What Happens to Work Comp Payments When Insurers Fail
Wednesday, June 17, 2009 | 0
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 Co. (Fremont) a national workers' compensation insurer headquartered in Glendale, Calif. 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 Corp., 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 Corp., 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 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.
Top 10 Supervisor Best Practices When Handling Work Related Injuries
Supervisors are the front-line reporters of work-related injuries and accidents and bear the primary responsibility for making sure employees perform post-injury response procedures in accordance with the employer's workers' compensation policies.
Ten Actions Supervisors Must Take
- Make sure injured employees take a Work Ability Form (WAF) with them when they go to the medical provider.
- Accompany injured employees to the medical provider.
- Inform medical providers the WAF must be returned (by mail or fax) to the supervisor (or injury coordinator) within 24 hours of a work-related injury. If the supervisor has a problem retrieving the completed WAF from the medical provider within 24 hours, the issue should be referred to the injury coordinator for action.
- Compile a Post-Injury Package consisting of completed WAF together with Witness, Supervisors, and Employee Reports of Incident and fax to injury coordinator.
- Train employee subordinates in the basics of workers' compensation benefits such as rights and responsibilities under the WCMP, Post-Injury Response, and Transitional Duty Program.
- Demonstrate to employees how to obtain emergency medical care for injured employees.
- Demonstrate to employees how to get non-emergency care for injured employees.
- Describe what forms and documents to give to (and get from) an injured employee.
- Participate in weekly meetings with the injury coordinator and injured employee.
- Train employees in post-injury response roles and responsibilities.
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Robert Elliott is executive vice president of Amaxx Risk Solutions Inc. in in Mansfield Center, Conn. © Copyright by Amaxx Risk Solutions Inc. and http://www.ReduceYourWorkersComp.com . Reprinted with permission.
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