Washington--The insurance industry has established reform of South Carolina's workers' compensation system as its top legislative priority in that state for this year, insurers' trade group representatives said.

But while legislation to reform the system has been introduced in both houses of the South Carolina General Assembly, prompt action is not likely, according to a staff official of the American Insurance Association.

The bills call for dissolution of the state's Second Injury Fund, which pays an employer's additional insurance cost when an employee with a prior disability is injured. The intent is to put the nondisabled and disabled on an equal footing when it comes to hiring. The fund also ensures payment of workers' comp benefits to injured workers whose employers fail to comply with workers' comp law coverage provisions.

Lately employer assessments that bankroll the fund have been soaring.

Under the legislation the burden of proof would be put on employees to establish a workers' comp claim and they would have to provide expert medical evidence to establish causation. This provision would not apply to claims for an occupational disease or claims for a change of condition.

The proposed measures would halt the Second Injury Fund from reimbursing a self-insured employer or insurer for an otherwise qualifying injury occurring after June 30, 2007. It would continue to reimburse for claims resulting from injuries occurring on or before that date.

A notice of claim could not be filed with the fund after Dec. 31, 2010, and a request for hearing could not be filed after Dec. 31, 2011, for the purpose of establishing the validity for a claim for fund reimbursement.

Other provisions of the bills would toughen sanctions for fraudulent claims and clarify various terms and limit attorneys' fees. The growing use by employees of attorneys to pursue the claims is a primary reason for the upsurge in costs to the program, according to Julie Pulliam, a staff official at the AIA office in Atlanta.

She said the first step toward passage of the measures will be hearings on the bills in each chamber. The legislature will be in session until spring, Ms. Pulliam said, so it is unclear if and when final action on legislation will take place.

The AIA supports the bills but reserves the right to see if the final product can include even more reforms, explained Ms. Pulliam. "There is a consensus for reform," she said, "but we first have to see the reaction of the legislators to the bills as introduced to see what our next step will be."

The bills are the product of months of study by several task forces, both governmental and private.

The task forces were created because of a series of problems, according to Raymond Farmer, AIA assistant vice president, Southeast.

For example, the state Second Injury Fund increased its annual assessment charged to employers by 98 percent, driven by increases in disbursements from the SIF. South Carolina has had 30-40 percent higher loss ratios than neighboring states during the past five years, and in 2003 the combined ratio for South Carolina was 127 percent versus 98 percent countrywide, Mr. Farmer said.

Another problem is that an assigned risk plan is growing at six times the rate of the voluntary market and court decisions over time have broadened definitions of workplace injuries.

"There has been a growing chorus of discontent from South Carolina's employer community, as well as from insurers who provide workers' compensation coverage, about a system that has become increasingly dysfunctional," Mr. Farmer said.

Besides increased involvement of lawyers in the claims process in the state, a slowdown in claims processing by the commission that deals with claims has contributed to the higher costs, Ms. Pulliam said.

Special Reports /

'06 May Be The Year For S.C. Comp Reform

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