MGM represented various businesses that participated in a workers’ compensation self insurance group called AIK. These groups are permitted by Kentucky statute for the purpose of diluting workers’ compensation liability by spreading out the risks to a large group of employers. Under the plan, all of the approximately 3,000 businesses are equally liable for any workers’ compensation claims brought against them. Unfortunately, due to alleged mismanagement by the group’s trustees their exposure to actual and future risks came into question, and the group was placed in rehabilitation by the circuit court. Shortly after the court’s action, the Governor entered an Executive Order for the purpose of transferring control of all self-insurance groups from the Department of Workers claims to the Kentucky Office of Insurance. The court-appointed rehabilitator began plans to force the group to cover their shortfalls of approximately $58.5 million, whereby all members would have to pay their proportionate share and the state’s authority to appoint a rehabilitator. The State Legislature passed emergency legislation ratifying the Executive Order. The new law applied retroactively to all self insurance groups and defined such groups as insurers. MGM challenged the new law, claiming that its retroactive application was unconstitutional and that it unlawfully targeted only the one group in question. In addition, they asserted that the members were not liable for the shortfalls, because the trustees had breached their contract by not obtaining adequate re-insurance. (Update: As recently as 2014-2105, the Receiver issued a new round of assessments to those former members to pay the continuing expenses and liability from the ‘run off’ of AIK. Those subject to the assessment are those businesses who remain in business and who didn’t negotiate full and final settlements during their litigation.)
