The New York Workers’ Compensation Board has again extended the deadline for professional truck drivers who were part of a now defunct self-insured workers’ comp trust to sign a Memorandum of Understanding.
The board recently extended the deadline to Nov. 1, after first setting the date of Sept. 1 for members of the trust to sign the MOU agreement.
Back in July, truck drivers began receiving bills from the board stating they were on the hook for thousands of dollars after the self-insured trust they were members of, known as the Transportation Workers’ Compensation Trust, or Team Trust, failed a few years earlier.
The Team Trust is one of many trusts that are now defunct since New York set out to reform its workers’ compensation system by allowing employers to form self-insured trusts in the mid-1990s.
“The hope in the beginning was that employers who had direct involvement in managing their employees could pool the risks, resulting in lower premiums,” said Linda Clark, attorney for Hiscock and Barclay LLP, in August. Clark’s firm is representing some of the Team Trust members.
More than two dozen of these self-insured trusts, including many transportation-related trusts, have become insolvent since that time. According to Clark, there are more than 7,000 members of these trusts. The estimated liabilities of the trusts are around $1 billion.
She said problems with the trusts were they were often managed by individuals who had little experience with insurance regulations, and few regulatory controls were in place to ensure proper monitoring because the concept was so new.
“Ultimately, the optimistic goals of the trust went by the wayside,” Clark said on an August call about the trusts. “With few regulatory controls in place to ensure proper monitoring, the trusts started underreporting liabilities and claims reserves, and failed to disclose the true liabilities of the trusts.”
Clark said it took years before the board realized the magnitude of the problems associated with the trusts. In the mid-2000s, the trusts began to fail and the board began taking over the trusts that were in the worse shape.
Since that time, the board has hired forensic accountants to look at the books in an attempt to restructure the debt of the trust and calculate the liabilities of the trust, according to Clark. She said the methodology the board used to come up with the amounts trust members owe is a complicated one.
The Owner-Operator Independent Drivers Association has received calls from some of its members, who have received letters from the board. Some state they have received bills ranging from $14,000 to $33,000. They became members of the trust after signing trust agreements to lease on to New York-based motor carriers between 1995 and 2010, when the trust program was terminated.
Owner-operators, who were not incorporated, operating by doing business as (DBAs), are the “most vulnerable members of the trust,” according to Clark.
The board is urging members of the trust to sign a memorandum of understanding – or MOU – stating they will pay 75 percent of the assessment over an 18-month period, for now. In August, Clark said the board’s goal was to collect the amount owed to pay the assessed liabilities of the trust each month.
During this 18-month period, both the board and Team Trust members who sign the MOU agree not to “commence legal proceedings against one another.” A revised MOU agreement, with the new deadline, is currently being drafted.
Even if Team Trust members sign the MOU and pay a percentage each month, Clark said there is still “no guarantee that the board won’t come after them again.”
“Many of the members of the trust may never see a zero liability bill,” Clark said. She said they may never be debt-free unless legislation is passed or an injunction is issued against the board, disallowing them from coming after the members of the trust for the trust deficits.
Another option, Clark suggested, is that the board should be trying to collect the deficit amount from third-party administrators, who managed the trust.
She said a May ruling by the New York Supreme Court in Riccelli Enterprises et al. v. New York Workers’ Compensation is promising case law for future cases brought by members of self-insured trusts. In that case, the high court upheld a lower court’s injunction against state efforts to assess members of another failed self-insured trust.
OOIDA Director of State Legislative Affairs Mike Matousek said the Association is researching the situation and possible solutions for truckers – as other groups are. In the meantime, if you receive communication from the state seeking payment, Matousek said trust members should consult an attorney first, but also try to keep the payments as low as possible for as long as possible.
Copyright © OOIDA