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Multiple Self-Insured Workers’ Compensation Trusts Shut Down by Workers Compensation Board!

Due to serious underfunding, numerous self-insured trusts (groups of employers pooling money to buy workers compensation coverage!) are being shutdown. The affects on injured workers are unknown but cannot be good.

N.Y. Regulators Shutting Down Five More CRM Trusts

New York — N.Y. Regulators Shutting Down Five More CRM Trusts: Top [04/02/08]

The New York State Workers' Compensation Board (SWCB) has ordered the termination of five group selfinsured workers' compensation trusts administered by Compensation Risk Management (CRM) since the beginning of the year and warned that 22 more trusts operating in the state are underfunded.

In a spreadsheet updating the status of the trusts issued last Friday, SWCB reported that it terminated Real Estate Management Trust of New York, Trade Industry Workers' Compensation for Manufacturers, and Transportation Industry Workers' Compensation Trust on Jan. 31.

The board is scheduled to terminate the New York State Cemeteries Trust on March 31 and the Wholesale & Retail Workers' Compensation Trust of New York on April 29. All five are managed by CRM based in Poughkeepsie, N.Y., with additional operations in California. CRM is part of Bermuda-based CRM Holdings, a publicly traded workers' compensation services company.

The only remaining CRM-administered trust in New York, Elite Contractors Trust, is listed as one of the 22 other trusts that are underfunded – meaning their assets don't total at least 90% of their liabilities.

Board spokesman Brian Keegan said the agency is working to ensure that claims filed by injured workers covered by the trusts are paid. But he said he could not immediately provide further comment on the problems with the industry late Tuesday afternoon. Last Aug. 17, the board released what it called the most dismal financial report on self-insured trusts in years.

Mary Beth Woods, chief of licensing for the board, said at the time the downturn reflected the impact of stringent new rate-setting rules for trusts. But she said the numbers were solid for the majority of group trusts, which account for more than $15 billion in annual payrolls.

Woods was unavailable for comment Tuesday.

In last August's report, the board listed 57 group trusts in New York and classified 29 of them as underfunded. "Once the trust is terminated, people have to get their own coverage," Keegan said. "What we will do is to make sure that the claims outstanding will get paid."

Jonathan Pierce, a spokesman for CRM, also said details of the specific trusts identified as terminated or underfunded by the board last week were not immediately available. "We are working with the board and the members to ensure everyone has proper coverage," Pierce said.

Independent Insurance Agents & Brokers of New York (IIABNY) posted an alert detailing trust eliminations on its website Tuesday afternoon and provided a link to the board's summary findings at http://www.iiaba.net/NY/02_News/01_DailyNews/NAV_NEWSDailyNews?ContentPreference=NY&ActiveState=NY&ActiveTab=STATE&ContentLevel1=NEWS&ContentLevel2=NEWSDAILY.

Tim Dodge, director of research and external communications, said IIABNY is concerned about CRM's trusts but doesn’t believe the administrator's problems are reflective of all self-insured trusts in New York. He also discounted complaints from one trust representative that part of the problem was triggered by former Gov. Eliot Spitzer's sweeping 2007 workers' compensation reform package.

"I think there are problems with certain trusts, but I don't think it's industry wide," Dodge said. "At this point I don't think we're going to know the full impact for a few years yet." Under New York law, all of the group self-insured trusts are liable for the claims left by the failure of a single trust. Keegan said unpaid claims would be transferred to a self-insured pool into which the trusts are required to post collateral.

Warning that more failures were to come, SWCB Chairman Zach Weiss requested authority in January to issue $59.5 million in bonds to cover liabilities created by fund defaults. The board shut down seven selfinsured groups in 2006 and 2007.

The bonds would be paid off by assessments to employer-members of the failed trusts. IIABNY said the board "fully expects to collect the assessments and has already begun collection efforts in conjunction with the state Attorney General's office."

Spitzer's reforms were signed into law in March 2007. Based on the reforms, New York Insurance Superintendent Eric Dinallo ordered a 20% rate cut effective Oct. 1.

Critics of the board say it has traditionally allowed its self-insurance groups to operate without adequate funding – a problem complicated by economic troubles in upstate New York and the nation's economic slump.

In a letter dated June 21, 2007, CRM Holdings Chief Executive Officer Daniel G. Hickey Jr. warned of further shutdowns and attributed the troubles to the state's shifting regulatory climate.

–By Michael Whiteley, WorkCompCentral Eastern Bureau Chief

mike@workcompcentral.com

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