Thursday, May 26, 2016

An Interesting Letter from a Servicing Agent

In late April, an interesting letter crossed my desk, It is something that may be of broader interest, and so this post will perhaps inform. 

There was a bakery company most remember, called Hostess Brands. That company had apparently been owned by Interstate Brands Corporation, which had purchased workers' compensation insurance from Lumberman's Mutual Casualty Company. The letter said that through some contractual arrangement, Lumberman's was relieved of responsibility, and Interstate Brands became financially responsible for its own workers' compensation benefits. Interstate then became bankrupt and was dissolved in December 2015. 

The funds that came from Lumberman's to Interstate were said to be deposited with a bank. From those funds, payments to and for injured workers were apparently to be made. However, we are now told that the bank has ceased paying, and so it appears that injured workers employed by Interstate or Hostess Brands will begin receiving their benefits and care from either the Florida Self-Insured Guaranty Association (FSIGA) or the Florida Insurance Guaranty Association  (FIGA). 

This is intriguing in its own right. Was Interstate self-insured? That description has specific connotations. Employers, as defined by the law, are responsible for workers' compensation benefits for their employees. The payment of these benefits are to be "secured" according to Fla. Stat. 440.38. One method of securing benefits is purchasing an insurance policy. Though a great many people fail to understand that transaction, it is essentially a contractual transfer of risk in exchange for a fee (premium). 

Or, an employer may self-insure. FlaStat440.38 describes that this alternative is available if the employer can demonstrate to FSIGA "that it has the financial strength necessary to ensure timely payment of all current and future claims individually." In this Interstate case, the employer may have satisfied its statutory duty by obtaining an insurance policy. Thereafter, through a contract, it essentially became self-insured. Some may be curious whether that transition to self-insured status was subject to the requirements that FSIGA would have imposed if self-insurance was elected in the first instance?

And FSIGA, in taking over financial responsibility for these claims, may wonder whether any funds remain in the bank from that Lumbermans/Interstate transaction. And, if so, whether and how FSIGA may be able to access whatever funds remain, to the benefit of the injured workers to whom benefits are due. Access to such funds would also be to the benefit of the FSIGA and its overall financial strength. 

So, if you are involved in an workers' compensation claims involving Interstate Brands or Hostess Brands, you may wish to seek more information from representatives of these companies.  

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