State Sues Administrator of Workers’ Compensation

A New York State agency filed a lawsuit on Wednesday alleging fraud and seeking $405 million in damages from a company that has long helped administer workers’ compensation insurance for companies.

In addition, the attorney general’s office this week informed the company, CRM Holdings, that it would file a separate lawsuit next week charging the company with business fraud and security fraud, asserting that CRM engaged in deceptive and illegal practices to attract business.

Both the New York State Workers’ Compensation Board and the attorney general’s office say that CRM deliberately underestimated the workers’ compensation liabilities of many companies to help drum up business, enabling CRM to charge artificially low premiums, ultimately leaving the companies with inadequate reserves to cover liabilities.

In New York, many small- and medium-size employers in the same industry band together to form self-insured group trusts that provide workers’ compensation coverage to their employees. But state officials assert that more than a dozen of these group trusts have failed financially in recent years, leaving tens of thousands of workers without the insurance, because of malfeasance by CRM and other trust administrators.

Full article here.