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Tag: 2021 News

Unlicensed Agent Arraigned for Stealing $1.4 M in Comp Premiums

A former Costa Mesa resident, who was arrested in October on suspicion of collecting over $1.4 million from companies paying for bogus workers’ compensation insurance coverage, made her first court appearance in Orange County last week to face multiple felonies.

Unlicensed insurance agent Karyl Lynn Reed, 57, was arraigned on multiple felony counts of grand theft, forgery, embezzlement, and aggravated white-collar crime after allegedly defrauding three victims. Earlier this month, Reed was arrested in Seabrook, Texas, and extradited to Orange County.

An investigation by the Department of Insurance found that between 2012 and 2019, Reed acted as an insurance agent without a license and collected premiums for workers’ compensation insurance through her businesses, Envoy Business Partners and Allenn Specialty Group. Both companies operated out of facilities located at 16787 Beach Blvd,. Suite 730, Huntington Beach, CA 92647-4848

She would provide her victims with fraudulent Certificates of Insurance, causing her victims to believe they had valid coverage when there was actually none.

The investigation discovered Reed also operated a staffing company without valid workers’ compensation coverage and personally adjusted and administered employee injury claims. She collected workers’ compensation premiums and payroll, employer and employee taxes from victims, and provided them with falsified Certificates of Insurance as well leading them to believe they were covered when they were not.

The Department’s investigation revealed that one victim did not have workers’ compensation coverage for an employee who became injured. Another victim had requested an updated Certificate of Insurance from their insurance company and were told no policy or coverage was in place and found out the policy number Reed had provided them belonged to a policy for another business.

The investigation further revealed another victim who discovered the money they were paying Reed to her staffing service was not being remitted to the insurance company.

The public defender representing Reed could not immediately be reached for comment. Reed is due back in court in December. The case is being prosecuted by the Major Fraud Unit of the Orange County District Attorney’s Office.

Consumers can check the license status of their agent or contact the Department of Insurance at 800-927-4357 if they suspect they are victims of insurance fraud.

WCIRB Updates COVID-19 Impact Report

The Workers’ Compensation Insurance Rating Bureau of California has released its COVID-19 in California Workers’ Compensation report, which details the characteristics of COVID-19 workers’ compensation claims in California and their impact on the state’s workers’ compensation system.

In total, including denied claims, almost 160,000 COVID-19 claims have been reported to the Division of Workers’ Compensation as of early September 2021. About 43% of COVID-19 claims have been reported by self-insured employers. Typically, about one-third of non-COVID-19 claims are self-insured employer claims. With the Delta variant, those numbers are likely to grow.

More than one-half of COVID-19 claims were incurred by workers with ages between 16 and 39, which is somewhat higher than the proportion of all indemnity claims incurred by younger workers.

In a typical year, about 600,000 workers’ compensation claims of all types are filed.

In the early months of the pandemic, the ratio of workers’ compensation claims to infections was high with a statewide stay-at-home order, a relatively broad presumption of compensability and most claims arising from healthcare workers and first responders. The high share of healthcare COVID-19 claims has been relatively consistent throughout the pandemic.

The winter surge was severe in California with about one-half the infections and workers’ compensation claims arising during that period. In December 2020, at the height of the winter surge, more than one-third of all indemnity claims were COVID-19 claims.

Since the rollout of the vaccines in early 2021, the ratio of workers’ compensation claims relative to infections has been relatively low. After dropping sharply in the spring of 2021 following the rollout of the vaccines, the proportion of COVID-19 claims have recently increased somewhat with the Delta variant.

About 22% of the COVID-19 death claims reported in WCIRB transaction data are from the healthcare sector. COVID-19 death claims are often reported relatively late. As a result, totals for 2021 will likely increase. Almost 80% of COVID-19 death claims were incurred by workers aged 50 years or older compared to about one-third of all indemnity claims.

Denial rates on COVID-19 claims have been higher than on non-COVID-19 claims as only about 7% of non-COVID-19 claims are denied. Many COVID-19 claims are denied due to the lack of a positive test result for a COVID-19 infection.

