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IN RE:

GALLAGHER BASSETT SERVICES, INC.

 

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CONSENT AGREEMENT
Docket No. INS-12-238

This Consent Agreement is entered into by and among Gallagher Bassett Ser­vices, Inc. (the “Company”), the Maine Superintendent of Insurance (the “Superinten­dent”), and the Office of the Maine Attorney Gen­eral (the “Attorney General”).  Its purpose is to bring to a halt, without resort to an adjudicatory proceeding, violations of 39-A M.R.S. § 359(2) certified to the Superintendent by the Maine Workers’ Compensation Board (the “Board”) pursuant to that provision.

I
STIPULATIONS

  1. The Superintendent is the official charged with administering and enforcing Maine’s insurance laws and regulations.
  2. The Company is organized and domiciled under the laws of the State of Illinois and is licensed in Maine as a third-party administrator under License Number TAF32160 issued in July 2009.  The Company administers claims arising under the Maine Workers’ Com­pensation Act of 1992, M.R.S. Title 39-A, as amended, and regulations of the Board issued there­under (the “WCA”).
  3. In December 2006, the Board’s Monitoring Audit & Enforcement Division (the “MAE Divi­sion”) audited the records of the Company with respect to claims filed under the WCA with dates of injury between January 1, 2005 and June 30, 2006.  This audit focused on compli­ance with WCA requirements for form filing, timeli­ness of indemnity payments, and accuracy of indemnity bene­fits.
  4. On January 17, 2007, the Board issued a Compliance Audit Report detail­ing its findings (the “2007 Report”).  The 2007 Report’s findings relevant to questionable claims-handl­ing techniques that violated 39-A M.R.S. § 359(2) included unfiled, late and inaccurate forms; untimely and inaccurate indemnity payments; and improper recovery of overpaid benefits.  
  5. In January 2007, the Board and the Company entered into 23 consent decrees, in lieu of administrative hearings, addressing the findings in the 2007 Report.  In one such decree (the “Consent Decree”), the Company agreed that it had “engaged in patterns of ques­tion­able claims-han­dling tech­niques in violation of Section 359(2)” of the WCA by (i) failing to file or timely file forms with the Board, report accurate infor­ma­tion on WCB-3 forms, pay benefits timely, and pay claims properly, and (ii) improperly recovering benefits.
  6. On March 15, 2007, the Board certified these findings to the Superintendent as required by 39-A M.R.S. § 359(2).
  7. The Company attended Board training to address the claims-handling issues identified in the Report at various times.
  8. In August 2007, the Company adopted a Corrective Action Plan at the request of the MAE Division to address specific issues raised in the Report.  The Board lifted the Corrective Action Plan in mid-2011.
  9. Maine Bureau of Insurance (the “Bureau”) staff performed a targeted market conduct examination of all open indemnity claims with dates of injury on or after January 1, 1993 that were open during 2007 (the “Exam­ina­tion”).  The pur­pose of the Examination was to determine whether the viola­tions of 39-A M.R.S. § 359(2) found by the Board and agreed to by the Company still existed as of Examination period.  The Examination covered a sample of 50 indemnity and medical payment claims and focused on whether the Com­pany timely filed all required Board forms, accurately calcu­lated indemnity benefits and timely distributed benefit payments as required by the WCA.
  10. During the Examination, Bureau staff found that the Company’s compliance ratios had improved over those established by the 2007 Report.  Specifically, the Company sur­passed the Board’s benchmarks for timely initial indemnity payments and memoranda of payment.  The Company’s its overall compliance ratios for the timeliness of form filings and for timely medical payments were acceptable.  However, The Company did not meet acceptable compliance levels for either timeliness of wage statement filings and waiting period payments or accuracy of indemnity payments. 
  11. In October 2010, the Company acquired substantially all the third-party administrator assets of GAB Robins North America Inc. (“GAB Robins”).  This transaction included GAB Robins’ Maine workers’ compensation claims.  GAB Robins’ claims personnel who had worked on those claims became employees of the Company. 
  12. In March 2011, the MAE Divi­sion audited the records of the Company with respect to claims filed under the WCA with dates of injury during 2010.  This audit focused on compli­ance with WCA requirements for form filing, timeli­ness of indemnity payments, and accuracy of indemnity bene­fits.
  13. On August 11, 2011, the Board issued a Compliance Audit Report detail­ing its findings (the “2011 Report”).  The 2011 Report’s findings relevant to questionable claims-handl­ing techniques that violated 39-A M.R.S. § 359(2) included untimely benefit payments, inaccurate claims payments, late payment under approved agreements, orders or deci­sions, and late or unfiled WCB-1 and WCB-9 forms.  The 2011 Report did not measure timely payment of medical bills.  The Com­pany’s compliance rates were otherwise acceptable.
  14. The Company’s August 17, 2011 letter accepting the Examination results represented that Company staff had taken steps to verify average weekly wage and weekly benefit rate calculations, monitor partial indemnity payments, and monitor open indemnity claims for form filing errors.
  15. In August 2011, the Board and the Company entered into eight consent decrees, in lieu of administrative hearings, addressing the findings in the 2011 Report.
  16. The following table details the findings, expressed as percentage of compliance, of the 2007 Report, the Examination, and the 2011 Report:

