More than 4,000 Kentucky business owners participating in a group workers’ compensation fund have been left holding-the-bag and being billed for $51 million in claims racked up by AIK Comp, a self-insurance plan recommended by Associated Industries of Kentucky.
A wide variety of businesses signed up for AIK’s self-insurance fund, making them, as members co-owners and liable for losses as far back as January 1999. All members and even some firms that dropped out of AIK several years ago have been billed.
The statewide bailout effects thousands of businesses, many of which have received bills for from $20,000 to $142,000 to enable AIK to cover liabilities for workers injured on the job. AIK has warned that anyone who doesn’t pay the assessment will be pursued by collection lawyers.
Employers pay workers’ compensation to protect them if an employee is injured on the job. Rates vary depending on the size of the company and the likelihood of injury. If re-insurance would have been in place, AIK members would not face the special assessments, lawyers said.
AIK had an aggressive sales campaign that offered workers’ compensation insurance at premiums well below the going rates during the last five years, attorneys say.
According to the Kentucky Department of Insurance, AIK’s shortfall was about $1.5 million in 1999, and then it had four successive years in which deficits hit $12.3 million, $11.2 million, $17.9 million and $15.5 million.
Despite the depth of the problems, state regulators working with AIK remain optimistic. AIK has received about $10 million in payments and another $1 million is being held by attorneys on behalf of AIK members, Ernest Dye, the Kentucky Office of Insurance appointee running the company explained.
Dye said AIK’s problems were caused by setting premiums too low to cover claims and then “not reacting fast enough.”
“We’re feeling pretty positive about it,” Dye said. AIK has given members who owe more than $500 up to five years to pay off the assessments. Dye said AIK’s target is to collect at least 20 percent of the $59 million before year-end.
“That goal is within reach,” he said. “The bottom line is workers still need to have their claims paid and I anticipate that happening.”.
The financial problems have prompted numerous lawsuits and accusations of fraud and misrepresentation. Several attorneys are seeking class-action lawsuit status.
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