Virtually all COVID-19 indemnity-only claims close quickly as they typically involve only short durations of TD. COVID-19 claims with both medical and indemnity benefits on average close more quickly than the typical indemnity claim as more have relatively small incurred values.

Biden Abandons Plans to Limit Drug Pricing

The framework of a deal on President Biden’s social spending package unveiled on Thursday does not include allowing Medicare to negotiate lower prescription drug prices, leaving out a major Democratic priority.

A senior administration official told reporters there were not enough votes among Democrats to pass the policy.

“[President Biden] has spent countless hours over the last several weeks discussing this topic with members of Congress and trying to secure a deal,” the official said. “But at the end of the day, there are not yet enough votes to get something across the line that will deliver what the American people need and expect on prescription drugs.”

The absence of drug pricing in the package is a major failure for the party on one of its key campaign pledges, and an area where leaders like Biden and Speaker Nancy Pelosi (D-Calif.) had repeatedly vowed to take action.

Sen. Kyrsten Sinema (D-Ariz.), as well as a small handful of House Democrats, were seen as obstacles to passing the policy.

As rumors circulated about drug pricing provisions being dropped or watered down on Wednesday, vulnerable House Democrats urged their party to keep a strong provision in, noting they campaigned on it.

“All of us would love to be able to go back to our districts and say, ‘Hey this is something we campaigned on that we delivered,'” said Rep. Susan Wild (D-Pa.), speaking of other front-line members in competitive districts.

Now, because of objections from a small minority of Democratic lawmakers, the drug pricing provision is being left out.

The proposal is extremely popular with voters. A Kaiser Family Foundation poll this month found that 83 percent of the public support allowing the government to negotiate drug prices.

Lawmakers had expressed hope in recent days that they would be able to find a compromise on a narrowed version of the drug pricing measure. Senate Finance Committee Chairman Ron Wyden (D-Ore.) said in recent days he would not accept a “fig leaf” on drug pricing and would insist on a strong measure.

Sen. Bernie Sanders (I-Vt.) has also made lowering drug prices a top priority for the package.

Reps. Scott Peters (D-Calif.), Kathleen Rice (D-N.Y.) and Kurt Schrader (D-Ore.) voted against a drug pricing proposal in committee last month, warning it would harm innovation from drug companies to develop new treatments. They pushed an alternative, much scaled-down measure.

The absence of drug pricing measures in Biden’s new spending framework is a major victory for the pharmaceutical industry, which fought hard against the proposal with lobbying and a seven-figure ad buy, and has long been a powerful force in Washington.

Drug companies warned that regulation of their prices would harm their ability to do research and bring new treatments to market.

Employers Holdings Announces Record Breaking Performance

Employers Holdings, Inc., a holding company with subsidiaries that are specialty providers of workers’ compensation insurance and services focused on select, small businesses engaged in low-to-medium hazard industries, just reported financial results for its third quarter ended September 30, 2021.

– – Record number of ending policies in-force (109,870), up 6% since year-end;
– – Gross premiums written were $152.3 million, up 16% year-over-year;
– – Net premiums earned of $147.1 million, up 2% year-over-year;
– – Net income of $15.0 million, or $0.53 per diluted share;
– – Adjusted net income of $11.6 million, or $0.41 per diluted share;
– – The Company repurchased 327,402 shares of its common stock at an average price of $40.54 per share;

Chief Executive Officer Katherine Antonello commented: “We closed the quarter with yet another record number of policies in-force and our written premiums, which were up 16% year-over-year, were the highest they have been since the first quarter of 2020. To recognize the positive shift we are experiencing in audits, we increased our final audit accruals by $4.7 million during the quarter. In addition, October premium writings are off to a very strong start, a sign that small businesses are beginning to thrive and are actively shopping for workers’ compensation coverage.

