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Workers Comp Carriers Face Class Actions
By Stefani Mingo
There are 15 to 20 pending class actions or lawsuits based on the Unfair Business Practices Act, attorney Heywood G. Friedman said. And those lawsuits have as their defendants 30 to 40 of the larger insurers providing workers comp from 1985 through 1992.
The most recent cases were brought on behalf of certain California employers who purchased workers comp insurance from Superior National Insurance Company, California Compensation Insurance, and Pacific Rim Assurance Company.
Southern California-based Superior National Insurance Group Inc.parent company of Superior National, Pacific Rim and Cal Compis the largest private workers comp writer in California, and the ninth largest writer of workers comp insurance in the nation. When Superior acquired Pac Rim and Cal Comp, it inherited the exposure presented by both of those cases, Friedman said.
The three cases are titled Coles Carpet and Four Installers Inc. vs. Superior National Insurance Group Inc., dba Superior National Insurance Company; Notricas 32nd Street Market vs. California Compensation Insurance Company; and California Sample Services Inc. vs. Pacific Rim Assurance Company. According to Friedman, the three have the same basic theory of liability as the other class actions which is non-compliance with the California Unit Statistical Plan alleged to have negatively reported employers ex-mod [experience modification] rates.
As a result, employers whose premiums were calculated based on ex-mods from the WCIRB paid higher premiums for their comp coverage. The ex-mod is a percentage figure that is used to adjust the employers workers comp premium, based on claims experience. Generally, the higher the losses reported, the higher the resulting premium.
Certain California employers are allowed the opportunity to participate in the class actions. This includes any employer who purchased workers comp policies from Superior, Jan. 1, 1984 through Dec. 31, 1998; or from Cal Comp or Pacific Rim, Jan. 1, 1984 through Dec. 31, 1992; had at least one indemnity claim filed against them; and had an individual earned premium of no less than $5,000.
The Law Offices of Heywood G. Friedman is counsel of record for Superior National Insurance Group Inc., while the plaintiff class co-counsel is Roxborough, Pomerance, Gallegos & Nye LLP, and Shernoff, Bidart, Darras & Dillon. Roxborough is involved in 11 class actions of this kind. Similarly, a class action against Fremont Pacific Insurance Company, titled R&M Food Services Inc. v. Fremont Pacific Insurance Company, et. al, is nearing a settlement. On March 15 the Court gave preliminary approval that Fremont shall make available to the plaintiff class benefits totaling $4.55 million in the form of policy premium credits. The policy premium credits will be sent to each policyholder for each policy issued from Jan. 1, 1990 through Dec. 31, 1998.
In addition, the preliminary settlement states that the plaintiff class counsel shall receive $2,333,333 in attorneys fees and reimbursable costs not to exceed $115,000 to reimburse time and expenses incurred in connection with the litigation against Fremont. The Court will decide whether to finally approve of this settlement at the hearing set for July 7.
Meanwhile, the other big news in the workers comp industrywhich some feel is the single most important decision to come out in 10 yearshas to do with VPS Management Inc. vs. Pacific Rim Assurance Company. On June 23, the California Supreme Court ordered depublication of the VPS case.
In this case, the Second Appellate District of California held that a workers comp insurer was immune from liability in a civil lawsuit for alleged non-compliance with the California Unit Statistical Plan.
Under the authority brought about by the VPS case, the viability of the numerous class action and related lawsuits for alleged misreporting of claims information to the WCIRB were brought into serious question. Earlier this month, three lawsuits were dismissed pursuant to the VPS case. This decision [to depublish VPS] brings into question the dismissals referenced above, Friedman said.
Even though these class actions are all taking place in California, Friedman referred to this as a national issue in two regards. One, these cases are directed against carriers that are national in their operation, he said. And two, it has created a theory of potential liability that can be used in any state and on any carrier.
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