February 9, 2016

Preliminary Ruling Could Affect Workers’ Compensation Program for WG Members

A preliminary release of a recent ruling by the California Department of Insurance could affect some of Western Growers’ membership. More than a handful of WG members are insured through a Berkshire Hathaway subsidiary company with a program known as the Applied Underwriters EquityComp Program.

EquityComp, unlike a “Guaranteed Cost” program, is designed to allow an insured to participate in the overall results of their Workers’ Compensation program. Under EquityComp, if the client’s results are positive, the overall program costs are lower than what they would have paid in a standard market. If the client’s results are adverse, the client would pay more. The concept is that the insurance company and policyholder are partners and both share in the fortunes of the individual program’s results.

The mechanics of EquityComp is that once a client leaves, Applied Underwriters requires the policyholder to pay the total estimated future liabilities of the program, plus a “Loss Development Factor” (LDF).  An LDF is the insurance industry’s best guess of how much medical and indemnity costs will inflate before the claim is settled. 

In a recent administrative ruling between Applied Underwriters and a policyholder, the administrative law judge decided that because of the way a document that contained the LDF’s was developed, the entire agreement was invalid and unenforceable.

While there are some WG members who like and enjoy benefits from the program, we do have membership that may want to exit EquityComp. Western Growers Insurance Services feels the ruling may benefit those wishing to leave the program. Any member who wishes to discuss their situation may contact David Duvall at (949) 379-3853.