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A state appeals court has sided with a group of small-business owners and sharply rebuked the Ohio Bureau of Workers' Compensation for the unfair way it set its rates for more than a decade.
The unanimous, three-judge panel largely affirmed a 2012 class action decision of Cuyahoga County Common Pleas Judge Richard McMonagle that 270,000 Ohio employers are entitled to refunds of hundreds of millions of dollars in premium overpayments from the BWC.
The trial judge awarded the class $859 million in damages. The judges returned the case to the district court for a recalculation of some of the damages owed to certain members of the plaintiff class.
Stuart Garson, an attorney for the class, said he was satisfied with the ruling and that the recalculation should be modest.
“It looks like we won big,” he said in a message left on voice mail. “The opinion just excoriates the bureau and the third-party administrators” who sponsored the group plans that gave some employers lower rates at the expense of other employers.
The BWC took some solace in the appeals court decision to return the case to the trial judge to recalculate the financial award. The recalculation will take into account the benefit some of the plaintiffs may have received in years before they were excluded from lower-cost group rating plans.
“While we're pleased the court recognized that many of the businesses in the suit benefitted from the group rating program, we are, of course, disappointed with the decision and are considering our options,” BWC spokeswoman Melissa Vince wrote in an emailed statement.
In the appeals court decision, Judge Kenneth Rocco wrote, “Reduced to its irreducible essence, this appeal is about a cabal of Ohio Bureau of Workers' Compensation bureaucrats and lobbyists for group sponsors who rigged workers' compensation insurance premium rates so that for employers who participated in the BWC's group rating plan, it was 'heads we win,' and for employers who did not participate in the group rating plan, it was 'tails you lose.' For more than 15 years, the BWC allowed nongroup-rated employers to subsidize excessive, undeserved premium discounts to group-rated employers who were handpicked by group sponsors to participate in the BWC's group rating plan.”
The plaintiffs had argued that unreasonably steep discounts, as much as 90%, were offered to employers who annually could join groups administered by third parties — usually because they had no recent claims — at the expense of employers who did not qualify for group membership — usually employers with at least one claim. An employer in a group that incurred even a single claim would be excluded from the group the next year and would see its workers' comp insurance rise substantially.
Since the original filing of this lawsuit in 2007, the BWC has revised its policies and reduced the group discounts.
Judge Rocco wrote that the bureau violated a key principle of workers' compensation insurance — that every employer be charged a reasonable rate based on its own risk.
“The record reflects that for more than fifteen years, the BWC ignored the criticisms and recommendations of its actuarial consultants and maintained an unlawful and inequitable rating system under which it knowingly overcharged nongroup-rated employers workers' compensation insurance premiums in order to subsidize massive, undeserved premium discounts for group-rated employers,” he wrote.
Jay Miller writes for Crain's Cleveland Business, a sister publication of Business Insurance.