July 16, 2008

New York: Trust not in Trusts

We have been following the saga of the busted trusts in New York (here and here). Twelve workers comp trusts, all administered by Compensation Risk Management (CRM), have apparently failed. The workers comp board has decided to hit up the remaining trusts for the shortfall. These latter trusts are all solvent, and all are administered by someone other than CRM. The healthy trusts have been asked to cough up $11 million to pay for the sins of others, a mere 8,000 percent increase in their monthly assessments. That's joint and several liability on a New York scale, indeed.

The solvent trusts cried foul and took their case to the New York Supreme Court, where they won the skirmish and most certainly will lose the war. Acting Supreme Court Justice Kimberly O'Connor has put a temporary halt to the assessments, not because they are illegal, but because the comp board has not proven that the failing trusts are in fact insolvent.

"Insolvency must be real and actual prior to imposing the assessment, not prospective or speculative," she wrote.

Attorney for the solvent trusts, Rich Honen, has declared victory. "Annulled and vacated is what we asked for. The petition was granted."

That's like scoring two runs in the top of the first inning and claiming victory. This reprieve is not likely to last. In her ruling, Justice O'Oconnor has (somewhat reluctantly) upheld the board's right to assess healthy trusts. Board chair Zachary Weiss is semi-thrilled: he surely does not like the delay, but he is "pleased...that this decision will allow us to collect the money needed to pay the claims of injured workers."

Assuming the board's auditors can work their way through the CRM mess in a timely manner, the assessments will be in the mail before long. That's a tough pill to swallow: the healthy trusts played by the rules, paid actuarially sound premiums and confronted reasonably accurate reserves on their claims - none of which can be said of CRM's accounts. In this case, the good guys pay the price for the scoundrels. It isn't fair, but after all, this is New York.

| 1 Comment

1 Comment

"Hear me now and listen to me later" - I am not here to pump (clap) you up. Mark my words, this deficit will not remain solely in the trust world; all employers/carriers in my opinion will be paying for the mismanagement by CRM.

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This page contains a single entry by Jon Coppelman published on July 16, 2008 10:31 AM.

Buried alive was the previous entry in this blog.

Cavalcade of Risk and a news roundup is the next entry in this blog.

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