Frankfort, Ky.-based AIK COMP. has announced it plans to assess former members more than $97 million in an attempt to cover its debts. AIK intends to recover the money in retroactive premiums in an attempt to keep injured workers’ claims fulfilled.
AIK is a self-insured workers’ compensation fund. It was established in 1979 as Associated Industries of Kentucky Selective Self-Insurance Fund. Member employers received reduced workers’ compensation rates. Members understood at the time they could later be retroactively charged for any shortalls.
April 7, Franklin Circuit Court Judge William Graham signed an order enabling AIK COMP rehabilitator Martin J. Koetters to continue his efforts on behalf of the financially troubled self-insured group workers’ compensation fund.
Members of the fund were assessed for a shortfall of $58.5 million in November 2004. (The actual deficit is now estimated to be at least $100 million.) Approximately 1,800 of the fund’s more than 3,700 members paid at least the first installment of the assessment, resulting in the collection of $12.2 million in cash.
Some AIK COMP members, however, challenged the assessment in court, stalling the rehabilitation and leading to an order by Judge Graham on Jan. 27 for a 40-day mediation period between the rehabilitator and a group of opposing counsel. The April 7 order, in effect, ended the mediation process.
“This is a very positive outcome for the injured workers of AIK COMP. We will move forward very quickly to reinvigorate the process of collecting assessments, which had been put on hold,” said Koetters, who is also executive director of the Kentucky Office of Insurance.
Under the order, Koetters is authorized to collect at least 20 percent of the total due from each member who has not previously paid. Assessments under $500 will be collected in full.
Governor Ernie Fletcher signed an executive order on Aug. 3, 2004, transferring regulation of self-insured group workers’ compensation funds, including AIK COMP, from the Office of Workers’ Claims to the Office of Insurance.
Senate Bill 86, which ratified Governor Fletcher’s earlier executive order, unanimously passed both houses of the General Assembly and was signed by the governor March 1. SB 86 also declares that an emergency exists, makes the statute retroactive to Aug. 1, 2004, and cites the need for stronger oversight of the self-insured group workers’ compensation market.
AIK COMP entered into voluntary rehabilitation on Aug. 5, 2004. The fund announced in late December 2004 that it would suspend writing new or renewal business, effective Jan. 1. All policies ended March 1. In addition, 12 members of the AIK COMP staff were terminated at that time.
According to Chuck Greenwell and Charlie Middleton, attorneys for the trustees, the trustees of AIK Comp applaud the outcome of yesterday’s hearing and the order of rehabilitator Martin J. Koetters to collect assessments from disgruntled AIK COMP members who have not paid.
In an official statement they said “The trustees have a fiduciary duty to protect the injured workers, and the assessments are critical to do that. Unfortunately, some AIK COMP members have crippled the rehabilitation by preventing the rehabilitators enforcement and collection of member assessments for more than nine months.
“These AIK COMP members have caused or contributed to enormous and irreparable damage to the rehabilitation of AIK Comp, which has since stopped writing new business, cancelled its existing policies and lost its entire market share. By fighting these assessments, certain AIK COMP members have not lived up to their responsibility to injured workers. Instead these members have compromised the rehabilitator’s power to assess and hurt AIK COMP members who already paid their assessments.”
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