A New York insurance agent group called today for adoption of four principles to address the "crisis" with the state's workers' compensation trusts, used by employers to self-insure against employee injury claims.
The announcement by the Independent Insurance Agents and Brokers of New York came as negotiations continued involving business, labor, the governor's office and both houses of the legislature to craft a measure reforming regulation of the trusts.
Their talks, which continue tonight, are up against a Monday deadline, when the legislature is due to adjourn.
A series of defaults by a number of the trusts that pay injured worker claims has created a financial strain on the system.
The State Workers' Compensation Board estimates that the present value of the unpaid liabilities for the defaulted trusts is approximately $363 million, which it said is spread out over the life of claims and could take decades to see through.
Twelve trusts have failed since 2006, and according to WCB figures, 10 trusts currently fail to meet or exceed the Board's 90 percent threshold for reserve levels. The board has said it has been limited by the current law in how it handles the trusts.
IABNY, which is not part of the negotiations over legislation, reacted to "significant disruption occurring in the marketplace," noting the recent termination of five trusts operated by Compensation Risk Managers, the suspension of CRM's license, and the finding that at least 10 trusts are underfunded.
The organization outlined four principles it said should serve as a guideline to advance and evaluate legislative and regulatory proposals:
o A short-term solution must be put in place that assures outstanding claims are paid in full and in a timely fashion.
o Healthy trusts should not be looked to for assessments or other means of extracting funds to help pay the obligations of the failed trusts.
o Regulators should aggressively assess the assets of the failed trust managers and their member employers to obtain funds to help pay the claim obligations of the trusts.
o A long-term solution needs to be put in place that provides a better approach to trust oversight and establishes some type of backstop such as a guaranty fund.
"We are confident that, if followed, these principles will lead to addressing both the short-term and long-term issues facing employers and their employees that have chosen to be served by a self-insured trust," said IIABNY Chair Neal L. Sullivan. The IABNY said in its statement that if the WCB goes after healthy trusts for assessments, "this would simply exacerbate the problem by putting more trusts and their employer members in jeopardy."
The WCB has made efforts to assess functioning trusts, which have resisted and tied the issue up with a court challenge.
Art Wilcox, who is representing the AFL-CIO in the talks, said with the exception of the assessments, all of the issues mentioned by IABNY are on the table. He said the negotiating group will work over the weekend, and "hopefully we'll get something wrapped up by Monday.
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