THE INSURERS CANNOT GET THEIR ACT TOGETHER: Asbestos and environmental exposures have generated adverse loss reserve development over time

The Hartford Signs $1.5 Billion Reinsurance Deal Covering Asbestos Liability
January 3, 2017


The Hartford has signed a reinsurance agreement effective Dec. 31, 2016 with National Indemnity Co. (NICO), a subsidiary of Berkshire Hathaway Inc., for a $1.5 billion aggregate excess of loss reinsurance agreement covering certain of The Hartford’s asbestos and environmental liability exposures. The company said the reinsurance premium for this agreement is $650 million.

The agreement covers potential adverse development on The Hartford’s existing asbestos and environmental reserves as of Dec. 31, 2016, excluding those held by the company’s U.K. property/casualty run-off subsidiaries, which the company is under contract to sell to Catalina Holdings Ltd. and currently expects to close in first quarter 2017.

The agreement provides up to $1.5 billion of reinsurance for adverse net loss reserve development above estimated net loss reserves of $1.7 billion as of Dec. 31, 2016.

The Hartford said it will continue to handle claims, subject to certain conditions, and will retain the risk of recoveries under third-party reinsurance contracts for these exposures.

“Our asbestos and environmental exposures have generated adverse loss reserve development over time, creating uncertainty for investors and others about the ultimate cost of these policy liabilities, most of which were underwritten prior to 1985,” said Chief Financial Officer Beth Bombara.

He said the agreement “reduces uncertainty about potential adverse development” while allowing The Hartford to continue to handle both claims and reinsurance recoveries, which it believes will enable it to “achieve the best possible resolution for these long-tail exposures.”

The agreement will be accounted for as a retroactive reinsurance agreement, resulting in a charge of approximately $423 million, after-tax, against fourth quarter 2016 net income. The reinsurance premium is expected to have a slightly negative impact on 2017 P/C net investment income.

Mayer Brown represented The Hartford in the agreement.

Last year the insurer said a review of asbestos and environmental policies showed that the company needed to add to reserves because of higher-than-expected legal costs. In July the insurer announced a deal in which Catalina Holdings Ltd. agreed to take on its book of asbestos-related liabilities in the U.K.

Catalina Holdings UK Ltd. agreed to buy the insurer’s Downlands Liability Management Ltd. (DLM) and Hartford Financial Products International Ltd. (HFPI), which is U.K. business that has been largely in runoff since 1993. As of March 31, DLM and HFPI had total assets of about $1 billion, undiscounted gross reserves of $686 million, undiscounted reserves net of reinsurance of $516 milion, and shareholders’ equity of $321 million, all on a U.S. GAAP basis.

Mark A. Cox, a Texas Clinic Owner, Pleads Guilty to $1M Insurance Fraud and was sentenced to 10 years deferred probation and ordered to pay $1 million in restitution.

Mark A. Cox, a Texas Clinic Owner, Pleads Guilty to $1M Insurance Fraud
and was sentenced to 10 years deferred probation and ordered to pay $1 million in restitution.

January 3, 2017


A Gainesville, Texas, clinic owner has pleaded guilty to insurance fraud and was ordered to repay $1 million after an investigation by the Texas Department of Insurance found that he billed for chiropractic services without having a licensed chiropractor on staff.

“In a case like this, we’re able to reduce fraudulent claims and improve the quality of care people get,” TDI Fraud Director Chris Davis said in the department’s announcement. “Insurance fraud is never a victimless crime, but the problem is magnified when someone puts patients at risk.”

Mark A. Cox entered a guilty plea to first degree felony insurance fraud in December and was sentenced to 10 years deferred probation and ordered to pay $1 million in restitution.

The TDI investigation found that Cox had submitted billings for chiropractic services from 2010 through 2015 but wasn’t a licensed chiropractor. The restitution is equal to the amount he received in insurance payments for the services.

“The Cooke County District Attorney’s Office was a great partner in this case,” said TDI investigator Donald McWhorter. “John Warren helped us get a search warrant and a resolution that’s good for insurance consumers across the state.”

TDI investigators are certified peace officers and work closely with law enforcement authorities around the state when investigating fraud cases.

