One thing you learn quickly in today's highly competitive business environment is never rest on your laurels. The same holds true for workers' compensation results. Imagine this scenario: Your claim management program has finally gotten traction, and frequency (claim counts) and severity (claim costs) are trending downward. Lost workdays have also decreased. Outcomes are improving, and you know executive management is going to be pleased with these results. You report the news to executive management, and they give you a big pat on the back for a job well done, and then they instruct you to set new, "stretch" claim frequency and severity reduction goals. Welcome to the new "top line/bottom line"-centric world! To meet the goals and set expectations you have to look beyond your internal team and take a broader view of your service providers. Your claim administrator is not the only service provider who can help improve your outcomes. What about your broker? Are you exploring, and then effectively using, the brokerage services available to you? If not, you may be missing out on services and resources that can help you drive better outcomes. Many brokers offer the following services and resources, and they can serve as an extension of your staff where you need help the most. 1. Claim Services a. Technical experts to assist on complex, high-dollar claims b. Claim audit and file review protocols, automated programs and assistance c. Recommendations on how to develop the most effective claim administrator account handling instructions that facilitate success, rather than impede it d. Assistance with claim administrator performance agreements and service contracts e. Guidance on claim administrator service delivery model options 2. Jurisdictional legislation, case law and reform experts a. In addition to providing you with information, interpret what it means to your organization, and if appropriate, how to optimize cost savings related to state reforms 3. Return-to-Work programs a. Ideas on how to develop an effective program, how to implement it and how to measure results b. Consulting-level expertise may be available 4. Loss control/safety a. Claims analysis: A deep dive into why accidents are happening, to whom, where, when, how, and ultimately, how to prevent them b. Safety program assessment, design, implementation, training, communication and monitoring c. Industrial hygiene and OSHA expertise 5. Workers' Compensation cost allocation models a. Ideas on how to charge claim costs back quickly, consistently and equitably, driving awareness and accountability within your business units, divisions and locations 6. Service Provider marketing, assessment and selection a. Assistance with Request for Proposals (RFPs), automated RFP response collection and assessment, selection of finalists, interviews and site visits, reference checks, negotiations and program implementation. Brokers work with a variety of claim administration, medical management and risk management information system (RMIS) providers, and they know which of them consistently finishes on top in terms of outcomes and quality. 7. Benchmarking and customized reports a. Comparison of your outcomes to your industry peers (by Standard Industrial Classification Code (SIC) or North American Industry Classification System (NAICS) b. Customized reports to help you proactively identify and address claim trends 8. Risk financing feasibility studies a. Should you consider qualified self-insurance, higher retentions, self-administration or a captive to reduce the cost of your workers' compensation program?� b. What option(s) will give you the greatest control over how your claims are handled? 9. Research, reference materials a. Brokers typically have extensive libraries of reference materials and often publish white papers based on research they have conducted. Information is power, so make sure to avail yourself of these resources. Knowing that you have a variety of resources upon which you can draw makes the challenge a little less daunting. And, by drawing on the experts, you will develop a state-of-the-art program that will drive progressively improving outcomes. It's a win-win! Another article about broker selection: http://reduceyourworkerscomp.com//choose-insurance-broker-wisely.php More FREE TOOLS: WC Calculator: www.reduceyourworkerscomp.com/calculator.php WC 101: www.ReduceYourWorkersComp.com/workers_comp.php Follow Us On Twitter: www.twitter.com/WorkersCompKit View the Entire Blog: http://blog.reduceyourworkerscomp.com/
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers' comp issues.
©2009 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com
Note: Workers’ Compensation Insurance is a type of “property and casualty” business insurance required in all states, except Texas where an employer may opt out. It is referred to as a “line” of insurance coverage and is purchased from an insurance agent or broker.
Weekly Fraud Blotter from Lexis/Nexis
Temptation to Fraud: A Double Whammy
“Insurance agents who play games with their customers’ money and trust will ultimately lose. If you decide to break the law, CDI investigative teams will find you and help prosecute you.” Insurance Commissioner Steve Poizner said when announcing the prosecution of a local insurance agent who pled quilty to two counts of felony grand theft.
