Bill Text: CA SB487 | 2013-2014 | Regular Session | Amended
Bill Title: Workers' compensation insurance: Self-Insured Group
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2014-02-03 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB487 Detail]
Download: California-2013-SB487-Amended.html
BILL NUMBER: SB 487 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 29, 2013
AMENDED IN SENATE APRIL 4, 2013
INTRODUCED BY Senator Calderon
FEBRUARY 21, 2013
An act to amend Sections 3700.1, 3701, 3701.3, 3701.5, 3701.7,
3701.8, 3702, 3702.5, 3702.8, 3702.10, 3741, 3742, 3744, 3745, and
3746 of, to amend, renumber, and add Section 3740 to, to amend,
repeal, and add Section 3743 to, and to add Sections 3701.85 and
3742.5 to, the Labor Code, relating to workers' compensation
insurance.
LEGISLATIVE COUNSEL'S DIGEST
SB 487, as amended, Calderon. Workers' compensation insurance:
Self-Insured Group Security Fund.
Existing law generally requires an employer to compensate, without
regard to negligence, an employee for an injury sustained by the
employee if the injury arose out of, and in the course of,
employment, as specified.
Existing law requires each employer, except as specified, to
secure the payment of compensation by either being insured against
liability to pay compensation, or by securing from the Director of
Industrial Relations a certificate of consent to self-insure, either
as an individual employer, or as one employer in a group of
employers. Existing law establishes the Self-Insurers' Security Fund,
governed by an 8-member board of trustees and administered by the
Director of Industrial Relations, to provide for the continuation of
workers' compensation benefits delayed as a result of the failure of
a private, self-insured employer to meet its compensation obligations
when the employer's security deposit is either inadequate or not
immediately accessible for the payment of benefits. Existing law
requires every private, self-insuring employer to secure incurred
liabilities for the payment of workers' compensation by making a
deposit based on estimated future liability for compensation.
Existing law authorizes an alternative security system established by
regulations adopted by the director whereby private insurers can
collectively secure their aggregate liabilities, as specified.
This bill would distinguish between individual self-insured
employers and groups of self-insured employers by creating a separate
Self-Insured Group Security Fund for group self-insured employers
that is similar to the existing Self-Insurers' Security Fund
structure, which would continue, but only for individual self-insured
employers. The bill would authorize a similar alternative security
system to be established by regulations adopted by the director
whereby group self-insured employers may collectively secure their
aggregate liabilities, as specified. The bill would establish the
Self-Insured Group Security Fund as a nonprofit mutual benefit
corporation, governed by a 7-member board of trustees, and provide
similar powers and authority as is provided to the existing
Self-Insurers' Security Fund. The bill would make additional
conforming changes. The bill would state the intent of the
Legislature in this regard.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 3700.1 of the Labor Code is amended to read:
3700.1. As used in this article:
(a) "Director" means the Director of Industrial Relations.
(b) "Fund" means the Self-Insurers' Security Fund established
pursuant to Section 3742.
(c) "Fund member" means a stand-alone self-insured employer which
participates in the Self-Insurers' Security Fund.
(d) "Fund trustees" means the Board of Trustees of the
Self-Insurers' Security Fund.
(e) "Incurred liabilities for the payment of compensation" means
the sum of an estimate of future compensation, as compensation is
defined by Section 3207, plus an estimate of the amount necessary to
provide for the administration of claims, including legal costs.
(f) "Insolvent self-insurer" means a stand-alone self-insured
employer whose certificate of consent to self-insure has been revoked
by the director or whose security deposit has been used by the
director pursuant to Section 3701.5.
(g) "Insolvent SIG" means a SIG whose certificate of consent to
self-insure has been revoked by the director, which has failed to pay
compensation, or whose security deposit has been used by the
director pursuant to Section 3701.5.
