Liberty Mutual hunts more damages from AIG workers’ comp case

Yesterday we covered, among other things, a potentially huge workers’ comp rate in California and discounted rates offered to members of the National Federation of Independent Business (NFIB).

Today we see in BusinessWeek and Forbes articles that say the Ohio governor wants lower workers comp rates for his state.

Governor’s goal: 4 per cent reduction

From BusinessWeek: “Ohio’s governor wants the state to lower the premiums employers pay for workers’ compensation by 4 percent for a total cut of about $65 million a year.”

From Forbes: “Gov. John Kasich’s office said the goal is to reduce the cost of doing business in Ohio and make the state more competitive. His proposal was submitted Thursday to the board of the state Bureau of Workers Compensation. If adopted in May, employers would first see premium changes in February.”

Rates determined by sector and claims history

According to the Cleveland Leader, “Presently, rates for specific businesses are determined by the industry that it is in and its claims history. Steve Buehrer, BWC Administrator and CEO, said that the goal is to reduce costs for all employers in Ohio, and one of the factors in the decision to reduce rates is a trend of decreasing claims frequency and positive investment returns.”

Texas high court says state immune from worker-comp retaliation suits

In Texas, the state Supreme Court delivered a setback to workers who are improperly fired in retaliation for filing workers’ comp claims.

An April 29 piece at Business Insurance says, “The state of Texas, including its political subdivisions, is immune from workers compensation retaliation lawsuits, the Texas Supreme Court ruled Friday.

Terminated ‘shortly after’ workers’ comp filing

“According to the decision in Travis Central Appraisal District vs. Diane Lee Norman, Ms. Norman went to work for the district as a probationary employee in January 2006. She was terminated six months later, shortly after filing a workers compensation claim, and sued for retaliation under Texas’ workers compensation statute.”

Opinion reverses earlier ruling

An Austin American-Statesman article says, “An earlier Supreme Court ruling said state law waived sovereign immunity, which protects government from being sued over most issues, for claims under the Texas Anti-Retaliation Act.

“But Friday’s opinion held that recent changes in law stripped the sovereign immunity waiver for cities, counties, school districts and other local governments.”

‘Ruling weakens employee protection’

A Statesman blog adds: “Plaintiffs lawyers say the ruling weakens employee protection and gives local governments free rein to fire workers’ comp recipients without proper cause.

Attorney says workers still have ‘ADA Act and grievance procedures’

“But Jennifer Powell, who argued the case on behalf of the appraisal district, said fear of lawsuits has kept governments from firing workers’ comp recipients for legitimate but unrelated reasons. Employees who believe they were improperly fired can still seek protection under the Americans With Disabilities Act and internal grievance procedures, Powell added.”

Liberty Mutual fights AIG settlement

Liberty Mutual is fighting a proposed settlement in the AIG workers’ comp premiums case.  A Bloomberg piece in The Boston Globe says, “American International Group should pay more than $1.5 billion to rivals to settle a lawsuit alleging the insurer cheated industry-funded pools that cover injured workers, Liberty Mutual Holding Co. said.

Liberty seeks more than triple AIG agreed to

“The proposed damages are more than triple the $450 million that AIG agreed to in a preliminary settlement advocated by seven insurers, including Travelers Cos. and Ace Ltd. in January. The higher payout is justified because the settlement didn’t account for the full scope of AIG’s underreporting of premiums, Liberty Mutual’s Safeco and Ohio Casualty subsidiaries said in federal court documents filed in Chicago.”

Was under-reported amount $2 billion–or $6.1 billion?

Marketwatch reports that “Liberty Mutual is challenging a key component of the proposed settlement, arguing that AIG had underreported its workers’ compensation premiums by $6.1 billion, instead of the roughly $2 billion outlined in the settlement agreement.

“The putative class-action case–and another lawsuit that preceded it–concern payments insurers are required to make, based on their market share, to support state-mandated pools for workers’ compensation coverage. The state pools cover workers who can’t get coverage from the private sector.”