A CDI investigation found, the owner-agent sold various types of insurance policies, including automobile, property, general liability and workers’ compensation to individuals and businesses allegedly stole insurance premiums, in excess of $8,300, from four business owners, failed to send the premiums to insurance companies and issued bogus insurance certificates. She was arrested and released on bail.
While out on bail, the agent continued to collect premiums from additional victims of an additional $6,800 and again failed to place insurance coverage. Total premiums collected on both counts total in excess of $20,000.
The Department of Insurance revoked the defendant’s insurance licens and barred her from working in the insurance business.
Close to 1,900 insurance fraud-related arrests have were by the Department of Insurance’s enforcement division since Commissioner Poizner took office in 2007 – more arrests than were made during any other two- year period, under any previous insurance commissioner. (workersxzcompxzkit)
Reposted with Permission Visit LexisNexis for more information and full reports.
The latest workers’ comp fraud blotter see http://law.lexisnexis.com/practiceareas/Workers-Compensation-Law-Blog/workers-compensation-fraud-/Workers-Comp-Fraud-Blotter-9182009—Recent-Arrests-Charges–Convictions
We are accepting short articles* (300-800 words) on WC cost containment. Contact us at: Info@ReduceYourWorkersComp.com. *Non-compensable.
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker about workers’ comp issues.
©2009 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com
Fact: Workers’ Compensation Insurance is a type of “property and casualty” business insurance required in all states, except Texas where an employer may opt out. It is referred to as a “line” of insurance coverage and is purchased from an insurance agent or broker. For detailed information about your state’s requirements, contact your INSURANCE broker or agent.
Weekly Fraud Blotter from Lexis/Nexis: September 18, 2009
Three Employers Arrested in Two Days
It is illegal for businesses in Louisiana to misrepresent the status of their employees in an effort to avoid paying workers’ compensation insurance, payroll taxes and other employee-related costs. Employers who fail to comply can be fined up to $250 per employee per incident. Continued non-compliance can result in larger fines, an injunction from doing business in the state or possible jail time.
Agents with the Louisiana Insurance Task Force arrested the owner of a cleaning service on charges of insurance certificate forgery. His arrest follows that of two owners of a drywall business on charges of felony theft and workers’ compensation premium fraud totaling an estimated $1.2 million in unpaid insurance premiums.
“All employers doing business in Louisiana are required to provide workers’ compensation coverage for their employees. Businesses not covering their employees are shortchanging those employees and driving up costs for other businesses,” said Curt Eysink, executive director of the Louisiana Workforce Commission. “This is an important step in creating a level playing field for all businesses to compete fairly.”
The cleaning service owner is accused of altering an expired certificate of insurance to make it appear his company was covered by a workers’ compensation policy in order to maintain his service contract with the State of Louisiana. State contractors are required to have a workers’ compensation policy in effect to qualify for work. The investigation was triggered by a report showing the defendant’s work comp coveraged was cancelled due to non-payment.
Following a tip received by LWC, it was discovered the drywall business owners under reported the number of employees — reporting 35 and a payroll of $145,347, when there are more than 300 and a payroll of $4.2 million. (workersxzcompxzkit)
The Louisiana Workforce Commission has worked throughout the year investigating suspected employer and employee fraud. Through the second quarter of 2009, nearly 1,600 investigations were completed by the LWC Office of Workers’ Compensation Fraud and Compliance Units, with 13 referred to the AG’s office for possible prosecution. More than 10 arrests have been made.
Reposted with Permission Visit LexisNexis for more information and full reports. The latest workers’ comp fraud blotter see http://law.lexisnexis.com/practiceareas/Workers-Compensation-Law-Blog/workers-compensation-fraud-/Workers-Comp-Fraud-Blotter-9182009—Recent-Arrests-Charges–Convictions
Try Our FREE WC IQ Test: http://www.workerscompkit.com/intro/
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NEW ARTICLE: Return to Work in Unionized Companies
http://reduceyourworkerscomp.com//Return-to-Work-Programs-Unionized-Companies.php
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker about workers’ comp issues.
