Los Angeles based law firm Roxborough, Pomerance & Nye LLP recently won a ruling that the firm said will affect the way workers’ compensation premiums are calculated for California employers covered by a carrier that subsequently was liquidated or became insolvent.
“California employers who work hard at minimizing their claims losses and expenses should not be punished by a carrier’s insolvency and the way their claims history is rated,” said Nicholas Roxborough, managing partner of RPN. “We are pleased the Department of Insurance recognized this fact in the Star Roofing case and issued an Administrative Law decision that can now be cited in subsequent cases as precedent.”
In Star Roofing Company Inc. v. The Workers’ Compensation Insurance Rating Bureau (WCIRB), the California Insurance Commissioner ruled that similarly situated employers whose workers’ compensation carriers went into liquidation and reported statistical information to the WCIRB in an untimely fashion can now request—under certain circumstances—their “ex mods” to be recalculated using the late reported data from the insolvent carrier. The ex mod (Experience Modification) is a percentage figure that is used to adjust an employer’s workers’ compensation premium, based on the employer’s previous three years of claims experience, the firm said.
Up until now, the WCIRB, a rating organization licensed by the Insurance Commissioner, would not use data that was submitted untimely from an insolvent carrier, and there were no exceptions. Rather than rewarding California employers with a low experience modification for demonstrating a proven safety record, the practice penalized some because it could result in higher premiums if they obtained insurance from a now insolvent carrier who had failed to report data to the WCIRB within a specific time period, the firm claimed.
The new ruling essentially states that if the WCIRB or an Administrative Law Judge finds the data to be reliable, regardless of the carrier’s status, the data may be used in the recalculation, the firm said.
Additionally, the firm explained, the court further opened the door for other employers as well when it applied the law of “equitable relief” finding that a specific section of the Experience Rating Plan (ERP) should be “waived” to prevent retroactive application of an ex mod above 100 percent that is effective between April 1, 2002 and Dec. 31, 2003 (if the ex mod has been promulgated without experience data from an insolvent insured).
Applying the global rules expressed in this decision to the specific facts and testimony of Star Roofing, the Department of Insurance (DOI) ruled as follows:
Star Roofing’s 2003 ex mod of 101 percent is rescinded, and the WCIRB is ordered to recalculate it, using Star Roofing’s 1999 experience data as reported (late) in a corrected Unit Stat Report submitted by Villanova. This was because the court found the data to ultimately be “reliable.”
The court further ordered that if the recalculation of the ex mod yields an ex mod above 100 percent for Star Roofing, then the recalculation and use of late reported information should not be used.
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