We maintained our current accident year loss and LAE ratio on voluntary business at 63.6%, down from 65.5% a year ago. Indemnity claim frequency continues to be down in recent periods while indemnity claim severity remains moderate. As part of our continued technology and process improvements initiative, we implemented a new comprehensive claims system during the quarter which we believe has enhanced and streamlined our claims handling processes. In connection with this implementation, we undertook several process changes and, as a result, we chose not to recognize any prior year loss reserve development during the quarter.

Our underwriting and administrative expenses of $37.4 million were down 19% from a year ago. The decrease was primarily a result of targeted expense savings, mainly in the areas of compensation and professional fees.”

Ms. Antonello continued, “Our Cerity operating segment, which offers digital workers’ compensation insurance solutions directly to consumers, continues to grow while remaining within our targeted low hazard groups. We believe that Cerity’s technological and intellectual capabilities will support our future growth initiatives and provide direct access to workers’ compensation insurance for businesses seeking an online experience.

To capitalize on emerging labor market improvements, we recently expanded our underwriting appetite at both Employers and Cerity to include additional classes of business within our targeted hazard group mix. We remain committed to maintaining the highest level of underwriting discipline and to aggressively managing our expenses within our Employers and Cerity segments. Our balance sheet and capital position are very strong and are highly supportive of these key initiatives.”

Court Orders State Prison Staff to be Vaccinated

Since the COVID-19 pandemic began, over 50,000 incarcerated persons in California’s state prisons have been infected by the SARS-CoV-2 virus. At least 240 have died from the disease, many more have been hospitalized.

Finding California’s plan for curbing the spread of Covid-19 in state prisons woefully inadequate, a federal judge ordered the state to carry out a court-appointed receiver’s recommendation that all prison staff be vaccinated by January 12, 2022

At a July 29 case management conference, court-appointed receiver J. Clark Kelso stated that “all of our efforts to date have been insufficient to achieve the very high rate of staff vaccination that is necessary to further significantly reduce the risk that Covid will be introduced into our prisons,” in part due to the threat posed by the more infectious delta variant.

The state had argued that its current policy of requiring vaccines at two health care-focused institutions – the California Health Care Facility in Stockton and California Medical Facility in Vacaville – and for employees working in designated health care settings at 33 other prisons was a reasonable approach. Under that policy, unvaccinated employees are also required to undergo Covid testing twice per week.

Judge Tigar disagreed with the state’s assessment, concluding that its failure to implement a vaccine mandate for staff constitutes deliberate indifference in violation of the Eighth Amendment.

“A finding that defendants were not deliberately indifferent based on a toolbox without a vaccine has little relevance when the same toolbox now includes a vaccine that everyone agrees is one of the most important tools, if not the most important one, in the fight against Covid-19,” Tigar wrote.

The judge ordered Kelso to draft an implementation plan, including a deadline for all covered persons to be vaccinated, by Oct. 12. The mandate would allow for certain religious and medical exemptions.

Under current rules, prison employees must get vaccinated or submit to regular COVID-19 testing. Tigar’s order would eliminate the testing alternative for everyone except those with religious or medical exemptions.

Defendants and the Receiver jointly filed the required plan with a deadline for covered persons to be fully vaccinated by November 29, 2021.

Defendants subsequently indicated some confusion over whether the deadline was as stated in the filed plan, explaining that they had requested a December 20, 2021 deadline to which the Receiver did not agree. The Court ordered Defendants to meet and confer to attempt to resolve any dispute that might exist over the implementation deadline.

The Receiver requested an order setting a specific implementation deadline. The Court reviewed the Receiver’s and Plaintiffs’ filings in support of such an order, and Defendants’ and Intervenor California Correctional Peace Officers’ Association’s filings in opposition.

In light of the compelling public health considerations underlying the vaccination order, as well as the significant passage of time – thirty days since the Court issued its order – without any apparent action aside from the October 12 joint filing of an implementation plan, the Court agreed with the Receiver that it is appropriate to set a specific vaccination deadline at this time.

The Court ordered that full vaccination of the persons covered by the September 27, 2021 order occur no later than January 12, 2022.