©2008 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com
Workers’ Compenstion Insurance is a type of “property and casualty” business insurance required in all states, except Texas where an employer may opt out. It is referred to as a “line” of insurance coverage and is purchased from an insurance agent or broker.
Weekly Fraud Blotter from Lexis/Nexis: September 18, 2009
In another victory for CDI, Insurance Commissioner Steve Poizner announced a former insurance broker was ordered to pay $119,427 restitution to five victims, following a conviction of eight felony counts including elder abuse, grand theft and computer fraud. He was sentenced to serve one year in Los Angeles County Jail on August 12.
“Any agent or broker who attempts to cheat customers by pocketing their premiums and leaving them exposed to losses will face serious consequences,” said Commissioner Poizner. “Jail time, fines and restitution are only the beginning for these unscrupulous criminals.”
According to CDI investigators the conviced broker collected at least $6,895 from five clients between August 2006 and September 2007, for the purpose of purchasing insurance products (homeowners, commercial general liability and workers’ compensation). Although he placed coverage for two clients, he but allegedly failed to remit any premium, resulting in the insurance company sending cancellation notices on both policies. Both of these clients paid premium directly to the insurance company to reinstate their policies.
The broker allegedly failed to place and remit premiums to any insurance company for three other clients and purportedly issued bogus certificates of insurance to two of these clients to give the impression the coverage was legitimate. (workersxzcompxzkit)
The alleged scam was discovered by the son of one of the victims, a senior citizen, who attempted to file a claim when his father’s home was damaged in a fire. This victim had neither received a certificate of insurance nor a policy. It was discovered the defendant failed to place any coverage on the victim’s home, resulting in an uncovered loss to the senior exceeding $110,000.
Reposted with Permission Visit LexisNexis for more information and full reports.
The latest workers’ comp fraud blotter see http://law.lexisnexis.com/practiceareas/Workers-Compensation-Law-Blog/workers-compensation-fraud-/Workers-Comp-Fraud-Blotter-9182009—Recent-Arrests-Charges–Convictions
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker about workers’ comp issues.
©2008 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com
How Would You Decide?
Here’s what Tom Robinson, J.D., writer for Lexis Nexis Workers Comp Law Center reports on a rare victory for the insured about lack of workers’ compensation coverage.
Here’s What Happened
Plaintiffs opened a new dealership, Rhino Linings of Santa Fe Springs, selling and installing spray-on linings onto the beds of pickup trucks and other vehicles. When plaintiffs inquired about insurance needs, Rhino USA, the company selling the dealerships, referred them to Robyn Thaw, an experienced insurance agent in California, who had handled the insurance programs for a number of the Rhino dealerships.
Plaintiffs indicated Thaw told the plaintiffs she was, indeed, knowledgeable about the specific needs of the new Rhino dealership and she had put together a specialized insurance program specifically designed for their business. Thaw had attended informational seminars for new dealers given by Rhino and at those meetings spoke to the groups about insurance needs and various insurance products tailored for Rhino dealerships.
When plaintiffs suggested they meet with Thaw to discuss their needs, they said Thaw indicated a meeting would not be necessary, and she would forward to them the necessary applications. Evidence suggested the plaintiffs filled out some portions of the forms but left the insurance portions of the forms blank, to be filed in later by Thaw. Various policies of insurance were subsequently delivered by Thaw to the plaintiffs.
Still later, an employee working for plaintiffs was severely injured in a fire at the dealership premises. It was then determined no workers’ compensation insurance had been procured. The injured worker sued plaintiffs and others, including Rhino USA, and obtained a verdict exceeding $11 million.
Plaintiffs then sued Thaw and her insurance agency, contending in pertinent part Thaw had negligently failed to secure necessary workers’ compensation coverage. Following a bench trial, the trial court found Thaw and the agency liable for negligently procuring insurance and the defendants appealed.
