States Gang Up On Utah WC Fund

|

By Gary Mogel

|

NU Online News Service, Nov. 6, 2:05 p.m.EST?The Utah Workers' Compensation Fund, facing ongoingdisputes with several states over whether its government-ownedsubsidiary can lawfully write workers' comp business in thosestates, is now trying to divest the unit.

|

According to a WCF statement, the action is in response toregulatory challenges by the approximately 25 states?most notablyIdaho?that ban out-of-state government-owned insurancecompanies.

|

WCF also announced that it is suing the State of Utah over theownership of the Fund's assets. According to a WCF statement, theFund believes its policyholders own the assets, whereas Utah thinksthe state owns the assets.

|

"This action is to protect the rightful owners, thepolicyholders of the company," said Lane A. Summerhays, WCF's chiefexecutive officer and president.

|

In addition to the states, insurers and their trade groups alsooppose state funds venturing out of the fund's state of domicile."It is basically a fairness in competition issue," said KeithBateman, vice president and director of workers' compensation forthe Downers Grove, Ill.-based Alliance of American Insurers.

|

Mr. Bateman pointed out that the state funds have a taxadvantage under Section 501 of the Internal Revenue Code thatprivate insurers do not have.

|

"Carriers under that section qualify for an exemption if theyare markets of last resort, established by the state, have amajority of their board appointed by the governor or legislature orother public official, and have their assets returned to the stateupon dissolution," he explained.

|

Under the proposed divestiture plan, the subsidiary, Salt LakeCity-based Advantage Workers' Compensation Insurance Company, wouldbecome a publicly traded stock company. The divestiture is plannedfor completion by June 30, 2004, if a stock distribution formulacan be approved by the Utah Insurance Department by that time.

|

WCF spokesperson Thomas E. Callanan noted that, earlier thisyear, a bill (S.B. 170) that would have eliminated governmentownership and made WCF into a mutual insurance company failed towin passage after heavy opposition from insurers.

|

"Without a legislative solution, we believe it is in the bestinterest of WCF policyholders to protect Advantage's value throughthis divestiture," said Mr. Summerhays in a statement. "If we donothing, Advantage may well lose its ability to write insurance inother states and its value will be greatly harmed."

|

A similar dispute?but with a different result?occurred in Maineafter that state's workers' comp fund, Maine Employers' MutualInsurance Company, attempted expansion into New Hampshire and otherstates.

|

"We prevailed because we were able to show that MEMIC did nothave any special advantages, such as a tax advantage," said MEMICspokesperson Michael Bourque. "There was no special exemption, asthere is in Utah. We competed like everyone else."

|

Mr. Bourque noted that MEMIC, through a subsidiary, now writesworkers' comp coverage in New Hampshire, Vermont, Massachusetts andConnecticut.

Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader

  • All PropertyCasualty360.com news coverage, best practices, and in-depth analysis.
  • Educational webcasts, resources from industry leaders, and informative newsletters.
  • Other award-winning websites including BenefitsPRO.com and ThinkAdvisor.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.