Hundreds of Employers Without Statutory Coverage ….

American Labor Alliance Loses Again

American Labor Alliance is fighting multiple cease and desist orders from the California Department of Insurance. It has been ordered it to stop selling [not insurance but] what it claims is an alternative to traditional workers’ comp insurance or self-insurance.

CDI is clear that ALA is not a licensed insurer or producer and its CompOne product does not provide the required statutory coverage. “American Labor Alliance attracted customers by marketing low [cost] workers’ compensation premium rates, but the end result is employers holding worthless pieces of paper, as the policies are not valid, which means the employers have no coverage—leaving them and their employees at great risk,” the Department noted when issuing its first cease and desist order. ALA’s appeal is now pending before a state administrative law judge.

The company admitted under oath that it has no reinsurance, no excess insurance, and, incredibly, no claims reserves. It says it is paying claims out of current cash flow. [see link to story]

The organization appears to be one scandal after another, charging employers the 2% CIGA fees while CIGA says there is no coverage, charging the other statutory surcharges while the Department of Industrial Relations says ALA has no authority to do so, and leaving employers subject to third party claims for losses because the thing isn’t coverage and therefore there is no statutory protection under the sole and exclusive remedy. There is also no coverage 2 or B as it is sometimes called.

In an exclusive interview with Workers’ Comp Executive, the MEWA president threatened us if we interfered with what they called “our organizing.” [see link to story]

Now comes the Federal Department of Labor to pull the proverbial rug out from under the American Labor Alliance and its CompOneUSA workers’ compensation program. ALA is or was maintaining that it is exempt from state regulation because it is a labor organization offering welfare benefits that are exempt under ERISA, but DOL is now saying that American Labor Alliance is NOT a valid union and is refusing to accept ALA’s financial filings, and closed its file.

“The U.S. Department of Labor has advised ALA that it does not recognize them as a union for purposes of ERISA,” says California Department of Insurance attorney Teresa Campbell. “Therefore, and ALA admits, since it is not a union governed by the collective bargaining agreements, it is a [Multiple Employer Welfare Arrangement or MEWA], and [as such] is subject to CDI regulation.” Campbell wrote this in a closing brief to the state’s case to shut down the program.

As evidence, she included a letter from Larry King in DOL’s Office of Labor-Management Standards to ALA president Marcus Asay.

DOL says “The purpose of this letter is to inform you that the Office of Labor-Management Standards (OLMS) has determined that American Labor Alliance does not quality as a labor organization pursuant to Sections 3(i) and (j) of the Labor-Management Reporting and Disclosure Act (LMRDA), 29 U.S.C. Section 402(i) and (j). As a result, OLMS has terminated the Alliance’s file number (LM-544-829), and the organization should not file annual financial disclosure reports with OLMS.” The letter was dated February 23, 2017.

Beyond the loss of its designation as a labor organization, CDI through Campbell maintains that ALA’s actions in selling and operating the CompOneUSA program violate a host of state regulations, including issuing certificates of insurance that listed itself as the insurer and transacting business without a certificate of authority.

“ALA admits they marketed, sold, and serviced insurance products in California. They have paid claims to providers and paid benefits to the employees. They perform underwriting and collect state mandated taxes and fees assessed to insurance transactions,” Campbell noted. “Whether ALA acted as an insurer or a producer, it admittedly had no certificate or license to transact insurance business in California in either capacity.”

Testimony delivered under oath at ALA’s appeal hearing revealed that the program was started with no initial capitalization. The program is paying claims as it goes and company officials confirmed that they do not maintain separate reserves for the workers’ comp claims it incurs. The program has no reinsurance or stop loss coverage.


ALA Lacking Veracity

ALA’s claims it doesn’t know what CDI’s Campbell is talking about in its rebuttal to the Department. ALA officials say they never received such a letter and claimed that nothing has changed in its relationship with the federal agency. They also question the authenticity of the letter.

But ALA’s claim lacks veracity. DOL officials confirm to Workers’ Comp Executive that the letter is real.

“Thursday, March 30, 2017, is the first time/day I have seen or received the Letter from Larry King, dated February 23, 2017,” says Asay in a declaration signed under the penalty of perjury. “The mailing address on the Letter is correct except that the suite number is missing. I and AGSA [Agricultural Contracting Services Association Inc. dba American Labor Alliance] have been a tenant of that location for approximately ten consecutive years and AGSA is by far their largest leaseholder.”


What MEWA Worry?

Asay goes on to state that the organization is receiving other normal communications from DOL, including from Mr. King himself. He also maintains that its union file number is still active and as evidence includes a screen print of the results of a search of DOL’s database showing ALA’s union reporting history. But the reality is quite different.

The printout provided by Asay lists ALA’s annual reports since 2013 all filed in either September or October of the filing year. The latest report listed is the 2015 annual report filed September 30, 2015. There is no 2016 report listed. Annual reports are due within 90 days of the end of the union’s fiscal year. ALA’s past annual reports are based on a July 1 thru June 30 reporting period.

The print out also gives no indication whether the file number is active. A proper search of the website, however, offers a clearer picture:

Using the name search feature offered and searching for “American Labor Alliance” produces the same result that ALA submitted under penalty of perjury as evidence of its active status. HOWEVER, clicking the box that limits the search to “ACTIVE UNIONS ONLY” produces no results for ALA. As the letter indicates: American Labor Alliance is not an “Active Union” in the eyes of DOL.

DOL officials confirmed to Workers’ Comp Executive that the letter is real and that ALA’s union file number is no longer active. “Per the letter that you have a copy of, OLMS has determined that the ALA is not a labor organization within the meaning of the LMRDA, and has therefore terminated its file,” says DOL’s Michael Trupo in Washington.


Hundreds Of Employers May Be Liable

Workers’ Comp Executive has confirmed that hundreds of businesses have entered agreements with ALA over the past year. Most are small with only a handful of employees, but some have hundreds of employees. None of them have or have had workers’ comp coverage under California’s laws. Compline has been matching them to its database.

State officials maintain that the “benefits” ALA provides are not the required statutory insurance coverage, and legal experts say the employers may not have the protection of California’s sole and exclusive remedy law. Injured workers, therefore, can bring damages cases against employers. Such claims are excluded from all Commercial General Liability policies, say experienced brokers.

CDI issued multiple cease and desist orders last year against ALA for running the program. The organization has steadfastly refused to abide by the orders. Administrative Law Judge Kristin Rosi is expected to rule on the validity of the order later this spring.