(h) "Private self-insurer" and "private self-insured employer"
mean any employer that has been issued a certificate of consent to
self-insure by the director, whether as a stand-alone self-insured
employer or as a member of a SIG which has secured the payment of
compensation pursuant to subdivision (b) of Section 3700.
(i) "SIG" means a nonprofit mutual benefit corporation to which a
group of private self-insured employers have transferred primary
liability for their workers' compensation obligations and has secured
the payment of compensation pursuant to subdivision (b) of Section
3700.
(j) "SIG Fund" means the Self-Insured Group Security Fund
established pursuant to Section 3742.5.
(k) "SIG Fund Member" means a SIG which participates in the SIG
Fund.
(l) "SIG Fund Trustees" means the Board of Trustees of the SIG
Fund.
(m) "Stand-alone self-insured employer" and "stand-alone
self-insured" mean a private employer that retains primary liability
for its own worker's compensation obligations, whether alone or in
connection with guarantors, and has secured the payment of
compensation pursuant to subdivision (b) of Section 3700.
SEC. 2. Section 3701 of the Labor Code is amended to read:
3701. (a) Each year every private self-insuring employer shall
secure incurred liabilities for the payment of compensation and the
performance of the obligations of employers imposed under this
chapter by renewing the prior year's security deposit or by making a
new deposit of security. If a new deposit is made, it shall be posted
within 60 days of the filing of the self-insured employer's annual
report with the director, but in no event later than May 1.
(b) The solvency risk and security deposit amount for each
stand-alone self-insured employer shall be acceptable to the
Self-Insurers' Security Fund.
(c) Unless otherwise permitted by regulation, the deposit shall be
an amount equal to the self-insurer's projected losses, net of
specific excess insurance coverage, if any, and inclusive of incurred
but not reported (IBNR) liabilities, allocated loss adjustment
expense, and unallocated loss adjustment expense, calculated as of
December 31 of each year. The calculation of projected losses and
expenses shall be reflected in a written actuarial report that
projects ultimate liabilities of the private self-insured employer at
the expected actuarial confidence level, to ensure that all claims
and associated costs are recognized. The written actuarial report
shall be prepared by an actuary meeting the qualifications prescribed
by the director in regulation.
(d) In determining the amount of the deposit required to secure
incurred liabilities for the payment of compensation and the
performance of obligations of a self-insured employer imposed under
this chapter, the director shall offset estimated future liabilities
for the same claims covered by a self-insured plan under the federal
Longshore and Harbor Workers' Compensation Act (33 U.S.C. Sec. 901 et
seq.), but in no event shall the offset exceed the estimated future
liabilities for the claims under this chapter.
(e) The director may only accept as security, and the employer
shall deposit as security, cash, securities, surety bonds, or
irrevocable letters of credit in any combination the director, in his
or her discretion, deems adequate security. The current deposit
shall include any amounts covered by terminated surety bonds or
excess insurance policies, as shall be set forth in regulations
adopted by the director pursuant to Section 3702.10.
(f) Surety bonds, irrevocable letters of credit, and documents
showing issuance of any irrevocable letter of credit shall be
deposited with, and be in a form approved by, the director, shall be
exonerated only according to its terms and, in no event, by the
posting of additional security.
(g) The director may accept as security a joint security deposit
that secures an employer's obligation under this chapter and that
also secures that employer's obligations under the federal Longshore
and Harbor Workers' Compensation Act.
(h) The liability of the Self-Insurers' Security Fund and the SIG
Fund, with respect to any claims brought under both this chapter and
under the federal Longshore and Harbor Workers' Compensation Act, to
pay for shortfalls in a security deposit shall be limited to the
amount of claim liability owing the employee under this chapter
offset by the amount of any claim liability owing under the federal
Longshore and Harbor Workers' Compensation Act, but in no event shall
the liability of the fund exceed the claim liability under this
chapter. The employee shall be entitled to pursue recovery under
either or both the state and federal programs.