 

2007 Report

MCE

2011 Report

WCB-1 (First Report)

49

80

82

WCB-2 (Wage Statement)

40

56

90

WCB-2A (Tax/Deps. Stmt)

28

88

94

WCB-3/4A (MOP)

47

80

89

WCB-3/4/4A (Disc/Mod)

71

78

WCB-8/4A (Disc/Reduction)

80

n/a

100

WCB-9 (NOC)

43

86

67

WCB-11 (Initial)

56 (comb.)

89

85 (comb.)

WCB-11 (Annual/Final)

75

Initial Payment of Indemnity

63

82

90

Waiting Period Payment

n/a

55

n/a

Subsq. Payment of Indemnity

81

95

94

Payment of Medical Bills

72

79

n/a

Payment of Orders

50

n/a

50

Average Weekly Wage

47

n/a

78

Weekly Compensation Rate

31

n/a

74

Partial Benefits

0

n/a

62

Indemnity Paid

16

50

36

  1. The Company has completed some formal reviews, under insurer audits, of claims.

II
MAINE LAW

  1. 39-A M.R.S. § 359(2) provides in part that:

[T]he [workers’ compensation] board … upon finding, after hearing, that an employer, insurer or 3rd-party administrator for an employer has engaged in a pattern of question­able claims-handling techniques or repeated unreasonably contested claims … shall cer­tify its findings to the Superintendent of Insurance, who shall take appropriate action so as to bring any such practices to a halt.

III
CONCLUSIONS OF LAW

  1. The Company violated 39-A M.R.S. § 359(2) by engaging in a pattern of ques­tion­able claims-handling techniques through December 31, 2010. 
  2. The Superintendent is required, pursuant to the Board’s March 15, 2007 certification of its findings that the Company engaged in a pattern of ques­tion­able claims-handling tech­niques, to take appropriate action to bring those practices to a halt. 

IV
COVENANTS

  1. The Company shall comply with each provision of this Agreement.
  2. The Company shall bring to a halt, as set forth in this Agreement, the pattern of ques­tionable claims-han­dl­ing tech­niques.
  3. Within thirty (30) days after the effective date of this Agreement, the Company shall adopt, and deliver to the Superintendent for approval, with a copy to the WCB Deputy Director, MAE Division, written procedures that ensure that all claims for indemnity benefits under the WCA are paid in compli­ance with Maine law. 

At a minimum, such procedures must include plans for:

  1. ensuring compliance with the benchmarks in Exhibit A;
  2. hiring and retaining supervisory and front-line staff experienced in handling workers’ compensation claims in Maine;
  3. training in-house claims personnel on the provisions of the WCA concerning derivation of benefit levels from average weekly wages and accuracy of indemnity payments;
  4. ensuring that employers cooperate in meeting the reporting requirements of the WCA;
  5. maintaining claims payment standards through education and super­vision of in-house claims personnel;
  6. implementing adequate claim review procedures, to include monitoring the accu­racy and timeliness of WCB form filings and indemnity payments; and
  7. auditing, on at least a quarterly basis, all indemnity claims to measure compliance with the bench­marks in Exhibit A.

