Pennsylvania Compensation Rating Bureau (PCRB) Appeals of the Rating System: Or how to make a successful appeal regarding classification(s)

By

Henry F. Pastuck Senior Risk Advisor Consumers Insurance Agency, Inc.

As an agent/broker, workers compensation coverage can present a multitude of challenges. Presently, it is a buyers market and many carriers have offered wellabove what was once a 3-5% commission. One carrier was offering 17% commission for mono-line WC business. Days when carriers were only entertaining accounts with credit experience modification factors seem like a distant memory. Frequency or severity issues previously presented themselves as major cost issues and attracted the attention and time of the top people in your clients company or firm. What was one moment an administrative matter, a matter of meeting legal requirements for coverage, became a corporate priority as it was realized that their WC costs were indeed in their control. Industrial hygiene efforts, CTDs(cumulative trauma disorders, RMDs ( repetitive motion disorders), PELs (Permissible Exposure Levels), workplace design, ergonomics, all were part of managing costs associated with WC coverage. Accident prevention and return to work programs became the buzz words surrounding the attempt to mitigate costs of compensation insurance and thus preserve competiveness and profitability. Perhaps a new broker/carrier relationship was even being considered for their substantial resources and expertise. Given the corporate initiative and priority, results were achieved and the upward trend to costs and premiums slowed, halted and may even started to decline. Congratulations to everyone involved. Next crisis please. One day, however, a letter is received and it is from the Pennsylvania Compensation Rating Bureau (PCRB) and it carries a message that sends a collective shudder through your clients organization. Due to a WC audit or a recent Bureau field survey report, the formerly authorized class or classes are now being changed to a different class code - at substantially higher rate(s). In some cases, the resulting premium differential doubles or triples the premium and the dilemma now becomes how the insured client affords this new unexpected, unanticipated increase in insurance expense. Along with the letter informing your client and you of this change are (2) pages from the PCRB manual- PCRB rules of procedure for appeals of the rating system. In short order, you feel a certain connection to the term aggrieved party (AP). In rather complex and difficult language, the aggrieved party is informed of certain time limits and dates by which to make their case. Of course, in some circumstances, the change in classification might be totally appropriate. In other cases, the aggrieved party might see the new classification as completely arbitrary and capricious-defying belief and sensibility. If that is the case, there is much work to be done. Paragraph F. Review First, the aggrieved party (AP), must notify the PCRB, in writing, as to the desire to be granted a Paragraph F. review. A Paragraph F. review is the name the Bureau has assigned to the preliminary process of reviewing an insureds grievance. It is

required that the (AP) will also submit all information in support of said appeal. At this time, both the (AP) and the PCRB will attempt to make certain that the facts of the appeal are fully agreed upon and the Bureau may also make written inquiries to the appellant and as well as make a physical visit in order to make a determination of fact or condition as may exist. If sufficient information has been provided and if the Bureau is so inclined, the PCRB will notify the appellant, in writing, that the staff Paragraph F. review has been completed and that the decision is final. The appellant may remain at odds with the final decision and it is then incumbent upon the (AP) to present its appeal to the Appeals Subcommittee of the Bureaus Classification and Rating committee. The only remaining relief is to prevail upon the Insurance Commissioner pursuant to Section 654 of the Law and Section 717 of the Act. Appeals Subcommittee Any party in dispute with the final decision pursuant to Paragraph f. will then have the opportunity to bring the issue to the Appeals Subcommittee. The Appeals Subcommittee will be comprised of an equal number of public and insurer members-although no number is specified. Whether it is the Paragraph F. review or the appeal of a final decision, the opportunity for success rests largely on the quality of your documentation. Some firms were able to provide me with copies of the following in making their appeal a success: 1. Policy copies for years in question or dispute. 2. PCRB field survey reports 3. WC audit summaries 4. Correspondence/emails to/from PCRB 5. Correspondence/emails to/from carrier(s) 6. Correspondence/emails between PCRB and carrier(s) 7. Correspondence/emails between you and the insured 8. Application(s) for coverage-new and renewal Undertaking such a challenge is no insignificant matter as the outcome can have a severe impact to the insureds bottom line. Many agents understand the position of being the advocate for a client. However, many agents may not be prepared to tackle what can be a very daunting task. Hours are required to catalogue, read and review the documents listed above with the goal of determining consistency in policy underwriting and issuance, in the field survey reports and all other related documents and policy information. In one particular case, (4) PCRB field survey reports were obtained. Three of the reports documented identical findings and confirmed the classifications. The 4th, and latest report, contained nearly identical language, described identical conditions and operations-but produced a new and different interpretation - and much higher rate for the newly determined classification.

Ultimately, the potential for success will be determined by how closely the (AP) can rely upon the PCRB manual and definitions to argue the case. It should also be understood that while you are constructing, in essence, a legal argument, it has to recognize the nature and the function of the PCRB-which is a nongovernmental organization of private insurers. Therefore, the closer the appeal follows the language, the rules and regulations of the Manual, the better your chances of having the appeal go in your favor. Making an appeal for a client presents a few problems. First, it might be the case that you or your firm has never made a successful to the PCRB - or any appeal, for that matter. Second, as the agent/broker, you may find yourself at odds with your client as a result of some fault found in your performance-either real or imagined. Third, the need to rectify this matter may take on added significance in relation to the premium/dollar amount involved. Any time you look at doubling or tripling the current premium, or the amount(s) approach $100,000.00, you may find yourself under intense scrutiny. In any case, the part you play in resolving this matter will be a significant factor in your ongoing relationship. Summary 1. The Manual must now become your friend and companion you must be willing and able to spend the time necessary to understand and apply the rules, regulations and definitions, as stated(or) 2. Find an expert with experience in making appeals to the PCRB-this might be particularly advantageous as if the appeal is successful, take credit where credit is due. If the appeal fails, you can lay it at the feet of the expert 3. Thoroughly review your WC application(s) for new and/or renewal coverage 4. Never allow your application for WC coverage to contain classifications which are not currently approved or authorized 5. Be meticulous in your record keeping (e.g., items 1-7 above)
The PCRB is a non-profit corporation formed in 1915 in accordance with the insurance laws of Pennsylvania and is not affiliated with state government. The PCRB's enabling statute specified that classification of employers, underwriting rules, policy forms, loss cost values and rating plans for workers compensation shall be proposed by a rating bureau situated within the state. The PCRB is subject to supervision and examination by the Pennsylvania Insurance Commissioner, who must approve its ability to compile loss costs on an equitable and impartial basis. The PCRB membership is comprised of all insurance carriers, including the State Workers' Insurance Fund ("SWIF"), authorized to sell workers compensation insurance in Pennsylvania. The PCRB is not to be confused with the Bureau of Workers' Compensation, a division within the Commonwealth of Pennsylvania's Department of Labor and Industry. That agency is responsible for a number of statutorily designated activities, including the conduct of hearings in contested cases involving workers compensation claims and the enforcement of requirements for employers to secure payment of workers compensation benefits for their employees. - Copyright 1997 Pennsylvania Compensation Rating Bureau