The California Department of Insurance administrative hearing bureau will take a second-day of testimony today in American Labor Alliance’s (ALA) appeal of a CDI Cease and Desist order. CDI ordered ALA to stop selling its unlicensed CompOneUSA workers' comp program to California employers. ALA is or was selling a replacement for workers’ comp under the guise of providing benefits under the Employee Retirement Income Security Act (ERISA) that are exempt from state oversight.
State regulators presented their case that American Labor Alliance or ALA is not licensed to provide insurance or to transact insurance business in California.
ALA maintains that it is exempt from state regulation under federal rules. It is defying CDI’s cease and desist by continuing to provide coverage to what it says is some 400 employers. Apparently, it continues to solicit new accounts.
No Exclusive Remedy
Additionally, CDI showed that ALA issued certificates of liability in the handful of cases it reviewed that listed the insurer as either Travelers or National Fire Insurance Company. When presented with the named insured and policy numbers both carriers responded that the policy numbers are not valid and that the listed insureds are not covered.
California law is explicit in stating clearly that workers’ comp coverage can only be provided a carrier admitted to write the line in California, or by an individual self-insured or self-insurance group permitted by the Office of Self Insurance Plans. There are no other options in California.
If CDI proves its case, employers in the program will have been illegally uninsured during their time in the program. They will not be protected under California’s workers' comp’s sole and exclusive remedy. Injured workers, therefore, can bring damages cases against employers. Such cases are excluded from all Commercial General Liability policies.
Neither CDI officials nor DIR officials have served any warrants on ALA, and neither has obtained any list of employers that have obtained or are obtaining “coverage” from ALA. CDI’s officials acknowledged on the witness stand that they did not contact ALA during the investigation. DIR officials have admitted the same to Workers’ Comp Executive.
Benefits Not Insurance
During testimony, ALA representatives maintained that the issue is with the standard Acord certificate of liability insurance form, not its coverage. ALA maintains that it is providing workers' comp benefits – not workers' comp insurance. It maintains that under federal rules for Multiple Employer Welfare Arrangements and the Employee Retirement Income Security Act (ERISA) it is an “entity claiming exception” (ECE) that is exempt from state oversight.
ALA argues that there is no place on the ACORD form to list the type of coverage that it is providing. In a brief filed just hours before the opening of the hearing, it argued that certain certs in question “may have incorrectly listed Travelers and National Union Fire in the form fields that are normally reserved for carriers of the workers' comp coverage offered to the client.” During testimony, it came out that the listed policy numbers associated with Travelers and National Union were for an ERISA bond policy issued to ALA and to the liability coverage that ALA purchased for itself.
Collects CIGA DIR Fees But Does Not Remit and Does Not Report Coverage to Bureau
ALA has no coverage under the California Insurance Guarantee Fund, although it has been collecting the fees, has not remitted the employer taxes for the uninsured employer's fund and other taxes and is not recognized to be able to report coverage to the Bureau.
An ALA representative also stated under oath on the stand that states are not obligated to accept the coverage it has sold to California employers. “That’s a paradox contained within ERISA that is unresolved to this day,” ALA’s chief architect of the program told the ALJ hearing its appeal. That executive will be back on the stand today to face what the judge said would be “a slew” of questions from the judge.
Look for exclusive, in-depth coverage of the case in the next premium edition as Workers’ Comp Executive is the only publication in attendance at this important hearing.