After a lengthy deliberation and bench trial that began on August 20, 2012, Judge Richard McMonagle finally issued his long awaited decision on the class action lawsuit challenging the BWC’s administration of Ohio’s workers’ compensation group rating programs between 2001 and 2009. San Allen v. Buehrer, Administrator, BWC (Cuyahoga County Court of Common Pleas 2012), No. CV-07-644950. The Court ruled in favor of the class action plaintiffs on all but two issues. Essentially, the Court found that the Bureau of Workers’ Compensation (BWC) implemented a group rating system that inappropriately over-charged non-group rating employers excessive premiums in violation of the statutory frame work for calculating employer premiums provided in Ohio Revised Code Sections 4123.29 and 4123.34. The Court then ordered restitution pursuant to a formula created by the Plaintiffs’ expert, Allen Schwartz. The Court also acknowledged that there could be thousands of potential members of the class that will not receive any restitution under the Schwartz formula (estimated at approximately 29,000 employers). However, even with a reduced number, the final amount of damages awarded could exceed $1 Billion.
While this figure is obviously very large, it is important to keep in mind that the BWC is currently sitting on a surplus in excess of $6 Billion. Some speculate that the BWC has maintained the surplus in order to make sure that any damages awarded in this suit are adequately covered without any significant harm to the its fund or future rates for employers. It is also important to note that this decision has no impact on the current group rating system operated by the BWC after 2009. Therefore, no further modifications are required to fix or remedy the inequities identified in this lawsuit.
What is surprising about this decision is that the Court found that the BWC admitted at trial that it had charged excessive and unreasonable premiums to non-group rated employers from 2001 to 2009. The Court specifically cited to prior legislative testimony from the former BWC Administrator, Marsha Ryan; testimony from former Chief Actuarial Officer, John Pedrick; testimony from the current Chief Actuarial Officer, Christopher Carlson; and testimony from the Director of the BWC’s Actuarial Department, Elizabeth Bravender. This testimony confirmed that non-group employers were charged extra premiums due to the faulty group rating plan.
Specific Issues Addressed
The Court addressed eight separate legal issues raised by the parties. Again, on all but two of those issues the Court ruled in favor of the Plaintiffs.
1. Jurisdiction: The Court ruled that it did have subject matter jurisdiction over this matter and that Plaintiffs were not required to pursue relief solely through the Court of Claims.
2. Exhaustion of Administrative Remedies: The Court ruled that it was not necessary for the class members to seek a remedy or restitution through the BWC’s administrative process and, in particular, the BWC’s Adjudicating Committee.
3. Class Certification was Appropriate: The Court refused to rehash the arguments regarding the class certification in light of the Appellate Court’s earlier decision upholding certification.
4. Equal Protection: The BWC’s group rating program did not violate the non-group member’s equal protection rights under either the federal or Ohio constitutions.
5. Admissions: The Defendant, BWC, admitted to the inappropriate overcharges of premiums for non-group members for the period of 2001 through 2009.
6. Violation of Law: The excessive and unreasonable premiums charged to non-group members violated Ohio Revised Code Sections 4123.29 and .34.
7. Pay Back Premiums: The Court ruled that the BWC must now “disgorge” the excessive premiums collected from the non-group rating members during the period at issue.
8. Formula for Restitution: The Court ruled that the method for calculating restitution would be based upon a formula created by the Plaintiffs’ expert, Allen Schwartz. The formula created by the BWC’s expert, Mr. Conger, was rejected by the Court.
9. Interest: No interest is to be awarded on the premiums allegedly overpaid to the BWC.
The Court refrained from issuing any final determination on the amount of the restitution pending a final report from the Plaintiffs’ expert. It was noted in the Court’s decision that on the eve of trial, the BWC provided new figures that were needed to calculate the appropriate or actual amount of restitution for the non-group member employers and for each year that they fell within the eligibility criteria. The Court gave the Plaintiffs until January 28, 2013 to submit a new report using the Schwartz formula for restitution. The BWC would then have up until February 28, 2013 to file any objections to that figure or method of calculation. A final hearing was scheduled for March 14, 2013 for the Court to discuss the issue of restitution.
It is expected that the BWC will file an appeal from this decision and challenge both the findings of a statutory violation of O.R.C. 4123.29 and 4123.34, as well as the formula for determining the amount of restitution. It is also expected that a number of different business groups will file amicus briefs challenging the findings. As a result, this case will continue to be litigated and will most certainly find its way to the Ohio Supreme Court for a final determination. As a result, there won’t likely be any significant payout to Ohio employers from this decision for several years.