The New York State Workers' Compensation Board ("Board"), suing in its capacity as successor to two insolvent group self-insured trusts ("GSITs") and as the governmental agency charged with administration of the Workers' Compensation Law ("WCL") and attendant regulations, commenced these actions to recover the accumulated deficits of the subject trusts from former members on a joint and several basis.

Following many years of litigation and countless settlements, 53 defendants remain in Action No. 1 ("21st Century"),^[FN1] and 13 defendants remain in Action No. 2 ("A&D").^[FN2] An inquest [*2]on damages in 21st Century and a plenary trial on damages in A&D were conducted jointly on August 9-11, 2022 in accordance with a so-ordered stipulation of the parties. The Court heard the testimony of five witnesses, and numerous documents were stipulated into evidence.

Post-trial briefing was completed on December 22, 2022. Based on the credible testimony and evidence adduced at trial, the Court hereby makes the following findings of fact and conclusions of law.

The 21st Century action involves the Elite Contractors Trust of New York ("ELITE"), a GSIT comprised of employers within the construction industry. ELITE was in active operation from August 1999 until July 2008.

The Board assumed administration of ELITE on April 1, 2010 after finding the trust to be insolvent, and it retained the accounting firm of Lumsden & McCormick, LLP ("L&M") to determine the trust's cumulative deficit and calculate each member's share. The Board offered former members the opportunity to be released from liability by paying their pro rata share, an offer that some ELITE members accepted, but others did not.

The 21st Century action was commenced against non-settling former members on January 31, 2014. The Board's verified complaint, dated May 30, 2014, alleges two causes of action: (i) recovery of ELITE's deficit, then estimated at about $36 million, from the former members on a joint and several basis, together with interest at the rate of 6% pursuant to State Finance Law ("SFL") § 18 (3) and (4); and (ii) recovery of a 22% collection fee under SFL § 18 (3) and (5) (see 21st Century, Ex. 1 [C] ["Complaint"], ¶¶ 2268-2275).

In May 2017, the Board moved for partial summary judgment as to the former members' joint and several liability for the accumulated deficit. The Court granted the motion by Decision & Order dated January 9, 2018, holding that the employer-defendants named in the complaint, including the 53 remaining defendants ("Remaining ELITE Defendants"), are jointly and severally liable for the portion of the deficit accumulated during their years of participation (see 58 Misc 3d 1211[A], 2018 NY Slip Op 50050[U] [Sup Ct, Albany County 2018] ["PSJ Decision"]).

Discovery then ensued as to damages. Due to their persistent and longstanding failure to respond to the Board's discovery demands, the Court conditionally granted a motion to strike the answers of the Remaining ELITE Defendants. On January 9, 2020, the Court issued written confirmation that the answers of the Remaining ELITE Defendants had, in fact, been stricken pursuant to the conditional order.

The Board then moved in November 2020 for entry of default judgments. In a Decision & Order dated October 4, 2021, the Court reaffirmed its ruling that the answers of the Remaining ELITE Defendants had been stricken, but nonetheless ordered an inquest on damages (see Board Mem, Ex. B ["DJ Decision"]). While recognizing that the Board had submitted competent expert proof to establish the amount of defendants' joint and several liability, including the affidavits of Christopher Lukowski, a forensic accountant with L&M (see 21st Century, Exs. 6-7), the "computation of [ELITE's] accumulated deficit is a complex matter," and the accounting expert's "opinions [were] based on extrinsic evidence, including a wide array of [*3]business and financial documents concerning the Trust" (DJ Decision at 10).^[FN3]

The A&D action involves the Team Transportation Workers' Comp Trust ("TEAM"), a GSIT comprised of employers within the transportation industry. TEAM was in active operation from October 15, 1995 through December 31, 2010.

After assuming administration of TEAM on February 1, 2012, the Board engaged L&M to perform a forensic reconstruction of the deficit, and former members were invoiced for their proportionate share.

Thereafter, the Board purchased an Assumption of Workers' Compensation Liability Policy ("ALP") for TEAM, which transferred the GSIT's remaining liabilities for open workers' compensation claims to an insurance carrier in exchange for payment of a single premium financed through bond proceeds (see A&D, Ex. 3).^[FN4] L&M recalculated TEAM's deficit in 2017 to account for the purchase of the ALP as well as collections from member assessments.

At that point, the Board offered former members the opportunity to receive a full release in exchange for payment of their pro rata share of TEAM's deficit. Some former TEAM members accepted the Board's proposal; others did not.

