NASHVILLE TENN. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
More than 560 restaurateurs across Tennessee were ordered by a judge in late January to pay money bolster the fund, which the state Department of Commerce and Insurance alleges was mismanaged by the TRA’s longtime president and chief executive, Ronnie Hart. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
The fund was formed by the TRA in 1993 as a trust for its members to pool their liabilities under Tennessee’s Workers’ Compensation Law. It has been under state control since December 2005 because of substantial deficits. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
The state also is suing Hart’s now-defunct company, Hospitality Management Plus, or HMP, claiming the for-profit entity Hart formed to run the trust received excessive fees for administrating the organization’s workers’ compensation fund and dipped into reserves without authorization. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Hart did not return calls seeking comment by press time. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Three other parties also are named in the civil suit, including the claims administrator, Franklin, Tenn.-based Claims Management Consultants, which was reportedly owned in part by Hart’s son, Clint Hart. The other two parties include Florida-based accountant William L. Shores, who provided accounting services to the trust, and, separately, Shores’ firm: Shores, Tagman, Butler and Co., P.A. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
The state’s lawsuit, filed Dec. 10, contends that during the 12 years Hart ran the fund HMP was often paid double the fees it was contracted to receive. The suit also contends that the trust’s claims reserves were understated and deficiencies were higher than reported. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
The suit states: “Hart knew, or should have known, that such activity was detrimental to the trust. Nevertheless, HMP traded on Mr. Hart’s stature as chief executive officer of TRA and Mr. Hart’s personal relationships with the members of the Board of Trustees to induce them to approve otherwise excessive fees.” —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
To complicate matters, Hart filed for Chapter 7 personal bankruptcy protection last spring. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Nathan Ridley, the attorney representing the trust, said the trust was created in 1993 because workers’ compensation insurance rates were oppressive. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
“So the restaurateurs said, ‘Let’s do this ourselves,’ and they formed the trust,” Ridley said. “The problem is that when they agreed to do this by state law they agreed to joint and several liability, which in legalese means they are all responsible for all liabilities of the trust.” —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Dan Haskell, general counsel for the TRA, said one of the issues is that the 564 trust members are being assessed liabilities for other members who might have gone out of business and disappeared. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
“But their injured workers are still in this pile, so the current members of the trust are charged with the costs,” he said. “For some members it is a significant amount of money. For some, that could, along with the current economy, put them out of business.” —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Jeff Messinger, who has owned the Mt. Vernon Restaurant in Chattanooga for 32 years and is chairman of the TRA’s board, said he has paid about $25,000. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
“This is not a light amount, especially right after the holidays, and with the economy being so bad,” he said, “and I have a 21-year-old daughter in college. All members have these kinds of issues facing them now, not just me.” —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
TRA members had asked for a cap on the amount they would be liable for, but Chancellor Claudia Bonnyman of the Davidson County Chancery Court in Nashville denied the request and another one to release members of liability once their current portion is paid, saying the trust must continue to serve their fiduciary duty to existing claims of injured workers. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Mark Jaquish, the receivership director for the state, said trust members’ liabilities are based on their payroll for the period of time they participated in the trust. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
“The longer they were in the trust, the larger the payroll insured by the trust, the greater their assessment,” he said. “There are some complicated, expensive outstanding claims for injured workers [for whom] they could be liable for a long time, unfortunately.” —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Joseph Keane, the state’s liquidator for the insurance trust, said there is a provision for payment plans for companies that would experience financial hardship. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
“A company might have to document it, but the details of that are yet to be determined,” he said. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Randy Rayburn, owner of three Nashville restaurants, the Sunset Grill, Midtown Café and Cabana, said that despite the allegations against Hart, the TRA’s board voted 7-4 to retain him as chief executive of the association. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Rayburn said the allegations have been sent to the Attorney General’s office to see whether there has been criminal conduct as well, which is yet to be determined. Officials at the state Attorney General’s office could not be reached for comment. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Jaquish said his office’s standard procedure includes sending all receiverships’ information to the state attorney’s office, but in this particular case the defendants have until Feb. 14 to respond. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
“Certainly, if we become aware of any possible criminal activity related to our work, it would be referred to the appropriate legal body,” he said. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
TRA chairman Messinger supports the TRA and is not yet passing judgment on Hart or others. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
“I don’t want to make a judgment until the court winds up its findings,” he said. “I have faith in the American court system to get it right. I am just happy to be moving forward and away from this whole workman’s comp issue.” —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
While the Tennessee restaurateurs may have had trouble with self-insured workers’ compensation programs, others continue to benefit from them. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Jim Funk, head of the Louisiana Restaurant Association, started LRA’s self-insurance program in 1982 and believes it is one of the most successful in the country, with approximately 1,900 participants representing 2,600 units. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Funk, who uses an outside auditor, said his group’s fund is otherwise handled entirely in-house and employs 41 people dedicated to the function. Its workers’ compensation fund has annual premiums of about $23 million, with $50 million in its investment portfolio. The LRA’s program has returned dividends totaling $81 million over the years, with a return of $12 to $14 for every dollar paid in dues, Funk said. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
“We haven’t had an increase in dues since 1989,” he said. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Funk hasn’t heard any members express concern about the situation in Tennessee. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
“I don’t know how Tennessee is regulated or governed, but in the insurance business you have to dot every I and cross every T,” he said. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Tom Sponseller, president and chief executive of the Hospitality Association of South Carolina, said that while things in Tennessee may have gone awry, Funk has set a great example of how successful a self-insurance fund can be if managed well. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
In fact, he said, the South Carolina group is considering going that route because it is a less expensive alternative. Sponseller has only seen one self-insured fund close in South Carolina in 18 years, and it wasn’t due to shortfalls. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
Self-insured funds usually save participants money because they have enough reinsurance to pay the biggest claims, he said, and after four or five years leftover profits are often returned in the form of dividends, as in Louisiana. —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.
“What happened in Tennessee is a rarity,” Sponseller said. “Self-insured funds can save 5 [percent] to 30 percent. The risk, of course, is like they are seeing in Tennessee, usually everyone in the fund is joint and severally liable for the liability.” —Even as members of the Tennessee Restaurant Association scramble to cover a $4.8 million shortfall in a workers’ compensation fund that the state alleges was mismanaged by the group’s leader, other state restaurant organizations maintain that self-insured programs remain a practical business option.