New York Gov. Andrew Cuomo announced last Friday the state issued $370 million in bonds to assist businesses in failed group self-insured trusts fulfill their obligations to their injured workers.
The bonding is made possible in Gov. Cuomo’s 2013 Business Relief Act, which authorizes the New York State Workers’ Compensation Board (WCB) to use the proceeds to purchase insurance to pay the claims of these injured workers; the employers will repay the cost of insurance under favorable terms, according to the announcement.
“Through the 2013 Business Relief Act, the state is providing a practical and affordable way for thousands of businesses to meet their responsibilities so that injured workers can receive the compensation they deserve,” Gov. Cuomo said.
“Employees who are hurt on the job are rightfully entitled to their workers’ compensation benefits, and the bonds issued by the state will provide financial assistance for employers to meet those needs. We are pleased to work side by side with the business and labor communities so that all New Yorkers are covered,” the governor said.
The bonds are issued through the Dormitory Authority of the State of New York. Officials said the bonds received the highest possible credit ratings from Moody’s, Standard & Poor’s and Fitch. Lead bank Siebert Brandfort Shank, a certified Minority and Woman-Owned Business Enterprise (MWBE), and Goldman Sachs brought the bonds to market. The bonds are free of New York State and city taxes.
The WCB will use the bond proceeds to purchase insurance policies that will pay the claims of injured workers because those employers — members of insolvent group self-insured trusts — abandoned their claims, officials said.
The businesses in these trusts will reimburse WCB for the cost of these “assumption of liability policies” over 10 years, at low interest rates.
By the end of this month, WCB is expected to finalize the insurance policy purchase on behalf of the two largest defaulted group trusts, the Healthcare Industry Trust of New York and the Healthcare Providers Self Insurance Trust.
Additional proceeds can purchase insurance policies for group trusts that refused to meet their claim obligations and whose claims WCB now administers, officials said. The Business Relief Act of 2013 authorizes up to $900 million in bonding capacity.
Transferring claims to insurance companies provides for the payment of benefits to injured workers; currently, WCB pays their claims and is engaged in legal proceedings to recoup those costs, officials said. The insurance does not relieve trust members of liability, but it does create a clear and lower-cost mechanism for employers to meet their obligations toward their injured and ill employees. Assumption of liability insurance also caps the cost of these claims for employers, at a favorable price, officials said.
WCB Chair Robert Beloten said this is “a creative and very effective method” of ensuring injured workers receive all the benefits they deserve under the law, while at the same time resolving the difficult situation these employers find themselves in after their group trusts failed.
Paul Williams, Jr., president of Dormitory Authority of the State of New York said the bond sale was highly successful, with very strong investor interest based on the pledged security for this new AAA rated program.
Brian Sampson, executive director of Unshackle Upstate, a Rochester, N.Y.-based business group said that since the recession, there has been a looming threat to existing employers that participated in self-insured trusts for workers’ compensation insurance.
“That threat comes from an estimated $800 million liability to the employers that are still in business,” Sampson said. “Governor Cuomo and his team worked diligently with the business community to address the problem and are now issuing bonds to decrease that burden on existing employers. This is a prudent move that will help retain much-needed jobs across the state.”
Joel Shufro, executive director of the New York Committee for Occupational Safety and Health said, “We commend the Governor and the Workers’ Compensation Board for taking this important step to ensure that there is no interruption of benefits for injured workers.”
“We strongly agree that employers who underpaid their obligations by entering into group self-insurance trusts should be required to meet their responsibilities. Employers who benefited from making artificially low payments should not be bailed out at the expense of injured workers or by employers that already paid their fair share,” Shufro said.
Source: New York Governor’s Office