R.I.’s Beacon Mutual Begins Paying Fine after Judge Denies Injunction

Rhode Island workers’ compensation insurer Beacon Mutual Insurance Co. has made the first payment of $500,000 in its fulfillment of a consent order that calls for $2.5 million in fines and policyholder refunds of $7 million for years of mismanagement and questionable business and political dealings.

The insurer made the payment to the Department of Business Regulation last week after Superior Court Judge Michael Silverstein refused to order an injunction against the consent order that was requested by three policyholders.

Heritage Healthcare Services, Inc., Vito’s Express, Inc. and Swimming Pool Specialists, Inc., had argued that the courts, not the state regulators, should determine any penalties against the insurer for years of improper pricing and dealings.

Beacon Mutual entered into the consent order with the DBR on July 27, after the state agency concluded a market conduct exam that was critical of the workers’ compensation carrier’s previous management practices.

Beacon must pay another $500,000 of the $2.5 million penalty by Dec. 15, 2007.

However, the embattled insurer could be off the hook for the remaining $1.5 million of the $2.5 million total as long as it implements various recommendations and reforms set forth by DBR.

In denying the injunction, Judge Silverstein questioned the standing of the three policyholders and said he doubted they would succeed in any suit against DBR.

“The court believes that permitting an end run around the regulatory process; reducing the amount of the agreed penalty and withholding from eligible policyholders approximately $7 million does not serve the public interest,” Silverstein wrote.

Employers with Beacon insurance policies dated from Oct. 1, 2005 through Sept. 30, 2006 will be eligible for the total of $7 million in refunds. Eligible policyholders should be paid no later than March 31, 2008.