In the process, the politically powerful prison guards’ union and Gov. Gavin Newsom have resisted a COVID vaccine mandate, despite growing outbreaks. On October 12, 2021, the State of California appealed the Order to the 9th Circuit Court of Appeal. Newsom’s administration on Monday asked Tigar to pause his order while the appeal makes its way through court.

Connie Gipson, director of the correction’s department’s Division of Adult Institutions, said in the filing that she’s concerned a significant number of employees would quit or face firing rather than accept the vaccine.

L.A. County Pursues Restaurants for Dining Ban Violations

Los Angeles County reached a settlement with one of two restaurants sued earlier this year for allegedly disregarding the outdoor dining ban put in place last November to stop the spread of the coronavirus.

Last Dec. 2, county public health inspectors observed 18 to 22 customers eating and drinking on Cronies Sports Grill’s outdoor patio and also saw that a closure notice at the Agoura Hills eatery on Kanan Road that had been posted on the front door the day before was camouflaged by a banner, according to the Los Angeles Superior Court lawsuit brought Jan. 27. On Dec. 12,

Cronies’ public health permit was revoked and a written notice was given to cease all restaurant operations, the suit states.

Under the settlement, Cronies has agreed to pay $10,000 in abatement costs, plus $25,000 in suspended civil penalties enforceable only if a court finds the settlement has been violated b the restaurant, according to an order signed Thursday by Judge Maureen Duffy-Lewis.

The eatery is further stopped by an injunction from opening, conducting or participating in any restaurant operations in violation of the Los Angeles County Code and/or all applicable state and local health orders, including the Reopening Safer at Work and in the Community for Control of COVID- 19 Blueprint for a Safer Economy, according to the order.

The injunction also prohibits the business from “engaging in, conducting, managing or carrying on the operation of the restaurant or other dining establishment without a public health permit” in violation of the Los Angeles County Code, according to the order. The injunction will be ended in 18 months if Cronies fully complies with the terms.

Within 10 business days of the effective date of the settlement, Cronie’s must allow the county Department of Public Health to conduct a permit reinstatement inspection of the eatery without any customers present, according to the order. Within two business days after passing the inspection, Cronie’s must pay a $1,375 public health permit fee in, after which the restaurant’s permit will be reinstated within another two days, according to the order.

Los Angeles County lifted its ban on outdoor dining on Jan. 29. In the same lawsuit, the county sued the Tinhorn Flats Saloon & Grill on Magnolia Boulevard in Burbank. That part of the litigation is still pending.

On Dec. 15, a public health inspector saw more than 25 customers dining in theoutdoor patio of the Tin Horn Flats restaurant, the suit states. The property owner, Isabelle Lepejian, obtained an eviction order against the restaurant operators in June.

The City of Burbank created a page on it’s website to keep the community informed about the ongoing legal proceedings against Tinhorn Flats, which include arrests made by law enforcement during the extended legal battle.

EDD Fraud Loss Estimate Increased from $11B to $20B

The state’s much-maligned Employment Development Department acknowledged Monday, that organized crime rings and inmates snatched $20 billion intended for jobless Californians during the height of the pandemic. The loss is higher than the $11 billion estimate given earlier in the year.

Courthouse News reports that the alarming admission came during an oversight session in which the department’s brass updated lawmakers on progress being made to fraudproof and revamp an agency that failed millions of Californians last year. The updated total of confirmed unemployment benefits issued to scammers nearly doubles the estimate given by the department this past January, thought it warned at the time the figure could be as high as $30 billion.  

Of the $177 billion that was paid out, $20 billion is estimated to be fraudulent,” EDD Director Rita Saenz told lawmakers.

The swift takeover of California’s unemployment system last year roiled taxpayers and was a political nightmare for Governor Gavin Newsom and the state’s Democratic leaders. The embarrassing revelation that inmates on death row were able to apply for and receive benefits while hundreds of thousands of legitimate claims went unfilled spurred the overhaul of the department’s leadership and its outdated customer service systems.  

The fraud not only sparked criminal investigations but caught the attention of lawmakers who turned to the state’s venerable auditor for help.