The Company shall deliver to the Superintendent and the WCB Deputy Director, MAE Divi­sion, the results of the audits referred to in sub­paragraph (g) for four (4) suc­ces­sive calendar quarters starting with the beginning of the quarter in which the Company exe­cutes this Agree­ment.  The Company shall deliver each audit report within thirty (30) days after the end of the applicable calendar quarter.  Each report shall be an Excel spreadsheet and contain the following data, safeguarded in accordance with the WCA, for each claim:  the Board number, if known; the claimant’s Social Security number (general format, no dashes); the claimant’s last and first name (in that order); the date of injury; the Company claim number; and the third-party adminis­tra­tor, if any.  Within forty-five (45) days thereafter, the Superinten­dent may call a meeting with the Company to discuss any concerns he may have with the Company’s claims performance during the period covered by such audit report.  Fail­ure to call any such meeting shall not waive any of the Super­in­tendent’s or the Attorney General’s rights under this Agreement.  The Company shall deliver with the last audit report (the “Final Self-Audit Report”) a certification in the form attached as Exhibit B, attesting to the accuracy of all claims performance audit infor­mation required under this Agreement.  The Company shall also deliver, upon the Superintendent’s or the WCB Deputy Director’s request, any and all work papers and documents, in any format, in its possession, custody or control, related to any Self-Audit Report.  The Company shall compile such information in a manner acceptable to the Superintendent.

  1. The Company shall, for the period starting January 1, 2005 and ending as of the effective date of this Agreement:
      1. submit to the Bureau of Insurance within thirty (30) days of the effective date of this Agree­ment, an electronic spreadsheet listing all indemnity claims adjusted in the above period presented to the Company under the WCA, for the purpose of allow­ing the Bureau to designate a statistically valid random sample of claims, selected in accordance with National Association of Insurance Commissioners (“NAIC”) standards to produce a 95 % confidence level and a 5 % upper error limit, for each calendar year (the “Desig­nated Claims”) for further review by the Company as set forth in this paragraph;
      2. upon receiving the list of Designated Claims from the Superintendent, review the inca­pacity periods, and indem­nity benefits, penalties and interest originally paid thereon;
      3. recalculate the benefits, penal­ties and interest for the Designated Claims to ensure their compliance with the WCA;
      4. pay to the appropriate claimants for the Designated Claims any deficien­cies, with the penalties and interest provided for in the WCA, and file with the Board such related forms as the WCA requires; and
      5. deliver to the Superintendent and the WCB Deputy Director, MAE Division, by the date the Company must deliver the Final Self-Audit Report, an electronic spreadsheet report viewable in Microsoft Excel listing each claim so reviewed (the “Look-Back Report”).  The Look-Back Report shall contain the follow­ing data, safeguarded in accordance with the WCA, for each claim: 
        1. the Board number, if known;
        2. the claim­ant’s Social Security number (gen­eral for­mat/no dashes);
        3. the claimant’s last and first name (in that order);
        4. the date of injury;
        5. insurer name and claim file num­ber;
        6. the incapac­ity periods;
        7. the amount of indem­nity originally paid;
        8. whether or not the claim was settled under 39-A M.R.S. § 352 (Y or N) and the date of such settlement;
        9. the amount of indem­nity paid after review;
        10. the amount of penal­ties paid after review;
        11. the amount of inter­est paid after review;
        12. the amount of overpayment upon review; and
        13. the name of the person con­ducting the review.

      6. The Company shall deliver with the Look-Back Report a certification attesting to the accuracy of all information in the report, in the form attached as Exhibit B.  


    This paragraph shall not apply to any claims that (w) are subject to the audits described in paragraph 23, (x) have been discharged under 39-A M.R.S. § 352, (y)were previously audited by the Board and subse­quently corrected by the Company, or (z) the Company has reviewed and corrected under the look-back provision of an agreement between the Bureau and an insurer for which the Company adjusted claims during the above period.

