusts while a temporary injunction remains in force. O’Connor gave Weiss until Wednesday to provide the trusts a final bill on their share of the $10 million assessment approved by the judge.
The trusts filing suit include Contractors Compensation Trust, Cooperative Association of Food Enterprises Workers' Compensation Trusts, The El-Con Trust, Empire State Hospitality Workers' Trust, Empire State Education Trust, Empire State Transportation Workers' Compensation Trust, First Automotive Trust, NYSARC Workers' Compensation Trust, New York Petroleum Associations Compensation Trust, New York McDonald's Operators Workers' Compensation Trust, NY Transportation Workers' Compensation Trust, Retailers of New York Workers' Compensation Trust and Selective Safety Trust.
A copy of the judge’s decision is available on the workcompcentral Web site.
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Workers Comp Board Threatens to Revoke CRM’s License Over Insolvent Trusts; A.M. Best Places Majestic Under Review With ‘Negative Implications’
(May 2, 2008) — The New York Workers’ Compensation Board has notified Poughkeepsie-based Compensation Risk Managers, LLC that it will pursue administrative action against the firm with the object of revoking its license to act as a third party administrator of self-insured trusts. The move followed the board’s recent decision to terminate five of CRM’s six trusts due to insolvency. In its notice to CRM, the board accused the administrator of failing to pay claims in a timely manner, failing to file proper reports with the board, under-reserving losses, and filing inaccurate information about its clients with the board. CRM promptly announced that it will fight the charges, which it characterized as “substantially without merit.”
Separately, A.M. Best announced on April 29 that it has placed its financial strength ratings of Majestic Insurance Company, an affiliate of CRM, under review with “negative implications.” The company cited the potential impact of the New Yorkaction against CRM as the main reason for the review. It also mentioned worries about the financial flexibility of Majestic’s and CRM’s parent company, CRM Holdings, and the adequacy of Majestic’s capitalization.
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Most Self-Insured Trusts Administered by CRM Are Terminated
(April 1, 2008) — The most recent New York State Workers’ Compensation Board Group Self-Insured Trusts Summary of Funding Status Report as of March 28 indicates five of the six trusts administered by Compensation Risk Managers, LLC of Poughkeepsie, have been terminated. The following is a list of the trusts involved and their termination date:
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● New York State Cemeteries Trust
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Terminated 3/31/08
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● Real Estate Management Trust of NY
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Terminated 1/31/08
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● Trade Industry WC Trust for Manufacturers
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Terminated 1/31/08
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● Transportation Industry Workers’ Compensation Trust
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Terminated 1/31/08
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● Wholesale & Retail WC Trust of NY
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Terminated 4/29/08
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The remaining trust, Elite Contractors Trust of New York, administered by CRM shows under-funded status with membership restricted and pending action indicated. IIABNY members who wish to review the Summary of Funding Status Report in its entirety will find it posted on the IIABNY Web site.
In a related matter, Mary Beth Woods of the state Workers’ Compensation Board clarified that the $59.5 million bond requested by the WCB is meant to offset some of the cost related to recent defaults. It is simply a cash flow mechanism, according to Woods. Bonding out some of the claims payments allows time for former members of the defaulted trusts to pay the assessments they owe. The WCB fully expects to collect the assessments and has already begun collection efforts in conjunction with the state Attorney General’s office.
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WC Board Imposes New Requirements for Trusts
(October 11, 2006) — The New York State Workers’ Compensation Board is requiring all group self-insured trusts to conduct a rate adequacy review, supporting rates “that will be charged in the fiscal years” beginning on Jan. 1, 2007. In a July 27 announcement, the Workers’ Compensation Board sent a letter to all group self-insured trusts outlining the new requirements.
The letter advised the trusts that if adequate funding levels are maintained, the rate review will be used for informational purposes only. If a trust becomes under-funded, the board will study the rate adequacy to determine appropriate remedial action. A qualified actuary should prepare the analysis, and clearly identify the break-even rate and assumptions.
The letter also outlines eight areas to consider and include in developing the rate adequacy and pro-forma financial statements. The pro-forma should a balance sheet and income statement. This required information should be filed with the Workers’ Compensation Board as soon as practicable and no later than 60 days prior to the start of each fiscal year. The board has indicated that trusts cannot issue rate quotes to new or renewal business prior to filing this documentation.
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