State insurance insolvency pool challenges new workers' compensation law

By Péralte C. Paul

The Atlanta Journal-Constitution

The state's insurance insolvency pool is asking a judge to declare unconstitutional a new law aimed at retroactively covering companies whose workers' compensation firms are declared insolvent.

The challenge in DeKalb County Superior Court by the Georgia Insurers Insolvency Pool comes nearly three weeks after Gov. Sonny Perdue signed the measure into law.

Allowing employers to buy into the pool now is unfair and places a burden on those pool members who paid into the fund all along, according to the filing.

The new law allows those employers to buy into insolvency pool coverage by paying $10,000 or $50,000, depending on whether their total net worth is below or above $25 million. Paying into it allows injured workers to be covered by the pool, which had $136.9 million in 2008, when the most recent audit was completed.

"The pool is placed in a position of uncertainty as to whether the legislation imposes duties and obligations on the pool retroactively in violation of the Georgia state constitution," the filing says.

At least two Georgia firms that were covered by Southeastern U.S. Insurance Inc. already have paid the $10,000, with another 60 employers planning on sending in their payments, which the pool's attorney argues subjects it and its member insurance companies to "immediate monetary harm by administering and paying these claims."

Those two companies, Hulsey Environmental Services Inc. and Leon Jones Feed and Grain Inc., are named as defendants in the challenge.

The law was drafted after last year's demise of SEUS. The Atlanta firm was declared insolvent and taken over by state insurance regulators.

When SEUS failed, some employers whose injured employees had active workers' comp claims became responsible for their medical bills because the insurance company wasn't required to pay into the insolvency pool at first.

John Hulsey, the owner of Hulsey Environmental Services, a Gainesville-based company his family founded in 1918, said the law was reviewed by at least five constitutional attorneys when first proposed because he expected it to be challenged.

When first drafted, the insurance industry lobbied heavily against its passage.

"All I did was do what the law required," Hulsey told The Atlanta Journal-Constitution. "I don't know why they're suing me, trying to punish me or these poor people that have legitimate issues and need help. It's strange to me."