     

    1. Should the Superintendent, in his sole and absolute discretion, determine, within twelve (12) months after receiving the (i) Final Self-Audit Report or (ii) Look-Back Report, that the Company:
      1. did not meet or exceed on average the benefit payment and form filing bench­marks in Exhibit A during the self-audit review period described in paragraph 23, then the Company shall deliver a civil penalty of up to Thirty-seven Thousand Five Hun­dred Dollars ($37,500) to the Superintendent, within thirty (30) days of receiv­ing the determination, or
      2. failed during the look-back review period described in paragraph 24 to correct deficiencies in indemnity benefits as required by subparagraph 24(d), including penalties and interest due thereon, pursuant to the WCA, resulting in compliance with the WCA in less than 93 percent of the claims required to be reviewed pur­suant to paragraph 24, then the Company shall deliver a civil penalty of up to Twelve Thousand Five Hundred Dollars ($12,500) to the Superinten­dent, within thirty (30) days of receiv­ing the determination.

      The Company agrees that (i) any civil penalties assessed under subsection (a) or (b) above will have resulted from its continued failure through the delivery date of either the Final Self-Adult Report or the Look-Back Report, to meet the benchmarks set forth in Exhibit A, (ii) in declaring any civil penalty due, the Super­in­tendent may rely on the Self-Audit Reports and the Look-Back Report as conclusive evidence of the fact and extent of such failure, and (iii) the amount of this penalty will not limit fur­ther measures, penalties or remedies that the Superinten­dent or the Attorney General may impose or seek under paragraph 34 below.

      In making the determination under subsection (a) above, the Superintendent will take into account the degree, expressed as a percentage, to which the Com­pany complied with the Exhibit A benchmarks.

    2. Should the Superintendent, in his sole and absolute discretion, determine, within twelve (12) months after receiving the Look-Back Report, that the Company, for any calendar year for which Designated Claims were reviewed, failed to achieve a 93% compliance rate in accurately calculating:
      1. average weekly wage,
      2. weekly compensation rate,
      3. partial benefits, or
      4. indemnity benefits,

    he may, in his sole and absolute discretion, order the Company to review up to all other claims paid during the period identified in paragraph 24 for the specific purpose of iden­tifying and correcting inaccurate payments to claimants.
    Should the Superintendent order such an expanded review, the Company shall (i) com­plete the review within the time specified by the Superintendent, which shall be no less than three (3) months but not more than twelve (12) months, (ii) upon completion of the review, submit a report to the Superin­tendent, in the format required for the Look-Back Report, listing each claim so reviewed, and (iii) provide, upon the Superintendent’s request, any additional documenta­tion, in a compiled in a format acceptable to the Superintendent, necessary for the Superintendent to verify that the review was properly completed.  Within thirty (30) days of receiving notice from the Superintendent of any improperly calculated element, specified in the subparagraphs above, in a reviewed claim, the Company shall correct such element and pay the related benefits, penal­ties and interest as required by the WCA.

    1. The Company shall pay, as provided by law, the Superintendent’s reason­able costs and expenses of monitoring its compliance with, and enforcing the Company’s obligations under, this Agreement.
    2. The Company shall not recoup any payments of refunds, interest, or civil penalties made under this Agreement or any costs associated with complying with this Agreement in any future rate adjustments.