The Board commenced this action against 292 non-settling former TEAM members on or about June 29, 2017 by filing a summons with notice. In a complaint dated October 18, 2017, the Board alleges the same two causes of action as in 21st Century.

Following the completion of discovery, the remaining 15 TEAM defendants entered into stipulations with the Board intended to streamline the trial. Under the stipulations, "each and every one of the [remaining] Defendants stipulate[d] and agree[d] to the imposition of joint and several liability against them relative to [their] respective period(s) of membership in [TEAM]," with specific dates of trust participation recited in the stipulation (Board Mem, Ex. E, Omnibus Stipulation). These 15 defendants further agreed that their affirmative defenses bearing on liability "have been effectively dismissed" (id.).

On March 25, 2022, the Board moved to dismiss the remaining affirmative defenses and counterclaims alleged by defendants. In a Decision & Order dated April 22, 2022, the Court granted the Board's unopposed motion, leaving only the amount of defendants' joint and several liability (i.e., damages) for trial.

The Board discontinued its action against two additional defendants prior to trial, leaving 13 former members of TEAM in the case ("Remaining TEAM Defendants"). The Board also withdrew its claim for a 22% collection fee after trial (see Board Mem, pp. 13-14).

Given the common issues of law and fact presented by the damages inquest in 21st Century and damages trial in A&D, the parties entered into a Stipulation For Joint Proceedings on June 15, 2022 (see Board Mem, Ex. C ["Joint Stipulation"]).

Under the stipulation, the Remaining TEAM Defendants waived their right to a jury trial, and all remaining defendants ("Defendants") stipulated to a joint trial before the Court.

Further, in order to allow the Board to present the expert testimony of a single accountant in the joint trial, the parties stipulated that Douglas Muth, a partner at L&M, would testify regarding ELITE in the place of Christopher Lukowksi.

The joint trial was held in the Albany County Courthouse over three full days.

In the 21st Century inquest on damages, the affidavits submitted by the Board in support of its motion for entry of a default judgment, together with the voluminous collection of exhibits annexed thereto, were deemed part of the trial record.

Additionally, Defendants introduced two exhibits into evidence: a duplicate copy of the ELITE ALP (Ex. A); and a collection of letters from the Board to the Dormitory Authority of the State of New York ("DASNY") and the Commissioner of the Department of Taxation & Finance ("DTF") regarding the workers' compensation assessment rate established annually under WCL § 151 ("Section 151") (Ex. B). The parties also agreed that the affirmation of counsel with exhibits submitted by the Remaining ELITE Defendants in opposition to the Board's motion for a default judgment ("Makowski Affirmation") would be part of the record.

Defendants conducted a lengthy cross examination of Douglas Muth, who testified in Lukowski's place. Defendants also cross-examined three other Board witnesses regarding ELITE: Trisha Gannon, a CPA who served as the Board's Director of Self Insurance until 2021; Kristine Goodremote, an accounting manager for NCAComp Inc. ("NCAComp"), which served as third-party administrator for ELITE; and Thomas Langer, who prepared actuarial reports concerning ELITE.

In the plenary damages trial in A&D, the Board presented three witnesses: Trisha Gannon; Douglas Muth; and Gina Emerson, the principal of S.A.F.E., LLC, which served as third-party administrator for TEAM. Seventeen exhibits were received into evidence in A&D, all but one (Ex. 7) on stipulation. The parties also agreed that the Court could consider the Makowski Affirmation.

Defendants did not call any witnesses of their own in 21st Century or A&D.

Post-trial briefs were submitted on or about December 5, 2022, and reply briefs were submitted on December 22, 2022. This Decision & Order follows.

Before addressing the issues raised at trial and in the parties' post-trial submissions, it is important to identify what is not at issue.

Each Defendant is jointly and severally liable for the portion of the trust's deficit accumulated during the member's years of participation. In 21st Century, it is a consequence of the PSJ Decision and the striking of the Remaining ELITE Defendants' answers, and in A&D, it is a consequence of the Remaining TEAM Defendants' stipulation to joint and several liability.

Defendants' years of trust participation also were established prior to trial. As a result of their defaults, the Remaining ELITE Defendants admitted the Board's allegation that they were members of ELITE for the periods shown on the schedule annexed to the Board's complaint (see [*4]21st Century, Complaint, ¶ 2218 & Schedule 6). And in A&D, the Omnibus Stipulation recites the dates of trust participation (see Omnibus Stipulation, ¶ 1).