How the Court Ruled
In Williams v. Hilb, Rogal & Hobbs Ins. Servs., 2009 Cal. App. LEXIS 1496 (Sept. 9, 2009), the Court of Appeal of California (Second Appellate District, Division Eight), affirmed the entry of the judgment against the defendants. Initially, the appellate court acknowledged that generally an insurance agent does not have a duty to volunteer to an insured that the insured should procure additional or different insurance coverage. According to the court, ordinarily the insurance agent’s duty is to use reasonable care, diligence, and judgment in procuring the insurance requested by an insured.
The court noted, however, the rule changes when any of the following factors was present: (a) the agent misrepresented the nature, extent or scope of the coverage being offered or provided; (b) there was a request or inquiry by the insured for a particular type or extent of coverage; or (c) the agent assumed an additional duty by either express agreement or by holding himself or herself out as having expertise in a given field of insurance being sought by the insured. The court continued that an agent assumes additional duties by holding herself out as having expertise in the insurance being sought by the insured and may be liable to the insured for losses which resulted as a breach of that special duty. (workersxzcompxzkit)
While the court acknowledged that ordinarily an insured has a duty to read and understand the policy of insurance, the court added that the language of the policy might not control because of an insurer’s conduct extrinsic to the contract. Moreover, an insured’s failure to read the policy did not always render the insured’s reliance on the agent’s advice unjustifiable as a matter of law. The court concluded that the evidence amply supported the court’s finding that Thaw failed to use the skill and care a reasonably careful insurance professional would have used in similar circumstances and that Thaw had held herself out as an expert. There was no error.
See generally Larson’s Workers’ Compensation Law, § 150.02, 152.02, 152.05.
Tom Robinson, J.D. is the primary upkeep writer for Larson’s Workers’ Compensation Law (LexisNexis) and Larson’s Workers’ Compensation, Desk Edition (LexisNexis). He is a contributing writer for California Compensation Cases (LexisNexis) and Benefits Review Board – Longshore Reporter(LexisNexis), and is a contributing author to New York Workers’ Compensation Handbook(LexisNexis). Robinson is an authority in the area of workers’ compensation and we are happy to have him as a Guest Contributor to Workers’ Comp Kit Blog. Tom can be reached at: compwriter@gmail.com.
http://law.lexisnexis.com/practiceareas/Workers-Compensation
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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker about workers’ comp issues.
©2008 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com
Cancelling a New York State Insurance Fund Workers’ Compensation Policy
There are special rules for employers with a workers’ compensation policy with the New York State Insurance Fund (NYSIF), (the Fund) who wish to switch to a private carrier.
Rules are spelled out in Section 94 of the Workers’ Compensation Law for how this is done but adding a few more measures makes the process far more certain – and loose ends have been known to cause substantial, but unnecessary, expense.
If you wish to leave the NYSIF do this:
1. First get a new policy with an effective date of coverage comfortably greater than 30 days into the future.
2. You need to give NYSIF 30 days notice of intention to cancel MEASURED FROM THE DAY IT RECEIVES YOUR NOTICE.
3. You must also have a new policy ready to assume coverage, without lapse, from the date of cancellation with the NYSIF.
4. When the NYSIF receives your notification of intent to change coverage NYSIF must notify the WCB, in writing, of the proposed change in coverage AT LEAST ten days prior to the date of cancellation. Ten days after that, the process of cancellation will begin.
If the NYSIF does not notify the Board properly, coverage with the Fund will continue until it complies. This can be the source of much trouble since the Fund will continue to bill for premium at an enhanced rate, even though a new policy is ready to assume coverage and the delay is no fault of the employer.
ALWAYS, ALWAYS, ALWAYS
ALWAYS copy the WCB Compliance Unit on intention to change coverage and include proof of a new policy with the letter. Send the communication certified with return receipt requested.
ALWAYS send proof of new coverage to the NYSIF with the letter notice of intention to leave the FUND.
ALWAYS notify the Fund by express mail, certified letter, return receipt requested and make sure that notification arrives MORE than 30 days prior to change in coverage.
ALWAYS mail to the Board Compliance unit a copy of the signed return receipt from the NYSIF. Keep copies of all correspondence.
These Steps Are Important Because????
Even though sending a copy of the new coverage to the Fund is not necessary, and it is not necessary to copy the WCB, those extra measures will serve an employer well if any later dispute arises.
