Although not in any immediate financial trouble, 11 of 14 self-insured employer workers' compensation trusts in New York administered by First Cardinal LLC are considering steps to dissolve their operations.

Richard Flaherty, First Cardinal president and chief executive officer, revealed the trusts' intentions in a letter to First Cardinal's broker partners.

He cited legislation signed into law in July by Gov. David Paterson as the primary reason for the decision. "It is now clear that the statute empowers the Workers' Compensation Board (WCB) to impose assessments on New York State self-insurance groups for other, unrelated self-insurance groups that have defaulted on their workers' compensation obligations," he wrote.

After the WCB imposed assessments across the entire self-insurance industry, 13 trusts administered by First Cardinal challenged the WCB's authority to make such assessments.

Last month, Acting Supreme Court Justice Kimberly O'Connor in Albany ruled that, while the WCB did not follow proper procedure in the case before the court, the board does have the authority to assess "all private self-insurers for the anticipated losses, liabilities and expenses" of defaulted trusts.

Mr. Flaherty said in his letter, "The legislation, perhaps unintended, has created an environment that could cause group self-insurance programs to be noncompetitive going forward."

The letter added that board members for First Cardinal-administered trusts have been meeting over the last 30 days, "and while not finalized, to date, independent, unanimous consent has been reached in 11 of our 14 trusts that the prudent course of action is to commence taking the steps necessary to dissolve the trusts."

The other three trusts, Mr. Flaherty added, have not yet come to a decision.

A First Cardinal representative reiterated that no final decisions have been reached as of yet by the trust boards, and the representative declined to name the 11 trusts referenced in the letter.

The representative noted that regardless of the outcome, First Cardinal will still administer self-insured groups in Massachusetts, New Hampshire and Texas.

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First Cardinal Trusts Consider Dissolving Operations

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