Finally, in addition to being precluded from raising any defenses going to liability, Defendants could not raise any affirmative defenses going to damages. This is a consequence of the striking of the Remaining ELITE Defendants' answers in 21st Century (see DJ Decision), the terms of the Omnibus Stipulation in A&D, and the Court's April 22, 2022 decision in A&D.

The issue before the Court is computation of each Defendant's joint and several liability for their years of trust participation.

To understand the manner in which the Board and its accountants determined the amount of Defendants' joint and several liability, it is necessary to review the mechanism used by the Board to finance ELITE and TEAM's accumulated deficits.

The Board assumed administration of these trusts after finding them to be insolvent, meaning that they were unable to pay outstanding claims as they matured (see 12 NYCRR 317.20 [a]). When the Board assumed administration of ELITE in 2010, the trust had an accumulated deficit of around $50 million (see 21st Century, Ex. 6 [C], 2010 Financial Statement), and TEAM had a deficit of more than $20 million when the Board assumed administration in 2012 (see A&D, Ex. 1, 2012 Financial Statement). And these were just two of many GSITs in New York State in financial distress at the time.

Through legislation adopted in 2013, DASNY was authorized to issue bonds to cover the workers' compensation obligations of self-insurers (see L 2013, ch 57). One tranche of bonds, referred to as the Series 2013A Bonds ("Bonds"), was issued in the total sum of $369,700,000, generating about $350 million in proceeds (see A&D, Ex. 5 ["Official Statement"], p. i). The Bonds "are special obligations of DASNY, secured by a pledge of a portion of the unified annual assessment to be paid by employers pursuant to Section 151 of the Workers' Compensation Law" (id., pp. i-ii).

Proceeds of the Bonds "may be used to acquire [assumption of liability policies] for unmet obligations of Self-Insurers" (id., p. ii; see WCL § 50 [3], as amended by L 2010, Ch 56, Part R). In the context of a GSIT, an assumption of liability policy ("ALP") allows a trust to transfer its liabilities for open or future claims to a licensed insurer in exchange for payment of a single premium in an amount acceptable to the Board and Superintendent of Financial Services (see 21st Century, Ex. 3 [C]).

The ALPs were procured through a competitive bidding process (see id.). As part of this process, insurance carriers were given information bearing on the GSITs' future claims liability, including deficit reconstructions, detailed claims information, actuarial reports, and financial statements. Although each Invitation for Bidders was GSIT-specific, all of the bid invitations followed the same template.

The Board purchased an ALP for ELITE on March 28, 2014 (see 21st Century, Ex. 3 [D] ["ELITE ALP"]). For a total premium of $26,824,000 (including required assessments and taxes), the low bidder, Technology Insurance Company, agreed to assume ELITE's liability for open claims. The premium was financed entirely through bond proceeds.

Using the same competitive process, the Board purchased an ALP for TEAM on January [*5]3, 2017, for the total premium of $10,965,586 (see A&D, Ex. 3 ["TEAM ALP"]).^[FN5]

With regard to the payment of debt service on the Bonds, Tricia Gannon testified that monies collected from GSIT members though assessments, collections and settlements are deposited into GSIT-specific subaccounts within the State Treasury's Short Term Investment Pool (see 21st Century, Ex. 3, ¶ 18; Transcript, pp. 57-58, 76; see also A&D, Ex. 4). Each year, the Board wires funds from the various GSIT-specific subaccounts in an aggregate sum sufficient to fund the annual payment of debt service (see 21st Century, Ex. 3, ¶¶ 19-20; Transcript, pp. 68-71, 143-144).

To date, the funds obtained or derived from GSIT members have been sufficient to meet the Board's debt service obligations (see 21st Century, Ex. 3, ¶ 21; Transcript, pp. 97-98). In this connection, Gannon referred to the annual reports that the Board is required to submit to DASNY and DTF under Section 151 regarding the workers' compensation assessment rate (see Ex. B). As discussed above, the Board pledged revenues from the Section 151 assessment to pay debt service on the Bonds if sufficient funds were not available in the GSIT-specific subaccounts (see Official Statement, pp. i-ii).

Gannon testified that the Section 151 reports from 2014 onward show that no funds other those obtained from the GSIT-specific subaccounts have been used to pay debt service on the Bonds (see Transcript, pp. 95-96, 144-146). Accordingly, each of the Section 151 certifications submitted by Defendants reflects "Anticipated Group Recoveries" in an amount equal to the required annual debt service payment (Ex. B), which offsets the debt service costs built into the Board's administrative budget (see Transcript, pp. 94-95).