The Fund remains liable and the new coverage does not go into effect until the Fund properly completes its own responsibilities. The Fund may charge for the extended coverage but it may have to refund surcharges attached to extended periods that were due to its own failure to notify the Board in compliance with Section 94. The new carrier should be asked for adjustment of its premium if the Fund has caused extended coverage to occur since the new policy CANNOT go into effect until the Fund’s coverage ceases. These rules, which do not apply when the NYSIF is not a carrier, were intended to guarantee that there is no lapse in coverage AND no periods of duplicate coverage. (workersxzcompxzkit)
NYSIF is an insurer. Like all insurers, it has fiduciary responsibilities to the insured and may NOT benefit from its mistakes should these mistakes result in extra expenses.
Author: Attorney Theodore Ronca is a practicing lawyer from Aquebogue, NY. He is a frequent writer and speaker, and has represented employers in the areas of workers’ compensation, Social Security disability, employee disability plans and subrogation for over 30 years. Attorney Ronca can be reached at 631-722-2100.
We are accepting short articles* (200-600 words) on WC cost containment. Contact us at: Info@ReduceYourWorkersComp.com. *Non-compensable.
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker about workers’ comp issues.
©2008 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com
10 Tips to Help You Maximize Results by Partnering with the Account Manager at your insurance broker or agent. Having a great working relationship starts with the selection process and continues throughout the relationship between client and insurance broker.
Today’s unprecedented global economic conditions have changed the way we work. Everyone is doing much more, often with much less. Priorities seem to change by the minute, as do deadlines, and expectations keep increasing. Multi-tasking has taken on a whole new meaning.
There is a positive in all of this, however. Challenges often present us with opportunities to be creative and to look at things in a different light. Are you getting the maximum possible value, and the best outcomes, from the resources you do have? Specifically, think about how you interact with your account manager.
Having led a large third-party administrator account management team, I was deeply involved in many client relationships. Almost without exception, the strongest, most productive client relationships were those that involved true partnership. They were a win-win for both parties, and they stood the test of time.
Many of these relationships did not start out as partnerships, but grew into them with a little investment of time and effort. There are key components that help foster partnership and collaboration. Listed below are some of the most important:
1. Working knowledge of each other’s organization, including
a. Mission, vision and culture
b. Strategic plan and objectives
c. Opportunities and challenges
d. Financial performance
e. Management team and other key players
f. Industry trends and outlooks
2. Clearly articulated and agreed upon objectives, supported by action plans which identify tasks, responsible team members and target dates.
3. Metrics to measure outcomes, identify emerging trends and determine levels of success.
4. Equally important, celebrating success as a team and building on it.
5. Open and frequent communication, with prior agreement on the preferred methods (emails, conference calls, in-person meetings or web meetings), how frequently and acceptable response times.
6. Client expectations and hot buttons – we all have them. What are the golden rules that must always be followed? Some examples:
a. Acceptable number of meeting attendees
b. Dress code at the client’s locations
c. Is the client technology/data driven or technology/data phobic?
d. What is the client’s policy on entertainment and gifts
e. Does the client expect regular executive management contact?�
Some of these should be common sense, but I have had to do my share of damage control simply because the wrong assumption was made. Ask and agree beforehand.
7. A willingness to challenge “We’ve always done it this way.” by asking, “Does this still make sense, and is it the best possible use of resources?” Go after the low hanging fruit first, such as:
a. Routine meetings, especially if travel is required.
Can they be done via video or teleconference?
b. Claim reviews – can the frequency be reduced with equal,
or even better, results?
c. Electronic and paper reports – do a complete inventory of
who is getting what, and then ask “why,” and if the report is
even being used. This is a big area of potential savings.
Regularly challenging convention is healthy, and it can result in reduced expenses, more resources for critical projects and better outcomes.
8. Flexibility and the ability to adapt to changing conditions; think about and develop a Plan B before you need one.
9. NO SURPRISES! There is nothing worse than being blindsided. Err on the side of caution.
10. Respect, courtesy and recognition – If someone has a different opinion, listen and respect it. If someone does a great job, say so. If someone makes a mistake, help him learn from it. (workersxzcompxzkit)
Partnerships create positive energy and help you accomplish more, with less. And, a true partnership can make the rough patches of road a little easier to navigate. Now, who wouldn’t welcome that in today’s new work environment?
