Oregon Threatens to Decertify Workers’ Comp Group

Oregon insurance regulators said Monday that they’ve taken the first steps toward decertifying a workers’ compensation self-insurance trust and will shut it down next week if the employers can’t come up with $750,000.

The Oregon Department of Consumer and Business Services said Oregon Employers Trust Inc. must increase its security deposit to $3.95 million based on membership growth and estimated claims liability through June 2012. The group is Oregon’s largest private group of employers that self-insure for workers’ compensation, state officials said.

Oregon Employers Trust Inc., which formed in 2009, is a group of about 200 companies that have agreed to assume “joint and several” liability for their own and each other’s workers’ compensation claims.

The trust is administered by Empire Pacific Risk Management Inc., of Lake Oswego. The trust’s president, Todd Hennelly of Empire Pacific, said Monday that several employers in the group have agreed to put up the money to remain compliant with the state.

“They feel it’s important that there be viable alternatives in the marketplace,” Hennelly said. The board of directors hopes to have everything finalized by the end of the week, he said.

In a letter to members posted on the Empire Pacific website, Hennelly wrote that administrators tried unsuccessfully to obtain a surety bond instead of paying cash.

The group includes a range of small- and medium-sized employers, including car dealerships, nonprofit organizations, construction companies and a handful of local governments.

If the state decertifies the group next week, its members would still be liable for workers’ compensation claims, and they would be required to purchase new workers’ compensation insurance immediately.

Almost all employers are required to purchase workers’ compensation insurance, which covers costs for workers injured on the job. The costs can last long into the future if a worker is killed or permanently disabled.

Security deposits ensure there’s enough money available to pay claims and administrative costs if the group defaults or goes bankrupt, said John Shilts, administrator of the state’s Workers Compensation Division. The size of security deposits tend to be volatile in the group self-insured market, although the 23-percent increase for Oregon Employers Trust is higher than typical, Shilts said.

“I think that reflects the growth in this group, the growth in their risk, and it really reflects how their own incurred losses have gone up,” Shilts said.

The state has decertified two self-insurance groups since 2011 – Oregon Contractors Workers Compensation Trust, which filed for bankruptcy in 2011, and the Oregon Nonprofit Employers Trust, which voluntarily dissolved last year.