Business

Idaho public entities surprised by thousands from class-action lawsuit settlement

Cindy Hunter, business manager for the Basin School District in Boise County, didn’t trust the $1,023.61 check when it arrived at Idaho City High School. “Is it safe to deposit in the general fund?” she asked the district auditor. “Will we be taxed on this?”

The money was fine, the auditor assured her. It was good, even if it seemed to come out of the blue.

“I thought, ‘Where did this come from?’ ” Hunter said. “We’re not used to getting money like that.”

The district is one of 13,400 businesses and state and local government entities that recently received checks after the Idaho Insurance Fund settled a class-action lawsuit for $35 million. The lawsuit said the fund owed the plaintiffs money for past years, when it distributed dividends to policyholders using a formula that prorated dividends in violation of state law. The Legislature has since changed the law to permit prorated dividends.

Some public entities, such as the city of Boise, administer their own workers’ compensation insurance programs. But most public entities in the state, including school districts, government agencies, cities and universities, pay premiums to the state-run Idaho Insurance Fund. Many private businesses use it, too.

The West Ada School District received more than $600,000 from the settlement. West Ada spokesman Eric Exline said the money was deposited into the district’s general fund and would be allocated next year. Exline couldn’t remember the district ever receiving unexpected money.

“Certainly not in a quantity like that,” he said.

The Boise School District plans to use its share of the money to resurface tracks at Borah and Capital high schools that had fallen into disrepair.

The Idaho Department of Health and Welfare received nearly $780,000, one of the largest payouts, a plaintiff’s attorney said. The money was deposited in the department’s general fund, and some was returned to the federal government.

The city of Meridian received $48,197.

THE LAWSUIT

The Legislature created the fund in 1917 to create the state’s first workers’ compensation insurance company, a requirement under the federal Workers Compensation Act. Many private insurers now sell workers’ compensation insurance in Idaho, too, but most public entities still use the state fund, said George Parham, the fund’s chief legal counsel.

In years when the fund has a surplus — including every year in recent history — it pays dividends to policyholders. The fund has prorated dividends, paying more to policyholders with fewer claims and payouts during the previous three years.

The plaintiffs, led by two small businesses — CDA Dairy Queen of Couer d’Alene and Discovery Care Centre of Salmon — sued, arguing that state law required the fund to pay equal dividends to all policyholders. Their lawsuit was later certified as a class action so other affected fund members might benefit if the businesses won their case.

The class included all businesses and entities holding policies with the fund between July 1, 2002, and May 5, 2009 — the day before Gov. Butch Otter signed emergency legislation allowing the fund to keep prorating dividends.

Only policyholders billed for annual premiums of more than $2,500 qualified, because the fund’s sub-$2,500 policyholders had already won a previous class-action lawsuit, which was filed by the same attorneys from Boise: Donald Lojen, of Lojek Law Offices, and Bruce Bistline, then of Gordon Law Offices.

Parham said that by settling, the fund avoided the possible $60 million-plus judgment the plaintiffs sought. Settling also meant avoiding paying another year of 12 percent interest to class members.

“This will have absolutely no effect on the long-term viability of the fund,” which had $678 million in assets last year, he said.

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