AIG: going, going,......?

AIG, a major workers' compensation carrier and reinsurer, is now facing another major economic loss amounting to $30 Billion, which may critically impact its ability to remain viable. In an exclusive report, Bloomberg, has reported that AIG, previously rescued by the Federal government in a $60 Billion infusion of dollars to offset troubled credit default swaps, is now facing additional losses.

Bloomberg reported, "...Wider losses may cast new doubt on whether the federal funds will be enough to prop up AIG, the biggest U.S. insurer by assets. The U.S. package almost doubled from the $85 billion approved in September to save the company from bankruptcy. Previous miscalculations about the swaps contributed to the ouster of Chief Executive Officer Robert Willumstad and his predecessor, Martin Sullivan. "

The huge insurance carrier, AIG, is considered to be a backbone of the workers' compensation insurance market and its financial instability, including insolvency, could critically shake the national patchwork of State programs. Earlier this year several State's issued statements that their insolvency funds would be a mechanism for relief should AIG fail. Declining State resources may place that solution also in jeopardy.

NJ Supreme Court Holds Electronic Insurance Policy Cancellations Invalid

In a sweeping, decision that may have impact on thousands of cases, the NJ Supreme ruled that an electronic cancellations of a workers’ compensation policies was not in compliance with the statute.

The Court ruled that the NJ Compensation, Rating and Insurance Bureau (CRIB) established a protocol called an FTP transfer to cancel policies by insurance carriers that was not in compliance with the law. NJ CRIB, the rate setting agency in NJ for workers’ compensation premiums, has been under investigative attack and legislative review. Recent legislation increased the governance to include some non-insurance affiliated members.

The NJ Supreme Court held, “…[that a] carrier does not satisfy N.J.S.A. 34:15-81 merely by transmitting electronic notice of cancellation of coverage to the Commissioner by way of the FTP. The statute clearly requires that to effectuate the cancellation, carrier also must file a statement certified by an employee that the required notice was provided to the insured.”

“In short, the Appellate Division correctly concluded that the use of the FTP system to transmit data about policy cancellations, without any accompanying certification, cannot be effective in light of the clear and unambiguous demands of N.J.S.A. 34:15-81(b).”

“… we have concluded that Sroczynski and any other party who previously raised the notice issue should be granted relief from the improper cancellations but that those cancellations that were never challenged should stand because the policyholders waived their right to do so.”

Walter Sroczynski v. John Milek (A-68/77-07) December 17, 2008

Click Here: Supreme Court of New Jersey Oral Argument May 5, 2008

US Supreme Court to Review Manville Asbestos Bankruptcy Order

The US Supreme Court has decided to review a decision interpreting a 1986 Bankruptcy confirmation plan order. The order formed the basis of a settlement by Travelers Insurance Company to resolve claims against it for conspiracy in concealing information about the dangers of asbestos.

In 1986, the U.S. Bankruptcy Court for the Southern District of New York (Lifland,J.) confirmed a landmark plan of reorganization for Johns¬-Manville Corporation that channeled hundreds of thousands of asbestos-related personal injury claims into a special trust fund for the benefit of injured workers and their families. The linchpin of this reorganization was the contribution of tens of millions of dollars Petitioners and other insurers into a trust for payment of asbestos claims in exchange for protection from future claims against the insurers, all of which was intended to provide Petitioners with full and final protection from suits relating to, arising from or in connection with the Petitioners' insurance relationship with Johns¬Manville. The Manville confirmation order was affirmed in a final judgment rendered by the Second Circuit in 1988.

The confirmation order in Manville was subsequently ratified by the U.S. Congress (see 11 U.S.C. 524(h)) and used as a model for Section 524(g) of the Bankruptcy Code. In the decades following the entry of the final judgment affirming the Manville plan of reorganization, and in reliance on the protections enacted by Congress, of billions of dollars have been paid into "524(g) trusts" for the benefit of hundreds of thousands of asbestos claimants. In 2002, Petitioners sought to enforce the court's orders when certain asbestos claimants tried to evade the confirmation order by suing Travelers directly in so-called "direct actions." The suits were enjoined by the bankruptcy court that fashioned the Manville plan of reorganization, which held that they were proscribed by the 1986 confirmation order. The bankruptcy court's decision was affirmed by the District Court, but in February over two decades after the original orders became final, a different panel of the Second Circuit held that the bankruptcy court lacked authority in 1986 to enter confirmation order that extended beyond the "res" of the debtor's estate, i.e., insurance policy proceeds.

