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Insurers file lawsuit over N.Y. workers comp law amendment

Posted On: Aug. 1, 2013 12:00 AM CST

Insurers file lawsuit over N.Y. workers comp law amendment

An amendment to New York's workers compensation law generated by New York Gov. Andrew Cuomo's 2013-2014 budget plan will cost insurers and self-insured employers up to $1.6 billion in unfunded liability, a lawsuit claims.

The lawsuit, filed Wednesday by insurers in a New York Supreme Court, seeks to permanently stop enforcement of the amendment, which calls for closing New York state's workers comp Fund for Reopened Cases to newly reopened claims beginning Jan. 1, 2014.

The plaintiffs in the case of American Economy Insurance Co. v. The State of New York include Liberty Mutual Group Inc. and several of its units.

The governor announced his intention to close the fund in January as part of his 2013-2014 budget plan. A report from the governor estimated at the time that closing the fund would generate annual employer savings of about $300 million by eliminating premium assessments employers pay to maintain the fund.

But litigants in the lawsuit allege any savings for employers would be offset by premium increases. They argue that after shuttering the fund, responsibility for paying claims previously covered by the fund will fall on insurers, driving up loss costs.

In fact, last month New York's State Department of Financial Services approved a workers comp loss cost rate increase of 9.5% to become effective Oct. 1. The lawsuit claims that 4.5% of the approved loss cost increase is due to the fund's closing.

The fund currently covers costs for workers comp cases that were closed but subsequently reopened because of medical recurrences or new medical developments that were not anticipated when a claim resolved.