BarTalk April 2001
Volume 13, Number 2

The WCB weighs in on the legal community

by Sid Fattedad

Recent reports have stated that WCB base rates are increasing in the legal community. Historically, rates in this industry have been fairly low; and, with the distribution of insurance rebates to employers over the next five years, law firms will be paying less than they ever have.

In reviewing the history of rates, law firms paid $.25 per $100 of assessable payroll from 1994 to 1996. This rate dropped to $.20 in 1997 – the maximum annual 20 percent decrease permitted under WCB policy – $.16 in 1998, and $.10 in 1999. Last year, the rate increased to $.15 because of the rise in claims’ costs, and we have maintained this rate for 2001.

The legal community is a fairly new entity in the workers’ compensation program. In 1994, 2,000 law firms along with 15,000 other white-collar businesses were brought into the scope of workers’ compensation coverage through Bill 63. Because these white-collar industries were generally safe and low risk, we set the 1994 premium rate at $.25 based on an actuarial best estimate, even though the average rate for all other industries in BC was $2.38. The WCB Board of Governors approved the $.25 rate on the basis that it would remain unchanged for three years so that we could accumulate injury and claims experience.

Although the addition of these white-collar industries meant there were 30 per cent more employers and 10 per cent more workers in our system, the additional $10 million in employer premiums translated into only a one per cent increase in gross premium revenue during 1994.

Law firms, jointly with accounting firms, paid approximately $5.5 million in premiums from 1994 to 1996 in subclass 3301. By the end of 1996, the subclass had accumulated a surplus of $2.1 million. While a rate reduction would have normally reduced the surplus balance to zero over 0five years, from 1997 to 1999 the WCB’s investment portfolio generated unexpectedly high returns that far outpaced the rate at which the surplus could be amortized. As a result, the surplus balance in subclass 3301 had grown to $4.7 million by 1999.

Today, the legal profession’s portion of the $4.7 million subclass surplus is estimated at $2.5 million, and this amount is being returned as a rebate to employers who were registered with the WCB on December 31, 1999. Based on a resolution from the WCB Panel of Administrators, employers who are eligible for less than $2,000 will receive their entire rebate in one lump sum. Those who are eligible for more than $2,000 will generally receive their rebate over five years. For 2000, the total rebate for employers in the legal profession is estimated at $1.3 million; for 2001, the rebate is projected at $326,000.

In summary, the facts show that a typical law firm with 20 staff members and a payroll of $1,400,000 paid a base premium of $1,400 in 1999. In the year 2000, the same firm paid a base premium of $2,100, but received a rebate of $1,000. The difference amounts to a net premium of $1,100 for this law firm in 2000.

When one considers the rebate, law firms are paying less in base premiums than they ever have.

Sid Fattedad is the Chief Financial Officer at the Workers’ Compensation Board of British Columbia.

This article was published in the April 2001 issue of BarTalk and is subject to the copyright by the British Columbia Branch of the Canadian Bar Association, 2005, all rights reserved.