Roxborough, Pomerance & Nye Wins Precedential Ruling

DECISION EXPECTED TO LOWER WORKERS’ COMPENSATION PREMIUMS FOR CERTAIN CALIFORNIA EMPLOYERS WHOSE CARRIERS BECAME INSOLVENT


LOS ANGELES, CA, December 19.2005—Los Angeles based law firm Roxborough, Pomerance & Nye, LLP (RPN) recently won a ruling that 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,” says 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.

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, this practice penalized them because it often resulted in higher premiums simply because they obtained insurance from a now insolvent carrier who had failed to report data to the WCIRB within a specific time period.

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.¹

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 December 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:

1. Star Roofing’s 2003 ex mod of 101% 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.”
    
2. The court further ordered that if the recalculation of the ex mod yields an ex mod above 100% for Star Roofing, then the recalculation and use of late reported information should not be used.

For more information, please contact Nicholas P. Roxborough or Damon M. Ribakoff at 818-992-9999. Click here for a copy of the 44-page decision.

Roxborough, Pomerance & Nye LLP (RPN) is a Los Angeles-based law firm providing expert legal counsel and representation to the business community. Established in 1995, the firm offers a broad range of legal services in all facets of civil litigation, with its primary focus on litigation, legislation and policymaking issues involving all types of business and insurance issues.

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1Specifically, the ruling applies if one of the following situations occur: The WCIRB determines that the experience data contained in a late reported Unit Statistical Report from the carrier is reliable An Administrative Law Judge finds the data to be reliable The WCIRB has used the experience data and a late report corrected in the Unit Statistical Report from the insolvent carrier to calculate a “revised experience modification” pursuant to Section 5, Rule 6 of the Experience Rating Plan.

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