CDI RECEIVES $110M ON BEHALF OF EXECUTIVE LIFE POLICYHOLDERS:
The California Department of Insurance announced it has received $110 million on behalf of California policyholders of insurance sold by Executive Life Insurance Company (ELIC) and its 330,000 former policyholders. The money, received May 26, is part of a settlement won by the U.S. Department of Justice in the criminal fraud case against Credit Lyonnais and various other French corporations and individuals, including Artemis S.A. Credit Lyonnais and the others involved in the ELIC case fraudulently obtained control over ELIC's junk bond portfolio and insurance assets in violation of federal and state laws that prohibited a foreign, government-owned bank from acquiring control of a California insurance company. "This is another positive step in our fight against insurance-related fraud in the state of California," Commissioner Garamendi said. "The settlement funds received today represent but a fraction of the damages that ELIC and its policyholders sustained as a result of the defendants' fraud. My Department's civil lawsuit against the defendants is continuing, and our pursuit of justice will not cease." In addition to the support that the Department provided to the criminal prosecution, Commissioner Garamendi has been working to recover any ill-gotten gains through a civil lawsuit currently pending in federal district court in Los Angeles. The U.S. Attorney's Office secured a $770 million settlement of the criminal case against Credit Lyonnais and others involved in the Executive Life Insurance Company fraud case. CDI will file a motion seeking an order authorizing distribution of the funds from the Conservation and Liquidation Court that has jurisdiction over the Executive Life estate.
WASH. L&I ENFORCES NEW ANTI-FRAUD LAWS:
Anti-fraud legislation passed in March took effect June 10, giving the Department of Labor and Industries (L&I) broad new authority to combat fraud and abuse of the workers' compensation insurance system. A change in the law governing successorship means that employers no longer will be able to avoid insurance premiums by closing a business and reopening a new one with a clean slate in regards to business taxes. Other changes will make it easier for L&I to prove fraud cases against workers, employers and health-care providers who knowingly cheat the industrial insurance system. When the state Legislature passed the anti-fraud measures in March, it also gave L&I additional resources to expand its fraud staff. Ten new investigators and auditors are being hired, and some existing L&I positions are being transferred to the anti-fraud effort. The agency recently named Carl Hammersburg to head the program. L&I's focus on combating fraud and abuse is in response to concerns expressed by employers and some workers. At rate hearings over the past two years, they told L&I that invalid injury claims, and employers who don't pay the premiums, put an unfair financial burden on companies that support the insurance system. L&I set out to overhaul the way it manages claims and how it uncovers, investigates and pursues fraud and abuse of the system by workers, employers and health-care providers. The agency reassigned additional people to combat fraud and abuse, and it adopted new procedures for investigations and audits. In addition, it requested legislation that would make it easier to prove fraud and harder to avoid business taxes. With the additional staff, L&I will conduct more validity checks to make sure new workplace-injury claims are legitimate. The agency's auditors will perform more random audits of businesses to make sure they are accurately reporting hours worked and paying premiums. L&I investigators will crosscheck with other government agencies to find workers who are collecting L&I benefits while secretly working at other jobs. New software programs will soon improve L&I's ability to detect duplicative and improper billings by health-care providers.
CALIF. SCIF: 7 PERCENT RATE DECREASE EFFECTIVE JULY 1:
State Compensation Insurance Fund announced a seven percent rate decrease on new and renewal policies with an effective date on or after July 1, 2004. The decrease is a result of the cost saving reforms adopted by the Governor and Legislature earlier this year. It follows an average 2.9 percent rate decrease that was effective Jan. 1, 2004. "Policyholders with July through December renewal dates will see an average decrease close to 10 percent from their expiring policies," said State Fund President Dianne C. Oki in a statement. "Policyholders will also be impacted by changes in individual class experience and by updated policyholder experience modifications, so some policyholders will see less, while others will see more than the average decrease." State Fund Executive Vice President Jim Neary said, "This rate decision prudently balances the needs of State Fund's policyholders for immediate rate relief, the uncertainties of estimating some reform savings and the need for State Fund to further strengthen its surplus position. Perhaps the best news is the potential for further rate reductions going forward. Some elements of reform that are unquantifiable upfront will bring down rates as savings emerge in experience. Other elements of reform, such as changes in the permanent disability rating system, will be reflected in rates when they take effect next year." In the last several years, State Fund has experienced unprecedented growth—increasing pressure on State Fund's reserves and surplus—due to the most dramatic marketplace contraction in the system's 90-year history. "State Fund will continue to review its experience and cost savings as a result of the new workers' compensation laws," Oki said. "We expect further rate reductions based on demonstrated savings in 2005."
UTAH'S COMP FUND ANNOUNCES $20 MILLION DIVIDEND:
Salt Lake City-based Workers Compensation Fund announced that it will pay dividends totaling $20 million to policyholders this year. All eligible policyholders, regardless of company or policy size, will receive a portion of the dividend by August 2004. "The $20 million dividend is a credit to WCF's policyholders and our employees, who have worked together to improve workplace safety statewide," said Lane Summerhays, president and CEO of Workers Compensation Fund. "We are pleased to share our excellent financial results with our policyholders, who are the owners of the company." Summerhays cites lower-than-anticipated workplace injury claims as the primary reason for the year's financial success. WCF had about 8 percent fewer claims reported in 2003 than in 2002, as well as a reduction in the number of very serious injuries reported. Other factors, such as WCF's Medical Management team, also contributed to helping injured workers recover and return to work sooner. "We are seeing more employers invest in workplace safety programs offered by WCF's staff of safety experts, which has played a role in fewer injury claims. From construction to manufacturing to office environments, improved safety affects employee well-being, as well as a company's bottom line," Summerhays said.