Relatedly, Gannon testified that the Section 151 reports reflect the Board's position that, while "[B]ond proceeds will allow for the purchase of ALPs and a cost-effective resolution of unmet self-insured obligations, . . . [they] will not relieve employers of liability for those obligations" (Transcript, p. 141). "Collections from the employers will continue to be aggressively pursued even after an ALP for their group has been executed. Recoveries will be applied against the debt service as appropriate" (21st Century, Ex. 3, ¶ 2; see 21st Century, Ex. 2 [A], p. 19).

The Board's calculation of the ELITE deficit came primarily from the Lukowski affidavits (see 21st Century, Exs. 6-7). Lukowski prepared a set of six schedules that updated ELITE's accumulated deficit as of December 31, 2019, apportioned the deficit to ELITE's years of active operations, and determined the joint and several liability of each Remaining ELITE Defendant for their years of participation (see 21st Century, Ex. 6, ¶¶ 12-13 & Ex. B ["ELITE Schedules"]).

The ELITE Schedules rely on data drawn from financial statements, actuarial reports, the ALP, and spreadsheets tracking monies paid or pledged by former ELITE members, including a spreadsheet prepared by NCAComp showing collections from deficit assessments (see 21st Century, Ex. 6, ¶ 11).

Schedule 1 is a summary of information taken from ELITE's financial statements showing the trust's surplus or deficit for each year (see id., ¶¶ 14-16). As of December 31, 2019, [*6]ELITE had a cumulative deficit of $32,949,886 (see id., ¶ 15).

Schedule 2 makes certain adjustments to Schedule 1 (see id., ¶¶ 17-23). Most notably, almost $20 million paid by ELITE members in response to deficit assessments was backed out of the trust's assets in this schedule in order to allow the payments to be credited and applied to the deficit in Schedule 5 (see id., ¶ 19). The deficit therefore increased to $54,491,163 (see id.).

Schedule 3 reallocates the deficit to the nine operating years of ELITE (see id., ¶¶ 24-28). The reallocation was done using information contained in the 2013 actuarial report prepared by Thomas Langer (see 21st Century, Ex. 5 [A] ["2013 Actuarial Report"]).

Schedule 4 adjusts each year's deficit to reflect payments made by trust members in response to deficit assessments and payments made (or promised) under settlement agreements (see 21st Century, Ex. 6, ¶¶ 29-32). Schedule 4 also credits settling members with a portion of the financial benefit obtained from the ALP purchase. Through these credits, the accumulated deficit was reduced to $25,283,138 (see id., ¶ 31).

Schedule 5 adjusts for accounts receivable owed by former ELITE members who did not enter into settlement agreements, which increased the deficit by about $2 million (see id., ¶¶ 33-36).

Through the first five schedules, Lukowski determined that ELITE had an accumulated deficit of $27,295,929 as of December 31, 2019 (see id., ¶ 35), and that deficit was apportioned among the trust's years of active operation.

Using the annual deficits set forth in Schedule 5, Lukowski then computed the joint and several liability of each Remaining ELITE Defendant for their years of participation (see id., ¶ 37). Schedule 6 provides five columns of information for each Defendant: (1) dates of trust participation; (2) fiscal years of trust participation; (3) the deficit associated with the member's years of participation; (4) the accounts receivable associated with the members' years of participation; and (5) total joint and several liability, which is the sum of the preceding two columns.

As discussed above, Muth appeared for cross-examination in place of Lukowski and, in essence, adopted Lukowski's affidavit testimony (see Transcript, pp. 330-331).

Muth testified that he performed an updated deficit reconstruction of TEAM in May 2022. His work product consisted of a seven-page narrative report and a set of six schedules (see A&D, Ex. 10), prepared using the same methodology as employed by Lukowski in 21st Century (see Transcript, p. 460).

In Schedule 1, Muth computes a cumulative deficit for TEAM of $7,944,514 as of December 31, 2021 (see id., p. 469).

After adjusting for assessment revenue, Schedule 2 shows a cumulative deficit of $21,177,805 (see id., pp. 469-471).

Schedule 3 then reallocates this deficit to TEAM's years of active operation (1996 to 2010) (see id., pp. 471-473).

