Take Advantage of Our Extensive

Real-World Experience & Legal Knowledge

St. Louis Work Comp Attorney Carefully Watching Chrysler’s Bankruptcy

We are all concerned about Chrysler’s injured workers. Here is a recent article I found. Jeff Swaney FREE CONSULTATION (314) 310-8373

States watch Chrysler’s possible impact on workers’ comp

Roberto CenicerosBusiness InsuranceMay 11, 2009 – 1:31 pm ET

NEW YORK — States are carefully monitoring Chrysler LLC’s bankruptcy case for its possible impact on workers’ compensation funds.

Indeed, Michigan’s workers’ compensation guaranty fund for self-insured employers would be exhausted if Chrysler reneges on its pledge to keep paying workers’ comp claims despite its Chapter 11 bankruptcy filing, according to the state’s attorney general.

In a court filing last week, Michigan Attorney General Mike Cox stated that Michigan’s Self-Insurers’ Security Fund could face insolvency as a result of Chrysler’s April 30 Chapter 11 filing and attempt to sell its assets to Italian automaker Fiat S.p.A.

Other states where Chrysler self-insures its comp liabilities say they also are monitoring the action, despite assurances from Chrysler that it will continue to pay its workers’ comp claims.

A Chrysler spokesman said the troubled automaker has court authority to keep paying workers’ comp liabilities owed to injured employees across the country.

As of Dec. 31, Chrysler had 38,257 U.S. employees. It purchases workers’ comp insurance in some states while self-insuring in others, according to various state regulator databases.

Objecting to language

Cox filed a motion in the U.S. Bankruptcy Court for the Southern District of New York, which is handling the Chrysler bankruptcy, last week objecting to some of the language in Chrysler’s bankruptcy filings. He said filings show there is potential for Chrysler and a buyer of its assets to disregard the auto manufacturer’s existing workers’ comp obligations.

The company’s recent court pleadings “may be interpreted as an intention to no longer meet such statutory obligations,” the attorney general’s motion states.

Proposed sale documents specifically reject a successful bidder’s assumption of Chrysler workers’ comp liabilities, so it appears an entity would not be left to make payments to injured Chrysler workers, the attorney general said.

The attorney general filed the motion on behalf of the Michigan Workers’ Compensation Agency and Funds Administration, which regulates self-insureds and oversees the security fund.

“If [Michigan’s] Self-Insurers Security Fund was forced to assume [Chrysler’s] workers’ compensation obligations, enough funds exist only to make benefit payments for a matter of weeks before this fund becomes insolvent itself,” the motion said.

“The concern…applies not only to [Chrysler’s] injured employees, but to all injured employees in Michigan entitled to benefits from an insolvent self-insured employer,” the motion states. “If the proposed sale order is approved and the debtors are unable or unwilling to continue paying their workers’ compensation obligations, the Self-Insurers’ Security Fund would eventually become insolvent.”

The attorney general’s motion also said other self-insured employers in Michigan could face additional assessments to help shore up the security fund in their state, but that would fall short.

Emergency assessments?

Michigan risk managers are concerned their self-insured programs would face an emergency assessment to make up for a security fund shortfall should Chrysler fail to meet its obligations, said Leigh Stepaniak, director of risk management for the Wayne County Airport Authority, Detroit Metropolitan Airport.

Such an assessment would be difficult given economic conditions, said Stepaniak, who also is a member of the board of managers for the Michigan Self-Insurers’ Association.

“We are all looking at our budgets, which are extremely tight, and we are looking at our own losses, and if they do any emergency assessment it is going to impact us,” Stepaniak said

Even if emergency assessments were levied, the fund’s “maximum possible balance would be approximately $9 million — substantially less than needed to cover the debtors’ statutory obligations,” according to the attorney general’s motion.

Chrysler’s workers’ comp liability potentially exceeds $150 million and requires the company to expend more than $25 million annually, according to the attorney general.

The Michigan Self Insurer’s Security Fund paid out nearly $5 million in benefits in 2008. There were 470 individually self-insured employers in the state, according to the Workers’ Compensation Agency’s 2008 annual report.

Officials in other states where Chrysler self-insures workers’ comp liabilities said they were reviewing the Michigan Attorney General’s filing to see if any action might be appropriate.

Illinois, too

“We have been talking to our attorney [general’s office] about our options and we are monitoring the Michigan situation,” said a spokeswoman for Illinois Workers’ Compensation Commission, which supervises self-insureds and operates a security fund. “We are talking with workers’ comp agencies [in Indiana, Missouri and Ohio] to see what they are doing,” the Illinois spokeswoman said. “But we don’t have any conclusions as of now.”

A spokeswoman for Missouri’s Department of Labor said they too are monitoring the situation and “will respond as more information becomes available regarding the bankruptcy filing.”

The Ohio Bureau of Workers’ Compensation expects that Chrysler will continue meeting its workers’ comp obligations because of the bankruptcy court judge’s approval to allow Chrysler to do so, a spokeswoman said.

Chrysler assured her several weeks ago that it would pay its workers’ comp claims, said Linda Hamilton, chairman of the Workers’ Compensation Board of Indiana in Indianapolis.

“There is concern, but Chrysler contacted us a number of weeks ago about what possibly may happen,” Hamilton said. “They made sure that they [addressed] all of their outstanding obligations for injured workers.”

Chrysler asked for the bankruptcy judge’s permission to continue paying its workers’ comp claims even before Michigan filed its motion.

While the judge has approved Chrysler’s request to continue paying its workers’ comp claims during bankruptcy, he did not rule on the Michigan Attorney General’s objection, a spokesman for Mr. Cox said.

“I’m not going to criticize the Michigan Attorney General, nor am I going to point out whether the Michigan Attorney General’s motion had any veracity at all,” a Chrysler spokesman said. “But we went to the court and the court has given us the authority to pay and we will pay our workers’ comp obligations to employees around the country.”