OSHA investigation of Jersey City Medical Center worker's fatal fall finds facility exposed employees to dangerous electrical hazards

January 3, 2016

OSHA investigation of Jersey City Medical Center worker's fatal fall
finds facility exposed employees to dangerous electrical hazards 

Employer name:

Jersey City Medical Center 
RWJ Barnabas Health 


Inspection site:
355 Grand St.
Jersey City, New Jersey

Citations issued: On Dec. 21, 2016, the U.S. Department of Labor's Occupational Safety and Health Administration issued citations to the medical center for one willful and four serious safety violations.

Investigation findings: OSHA began its inspection on June 28, 2016, after the employer notified the Agency that a worker needed to be hospitalized after falling from a ladder as he changed an overhead ballast in a light fixture. The worker later died from his injuries on July 17, 2016.

The agency cited the willful violation because the facility required employees to change ballasts without the proper lockout/tagout training on practices and procedures necessary to disable machinery or equipment to prevent hazardous energy release, as well as other safety hazards and related unsafe practices.

The serious violations involved the medical center's failure to ensure de-energized circuits were locked out, maintain an electrical lockout/tagout program, ensure that only qualified persons worked on live circuits, provide personal protective equipment, and ensure workers did not work on live parts.

Quote: "This worker's tragic death was preventable. Jersey City Medical Center did not have basic lockout/tagout safeguards in place to prevent exposure to electrical hazards, and failed to train its maintenance workers on these safeguards. As a result, the worker sustained an electrical shock while changing the ballast, fell approximately 6 feet off a ladder and died from his injuries," said Kris Hoffman, director of OSHA's Parsippany Area Office.

Proposed penalties: $174,593

The citation can be viewed at: https://www.osha.gov/ooc/citations/JerseyCityMedicalCenter_1158589.pdf

The employer has 15 business days from receipt of its citations and proposed penalties to comply, request a conference with OSHA's area director or contest the findings before the independent Occupational Safety and Health Review Commission.

To ask questions; obtain compliance assistance; file a complaint; or report amputations, eye loss, workplace hospitalizations, fatalities or situations posing imminent danger to workers, the public should call OSHA's toll-free hotline at 800-321-OSHA (6742) or the agency's Parsippany Area Office at 973-263-1003.

Under the Occupational Safety and Health Act of 1970, employers are responsible for providing safe and healthful workplaces for their employees. OSHA's role is to ensure these conditions for America's working men and women by setting and enforcing standards, and providing training, education and assistance. For more information, visit http://www.osha.gov.

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B-Way Corp. faces more than $81K in OSHA penalties after 3rd worker suffers amputation injury

January 3, 2017

Chicago metal container manufacturer faces more than $81K
in OSHA penalties after 3rd worker suffers amputation injury
Investigators find improperly installed safety guards after third serious injury in 17 months

CHICAGO - For the third time since the summer of 2015, a worker with a metal container manufacturer has suffered an amputation injury. In each incident, federal safety investigators found that, if the employer had complied with workplace safety standards, the injuries were preventable.

On Dec. 27, 2016, the U.S. Department of Labor's Occupational Safety and Health Administration issued B-Way Corp. one repeated and one serious safety violation, carrying proposed penalties of $81,062, following its investigation of the most recent injury. On Sept. 10, 2016, a machine amputated a 52-year-old temporary worker's right middle finger tip when it came in contact with the machine's operating parts - as he cleared a jam.

Agency investigators determined the employer installed the machine's safety guards improperly. They also found the company did not instruct workers properly in procedures to prevent machine movement during service and maintenance, a process known as lockout/tag out.

"Each year, manufacturing workers suffer hundreds of preventable injuries because employers fail to install safety guards properly and train workers in machine safety procedures," said Kathy Webb, OSHA's area director in Calumet City. "BWay Corp. needs to review its machines' operations corporate-wide immediately to ensure they have adequate and properly installed safety guards. They must also be sure that workers are using lockout/tag out procedures to prevent them from coming in contact with operating parts."