We welcome our newest guest-blogger Debra Drinane, ARM.
Author: Debra Drinane, ARM, has extensive experience in risk management, claims management and relationship management. She can be reached at debradrinane@att.net. Visit her at: http:/www.linkedin.com/in/debradrinane.
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All state laws vary.
©2008 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com
California Workers’ Comp Insured Loss and Expense Payments Top Earned Premium in 2008
Analysis by California Workers’ Compensation Institute (CWCI) annual report of the Workers’ Compensation Insurance Rating Bureau (WCIRB) noted the following highlights for WC calendar year losses and expenses.
1. California workers’ compensation earned premium fell by $2.3 billion to less than $11 billion last year.
2. Insurers’ loss and expense payments totaled nearly $11.2 billion, resulting in a pretax underwriting loss of $84 million according to a analysis of the annual report to the governor and legislature on workers’ comp calendar year losses and expenses.
3. Earned premium gross of deductible credits or recoveries, not including retrospective rating, dividends or nonstandard coverage, fell from $13.27 billion in 2007 to $10.93 billion in 2008, less than what insurers’ paid for medical, indemnity and administrative expenses.
4. Medical and indemnity payments alone accounted for $6.9 billion of the insurer’s 2008 payments.
5. The total rises to $7.12 billion of the $212 million when payments by the California Insurance Guarantee Association (CIGA) are added in.
6. Insurers also added $35 million in reserves for future claim payments.
7. Excluding the CIGA payments, insurers’ incurred losses was 63% of earned premium.
8. A total 100.5% of earned premium is achieved when overhead, loss adjustment and defense payments are added in.
9. The medical side incurred the biggest increase as total payments jumped $364 million to more than $4.1 billion.
10. In medical payment categories, reimbursements to physicians topped $1.5 billion and remained the biggest medical component, even though that total was down $39 million from 2007.
11. Hospital payments rose $131 million to nearly $1.1 billion.
12. “Other medical costs” were up $104 million due primarily to a $98 million increase in medical payments made directly to injured workers under compromise and release agreements.
13. Medical cost containment (fees for MPN access, bill review and utilization review) jumped $97 million to $284 million.
14. Med-legal evaluation costs increased $52 million to $202 million.
15. Pharmacy payments rose $20 million to $368 million.
16. Aggregate indemnity payments were down $183 million for the year.
17. Permanent disability payments fell $108 million from the 2007 total.
18. Total insured payments for vocational rehabilitation/supplemental job displacement benefits were down $41 million.
19. Temporary disability payments were down $36 million.
20. Death benefits, edging up by $2 million to $71 million last year, were the only indemnity component to increase.
Insurers’ overall loss adjustment and defense payments were up a fraction last year, rising $13 million to $1.824 billion. Insurers reduced their total overhead expenses by $205 million as general expenses and taxes fell by $139 million and declining premium helped push agent and broker fees down $89 million, which more than offset a $23 million increase in other acquisition expenses. (workersxzcompxzkit)
Author: Robert Elliott, J.D.
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©2008 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com
California CLO Office Settles Four Lawsuits
The purpose of all of these cases was to recover money for the benefit of policyholders, injured worker claimants, and other creditors of the Insurer.
California Insurance Commissioner Steve Poizner reports the Conservation & Liquidation Office (CLO) settled four lawsuits arising from the 2003 failure of Fremont Indemnity Company (Fremont) a national workers’ compensation insurer headquartered in Glendale. Under these settlements, the insurer’s liquidation estate receives up to $37.3 million from several defendants.
The insurer, one of the largest California-based workers’ compensation insurers, writing more than $800 million in premiums in its final year of full operations is only one of dozens of workers’ compensation insurers failing during the workers’ compensation crisis occurring from 1999 to 2003.
