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Oregon fines nine ÌìÃÀÍøÕ¾´«Ã½´«Ã½ companies $5 million

The Oregon Department of Consumer and Business Services (DCBS) has imposed a $5 million fine on nine insurers in the American International Group (ÌìÃÀÍøÕ¾´«Ã½´«Ã½) for numerous violations of Oregon insurance and workers’ compensation laws, some of them dating back to 1985.

According to DCBS, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ must pay $1 million of the fine within 45 days. DCBS has suspended the remaining $4 million and will withdraw or impose it next year, depending on whether the companies meet certain conditions.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ has agreed to the fine and the conditions.

DCBS cited the ÌìÃÀÍøÕ¾´«Ã½´«Ã½ companies for failing to comply with Oregon laws for processing claims of injured workers and reporting proof of insurance coverage. For example, the companies have failed to meet state standards in such areas as timely payment of medical benefits to injured workers and accurate reimbursements of costs for related services.

“We take these issues very seriously,” said DCBS Director Cory Streisinger. “Injured workers depend on their insurance carriers to pay claims accurately and on time, and our other major carriers succeed in doing so. ÌìÃÀÍøÕ¾´«Ã½´«Ã½ hasn’t lived up to the standards Oregon injured workers are entitled to expect, and it’s our job to hold them accountable.”

DCBS also cited the ÌìÃÀÍøÕ¾´«Ã½´«Ã½ companies for using insurance policy forms that hadn’t been approved by the state. Advance approval of policy forms by DCBS is required to protect workers and ensure that policies comply with Oregon regulations, DCBS said.

In addition, DCBS found that the ÌìÃÀÍøÕ¾´«Ã½´«Ã½ companies failed to accurately report workers’ compensation premiums and claims data, which the department uses to develop the base rates employers pay to cover their workers. Premium information also is used to calculate each insurer’s assessments to fund parts of the state workers’ compensation system.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s inaccurate reporting led to an underpayment of required assessments, and in addition to the fines imposed, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ has paid DCBS approximately $3 million in previously unpaid assessments and interest.

The DCBS order gives the ÌìÃÀÍøÕ¾´«Ã½´«Ã½ companies 60 days to provide documentation showing whether additional assessments are due.

DCBS said the recent problems in Oregon came to light following an investigation of ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s financial statements by state and federal regulators in New York, where most of the companies are headquartered. Prior enforcement actions against ÌìÃÀÍøÕ¾´«Ã½´«Ã½ companies in Oregon include a suspension in 1989, followed by a settlement in 1991; an average of 36 civil penalties per year for claims and coverage compliance violations between 1990 and 2004; and an average of 68 civil penalties per year for claims and coverage compliance violations in 2005 and 2006.

The corrective actions include meeting state compliance standards for claims processing and proof of coverage reporting, and not issuing or renewing any policies using unapproved policy forms. Streisinger will decide whether to withdraw or impose the suspended fine by Sept. 30, 2008.

According to DCBS, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ companies have already demonstrated improvement in some of these areas, and DCBS will be closely monitoring their performance over the next year.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ is the third-largest provider of workers’ comp insurance in Oregon. Member companies covered by the Oregon settlement are AIU Insurance Co., American Home Assurance Co., ÌìÃÀÍøÕ¾´«Ã½´«Ã½ Casualty Co., Commerce and Industry Insurance Co., Granite State Insurance Co., Illinois National Insurance Co., National Union Fire Insurance Co. of Pittsburgh PA, New Hampshire Insurance Co., and The Insurance Co. of the State of Pennsylvania.

Topics Claims Workers' Compensation ÌìÃÀÍøÕ¾´«Ã½´«Ã½ Oregon