After adjusting for member collections, Schedule 4 shows a cumulative deficit of $4,238,139, and that figure remains unchanged in Schedule 5 due the absence of any accounts receivable (see id., pp. 473-474).

Schedule 6 then computed the joint and several liability of each of the Remaining TEAM [*7]Defendants by reference to the years of participation set forth in the Omnibus Stipulation.

In their Post-Damages Inquest and Trial Memorandum of Law, defendants raise seven principal objections to the Board's computation of joint and several liability. In substance, Defendants: (1) challenge the methodology for computing joint and several liability utilized by the Board and its experts; (2) argue that the Board's ability to pay debt service on the Bonds through at least 2027 shows that it has not sustained any past, current or future monetary damages; and (3) challenge the sufficiency of the evidence adduced by the Board in support of its computation of their joint and several liability.

Defendants object to the methodology used by the Board to compute the amount of their joint and several liability. Defendants argue that: (1) there is no defined methodology for computing the joint and several liability of a former GSIT member, particularly where the trust has discharged its future claims liabilities through an ALP financed by bond proceeds; and (2) the Board has not "provided sufficient evidence that the methodology which it utilized, can properly be used to calculate joint and several liability damages" (Defendants Post-Damages Inquest and Trial Memorandum of Law ["Defendants' Mem"], p. 21).

Defendants contend that there is nothing in the WCL, agency regulations or the trust documents "stating how joint and several liability damages should be calculated" and "no case law which addresses this issue" (id., p. 24; see Transcript, p. 515 [testimony from Muth that agency regulations "don't stipulate" how you calculate joint and several liability]). From this, Defendants assert that the "calculation of joint and several liability damages performed by [L&M] lacks statutory, regulatory and contractual definition" (Defendants' Mem, p. 24).

Relatedly, Defendants argue that "no evidence was presented [in the Board's case-in-chief] providing a detailed explanation of the methodology developed by [L&M] to calculate joint and several liability damages where an ALP has been procured and the cost of the ALP has been paid through bond proceeds which require repayment of debt service obligations" (id.). "Therefore, the court is being asked to accept the results of the [L&M] methodology without an evidentiary showing of the content of the methodology" (id.).

The Court is unpersuaded by Defendants' methodological objections. As the Board correctly observes, WCL § 50 (3-a) (3) declares that "[e]ach [GSIT] member shall be responsible, jointly and severally, for all liabilities of the [GSIT] provided for by this chapter occurring during its respective period of membership," and such liabilities include all "trust obligations" (12 NYCRR 317.2 [o]; see also WCL § 50 [3-a] [8]). Further, the trust documents expressly state that members shall be jointly and severally liable "for all workers' compensation obligations incurred by the Trust" (A&D, Ex. 13, art VII; see A&D, Ex. 16; PSJ Decision, 2018 NY Slip Op 50050[U], *6). Thus, the nature and scope of Defendants' joint and several liability is adequately delineated in law, regulation and contract.

More fundamentally, the Court rejects Defendants' claim that it "is being requested to blindly accept the [Board's] methodology" (Defendants' Mem, pp. 24-25). The affidavit testimony of Christopher Lukowski, the courtroom testimony of Douglas Muth, and the detailed schedules submitted by both experts amply disclose the methodology they employed and calculations they made to quantify the joint and several liability of former GSIT members for an [*8]accumulated trust deficit where the GSIT's open claims have been liquidated through the purchase of an ALP (see Part B [2], supra).

Additionally, the Board's accounting experts testified that their computation of the deficits, their allocation of the deficits to the trusts' years of active operations, and their computation of Defendants' joint and several liability for such deficits were performed in a professionally reliable manner and are accurate to a reasonable degree of accounting certainty (see 21st Century, Ex. 6, ¶¶ 16, 23, 28, 32, 36, 42; see Transcript, p. 461).

Defendants' next set of objections pertains to the effect of the bond financing mechanism on the computation of Defendants' joint and several liability. Defendants' arguments are focused largely on the annual debt service payments made by the Board on the Bonds used to finance the ALPs.

Defendants rely on the testimony of Tricia Gannon that "there were sufficient funds available between 2014-2022 from member settlements and third-party collections to fund bond debt service obligations on all 25 trusts in which ALPs were procured" (Defendants' Mem, p. 27; see Transcript, p. 106). Gannon further testified that funds on hand when she left the Board in 2021 were sufficient to make debt service payments for another four or five years, through 2027 (see Transcript, pp. 106-107). "In substance, Ms. Gannon's testimony established that, until at least until 2027," there will be no need to resort to the Section 151 backstop "to fund debt service obligations on the bonds . . . procured through DASNY" (Defendants' Mem, p. 27).

