An action filed against the New York Workers Compensation Board(WCB) by group self-insured trusts over an increase in assessmentscould be decided by the end of this month.

The increased assessment was levied in part to cover theshortfall in benefits payments caused by defaulting trustsadministered by Compensation Risk Managers, LLC, according to BrianM Keegan, public information officer for the WCB. The trusts arecaptive insurers created to cover workers' comp claims forparticipants.

Richard E. Honen, an attorney with Phillips Lytle LLP,representing petitioners administered by First Cardinal, LLC, saidthat in New York State, every member of a self-insured trust, aswell as self-insured employers, contribute to the operational costsof the WCB.

"It's not a huge amount," he said of the annual assessment. InFebruary of this year, however, Mr. Honen said the assessmentskyrocketed.

"Round numbers, last year our assessment for all of ourpetitioners was in the neighborhood of about $140,000. This year,it was $12 million," he said.

His clients tried to meet with the WCB "several times" todiscuss the increase, but were refused, Mr. Honen said. Theysubsequently brought an action against the WCB in the state SupremeCourt, Albany County, to challenge not only the WCB's authority tolevy the increased assessment but also the board's handling of theentire process.

"We were never told what the increase was for," Mr. Honen said,"but we're pretty sure, and I think it's conceded by now, theincrease was to make up for what the Workers Compensation Boardthinks--keyword 'thinks'--might be the results of the failedCRM-managed trusts."

Mr. Keegan confirmed that the reason for the increase was inpart to make up the payments for claims of injured workers fromdefaulted group self-insured trusts, predominantly CRM.

When a group self-insured trust defaults, he said, the WCBbecomes responsible for paying current claims. He noted that themembers of the defaulted trust are ultimately liable for thosepayments due to joint and several liability. He explained, however,that it takes time to collect from those trust members, and thatsome claims need to be paid immediately. The increased assessmentto the nondefaulting trusts will help cover those payments, hesaid.

"When, in the future, we're able to collect from these defaultedtrusts, the assessment will be adjusted accordingly to the membersof the nondefaulted trusts," Mr. Keegan said. The nondefaultedtrust members would be rebated, he said, and he called the currentincrease essentially a bridge loan.

Mr. Honen sees this issue as determining whether groupself-insured trusts are jointly and severally liable for eachother. He noted that members having to cover a shortfall for theirindividual trusts is an accepted reality, but "if the WorkersCompensation Board now attempts to impose liability on trusts forevery other trust, that would be a difficult proposition."

Mr. Keegan, meanwhile, contended that the trusts are "balking atpaying an assessment that they've paid faithfully for years nowbecause it's so high."

Asked if there was an understanding among the trusts that theassessments could rise for all of them when a trust defaults, Mr.Keegan said, "I believe that there was. It's in the law. That's ourposition--that it's in the law. We haven't been hiding this. Thishasn't been a secret."

The section of the Workers' Comp law in dispute is Section50-5f, which says, in part, "Whenever the chairman shall determinethat the compensation and benefits provided by this chapter may beunpaid by reason of the default of an insolvent privateself-insured employer and the penal sum of the surety bond and/orthe securities or irrevocable letters of credit or cash held on itsbehalf by the chairman are about to become exhausted, the chairmanshall levy an assessment against all private self-insured employersin accordance with paragraphs c and e of this subdivision to assureprompt payment of such compensation and benefits."