N.Y. Issues Bonds to Resolve Workers’ Comp Claims

New York issued $370 million in bonds to assist businesses in failed group self-insured trusts fulfill their obligations to their injured workers, Gov. Andrew Cuomo announced in December.

The bonding was made possible in Cuomo’s 2013 Business Relief Act, which authorized the New York State Workers’ Compensation Board (WCB) to use the proceeds to purchase insurance to pay the claims of these injured workers; the employers will repay the cost of insurance under favorable terms, according to the announcement. The Business Relief Act authorizes up to $900 million in bonding capacity.

“Through the 2013 Business Relief Act, the state is providing a practical and affordable way for thousands of businesses to meet their responsibilities so that injured workers can receive the compensation they deserve,” Cuomo said.

The failed group self-insured trusts are estimated to have liabilities of a little less than $800 million.

The bonds are being issued through the Dormitory Authority of the State of New York. Officials said the bonds received the highest possible credit ratings from Moody’s, Standard & Poor’s and Fitch. Lead bank Siebert Brandfort Shank and Goldman Sachs brought the bonds to market.

The WCB will use the bond proceeds to purchase insurance policies that will pay the claims of injured workers because those employers – members of insolvent group self-insured trusts – abandoned their claims, officials said.

The businesses in these trusts will reimburse the WCB for the cost of these “assumption of liability policies” over 10 years, at low interest rates.

Transferring claims to insurance companies provides for the payment of benefits to injured workers; currently, the WCB pays their claims and is engaged in legal proceedings to recoup those costs, officials said.

The insurance does not relieve trust members of liability, but it does create a clear and lower-cost mechanism for employers to meet their obligations toward their injured and ill employees.

Assumption of liability insurance also caps the cost of these claims for employers, at a favorable price, officials said.

The WCB said this is “a creative and very effective method” of ensuring injured workers receive all the benefits they deserve under the law, while at the same time resolving the difficult situation these employers find themselves in after their group trusts failed.