Defendants further argue that the trial record is devoid of necessary evidence concerning the amount of debt service associated with the ELITE and TEAM ALPs. According to defendants, the only evidence at trial concerning debt service payments referred to the aggregate payments made on the Bonds, which were used to purchase ALPs for 25 GSITs. "Plaintiff did not provide evidence of the past and future debt service obligations of the [ELITE] and [TEAM] Trusts. Therefore, the court is left without evidence as to the joint and several monetary liability of Defendants for past and future debt service obligations of both trusts" (id., pp. 27-28).

Defendants also contend that "the testimony of Patricia Gannon concerning the manner in which Plaintiff's aggregate debt service payment in the amount of $28,234,404 made between 2014-2022 calls into question whether Plaintiff is effectively seeking to impose inter-trust liability upon Defendants for payment of the debt obligations" (id., p. 28). In other words, "it is uncertain whether Plaintiff is seeking to impose past and future joint and several liability damages upon Defendants for their percentage of the amount of past and future debt service obligations or the aggregate past and future debt service obligations for all ALPs" (id.).

"In substance, the testimony of Patricia Gannon reveals that the Plaintiff has not incurred any past, current, or future monetary damage in funding its annual aggregate $28,243,404 debt service obligation on behalf of each of the ALPs secured by it" (id., p. 29). "Accordingly, . . . Plaintiff has not yet incurred any past, current, or future economic loss attributable to the failure of Defendants to pay trust obligations" (id., p. 30).

Defendants' focus on the Board's ability to make debt service payments is misplaced. It [*9]is apparent from the Board's proof that it is seeking to recover the accumulated deficits of ELITE and TEAM, as calculated by L&M, independent of any bond financing costs.

At trial, Defendants questioned Muth about the role of debt service in the Board's computation of joint and several liability. After Muth testified that he was unfamiliar with a document showing the Board's annual debt service payment to be about $28 million, Defendants' counsel suggested that Muth "should have been familiar with the document in terms of putting the deficit calculation together" (Transcript, pp. 399-400). Muth responded in the negative, explaining that "how the bonds were being repaid has no impact on the deficit" (id., p. 400). "The deficit includes the cost of the ALP," but does not include debt service payments made on the Bonds used to finance the ALP (id.; see also id., pp. 405-409).

As articulated by Lukowksi in his affidavits and by Muth in his trial testimony, the cumulative deficits of ELITE and TEAM include open workers' compensation claims stemming from their periods of active operation. Prior to the purchase of ALPs, the magnitude of these outstanding liabilities would need to be determined actuarily (see e.g. 12 NYCRR 317.19 [requiring GSITs to submit an annual actuarial report setting forth an estimate of future claims liabilities]).

Instead, ELITE and TEAM liquidated their uncertain and contingent liabilities for open claims by transferring them to an insurance carrier in exchange for payment of a single premium. With the ALPs in place, there no longer is any need for the Board and its accountants to estimate the amounts needed for open claims; the open claims liability of ELITE was fixed at $26,824,000 and TEAM's liability was fixed at $10,965,586 through the purchase of the ALPs.

The purchase price of the ALPs therefore was "encompassed in claims expense[s] for the appropriate year" in the deficit reconstructions of ELITE and TEAM (Transcript, p. 506). In other words, the prior estimated claims liability of the trusts, "based on the actuarial estimate of claims," was replaced by "the actual ALP price" (id.).

Although L&M's computation of ELITE and TEAM's deficits properly relies on the purchase price of the ALPs, it does not reflect the debt service payments needed to repay the Bonds that were used to finance the purchase of the policies. But Defendants are not being asked to pay the borrowing costs attendant to the deficit financing required by their insolvent trusts, even though such costs might reasonably be viewed as trust obligations (see id., pp. 416-417).

For these reasons, the Court finds Defendants' arguments and contentions concerning the payment of debt service costs to be largely irrelevant to computation of joint and several liability. While member settlements and third-party collections have been sufficient for the Board to pay aggregate debt service to date and likely will be sufficient to fund such payments through 2027 without the need for the Section 151 backstop, the Board is not attempting to collect debt service costs from Defendants, and these costs played no part in the Board's deficit calculations.