AIG calls proposal ‘a desperate attempt’

Business Insurance weighs in with a look at both perspectives:

In a statement, Liberty Mutual called the proposed settlement “detrimental to the class of over 500 insurance companies victimized by AIG’s admitted wrongdoing.”

Judge Gettleman is scheduled to hear Liberty Mutual’s challenge to the settlement in June, sources said.

The insurers that agreed to the settlement are: ACE INA Holdings Inc., Auto-Owners Insurance Co., Companion Property & Casualty Insurance Co., Firstcomp Insurance Co., Hartford Financial Services Group Inc., Technology Insurance Co. and Travelers Indemnity Co.

AIG said in an emailed statement, “The settlement before the court is fair and reasonable, and Liberty’s opposition is the latest in a long line of desperate attempts to derail a settlement supported by the 50 state insurance departments and the other insurance companies in the litigation. We are confident that the settlement will be approved despite Liberty’s repeated efforts to prevent the parties from reaching a resolution.”

“Liberty has made this claim to regulators, experts and other insurance companies and been rejected by them all.”

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Frequently enough, a worker’s compensation case may be so complex as to demand legal representation. However, sometimes what seems like a cut-and-dried situation to an injured worker may result in a smaller award than envisioned–or even a denial. Have you, a friend or a loved one been injured on the job? Whether you’re merely seeking answers about your rights or believe a lawsuit may be necessary, be sure to seek counsel with attorneys trained and experienced in workers’ compensation. Here’s some resources:

Workers compensation basics

Injury on the job

Filing a claim

Illinois has its own dispute to settle: injured workers’ rights versus costs of premiums

AIG, the giant insurer and derivatives player known most recently for its bailout excesses and subsequent sell-offs and name changes of subsidiaries, was also the subject of an earlier SEC investigation.  The consequent settlement resulted in a return of “more than $800 million in Fair Funds to harmed investors in American International Group, Inc., which settled SEC charges of financial fraud and improper financial reporting and disclosure over a four-year period,” according to this SEC press release.

Out of bounds, long ago

Now it turns out that the insurance behemoth was playing fast and loose with workers’ comp regulations long before the SEC financial investigation.

According to a Dec. 23 AP story, “American Insurance Group Inc. and its insurance affiliates have agreed to pay more than $100 million in fines and other penalties to resolve claims the insurer violated workers compensation regulations.

“New York-based AIG also agreed to pay about $46.5 million in additional taxes and assessments.”

Possible effects on current litigation

Moreover, Bloomberg says the settlement may hurt AIG in a separate, high-dollar court action, also related to workers’ comp insurance:  “American International Group Inc., the company defending itself against a $1 billion workers’ compensation lawsuit filed by rival insurers, may have handed its accusers momentum by agreeing to pay $146.5 million to settle a probe by regulators.

“ ‘That certainly can’t help their position in court,’ said Edward Priz, president of Riverside, Illinois-based commercial insurance consultant Advanced Insurance Management LLC.”

A Dec. 22 Reuters article reports that “In addition to the fines, AIG will pay $46.5 million in taxes and assessments and has agreed to a potential $150 million in extra fines if it does not follow a compliance plan.

‘More than $2 billion’ misreported

“Pennsylvania authorities said the primary violation was the misreporting of more than $2 billion in workers’ comp premiums as general or commercial auto liability premiums.

“The examination focused on actions between 1975 and 1996, the same period that was the subject of the 2006 regulatory settlement between AIG and New York state, AIG spokesman Mark Herr said in a statement.”

States must approve, in majority

And the Wall Street Journal says, “The settlement requires formal approval from a number of states, and won’t be complete until AIG resolves litigation pending in federal court in Chicago with rival insurers over similar issues, the regulators’ statement said.”

Illinois debates costs versus benefits to injured workers

In Illinois, there’s quite a dust-up in the making over workers’ comp reform.

