Pinnacol Assurance Cuts Luxury Travel For Board

Decision Follows CALL7 Investigation, State Audit

Arthur Kane and Tom Burke and Tony Kovaleski , CALL7 Investigators
September 27, 2010

DENVER -- In the wake of a CALL7 Investigation and a highly critical state audit, Pinnacol Assurance has ended a controversial policy under which the company paid for state-appointed board members and their spouses to travel to exclusive resorts throughout the country.

Pinnacol has now barred company paid travel for the board members unless for training or educational purposes.

"How significant is the decision about travel for board members?" CALL7 Investigator Tony Kovaleski asked state Sen. Morgan Carroll-(D) Aurora.

"I think it's huge because when this issue came up in the interim audit committee we heard a very firm defense of the policy," said Carroll. "It is very good news for the state... that they recognized that there are serious problems with those travel and expense policies."

In May 2010, the CALL7 Investigators found three members of the Pinnacol board of directors at the Pebble Beach golf resort in California.

The trip, paid for by Pinnacol, was designed as a reward for the company's top-producing agents. Expenses included hotel rooms, greens fees, a winery tour, catered meals, spa charges, flights and drinks.

The board of directors for Pinnacol is appointed by the governor to oversee the business practices of the worker's compensation insurer. When told of the trip in May, Gov. Bill Ritter called it, "ill-advised" and told 7NEWS he expected better judgment by the board. The governor does not have the authority to force board members to resign.

Pinnacol Assurance is defined as a "political subdivision of the state," and as such the company is subject to tax breaks and other financial incentives not afforded to privately owned and operated worker's compensation insurance companies.

Pinnacol was created by the legislature as "the insurer of last resort," meaning it can not deny worker's compensation coverage to any Colorado company. Pinnacol Assurance is the largest worker's compensation insurer in the state.

Despite a recent attempt by the company to maintain the privacy of some of its records -- following a 7NEWS request -- a judge determined that Pinnacol is subject to Colorado's "Open Records Act."

Kovaleski had asked for copies of the expenditures from the Pebble Beach trip. Those records have not yet been provided to 7NEWS.

The state audit, released in June, listed more than a dozen areas of concern including excessive bonuses and "golden parachutes" for executives.

The state-appointed board had approved more than $4 million for executives who are terminated by Pinnacol, with or without cause.

"Will you step down?" Kovaleski asked board chair Gary Johnson in June.

"Absolutely not. Look at the Pinnacol records under this board's leadership in the past five years. We have done our duty," replied Johnson.

7NEWS has requested interviews with Johnson and Pinnacol CEO Ken Ross and is awaiting a response.

Meanwhile, a company spokesperson directed us to a statement on Pinnacol website reading: "Pinnacol Assurance appeared before the Legislative Audit Committee to give a status update regarding the Performance Audit recommendations that were presented to the committee in June. Our board of directors and senior leadership took the recommendations from that audit report seriously and immediately began to develop implementation plans.

"Our progress since June is evidence of Pinnacol’s commitment to improving our business practices in order to deliver on our mission of protecting our policyholders and their workers."

The statement explained that the company has implemented six of the audit recommendations and continue to work on seven others.