State Auditor Elaine Howle found the department was ill-prepared for a major economic downturn and essentially ignored recommendations her office issued 10 years ago in wake of the Great Recession.  

EDD’s performance was poor before the pandemic, it just got miserable,” Howle told a joint budget committee Monday.

Howle’s reports spurred a flood of reforms and the auditor joined Saenz to give lawmakers a progress report on the department’s ongoing changes.

The auditor, who is scheduled to retire this year after 21 years on the job, said the department has implemented around 60% of the recommendations issued in her January report. The department has begun clearing its deferred claims backlog, updated its website to be more transparent for the public and renovated its call center.

While Howle called the changes “notable progress,” she urged the committee to keep up with persistent oversight and make sure the department carries out the changes.

The committee’s chair state Sen. Wendy Carrillo lamented the slow pace of progress, noting the department is still struggling with a massive claims backlog despite an influx of recent budget funding to help boost staffing levels. The Los Angeles Democrat asked Howle how the state can “turn this Titanic around” and be sure the embattled department is spending the $276 million in new funding and making changes wisely.  

“What’s the use if the system is so slow that it can’t take into account a new workforce or the need of people requiring assistance from the EDD?” asked the former broadcast journalist.

Monday’s hearing, which had been postponed multiple times over the last several months, comes as the state continues to struggle with high levels of unemployment.

Hartford Ranks First in Digital Capabilities

For the third consecutive year, The Hartford has ranked No. 1 for digital capabilities in Keynova Group’s Small Commercial Insurance Scorecard. This competitive benchmark study evaluates the top 10 small commercial insurance brands across four categories and tasks including functionality, ease of use, privacy and security, and support and access.

The Scorecard reviews the digital experience of 10 of the largest carriers offering small business insurance in the U.S., including Allstate, Chubb, GEICO, Hiscox, Liberty Mutual, Nationwide, Progressive, State Farm, The Hartford, and Travelers.

The Hartford received the top rating, significantly outperforming all its competitors across key areas of digital self-service including claims and the ability for prospects to easily obtain an online or mobile quote and buy small commercial insurance.

This annual competitive Scorecard evaluates the digital capabilities of carriers supporting small business insurance such as BOP (Business Owners Policy), Property, Liability, Workers Compensation, and Commercial Auto insurance policies. Results, derived from evaluating close to 250 criteria accessible through insurance carriers’ digital properties, enable providers to identify opportunities to deliver a best in class digital experience to small business prospects and customers.

Scorecard assessments employ active customer accounts, expert observations of digital capabilities, and a detailed evaluation of both the public-facing and authenticated experience. The Scorecard uses a weighted matrix of more than 250 objective criteria grouped and weighted by category and task.

“Our small commercial market leadership position is very clear,” said Stephanie Bush, head of Small Commercial and Personal Lines at The Hartford.  Recognition as the unrivaled leader for the third year in a row is a testament to our many years of investing in what makes a difference to our customers and agents.

The Hartford has been insuring small business owners for more than 200 years and was one of the first carriers to create a dedicated business unit for small commercial customers more than 30 years ago. The company, along with its agents, serves more than one million small business customers.

For more than 20 years,* Keynova’s Scorecards have been the trusted source for leading financial services firms to obtain competitive intelligence and actionable insights. Keynova Group was established as an independent entity in April 2020 following a spin-off from Dynatrace LLC.

DWC Announces 13.5% Increase in 2021 TTD Rates

The Division of Workers’ Compensation announced on September 15th, that the 2022 minimum and maximum temporary total disability (TTD) rates will not change for 2022. They quickly withdrew that announcement based on finding that the State Average Weekly Wage data posted by the U.S. Department of Labor (DOL), data used for the calculation was preliminary and incomplete.

The DWC now just announced that the actual 2022 minimum and maximum temporary total disability (TTD) rates will increase on January 1, 2022. The minimum TTD rate will increase from $203.44 to $230.95 and the maximum TTD rate will increase from $1,356.31 to $1,539.71 per week.

