|Copyright:||(c) 2011 A.M. Best Company, Inc.|
|Source:||A.M. Best Company, Inc.|
Insolvent self-insured workers’ compensation trusts in New York state left behind $924.7 million in liabilities, a far deeper hole than earlier estimates, according to a recent report.
Determination of the current level of deficits of the 17 defaulted group trusts is the result of an analysis of most recently audited financial statements, according to a report from the state Workers’ Compensation Board. The board acted in response to a new state law requiring it to conduct semi-annual reports on the insolvent trusts.
The legislation is an outgrowth of a dispute between the state and a company it accuses of fraud and mismanaging eight of the trusts The board filed a lawsuit against Compensation Risk Managers LLC and CRM Holdings in New York Supreme Court in Albany. In the lawsuit, which seeks at least $405 million in damages, the board alleges CRM mismanaged several self-insured workers’ comp trusts (Best’s News Service, May 14, 2010).
CRM provides fee-based management and other services for workers’ compensation self-insured groups through its operating companies, with domestic headquarters in Poughkeepsie, N.Y. Last year, the Nasdaq Stock Market delisted the company, which had been trading under $1 a share, for not meeting minimum Nasdaq guidelines (Best’s News Service, May 14, 2010).
The total sought from CRM and affiliated entities and individuals is $472 million, according to the board’s report. The workers’ compensation board is also taking legal action against the Hamilton Wharton Group, from whom it is seeking $33 million.
Attempts to reach the Attorney General Eric Schneiderman’s office or Gov. Andrew Cuomo’s office for comment were not immediately successful.
CRM Holdings’ primary insurance subsidiary, California-based Majestic Insurance Co., recently completed a rehabilitation plan that required the company to transfer its liabilities and certain assets to AmTrust Financial Services Inc. (Best’s News Service, July 12, 2011). The completion came three months after the California Department of Insurance seized the company and placed it into conservatorship, citing insufficient surplus levels.
Now that the deal has been finalized, AmTrust will assume responsibility for Majestic’s policyholder claims. Majestic, which was licensed to write workers’ compensation and property/casualty policies in 17 states prior to being placed into conservatorship, will be administered by AmTrust’s subsidiary Technology Insurance Co.