In a Dec. 28 press release, the workers’ comp and personal injury law firm of Katz, Friedman, Eagle, Eisenstein, Johnson and Bareck take the position that proposed reforms are, simply put, awful for injured workers, in two major areas:

The Illinois legislative bodies are currently considering changing the Illinois Workers’ Compensation Act in a way which sharply reduces the rights and benefits of the injured worker. Among the changes proposed is to eliminate the injured workers’ first choice of a treating doctor. The proposed legislation will require the injured worker to initially treat with the company appointed physician. The injured worker will then have the right to choose his or her own physician, but will be limited to one choice only.

Another change proposed is to reduce the benefit payment to those workers most seriously injured: those who are unable to return to work in their usual and customary employment. These injured workers suffer permanent wage loss which is now only partially compensated, but under the proposed legislation will be further limited.

Looking closely at costs

Although laudable for its concern about injured workers, the law firm PR does not mention cost of workers’ comp premiums, which we discussed in an Oct. 24 post, based mostly on this report from Oregon, which shows Illinois has the third highest rates in the nation.

And that’s where the insurance industry and Illinois employers are hanging their hats, as evidenced by a Dec. 17 post at Insurance Journal:

Independent insurance agents in Illinois are urging state lawmakers to pass workers’ compensation reforms in early January, before a new General Assembly will be sworn in.

“The facts are alarming,” stated Todd Henricks, president of the Independent Insurance Agents of Illinois (IIAI), in a message to the General Assembly urging lawmakers to take steps to lower the cost of the coverage and improve the state’s business climate.

Henricks said workers compensation costs in Illinois were at one time about average in comparison to the 50 states [but have since risen to third highest, as noted].

A barrier for incoming business?

A longish story at an Illinois regional news site tells the tale from the perspective of employers, including city government, who contend that the state’s workers’ comp rates not only throttle down business–and hiring–but also act as a roadblock to luring new business to the state. The story also contains several anecdotal examples of employees who abuse the workers’ comp system, perhaps with the aid of unethical medical providers.

According to The Daily Republican, Teresa Katubig, “president and CEO of Extra Help Employment and Payroll Services, which provides employees for large employers and other business owners were quick to point out that 85-90 percent of their employees do not file frivolous claims, but it’s the ones who do which drive up costs.

“ ‘Workers’ compensation can’t be an insurance program for employees who don’t have insurance,’ Katubig said. ‘I’ve heard employees tell their friends that, “It doesn’t matter, insurance is paying for it.” It does matter, because the businesses are the ones footing the bill.” ‘ ”

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Frequently enough, a worker’s compensation case may be so complex as to demand legal representation. However, sometimes what seems like a cut-and-dried situation to an injured worker may result in a smaller award than envisioned–or even a denial. Have you, a friend or a loved one been injured on the job? Whether you’re merely seeking answers about your rights or believe a lawsuit may be necessary, be sure to seek counsel with attorneys trained and experienced in workers’ compensation. Here’s some resources:

Workers compensation basics

Injury on the job

Filing a claim

AIG, the giant insurer and a major player at the core of the Great Recession, has been allowed by a federal judge to begin issuing subpoenas to 400 of its competitors in the workers compensation insurance business, according to a March 16 piece at businessinsurance.com.

The ruling, which allows AIG to pursue “nonparty discovery,” is part of a larger dispute between AIG and several competitors–but extends to “discovery of practices by insurers not named in the lawsuit, AIG said Monday in a statement.”

Industry leaders involved

The fracas involves some heavyweights in the industry, including some who joined forces in the original RICO suit against AIG: “The ongoing litigation grew out of a May 2007 lawsuit against AIG originally filed by the National Workers Compensation Reinsurance Pool made up of AIG competitors and operated by Boca Raton, Fla.-based NCCI Holdings Inc. That suit alleged violations of the Racketeer Influenced and Corrupt Organizations Act by AIG, among other assertions.”

It also involves some colorful language, for what might seem an otherwise dry topic.

Let’s pick up the story in 2005 when, according to an August 26, 2009 post at an insurance law blog, “a New York state investigation revealed that AIG had, over several decades, provided false reports of its workers’ compensation premiums to NCCI and state tax authorities to evade its residual-market obligations.” Id. Thereafter, in 2006, AIG entered into settlement agreements, including a $1.6 billion settlement with New York and federal authorities. The Participating Companies contested that the settlement agreements offered full and fair restitution. Id. at 5.

