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Employers resist worker's comp 'bailout' plan
Companies that made payments to trusts suing state board that wants them to ante up even more

By ERIC ANDERSON, Deputy business editor
First published: Tuesday, June 17, 2008

ALBANY -- As soon as this fall, dozens of employers in the Capital Region will face hefty bills from the state Workers' Compensation Board. They'll be asked to make up for years of underpayment into so-called self-insured trusts that provided their coverage for on-the-job injuries.
Those trusts have failed, and their administrator has agreed to give up its license.

In the meantime, however, healthy self-insured trusts are being asked to cover the failed trusts' costs, and that has triggered a legal battle.

Attorney Richard Honen of the Albany law firm Phillips Lytle LLP calls it a "bailout ... unique even for New York."

Honen, representing a group of 13 trusts -- basically employers that formed pools to self-insure against workers' compensation claims -- says they've seen their combined annual assessments to the board climb from $150,000 a year to $12 million this year. The assessments typically pay for the operation of the board, including regulatory oversight of the trusts.

Now, the increase is covering the benefits to injured workers of the failed trusts.

"The board needs resources now to pay the current claims of injured workers," said board spokesman Brian Keegan. "When in the future, the board is able to collect from defaulted trusts, this assessment will be adjusted accordingly."

"In the interim, the board recognizes its first priority is to defend the benefits injured workers across New York count on and will continue to act accordingly," Keegan said.

The group of trusts Honen represents has brought suit against the board and refused to pay the increased premiums.

"They've been paying full price for their premiums," he said Monday. "And now they're going to bail out people who've been paying extremely discounted premiums?"

When the trusts didn't pay, the board sought to seize more than $14 million in security bonds the funds had posted. But last month, Kimberly A. O'Connor, acting justice in state Supreme Court in Albany County, blocked that seizure while she decides the case.

The administrator of the failed trusts, Poughkeepsie-based Compensation Risk Management LLC, will surrender its license by Sept. 8. Meanwhile, a forensic audit is seeking to determine which of the members owes what to make up the shortfall.

The board has rough estimates of the liabilities of at least three of the trusts, and although those estimates are 18 to 30 months old, they show at least $145 million in outstanding liabilities. There was no word on how many assets the three funds held, however.

"I don't understand why no action has been taken against the administrator," Honen said.

Under an agreement with the board, Compensation Risk Management admitted no violations and paid no fines or penalties, a spokesman said.

"If that's the sum total of the action taken against that administrator, someone has let down the people of New York state," Honen said.

Eric Anderson can be reached at 454-5323 or by e-mail at eanderson@timesunion.com.