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August 2006

State: New York

Area of Interest: Mills Sees No Need for Workers’ Comp Case Rate Increase

Superintendent of Insurance Howard Mills today disapproved a filing by the New York Compensation Insurance Rating Board (NYCIRB) for an overall workers’ compensation insurance premium rate increase of 7.5 percent. The New York State Insurance Department determined that the increase sought was not supported by the information submitted to the Department in the NYCIRB’s filing and at a public hearing held in lower Manhattan on June 28, 2006.

The changes contained in the New York State Employment, Safety and Security Act, signed into law by Governor Pataki on Sept. 10, 1996, have reduced workers’ compensation costs for employers, while improving workplace safety.

The law repealed Dole v. Dow, a court-imposed standard that permitted New York employers to be sued by manufacturers of injury-causing equipment, and improved workplace safety by creating a new "safety first" mandate. In addition, the measure made the crime of workers’ compensation fraud a felony, and created an Inspector General’s unit within the New York State Workers’ Compensation Board.

Prior to the enactment of Governor Pataki’s reform legislation, New York State had the second highest workers’ compensation costs in the United States. In the governor’s first year in office (1995), rates were reduced by 8.4 percent and in 1996 rates fell by 18 percent. Rates decreased an additional 7.5 percent in 1997 and in 1998 rates were cut by 3.2 percent. After an unchanged rate level in 1999, rates declined 2.5 percent in 2000 and remained stable in 2001 and 2002. There were modest increases in 2003 (1.7 percent) and 2005 (5 percent), with a zero percent increase in 2004. The following chart illustrates the changes through the years:

All of New York’s state-licensed workers’ compensation insurers must send statistics to the NYCIRB, a private rate service organization which then evaluates the data and proposes rate changes, subject to Insurance Department approval. The effective date of the proposed increase was Oct.1, 2006

Source: State of New York

State: New York

Area of Interest: St. Paul Travelers Settles Bid-Rigging Probe
Agreement is Part of Ongoing Effort to Restore Competition in Insurance Industry

Attorney General Eliot Spitzer and State Insurance Department Superintendent Howard Mills today announced an agreement with one of the country’s largest property casualty insurance companies to resolve charges of customer steering, bid-rigging and improper finite reinsurance transactions.

Connecticut Attorney General Richard Blumenthal and Illinois Attorney General Lisa Madigan also joined in today's settlement.

Under the agreement, St. Paul Travelers, a major provider of automobile and homeowners insurance for individuals and commercial insurance for small businesses, will pay $77 million in restitution and penalties and adopt a series of reforms. In addition, St. Paul Travelers has issued an apology acknowledging its improper conduct.

As described in the Assurance of Discontinuance settling this case, the investigation found that St. Paul Travelers made undisclosed payments to insurance brokers and agents in exchange for business referrals, and participated in a scheme to fix insurance prices in the excess casualty area.

Under today's agreement, $37 million will be paid to St. Paul Travelers policyholders harmed by the company’s bid-rigging activities. In addition, St. Paul Travelers will pay penalties of $24 million to New York and $8 million each to Connecticut and Illinois.

In the fall of 2004, the New York Attorney General's office and the New York Insurance

Department announced a joint probe of misconduct in the insurance industry. This investigation has resulted to date in guilty pleas from 20 insurance company executives and officers, and the recovery of approximately $3 billion for consumers and workers compensation plans.

The investigation underlying today's Assurance of Discontinuance was conducted by AssistantAttorneys General Maria Filipakis, Matthew Gaul, and Mel Goldberg under the direction of David D. Brown IV, Chief of the Attorney General’s Investment Protection Bureau.

Susan Donnellan, a Deputy Superintendent and General Counsel of the New York State

Department of Insurance, led the Insurance Department’s investigation.