(i) Securities shall be deposited on behalf of the director by the
self-insured employer with the Treasurer. Securities shall be
accepted by the Treasurer for deposit and shall be withdrawn only
upon written order of the director.
(j) Cash shall be deposited in a financial institution approved by
the director, and in the account assigned to the director. Cash
shall be withdrawn only upon written order of the director.
(k) Upon the sending by the director of a request to renew,
request to post, or request to increase or decrease a security
deposit, a perfected security interest is created in the private
self-insured's assets in favor of the director and, in the case of a
stand-alone self-insured employer the Self-Insurers' Security Fund,
or in the case of a SIG the SIG Fund, to the extent of any then
unsecured portion of the self-insured's incurred liabilities. That
perfected security interest is transferred to any cash or securities
thereafter posted by the private self-insured with the director and
is released only upon either of the following:
(1) The acceptance by the director of a surety bond or irrevocable
letter of credit for the full amount of the incurred liabilities for
the payment of compensation.
(2) The return of cash or securities by the director.
(l) The private self-insured employer loses all right, title, and
interest in, and any right to control, all assets or obligations
posted or left on deposit as security. The director may liquidate the
deposit as provided in Section 3701.5 and apply it to the
self-insured employer's incurred liabilities either directly or
through the Self-Insurers' Security Fund or through the SIG Fund.
(m) The solvency risk and security deposit amount for each SIG
shall be acceptable to the SIG Fund.
SEC. 3. Section 3701.3 of the Labor Code is amended to read:
3701.3. The director shall return to a private self-insured
employer all individual security determined, with the consent of the
Self-Insurers' Security Fund (SISF) in the case of a stand-alone
self-insured employer or the consent of the SIG Fund in the case of a
SIG, to be in excess of that needed to assure the administration of
the employer's self insuring, including legal fees, and the payment
of any future claims. This section shall not apply to any security
posted as part of the SISF alternate composite deposit, the SIG
alternate composite deposit, or to any security turned over to the
Self-Insurers' Security Fund or the SIG Fund following an order of
default under Section 3701.5.
SEC. 4. Section 3701.5 of the Labor Code is amended to read:
3701.5. (a) If the director determines that a private
self-insured employer has failed to pay workers' compensation as
required by this division, the security deposit shall be utilized to
administer and pay the employer's compensation obligations.
(b) If the director determines the security deposit has not been
immediately made available for the payment of compensation, the
director shall determine the method of payment and claims
administration as appropriate, which may include, but is not limited
to, payment by a surety that issued the bond, or payment by an issuer
of an irrevocable letter of credit, and administration by a surety
or by an adjusting agency, through the Self-Insurers' Security Fund,
or the SIG Fund, or any combination thereof. If the director arranges
for administration and payment by any person other than the
Self-Insurers' Security Fund or the SIG Fund after a default is
declared, the fund and the SIG Fund shall have no responsibility for
claims administration or payment of the claims.
(c) (1) If the director determines the payment of benefits and
claims administration shall be made through either the Self-Insurers'
Security Fund or the SIG Fund, the fund shall commence payment of
the private self-insured employer's obligations for which it is
liable under Section 3743 within 30 days of notification. Payments
shall be made to claimants whose entitlement to benefits can be
ascertained by the fund or the SIG Fund, with or without proceedings
before the appeals board. Upon the assumption of obligations by the
fund or the SIG Fund pursuant to the director's determination, the
fund or the SIG Fund shall have a right to immediate possession of
any posted security and the custodian, surety, or issuer of any
irrevocable letter of credit shall turn over the security to the fund
or the SIG Fund together with the interest that has accrued since
the date of the self-insured employer's default or insolvency.
