Georgia Builders Association Attempts Takeover of Builders Insurance

When Builders Insurance Group — a mutual captive insurer for Georgia homebuilders — shifted its exclusive affiliation with Home Builders Association of Georgia, the association implemented a takeover of the insurer.

Under Georgia law, mutual captive insurance companies like Builders are required to sell insurance only to members of sponsoring associations, such as HBAG.

When Georgia homebuilders began to feel the pinch of skyrocketing work-related costs, it didn’t take long before trade association members scrutinized the collateral expense of annual association fees as well.

Builders Insurance recognized the predicament among its member base and took steps to offer an alternative to fees that for some amounted to more than 20 percent of their workers’ compensation premium policies.

Patrick Mitchell, Builders’ president and chief executive officer, said the law gave HBAG a membership monopoly.

“It was the only association through which Georgia home builders could purchase workers compensation and general liability coverage from Builders Insurance,” Mitchell said. “Despite the financial difficulty facing its members, HBAG and local chapter annual fees can now be as high as $675 per year.”

Earlier this year, Builders Insurance ended its exclusive agreement with HBAG and formed an additional relationship with Missouri-based Contractor’s Benefit Association. The action prompted HBAG to initiate a proxy vote that would disallow Builders to align with CBA and to replace Builders’ board of directors with six HBAG past presidents.

“With dues of only $60 a year, we believe the option of CBA membership – or membership in other associations we hope to offer soon – provides significant financial relief for many policyholders,” Mitchell said. “While Builders Insurance has no preference as to which association our policyholders join, we do strongly believe that they should have a choice.”

Mitchell said while policyholders value the services of HBAG, many reported they do not need HBAG’s entire package.

“We changed our business model to try to meet everyone’s needs,” Mitchell said.

Ed Phillips, HBAG executive vice president, said his organization is not receiving answers to their questions in regard to Builders Insurance directors’ salaries and the qualifications of Contractor’s Benefit Association. He said a HBAG board of elected trustees evolved into the mutual captive that is now Builders insurance Group.

“We’re a self-insured fund started 20 years ago that gives builders an alternative workers’ compensation coverage option,” Phillips said. “We advocate for the home builders industry – and we are directly related to the cost of housing in Georgia. We can’t get answers to our questions from the board.”

Phillips said the installation of six HBAG past presidents – who each agreed to salaries of $1 each for the first year – will form a new board of directors and regain control of the Builders Insurance Group.

HBAG has until July 21 — 60 days after implementing the proxy — to receive a majority of votes from 7,000 association voters.

Mitchell contends that Builders is simply offering a lower cost alternative to members who are feeling the crunch of the current economic downturn.

“Given the overwhelmingly positive response to this lower-cost alternative, Builders Insurance is looking to provide more options to our policyholders by adding other associations,” Mitchell said.

Mitchell called HBAG’s proxy a disruptive and costly misrepresentation under a self-serving agenda.

“If HBAG is successful in its efforts, the ability to choose lower-cost alternatives will be eliminated,” Mitcell said. “HBAG initiated its proxy contest only after we terminated its exclusive monopoly.”

Phillips said HBAG just wants Builders to answer their questions. He said the two organizations were “tied” together until Builders Insurance decided to severe the arrangement for what appears to be retribution for questions of accountability and transparency being asked.

“It is not clear at this point under Georgia law if they even have the right to do so,” Phillips added. “The courts may have to decide.”

Topics Workers' Compensation Georgia