New Firm to Handle RTD Claims

The RTD board selected a new firm on Thursday to take over its troubled accident and injury claims program and agreed to more than double the fees paid to the new contractor.

On a 7-3 vote, Southern California Rapid Transit District board members reluctantly approved a $9.5-million, two-year deal with HCM Calim Management Corp., a New Jersey-based subsidiary of Hertz Corp., as its claims handler. The firm will administer and settle about 6,500 injury and property damage claims filed against the district each year--most of them by riders claiming to have been hurt on buses.

HCM will take over the huge claims adjusting program Jan. 1 from Leonard J. Russo Insurance Services Inc., which recently withdrew as a bidder for the RTD business. Russo, whose image took a beating in the last two years because of a fraud investigation and an outside audit showing management problems, had been paid about $2 million a year to provide the service.

Some RTD board members were critical of the increased cost of the new contract and argued that the district itself should take over handling the claims. “I hate to vote for this,” said board member Gordana Swanson. “I’m not convinced we are getting a good deal.”

But RTD managers strongly urged approval of the new, larger contract, saying it will bring significant increases in staff to investigate claims, track settlements and control costs--changes called for in recent audits of the Russo operation.

Barbara Akk, the district’s risk manager who helped draft the new contract, told the board that the extra money would be a prudent investment as evidenced by the $90 million that the district has to keep on hand to settle claims.

The RTD claims program has been under scrutiny since last year when the Los Angeles County district attorney’s office began investigating a fraud ring that allegedly collected payments for phony injury claims against the district. In some cases, investigators said, the victims allegedly injured in RTD bus accidents did not exist or were never aboard the bus.

Estimates of the loss to fraud have ranged from a few hundred thousand dollars to millions.

The investigation is continuing and several people have been charged or have pleaded guilty, including a former Russo claims adjuster, two attorneys and a chiropractor.

In other action, the board rejected a staff recommendation to move toward raising fares and cutting back bus service to eliminate a $8.2-million deficit in the current budget. Instead, the board ordered managers to prepare other budget-cutting and revenue-generating proposals to be considered in two weeks. Board member John Day said he needs “additional convincing that we are as lean and mean as we can be.”