“On May 24, 2007, NCCI filed suit against AIG, alleging underreporting of premium data. AIG interposed numerous defenses and asserted counterclaims for an equitable accounting and an action on an open, current, and mutual account, both of which survived NCCI’s motion to dismiss. AIG also filed a 12-count third-party complaint against 24 named companies and numerous unnamed companies. Id. at 3.”

Court dismisses NCCI suit

But in August 2009, a federal district court dismissed the suit against AIG, “holding that the NCCI failed to establish standing to assert claims on behalf of the Pool.”

That’s when AIG came out swinging, inserting itself as plaintiff, and as described at workerscompsc.com, in September 2009 amended that complaint “in its Chicago racketeering conspiracy fight alleging fellow members of the National Workers’ Compensation Reinsurance Pool conspired to suppress a state and federal probe of the systematic underreporting of workers’ compensation premiums.”

AIG’s amendment, according to Michael Whiteley, “names as defendants the pool, NCCI and 19 insurance companies. It focuses on the actions of Liberty Mutual Group, Travelers, The Hartford, Ace INA Holdings and Sentry Insurance Co. as carriers AIG says have dominated the governing board of NWCRP.

“The amended complaint, which was filed under the Racketeer Influenced and Corrupt Organizations Act (RICO), alleges that NCCI flagged significant problems with the misreporting of premiums as early as 1986 and then conspired with pool members to conceal the problem while then-New York State Attorney General Eliot Spitzer was investigating the practice at AIG.”

AIG says it was targeted as scapegoat

Furthermore, AIG alleges the whole thing was a longstanding sham-up, designed to hurt AIG.

Again from the Whiteley piece: “And AIG repeated assertions that its competitors – led by Liberty Mutual, which last year overtook AIG as the leading comp insurer in America – conspired to make AIG the scapegoat in the Spitzer probe to prevent investigators from broadening their target.

“AIG said a Liberty Mutual representative on the pool’s governing board said at a board meeting in 2005 that the Spitzer probe gave the board ‘an opportunity to get the bastards at AIG.’ “

The residual market

What’s at stake is who-owes-what to cover costs in the so-called “residual market,” the pool for employers who can’t workers’ comp coverage in the primary market. As the insurance law blog explains:

“The action concerned the workers’ compensation insurance market. Employers obtain workers’ compensation insurance coverage from insurers in what is known as the “voluntary market.” Insurers that provide coverage to the voluntary market are required by state law to provide coverage to the “residual market,” which is the market for employers who cannot obtain coverage on the voluntary market. Those employers obtain workers’ compensation insurance coverage through an individual state’s assigned risk plan. Under that plan, the amount of insurance an insurer is required to provide for the residual market is directly proportional to the amount of premiums it collects for the policy it writes for the voluntary market. Mem Op. 3″

“Therefore, ‘any company that underreports its premiums to NCCI decreases its reinsurance participation rate and the overall total used to calculate all the rates.’ Id.”

‘Common practice in the insudtry’

Looking through the various accounts of the lawsuits and countersuits, it’s hard to find any instances in which AIG denies under-reporting these premiums. After all, it did settle for at least $1.6 billion in 2006. So far, it seems like AIG is merely saying, well, everybody did it.

From the businessinsurance.com conclusion, re AIG’s most recent action: “Now AIG is seeking proof through its subpoenas that premium underreporting practices it is alleged to have engaged in were common practice in the industry.”

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Regardless of whether you’ve been hurt on the job, it’s wise to know the basics of workers compensation in case you, a friend or family member need to file a claim in the future. If you do get hurt, you should be aware of the first things to do or what to tell a co-worker who has been injured.

Sometimes an injured employee takes all the correct steps but still has trouble getting the claim taken care of; in that case here’s some information for problems with denial of benefits. If legal help is needed to help with the case, be sure to speak to a trained, experienced attorney.