Defendants' joint and several liability includes their trust's liabilities for open claims, and those liabilities necessarily reflect the purchase price of the ALP purchased to pay the open claims (see PSJ Decision, 2018 NY Slip Op 50050[U], *10). But under the methodology applied by the Board, "evidence as to the joint and several monetary liability of Defendants for past and future debt service obligations of both trusts" (Defendants' Mem, p. 28 [emphasis added]) is irrelevant to the amount of Defendants' joint and several liability.

And contrary to Defendants' suggestion, there is no basis to conclude that the purchase of [*10]ALPs to liquidate the open workers' compensation claims of insolvent GSITs was intended to relieve former members of financial responsibility. In fact, the Official Statement to the Bonds specifically addresses this point: Although the intent of ALPs was to allow GSITs a cost-effective mechanism for resolving "unmet self-insured obligations . . . , such purchase of ALPs will not relieve employers of liability for those obligations" (21st Century, Ex. 2 [A], p. 19). "Collections from the employers will continue to be aggressively pursued even after an ALP for their group has been executed, and any amounts recovered from employers will be used to offset costs and expenses incurred by the Board" (id.).

And despite the State Legislature having amended the WCL in 2010 to allow ALPs to be used to secure workers' compensation claims and having authorized DASNY in 2013 to issue bonds to finance the purchase of ALPs, there is nothing in the text of the WCL manifesting the Legislature's intent to enact a State-funded takeover of the workers' compensation obligations of insolvent self-insurers. In fact, Defendants themselves acknowledge that the Bonds were just a "financing plan" (Defendants' Mem, p. 7).^[FN6]

Nor is there merit to Defendants' argument that the Board's payment of aggregate debt service on the Bonds "calls into question whether Plaintiff is effectively seeking to impose inter-trust liability upon Defendants for payment of the debt obligations" (id., p. 28). Gannon's testimony demonstrates that funds received from GSIT members are deposited into GSIT-specific subaccounts (see Transcript, p. 76), and L&M's deficit computations provided Defendants with GSIT-specific credits for such funds, as reflected in Schedule 4 (see id., p. 432 ["THE COURT: And the members are being credited for their contributions and it's taken into account on Schedule 4. MR. MAKOWSKI: "Right."]; see also id., pp. 401-402, 408-409, 412-413).^[FN7]

Finally, Defendants suggest that the Board cannot establish the amount of their joint and several liability until it determines whether collections from the other former GSIT members suffice to fully defray the costs of the ALP and other trust liabilities included within L&M's deficit calculation (see id., pp. 432-433; Defendants' Mem, p. 1 ["the record is clear that the alleged trust deficit estimates determined by the actuaries and accounting firms was a prospective actuarial expected deficit, not an actual deficit. There is no evidence . . . as to the actual deficit of each trust"]).

This, of course, begs the question of why other former GSIT members were obliged to pay assessments or settle with the Board, rather than just joining Defendants in seeking to wait on the sidelines to see if contributions from others would suffice. More fundamentally, a claim [*11]for future damages is not unripe for adjudication merely because it involves an estimate of future costs, so long as the estimate is made with "reasonable certainty" (Kenford Co. v County of Erie, 67 NY2d 257, 261 [1986]), as was done here. Otherwise, a plaintiff would never have a claim for future medical expenses, future economic losses, or future pain and suffering. There simply is nothing in law or logic that compels the absurd result advocated for by Defendants.

Defendants maintain that it is "unclear whether [in 21st Century] Plaintiff is seeking joint and several liability on the amount of the expected future deficit calculated by the actuaries and accountants (i.e., $25,240,000), or the actual cost of debt service for the ALP (i.e., $26,824,000)" (Defendants' Mem, p. 29).

The Board clearly is seeking to impose joint and several liability based upon the calculated ELITE deficit of $27,295,929 (see Part B [2] [a], supra). Debt service is irrelevant to this computation, and, in any event, $26,824,000 is the cost of the ALP, not debt service on the bond proceeds used to finance the purchase of the ALP. And the $25,240,00 figure cited by Defendants appears to be drawn from the 2013 Actuarial Report, which was superseded by ALP in terms of establishing ELITE's liability for open claims.^[FN8]

Likewise, Defendants assert that, "[d]uring Ms. Gannon's testimony concerning [TEAM], it is clear that the expected actuarial future deficit estimate amount was $4,238,139. However, Plaintiff paid a premium of $10,965,586 to the insurance carrier. . . . [I]t is unclear whether Plaintiff is seeking joint and several liability on the amount of the expected actuarial future deficit estimated by the actuaries and accountants (i.e., $4,238,139), or the actual cost of debt service for the ALP (i.e., $10,965,586)" (Defendants' Mem, p. 29).