Federal investigators determined the most recent injury occurred on the same type of machine on which a 65-year-old employee suffered an amputation injury August 2015. In that case, the worker lost the tip of her right middle finger when it was caught in a stacker plate on machine. In October 2015, a 56-year old-employee suffered the loss of the tip of his right index finger when cleaning a chuck on a machine at the facility.

View current citations here.

Based in Atlanta, B-Way Corp. specializes in the production of metal and plastic containers for product packaging has 28 facilities in the U.S., Canada and Puerto Rico. The company has 15 business days from receipt of its citations and penalties to comply, request an informal conference with OSHA's area director, or contest the findings before the independent Occupational Safety and Health Review Commission.

To ask questions, obtain compliance assistance, file a complaint, or report amputations, eye loss, workplace hospitalizations, fatalities or situations posing imminent danger to workers, the public should call OSHA's toll-free hotline at 800-321-OSHA (6742) or the agency's Calumet City Area Office at 708-891-3800.

Under the Occupational Safety and Health Act of 1970, employers are responsible for providing safe and healthful workplaces for their employees. OSHA's role is to ensure these conditions for America's working men and women by setting and enforcing standards, and providing training, education and assistance. For more information, visit http://www.osha.gov.

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The Monroe Clinic Inc. violated federal workplace health standards related to dangerous asbestos; it faces $261,890 in penalties

January 3, 2017

OSHA finds Wisconsin medical clinic exposed workers to asbestos hazards
Company knew of asbestos-containing material since 2008

MONROE, Wis. - Federal investigators found a local medical clinic failed to tell maintenance workers they were being exposed to hazardous asbestos material - which the company identified in 2008 - and did not provide workers with protective equipment.

An investigation by the U.S. Department of Labor's Occupational Safety and Health Administration found The Monroe Clinic Inc. violated federal workplace health standards related to dangerous asbestos. On Dec. 21, 2016, the agency cited the clinic with one willful and 11 serious safety and health violations after its June inspection of the facility. The employer faces $261,890 in proposed penalties.

"Monroe Clinic knew its employees were working amid materials known to contain asbestos, and failed to inform them of the location of hazards and to protect them from exposure to a known carcinogen that can cause life-long health issues and possibly death," said Ann Grevenkamp, OSHA's area director in Madison. "It is imperative that employers take all known precautions to protect workers from potential exposure to any material that may contain asbestos."

Investigators found maintenance employees had disturbed asbestos while conducting maintenance tasks, repairs and installation and removal of materials as they worked on the boiler and in crawl spaces, near ceiling tiles and in other areas where asbestos containing materials had been identified.

Asbestos exposure occurs when workers cut, damage or otherwise disturb asbestos-containing building materials including contact with materials that are deteriorating, releasing asbestos fibers that can be inhaled without proper protection. Asbestos can cause lung disease and mesothelioma, a cancer of the lining of the lung or stomach that is nearly always fatal. Asbestos fibers also remain on clothing and transfer to other surfaces such as upholstery and carpets, creating a danger of secondary exposure for others.

In its citations, OSHA alleges that Monroe Clinic failed to:

• Provide basic personal protective equipment such as protective clothing.
• Create a decontamination area for employees to remove protective clothing before leaving the worksite.
• Use appropriate work methods to minimize asbestos exposure, such as using wet methods to keep asbestos fibers from becoming airborne and using local exhaust ventilation.
• Provide respiratory protection.
• Conduct exposure assessments.
• Provide medical surveillance to monitor potential exposure.
• Post signage on the boiler room and in other locations warning of known asbestos containing material.
• Inform workers on the location and use of hazardous chemicals in the facility.

View current citations here.

The company has 15 business days from receipt of its citations and penalties to contest the findings before the independent Occupational Safety and Health Review Commission.

To ask questions, obtain compliance assistance, file a complaint, or report amputations, eye loss, workplace hospitalizations, fatalities or situations posing imminent danger to workers, the public should call OSHA's toll-free hotline at 800-321-OSHA (6742) or the agency's Madison office at 608-441-5388.

Under the Occupational Safety and Health Act of 1970, employers are responsible for providing safe and healthful workplaces for their employees. OSHA's role is to ensure these conditions for America's working men and women by setting and enforcing standards, and providing training, education and assistance. For more information, visit http://www.osha.gov.

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