The question presented, therefore, is: Whether the court of appeals erred in categorically holding that bankruptcy courts do not have jurisdiction to enter confirmation orders that extend beyond the "res" of a debtor's estate, despite this Court's recent ruling that "[t]he Framers would have understood that laws 'on the subject of Bankruptcies' included laws providing, in certain respects, for more than simple adjudications of rights in the res," Central Virginia Community College v. Katz, 546 U.S. 356, 370 (2006), and whether the court of appeals compounded error by:

(a) failing to apply as written a federal statute (11 USC §§ 524(g) and (h)), by limiting the scope of relief in a manner that is contrary to the express terms andpurposes of that statute;

(b) failing to give effect to the Supremacy Clause and holdings of this Court that federal bankruptcy relief cannot be overridden by rights alleged to have beencreated under state law; and

(c) failing to respect important principles of finality and repose, and the express provisions of § 524(g), by failing to approve a federal court's enforcement of a confirmation order that was affirmed over two decades ago on direct appeal.

08-295 TRAVELERS INDEMNITY CO. V. BAILEY, DECISION BELOW:517 F.3d 52

Federal Appeals Court Upholds Constitutional Challenge Against CMS Memo

In a significant decision the 10th Circuit Federal Court of Appeals ruled that a constitutional challenge against the CMS 2005 CMS memo on future medical benefits in workers' compensation claims may proceed. The Court reversed the decision of the trial court and remanded the case for further proceedings.

"This suit arose after CMS clearly rejected such use of § 411.47, declaring that it applies only to medical expenses incurred before the workers' compensation settlement. In a memorandum issued on July 11, 2005 (the 2005 Memo), it said.

Q11. Compromising of Future Medical Expenses-Does CMS compromise or reduce future medical expenses related to a [workers' compensation] injury?

A11. No. Some submitters have argued that 42 C.F.R. § 411.47 justifies reduction to the amount [set aside for Medicare in a workers' compensation settlement]. The compromise language in this regulation only addresses conditional (past) Medicare payments. The CMS does not allow the compromise of future medical expenses related to a [workers' compensation] injury."

The Court ruled:

"In light of this precedent, we conclude that Protocols has suffered an actual injury. It admits that it has arranged settlements that are contrary to what CMS has declared to be required. As a result, CMS may sometime in the future demand that Protocols reimburse Medicare for Protocols' portion of settlement proceeds. And according to affidavits submitted by Protocols, this potential liability has a present impact on its business-that is, the contingent liability has created an actual and imminent injury."

07-1175 - Protocols, LLC v. Leavitt (12/11/2008)

Parent Corporation Has 3rd Party Lien Rights

A NJ Appellate Court ruled that a workers' compensation carrier is permitted to enforce its right reimbursement against the third party recovery from a parent company of the employer.  Liberty Mutual was permitted to "pierce the corporate veil." The Court declared, "...To do otherwise would be to condone a situation in which an injured employee collects workers' compensation benefits and thereafter receives monetary damages in a third-party liability action with no obligation to reimburse the workers' compensation insurer."

LIBERTY MUTUAL INSURANCE COMPANY v. CIPRIANO

Decided Dec. 10, 2008.

Washington Supreme Court Restricts Asbestos Claims

The Washington Supreme Court has taken a step back in time and rendered two significant decisions limiting he rights of asbestos victims to gain recovery. The Court ruled that if a company did not make asbestos products or manufacture them there was no duty to war. Speaking for the minority, Justice Debra Stephens wrote, "no duty to warn of a serious hazard it knew or should have known was involved in the use of its product ignores logic, common sense, and justice." 

Decisions

Dec. 11, 2008	80251-3	-	Braaten v. Saberhagen Holdings
Dec. 11, 2008	80251-3	-	Braaten v. Saberhagen Holdings (Dissent)

ec. 11, 2008	80076-6	-	Simonetta v. Viad Corp.
Dec. 11, 2008	80076-6	-	Simonetta v. Viad Corp. (Dissent)

Asbestos Continues to Reduce Potential Years of Life

Asbestos exposure continues to have high rates of death in the US. Potential years of lost life continue to be at epidemic proportions. The US CDC reports that premature mortality as a result of asbestos related disease continues to be at all time highs. Asbestos is still not banned in the US