Following Fremont’s placement into liquidation in 2003, the Commissioner’s CLO conducted a thorough investigation of the company’s operations and management. The investigation eventually resulted in four lawsuits being filed on behalf of the insurer’s liquidation estate.
The first pair of lawsuits were filed in 2004. (Fremont Indemnity Co. v. Fremont General Corporation, et al. Los Angeles Superior Court Case Nos. BC 316472 and BC 320766). These actions were filed against Fremont’s parent companies, Fremont Compensation Insurance Group (an intermediate holding company) and Fremont General Corporation, Fremont ‘s ultimate parent company.
The actions arose mainly out of the treatment of Fremont under the parent company’s consolidated federal income tax returns and under certain tax sharing arrangements among the companies (The Tax Cases).
In 2006, the CLO filed another case, (Insurance Commissioner v. Rampino, et al. Los Angeles Superior Court Case No. BC 357691), alleging seven former directors and officers of Fremont breached their fiduciary duty to Fremont by engaging in a scheme which violated Fremont’s duties to its reinsurers prior to Fremont ‘s insolvency.
The scheme involved a practice known as “net line underwriting” intended to benefit Fremont at the expense of its reinsurers. The lawsuit alleged the scheme resulted in the reinsurers asserting claims for rescission of multiple valuable reinsurance treaties, which ultimately was settled at a loss to Fremont . (The D&O Case). (workersxzcompxzkit).
The final lawsuit, (Insurance Commissioner of the State of California v. Fremont General Corp., et al. United States Bankruptcy Court for the Central District of California, Case No. Adv. Proc. No. 8:08-ap-01258-ES), filed in 2008 arose out of a dispute over the ownership of a corporate fine art collection valued at more than $4 million (The Art Case). This art collection included numerous photographs by famed photographer Ansel Adams.
Author: Robert Elliott, J.D.
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Do not use this information without independent verification. All state laws are different. Consult with your corporate legal counsel before implementing any cost containment programs.
©2008 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com
One of the most important decisions a company makes is selecting their insurance broker. Smaller companies generally have insurance agents and larger companies have insurance brokers. Most large companies have brokers rather than agents because they have many "lines" of coverage. This is obtained from many different insurance companies — not just one. An agent normally represents only one insurance company (or a handful if they are a multi-line agent); a broker represents many different insurance companies. Some key questions to ask prospective brokers are:
- How will they structure your company's insurance program?
- How will they market your company to the insurance carriers?
- How creative are the individuals on the team — can they provideexamples ofhow they have enhanced another company's insurance coverage and reduced the insurance costs to make the program more cost effective?
- Who is the team that will service your account?
- Do they have experience in your industry?
- Does the firm have global capabilities (necessary if your company has operations outside the US)?
- Do they have a timeline of all activities they propose?
- What are the firms capabilities in the following areas:
- Claim Advocacy - claim specialists to help difficult claim situations
- Claim Reviews - reserve, claim closureand best practice reviews
- Loss Control - specialists to help developstrategic plans in: Ergonomics specialists, Repetitive Motion Injuries specialist, Loss Trend Analysis, Slip & Fall Prevention, Air Quality Programs, Lock-out/ Tag-out Expertise, Safety Consulting on key OSHA Requirements, Safety Culture Consulting
- Post-Loss Cost Containment - systems to reduce WC costs such as described http://www.reduceyourworkerscomp.com/employees-back-to-work-sooner.php
- Insurance Policy Review
- Coverage Analysis
- Certificate of Insurance Distribution
- RIMS Capabilities (Risk Management Information Systems)?
- Do they have experience withyour existing carrier?
- Fees and remuneration– are incentive-based optionspossible?
- Do they have captive affiliates?
- Do they have industry groups for your industry?
- Are there other services that differentiate their firm?
- Is the broker tied into the net — how user-friendly and complete is their website? Do they have lots of educational resources available for clients?
- Are they easily accessible via email?
- How easy is it to reach your team by phone?
These are some of the things you will evaluate when selecting the best broker for your needs. The biggest broker isn't necessarily the most qualified for YOUR situation, so meet with several to make sure their capabilities meet your needs. For more cost savings tips go to WC Cost Reduction Tips.
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