Source: State of New York

State: New Jersey

Area of Interest: Kearny, N.J. Company Faces $136,000 in Fines for Exposing Workers to Workplace Hazards

The U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) has cited Radial International Corp. for alleged safety and health violations, proposing a total of $136,000 in penalties. The Kearny, N.J., company, doing business as Radio Casting Corp., is a brass foundry and aluminum die-casting operation that employs 35 workers.

OSHA initiated its investigation in December 2005 in response to a referral by the Kearny Fire Department concerning open burning in the company's facility. According to Phil Peist, area director of OSHA's Parsippany, N.J., office, the company was cited for three willful violations with a penalty of $90,000; 25 serious violations with a penalty of $45,000; and three other-than-serious violations with a $1,000 penalty.

Alleged willful violations address the company's failure to provide free and unobstructed access to exits; failure to provide an effective hearing conservation program; and failure to ensure that employees are appropriately protected when working with molten metal.

The alleged serious violations include the company's practice of the open burning of debris within the production area of its facilities; the company's failure to have safe clearance in the aisle way used to transport molten metals; failure to provide easily accessible exit routes; failure to properly guard machinery; and failure to properly protect employees from lead exposure. The company also received three other-than-serious citations for its failure to provide employees with important safety and health information and for failure to maintain proper records.

Source: Occupational Safety and Health Administration

State: Florida

Area of Interest: Insurance Commissioner McCarty Calls for Tougher Building Codes for Panhandle

Florida Insurance Commissioner Kevin McCarty today testified before the Florida Building Commission (FBC) on the need to expand Florida’s tougher building codes to areas of the Panhandle that had been exempted. The Florida Building Code allows wind-borne debris regions from Franklin County to Escambia County to be limited to one mile from the coast, instead of the five (5) to 20 miles that is typical for the rest of the state.

McCarty testified to the FBC that attracting global reinsurers back to Florida is vital to addressing the affordability and availability problems in the state’s insurance market and the industry knows that homes built to the updated Florida building codes survived the 2004 and 2005 hurricanes extremely well. Therefore, “I am asking the Florida Building Commission to be proactive by passing tougher building standards for the Florida Panhandle region and bring this region up to par with the rest of the state,” McCarty said.

McCarty said that the assumption that the Panhandle is less likely to be hit by hurricanes than southern or central Florida has been disproved during the last two hurricane seasons. While McCarty admitted that another assumption – that tree coverage in the Panhandle would mitigate the possibility of damage – has some merit, he pointed to public and private studies, in addition to the extensive inland hurricane damage on the Gulf coast, to make the case that this theory no longer can justify the Panhandle carve out.

Pointing to a survey by the Institute for Business and Home Safety which showed that 72% of Floridians in the Panhandle want homebuilders to construct homes with wind-borne debris protection, even at a higher cost to home buyers, McCarty called on the FBC to end the Panhandle exemption from the wind-borne debris requirements.

Today’s workshop was the final chance for public comment before the FBC holds a final vote on the future of the Panhandle wind-borne debris regions on August 23rd. Florida’s statewide building code currently requires wind-borne debris protections in areas subject to 120 mph winds.

Source: State of Florida

State: California

Area of Interest: Insurance Commissioner John Garamendi Orders Orange Coast Title to Pay $800,000 to Settle Charges that the Firm Used Illegal Methods to Generate More Business

Insurance Commissioner John Garamendi today announced an agreement with Orange Coast Title Company that requires the firm to pay $800,000 and immediately cease giving illegal inducements to generate more business.

The settlement follows an investigation into Orange Coast’s business practices by the California Department of Insurance. It was sparked by numerous complaints made to the Department about Orange Coast, and eventually unearthed numerous violations amounting to more than $167,230 in illegal activities. They included false entries in financial books; illegal payments to induce more title business; payments for furnishings and other supplies to induce title business; illegal rebates; and other infractions.

The settlement requires Orange Coast to cease its illegal and inappropriate activities, pay a $626,335.75 fine, and reimburse the Department $173,664.25 in costs incurred during the investigation.

Source: State of California

"A good plan executed right now is far better than a perfect plan executed next week."
- George S. Patton