New York State AFL-CIO

Self Insured Workers’ Compensation Trusts

In the last edition of this column the first installment of a discussion of the financial debacle of the collapse of self-insured workers’ compensation trusts was begun by highlighting the settlement of the charges against Compensation Risk Managers, one of the largest administrators of such trusts. In reviewing the disposition of that case, Richard Honen, a lawyer for another trust administrator, First Cardinal, observed “slap on the wrist is too strong a phrase.”

The issue which has provoked attention in the collapse of this essentially unregulated market is the joint and several liability of those involved in these trusts when a member of a trust, a trust itself, a group of related trusts or all trusts cannot pay the liability incurred from the claims of injured workers.

First Cardinal is disputing its share of preliminary assessments by the Workers’ Compensation Board to cover CRM’s obligations from the first three failed self insured trusts CRM was administering.

Martin D. Rakoff, a CEO of CRM has stated “Existing and prospective members of trusts in New York State can rest assured that current state standards used to “grade” trusts operate within a very conservative system...independent accountants and actuaries...review individual trusts and make sure their assets exceed liabilities.”

“A trust which no longer had any assets and still had liabilities below the reinsurance retentions purchased to limit claim exposure would implement the following:
(The Workers’ Compensation Board) would collapse the security it obtained from the trust upon inception, then look to the individual members of the insolvent trust to live up to their obligations. “If these obligations still left a shortfall, an assessment of the entire self insurance community (individual self insureds and group trusts) would be issued. Individual self insureds post the majority of security by a wide margin; therefore, the impact of an assessment could be negligible for the trusts.”

“…Being self insured, individually or within a trust, is about taking control of your workers’ compensation to realize long term savings—not a short term fix.”

Mr. Rakoff wrote this in the Insurance Advocate April 25, 2005.

Solutions to the insolvency crisis that have been advanced include diverting funds from the State Insurance Fund, assessing all workers’ compensation policy holders, bonding and other schemes. The best suggestion is to follow   Mr. Rakoff’s advice as offered. After all, he did warn that “one can see the similarities between the traditional insurance market, (State Insurance Fund) insureds, and the self insurance community. All three are isolated financial models in which insureds can be impacted by other insureds.” (emphasis added)

Denis M. Hughes, President

Issue of the WeekThe following Memo was issued by Local 237 Teamsters in support of S. 6862 (Maltese)/A. 8232 (Towns):

This bill would amend the civil service law and the Administrative Code of the City of New York in relation to the collective bargaining process for certain peace officers and special officers.

Currently, there are 6,000 peace officers and special officers working for the City of New York, Health and Hospital Corporation, Department of Education of the City of New York, City University and New York City Housing Authority. The New York City Administrative Code was recently amended (Section 12-307 (4)(i) to provide that peace officers and special officers employed by New York City agencies represented by an employee organization in collective bargaining shall have the same right as police, firefighters, other fire department employees and NYC correction officers to bargain directly with the City of New York over all matters, including but not limited to, overtime and time and leave matters. The agencies covered by this bill that would be afforded similar treatment with respect to collective bargaining process are not City agencies, but rather are State created entities, not subject to such provision of the Administrative Code.

To maintain consistent collective bargaining process treatment of all peace officers and special officers involved in bargaining where the City of New York is a participant, this amendment to the Civil Service Law is necessary. The Administrative Code amendment corrects an inadvertent omission of a job title in the recent amendment to the Code previously described.

This bill has passed the Assembly and is currently on 3rd reading in the Senate.

Keep An Eye OnWednesday, June 18, 2008
Meet and Greet Reception in honor of 13th Congressional District Candidate, Michael McMahon at the New York State AFL-CIO, 100 South Swan Street, Albany, 4:00—6:00 p.m. Refreshments and Hors d’oeuvres will be served. (This is not a Fundraiser).

Please RSVP to Suzy Ballantyne at 518-436-8516 x 240 or by e-mail: sballantyne@nysaflcio.org.