As stated previously, L&M computed TEAM's deficit to be $4,238,139 and, in so doing, used the ALP's $10,965,586 purchase price to quantify the GSIT's future liability for open claims.

Defendants further contend that, in their cross-examination of the actuary who prepared the 2013 Actuarial Report, they showed that the Board "had not demonstrated an actual future deficit existed in [ELITE]. Instead . . . , the 2013 report only demonstrates an expected actuarial future deficit estimate" (id., p. 30). "This issue is important because to the extent Plaintiff seeks damage recovery from Defendants premised upon the cost of the ALP and subsequent payment of bond debt service obligations it is based upon an expected future actuarial deficit estimate as contrasted to an actual deficit" (id., pp. 30-31).

It is difficult to discern exactly what Defendants are objecting to, but the Court reiterates that: L&M did not rely upon actuarial reports to estimate ELITE's future claims liability following the purchase of ALPs; the Remaining ELITE Defendants are jointly and severally liable for those future liabilities (as well as all of ELITE's other outstanding financial obligations); the Board does not seek to recover damages "premised upon the cost of . . . subsequent payment of bond debt service" (id.); and the recovery of future damages, including the cost of the ALPs, is permitted so long as such damages are proven with reasonable certainty, as was done here.

Finally, the Court rejects Defendants' complaint that ELITE and TEAM "did not use the liquidation basis of accounting for [certain] financial reports . . . , that such statements contained a GAAP departure" (Defendants' Mem, p. 32). On the one hand, Defendants assert that the effect of these departures "on the financial statements has not been determined"; on the other hand, "Defendants maintain the GAAP departure[s] . . . were material and affect the reliability of the statements" (id.).

As testified to by Muth, the use of a liquidation basis would not have been useful because it would not show the GSIT's deficit, which is "the main point of these financial statements" (Transcript, p. 355; see also id., p. 357). Muth further testified that the departure from generally accepted accounting principles ("GAAP"), which concerned only the manner of presentation, had "no impact on the deficit" (id., pp. 370, 453-454; see also id., pp. 153-154 [Gannon, a fellow CPA, did not consider the GAAP departure to be material]). And Defendants did not offer any expert testimony of their own to support their contentions regarding materiality and professional reliability, just the argument of their counsel.

Through the credible affidavit testimony in 21st Century and the courtroom testimony adduced at the joint trial, together with the documents received into evidence, the Board has demonstrated its entitlement to judgments against Defendants in the amounts requested in its Post-Trial Memorandum.

The Court credits the methodology employed, and the calculations made, by the Board and L&M in determining the amount of Defendants' joint and several liability for ELITE and TEAM's deficits. There may be other possible methods for computing and apportioning a GSIT deficit where liability for open claims has been liquidated through an ALP financed with bond proceeds, but the Board's approach has been shown to be reasonable, professionally reliable, and consistent with governing law, regulations and trust documents (see Matter of Aides At Home, Inc. v State of NY Workers' Compensation Bd., 76 AD3d 727, 728 [3d Dept 2010]).

Defendants did not offer any witnesses or documents of their own, other than the Section 151 reports and the Makowski Affirmation. Nor did Defendants attempt to establish an alternative methodology for quantifying their joint and several liability, other than waiting and hoping that collections from other former trustmembers would suffice.

Defendants did raise numerous questions and objections to the Board's approach through their extensive cross-examination of the Board's witnesses, but the witnesses generally provided thoughtful and well-considered responses.

And for the reasons stated in Part C, supra, there is no merit to Defendants' objections to the Board's methodology, their arguments concerning the payment of debt service on the Bonds, or their other challenges to the Board's computation of joint and several liability.^[FN9]

Accordingly, it is

ORDERED that in 21st Century, judgment against the Remaining ELITE Defendants shall be entered in accordance with Exhibit D annexed to the Board's Post-Trial Memorandum; [*12]and it is further

ORDERED that in A&D, judgment against the Remaining TEAM Defendants shall be entered in accordance with Exhibit H annexed to the Board's Post-Trial Memorandum.

This constitutes the Decision & Order After Joint Trial of the Court. Duplicate originals of this Decision & Order After Joint Trial are being sent to plaintiff's counsel for filing and service.