Labor Code Section 4453(a) (10) requires the maximum and minimum weekly earnings upon which TTD is based increase by an amount equal to percentage increase in the State Average Weekly Wage (SAWW) as compared to the prior year. The SAWW is defined as the average weekly wage paid to employees covered by unemployment insurance as reported by the U.S. Department of Labor for California for the 12 months ending March 31 in the year preceding the injury. In the 12 months ending March 31, 2021, the SAWW increased from $1,383 to $1,570 – an increase of 13.5213 percent.

The calculation of the 2022 SAWW increase is as follows:

(2022 SAWW – 2021 SAWW) / 2021 SAWW
$1,570 – $1,383 = 187/1383 = 13.5213%

The calculation of minimum TTD rate for 2022 is as follows:

Minimum earnings for 2022 x SAWW increase x 2/3 = minimum TTD rate for 2022
$305.16 x 1.135213 = $346.42 minimum TTD earnings x 2/3 = $230.95 minimum rate for 2022

The calculation of maximum TTD rate for 2022 is as follows:

Maximum earnings for 2022 x SAWW increase x 2/3 = maximum TTD rate for 2022
$2,034.47 x 1.135213 = $2,309.56 maximum TTD earnings x 2/3 = $1,539.71 maximum rate

Under Labor Code Section 4659(c), workers with a date of injury on or after January 1, 2003 who are receiving life pension (LP) or permanent total disability (PTD) benefits are also entitled to have their weekly LP or PTD rate adjusted based on the SAWW.

SAWW figures may be verified using the DOL data.

Drywall Company Cited for $7.2M in Wage Theft Violations

The Labor Commissioner’s Office has cited NGC Construction, Inc., $7,209,872 for wage theft violations affecting 724 workers. An investigation found that the Visalia-based drywall company paid workers a fixed amount per project known as piece-rate. The workers, who put up drywall, provided painting services and stucco application, were not paid for non-productive time, resulting in workers earning less than minimum wage and less than the contract wages promised by the employer. Some of the company’s truck drivers were also not paid overtime.

“The law is clear: workers earning piece rate must be paid for their rest periods and other non-productive time while under the control of the employer,“said Labor Commissioner Lilia García-Brower. “The law ensures workers can take their required rest breaks and are paid for travel time from one worksite to another.”

The Labor Commissioner’s Bureau of Field Enforcement (BOFE) opened its investigation into NGC Construction in September 2018 as part of a Labor Enforcement Task Force onsite inspection prompted by a worker’s Report of Labor Law Violation. The company sent workers, who usually worked eight-hour shifts, to commercial and residential construction sites throughout the Central Valley from Arvin in the south to Modesto in the north and Paso Robles in the west.

An audit of the company’s payroll from July 22, 2016 to July 22, 2019 confirmed the findings that employees were not paid for all of their work.

The citations issued total $4,858,072 payable to workers in unpaid wages, damages and premiums. including:

– – $281,237 for minimum wage violations plus affecting 718 employees plus $74,693 interest
– – $355,931 in liquidated damages for those minimum wage violations affecting 718 employees
– – $289,364 for non-payment of contract wages affecting 722 employees
– – $44,280 for overtime affecting 43 employees
– – $355,931 in liquidated damages affecting 718 employees
– – $1,001,400 for itemized wage statement damages affecting 720 employees
– – $2,811,006.12 for waiting time penalties affecting 568 employees
– – $161 for meal period premium violations affecting 3 employees.

The Labor Commissioner cited NGC Construction Inc. along with Julio C. Mendoza, president and CEO of the corporation, for total of $2,351,800, which included violations for failing to pay minimum wages, overtime pay, meal period premiums and failure to issue proper itemized wage statements and associated civil penalties.

When workers are paid less than minimum wage, they are entitled to liquidated damages that equal the amount of underpaid minimum wages plus interest.

Enforcement investigations typically include a payroll audit of the previous three years to determine minimum wage, overtime and other labor law violations, and to calculate payments owed and penalties due. Civil penalties collected are transferred to the State’s General Fund as required by law.