    V
    MISCELLANEOUS

    1. The Company waives any:
      1. hearing rights arising from this Agreement,
      2. objection to any action that may be taken by the Superintendent pursuant to this Agreement, including but not limited to the imposition of the civil penalties speci­fied in paragraph 25 and agrees it will make no appeal from this Agreement; and
      3. objection to the Board’s release to the Superintendent and the Attorney General of  “audit working papers,” as defined in section 153 of the WCA, related to any audit of the Company and, in connection with this waiver, to the use of such papers by the Superintendent and Attorney General for purposes related to the implementation and enforcement of this Agreement.
    2. The Company acknowledges that this Agreement is a public record within the meaning of 1 M.R.S. § 402 and will be available for public inspection and copying as provided for by 1 M.R.S. § 408, and will be reported to the Regulatory Information Retrieval Sys­tem database at the National Association of Insurance Commissioners.
    3. The Company has been advised of its right to consult with counsel before executing this Agreement.
    4. This Agreement does not bind any person or entity not a party to this Agreement, or limit the Superintendent’s ability to seek any available legal remedy for alleged or actual viola­tions of the WCA or the Maine Insurance Code against any Company affiliate or subsidi­ary not a party to this Agreement.
    5. Nothing in this Agreement shall limit the ability of the Superintendent, in his sole and absolute discretion, in order to determine whether the Company has brought to a halt all violations of 39-A M.R.S. § 359(2) established by the Consent Decree, to investigate the:
      1. handling of the Company’s indemnity claims having dates of injury after Decem­ber 31, 2010; or
      2. accuracy of the self-audit quarterly review described in paragraph 23; or
      3. accuracy of the indemnity claim review described in paragraph 24.
    1. The purpose of the self-audit quarterly review described in paragraph 23 and the indem­nity claim review described in paragraph 24 is to bring to a halt the violations established by the Consent Decree.  Therefore, in consideration of the Company’s execution of this Agreement, the Superintendent and the Attorney General shall not pursue civil penalties, disciplinary measures or other civil or administrative sanctions, other than those agreed to herein, for violations established by the Consent Decree that continue through the period of the paragraph 23 and paragraph 24 reviews.  However, the Superintendent or the Attorney General may pursue any available legal remedy, including without limitation imposition of additional civil penalties and the limitation, suspension or revocation of workers’ compensation authorities issued to the Company by the Superintendent should the Company:
      1. engage in conduct that violates 39-A M.R.S. § 359(2) after the period of the paragraph 23 and paragraph 24 reviews; or
      2. violate any provision of this Agreement other than as described in subsections (a) and (b) of paragraph 25; or
      3. otherwise violate Maine law.
    1. The effective date of this Agreement is the date entered in the Superintendent’s signature line below.
    2. This Agreement may be modified only by the written consent of all parties.

    [The remainder of this page is left blank intentionally.]



    Dated:                        , 2012

    GALLAGHER BASSETT SERVICES, INC.

     

    By:______________________________________
    Its:______________________________________

     

     Printed Name and Title

    Subscribed and sworn to before me this _______ day of ________, 2012.

    ____________________________

    Notary Public
    ____________________________
    Printed name
    ____________________________
    Date commission expires

     

    Dated:                        , 2012

    OFFICE OF THE MAINE ATTORNEY GENERAL

     

    ________________________________________
    Jonathan R. Bolton
    Assistant Attorney General

     

    Effective
    Date:                        , 2012

    MAINE BUREAU OF INSURANCE

     

    ________________________________________
    Eric A. Cioppa
    Superintendent


    Exhibit A

    Form of Self-Audit Worksheet

     

    FROI Timely Filed

    NOC (WCB-9) Filed Timely

    Payment of Approved Agreements, Orders, Decisions

    TTD/TPD Accurate

    Average Weekly Wage

    Weekly Benefit Rate

    Partial Indemnity

    Bench­mark (%)

    85

    90

    90 

    75 

    80 

     75

    75 

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    Exhibit B

    Form of Certification

    IN RE:
    GALLAGHER BASSETT SERVICES, INC.

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    AFFIDAVIT OF CORPORATE OFFICER

    Docket No. INS-12-238

    The undersigned, being duly sworn, says:

    1. Terms used but not defined in this affidavit shall have the meanings given them in the Consent Agreement entered into between the above Company, the Superintendent and the Attorney General under Bureau docket number INS-12-238. 
    2. I have read and understand the Consent Agreement and exhibits attached thereto.
    3. I understand that the Board and Bureau may rely on the truthfulness of the information contained in and materials attached to this affidavit and that the truthfulness of this information is material to the ability of the Superintendent and the Board to evaluate the Company’s compliance with the Consent Agreement.
    4. I have read the materials attached to this affidavit.  They accurately and completely summarize the information contained therein, as required by [paragraph 23/paragraph 24] of the Consent Agreement. 
    5. I hold the position identified below and have obtained all necessary authority from the Company to give this affidavit on its behalf in connection with the proceedings undertaken as Bureau Docket No. INS-12-238

    ______________________________________
    (name typed or printed)
    ______________________________________
    (position typed or printed)
     ______________________________________
    (company name typed or printed)

    Acknowledgement

    State of _______________
    County of _____________

                Personally appeared before me on _____________, 2011, the above named ___________ __________________ and, being duly sworn, affirmed that this affidavit is based upon his or her personal knowledge and is true and correct.
     
                            Before me,
                                                                                                ________________________________
                                                                                                Notary Public/Attorney-at-Law
                           [seal]                                                             Printed Name:_____________________
                                                                                                My Commission Expires: ___________


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Last Updated: November 13, 2012