NY Workers Comp Rates Cut

New York Insurance Superintendent Eric Dinallo has ordered a 20.5% cut in New York Workers' compensation rates, based on changes to the state's WC laws enacted earlier. New York Governor Elliot Spitzer made reform of Workers' Comp a priority in his new administration, and he worked with legislative leaders to make changes in benefits and other statutes that have led to this significant rate reduction.

Spitzer may have been the bane of some businesses during his time as New York's Attorney General (which included high profile legal attacks on insurance industry abuses) but this latest news has got to be very welcome indeed to the larger business community there.

New York Imposing New WC Requirement On Out-Of-State Employers

Under new regulations set to take effect on September 9, 2007, out-of-state employers who have workers in New York State will have to make sure they have valid New York coverage, either through a separate policy for New York or by making sure New York is added to their multi-state policy in section 3.a of the policy.

More details can be found at http://www.wcb.state.ny.us/content/main/Small_Business/outOfStateEmployers.jsp

New York doesn't hesitate to apply significant fines for companies that they feel don't comply with these provisions, so if your company has workers who occasionally work in the state of New York, you will want to make sure you are in compliance with the new regulations.

Class Action Filed Against California WC Fund

The State Compensation Insurance Fund, or SCIF, has been hit with a class action lawsuit against the fund and some of its top executives. SCIF is the California Workers' Compensation Fund, and it competes against private insurance companies to provide Workers Comp coverage to employers in California. SCIF is the largest provider of such coverage in California.

The lawsuit seeks $25 million in compensatory damages and $50 million in punitive damages, and alleges that there were improper payments made by SCIF to some safety groups operated by former board members of SCIF.

The lead plaintiff in the action is Acro Constructers, Inc. of Burbank, and the law firm handling the suit is Pearson, Simon, Soter, Warshaw & Penny, LLP. in Sherman Oaks. It is reported that potentially there could be 250,000 members of the class action among California employers.

NCCI Sues AIG--For A Billiion Dollars

There's been an extraordinary development in the world of Workers' Compensation insurance in the past few days--the NCCI has sued American International Group (AIG) for a billion dollars. NCCI, the National Council on Compensation Insurance, is the insurance industry group that writes the classification and audit manuals used for Workers' Compensation insurance in most states. NCCI is essentially owned by insurance companies that write Workers' Compensation insurance, so it's an unprecedented event for this organization to file suit against a member insurer such as AIG--and for a billion dollars, no less.

The suit stems from something that had been uncovered by New York Attorney General Elliot Spitzer: AIG had for years been reporting a lot of Workers' Compensation premium as if it were other kids of liability insurance premium instead. This enabled AIG to avoid its fair share of Assigned Risk Workers' Compensation business, which tends to be unprofitable. And NCCI administers the national pool that makes the Assigned Risk system work in most states. Thus, AIG's deceptive practices made other insurers pick up more than their proper share of this Assigned Risk business. The suit by NCCI charges that the damages to other insurers was a billion dollars.

AIG, for its part, has responded that its settlement with Spitzer for $300 million dollars should have closed the book on this matter, but NCCI doesn't seem to agree.

A lot of insurance industry professionals have pooh-poohed Spitzer's investigations of their business, but this lawsuit would seem to suggest that there was even more to the story than even Spitzer documented.

Former Ohio WC Exec Sentenced for Fraud

Terrence Gasper, who until not so long ago was the chief financial officer of the Ohio Workers' Compensation fund (a monopoly state fund) has been sentenced to a bit over five years in prison for his role in an investment scandal. This is the well-reported scandal involving an investment fund in rare coins that had been promoted and managed by Tom Noe, who is currently serving a 18 year prison sentence for his part in the scheme.

The Ohio WC fund lost $13 million in the investment fraud, along with a fair chunk of its credibility.

California WC Premiums Decline

The latest report from the WCIRB (California's equivalent of the NCCI) indicates that statewide premiums for Workers' Compensation insurance have declined significantly in 2006. The report states that California WC premiums totalled $16.5 billion in 2006, down by $5 billion, or 23%, from 2005. The total is down $7 billion, or 30%, when compared to 2004 figures.

This is certainly good news for California employers, who had been subjected to horrific rate and premium increases in recent years. Of course, part of the reason current premium totals show such dramatic decreases is that prior years' totals were at record high levels. Still, California businesses are glad for the relief. California labor groups are far less happy with the reforms that are largely behind the decreases, of course, and there are some loud rumblings coming from that camp that the recent reforms may have gone too far in reducing benefits for injured workers.

Workers' Compensation in California clearly remains a political football match between employers' interests and workers' interests--as it is in every state.

West Virginia Changing WC Classifications

The state of West Virginia is continuing its transition from a monopoly state fund to a state that allows competitive private insurance. The latest step is to move in two steps to the NCCI classification system used in many other jurisdictions. At the moment, West Virginia still has only one Workers' Comp provider--BrickStreet Mutual Insurance is a mutual insurance company that was formed from the old state monopoly fund. But in the next few years other insurers will be allowed into the state to compete for Workers' Comp business from employers, and so it was necessary to shift over to the classification system used by insurers in other states.

The old classification system used by the state fund and BrickStreet had under 100 classification codes. Last July, BrickStreet moved to a new system with 470 classifications, and come July of 2007 will transition to the full 586 NCCI classifications codes.

This will no doubt be a source of some confusion and difficulty for WV employers, particularly in light of the fact that even though the NCCI classification system is widely used, errors in application of the system are still widespread. (Classification errors are among the most common causes of overcharges that I find in my consulting work.)

So although West Virginia is getting in step with most of the rest of the country in regards Workers' Comp classifications, employers would still be well advised to check those new classifications carefully.