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In a partial win
for at least one employer caught up in the
California workers' compensation insolvencies,
a California Department of Insurance Hearing
Judge has ruled in Star Roofing Company Inc.
v. Workers' Compensation Insurance Rating
Bureau that the Bureau must accept accurate
experience data generated by an insolvent
carrier for a policy year even if it's
untimely. The Department also says that the
Bureau was correct to refuse employer provided
claims loss data.
The much
anticipated ruling may give relief to other
employers whose experience suffered as the
result of a workers' comp insolvency, while
guaranteeing the fairness of the system. There
were between 25 and 30 appeals from employers
on hold pending the outcome of this case.
Star Roofing
had the unfortunate luck of being insured by
Villanova Insurance Company. When promulgating
Star's experience modification for 2003, the
Bureau did not use the experience data from
Star's 1999 and 2000 policies. The Bureau says
it was following the Department's directive to
exclude all insolvent insurer data for
policies with effective dates beginning from
April 1, 2002 to December 31, 2003, unless it
was submitted prior to 2000, Villanova's
"wide-spread failure" to report data
to the Bureau. Villanova was declared
insolvent in 2003. The result for Star Roofing
was the exclusion of good loss data and an
experience modification in excess of 100
percent.
The Bureau
argued that the data in Star's first unit
statistical report for its 1999 policy was
unreliable because it was two years late. The
Department disagreed saying that the Bureau
presented no evidence that the data was
unreliable. The data was used to calculate
Star's 2002 X-Mod, and was only excluded from
the 2003 X-Mod because of the Department's
directive, the decision says. Based on this
finding the Department determined the data was
accurate.
But the
Department supported the Bureau on the
employer provided loss run data ruling that
the Bureau isn't capable of analyzing raw data
and then converting it to the required format.
Furthermore, the Department agrees with the
Bureau that by accepting employer provided
information, even arguably reliable data,
employers are likely to submit only the good
data.
The
Department ruled the Department should rescind
Star Roofing's 2003 X-Mod and re-calculate it
using the 1999 experience data. According to
Star Roofing's lawyers the recalculation
should result in at least one year worth of
savings for the company.
(article
taken from WC Exec)
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