In a partial win for at least one employer caught up in the California workers' compensation insolvencies, a California Department of Insurance Hearing Judge has ruled in Star Roofing Company Inc. v. Workers' Compensation Insurance Rating Bureau that the Bureau must accept accurate experience data generated by an insolvent carrier for a policy year even if it's untimely. The Department also says that the Bureau was correct to refuse employer provided claims loss data.

The much anticipated ruling may give relief to other employers whose experience suffered as the result of a workers' comp insolvency, while guaranteeing the fairness of the system. There were between 25 and 30 appeals from employers on hold pending the outcome of this case.

Star Roofing had the unfortunate luck of being insured by Villanova Insurance Company. When promulgating Star's experience modification for 2003, the Bureau did not use the experience data from Star's 1999 and 2000 policies. The Bureau says it was following the Department's directive to exclude all insolvent insurer data for policies with effective dates beginning from April 1, 2002 to December 31, 2003, unless it was submitted prior to 2000, Villanova's "wide-spread failure" to report data to the Bureau. Villanova was declared insolvent in 2003. The result for Star Roofing was the exclusion of good loss data and an experience modification in excess of 100 percent.

The Bureau argued that the data in Star's first unit statistical report for its 1999 policy was unreliable because it was two years late. The Department disagreed saying that the Bureau presented no evidence that the data was unreliable. The data was used to calculate Star's 2002 X-Mod, and was only excluded from the 2003 X-Mod because of the Department's directive, the decision says. Based on this finding the Department determined the data was accurate.

But the Department supported the Bureau on the employer provided loss run data ruling that the Bureau isn't capable of analyzing raw data and then converting it to the required format. Furthermore, the Department agrees with the Bureau that by accepting employer provided information, even arguably reliable data, employers are likely to submit only the good data.

The Department ruled the Department should rescind Star Roofing's 2003 X-Mod and re-calculate it using the 1999 experience data. According to Star Roofing's lawyers the recalculation should result in at least one year worth of savings for the company. For a copy of the full decision, go to our Resources section at www.wcexec.com.

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