(2) The director shall promptly audit a self-insured employer upon
making a determination under subdivision (a) or (b). The employer,
any excess insurer, and any adjusting agency shall provide any
relevant information in their possession. If the audit results in a
preliminary estimate that liabilities exceed the amount of the
security deposit, the director shall direct the custodian of the
security deposit to liquidate it and provide all proceeds to the
Self-Insurers' Security Fund in the case of a stand-alone
self-insurer or the SIG Fund in the case of a SIG. If the preliminary
estimate is that liabilities are less than the security deposit, the
director shall ensure the administration and payment of compensation
pursuant to subdivision (b).
(d) The payment of benefits by the Self-Insurers' Security Fund or
the SIG Fund from security deposit proceeds shall release and
discharge any custodian of the security deposit, surety, any issuer
of a letter of credit, and the self-insured employer, from liability
to fulfill obligations to provide those same benefits as
compensation, but does not release any person from any liability to
the fund for full reimbursement. Payment by a surety constitutes a
full release of the surety's liability under the bond to the extent
of that payment, and entitles the surety to full reimbursement by the
principal or his or her estate. Full reimbursement includes
necessary attorney fees and other costs and expenses, without prior
claim or proceedings on the part of the injured employee or other
beneficiaries. Any decision or determination made, or any settlement
approved, by the director or by the appeals board under subdivision
(f) shall conclusively be presumed valid and binding as to any and
all known claims arising out of the underlying dispute, unless an
appeal is made within the time limit specified in Section 5950.
(e) The director shall advise the Self-Insurers' Security Fund or
the SIG Fund promptly after receipt of information indicating that a
private self-insured employer may be unable to meet its compensation
obligations. The director shall also advise the Self-Insurers'
Security Fund or the SIG Fund of all determinations and directives
made or issued pursuant to this section. All financial, actuarial, or
claims information received by the director from any self-insurer
may be shared by the director with the Self-Insurers' Security Fund
and the SIG Fund.
(f) Disputes concerning the posting, renewal, termination,
exoneration, or return of all or any portion of the security deposit,
or any liability arising out of the posting or failure to post
security, or adequacy of the security or reasonableness of
administrative costs, including legal fees, and arising between or
among a surety, the issuer of an agreement of assumption and
guarantee of workers' compensation liabilities, the issuer of a
letter of credit, any custodian of the security deposit, a
self-insured employer, the Self-Insurers' Security Fund, or the SIG
Fund shall be resolved by the director. An appeal from the director's
decision or determination may be taken to the appropriate superior
court by petition for writ of mandate. Payment of claims from the
security deposit or by the Self-Insurers' Security Fund shall not be
stayed pending the resolution of the disputes unless and until the
superior court issues a determination staying a payment of claims
decision or determination of the director.
SEC. 5. Section 3701.7 of the Labor Code is amended to read:
3701.7. Where any employer requesting coverage under a new or
existing certificate of consent to self-insure has had a period of
unlawful uninsurance, either for an applicant in its entirety or for
a subsidiary or member of a joint powers authority legally
responsible for its own workers' compensation obligations, the
following special conditions shall apply before the director may
determine if the requesting employer can operate under a certificate
of consent to self-insure:
(a) The director may require a deposit of not less than 200
percent of the outstanding liabilities remaining unpaid at the time
of application, which had been incurred during the uninsurance
period.
(b) At the discretion of the director, where a public or private
employer has been previously totally uninsured for workers'
compensation pursuant to Section 3700, the director may require an
additional deposit not to exceed 100 percent of the total outstanding
liabilities for the uninsured period, or the sum of two hundred
fifty thousand dollars ($250,000), whichever is greater.
(c) In addition to the deposits required by subdivisions (a) and
(b), a penalty shall be paid to the Uninsured Employers Fund of 10
percent per year of the remaining unpaid liabilities, for every year
liabilities remain outstanding. In addition, an additional
application fee, not to exceed one thousand dollars ($1,000), plus
assessments, pursuant to Section 3702.5 and subdivision (b) of
Section 3745, may be imposed by the director and the Self-Insurers'
Security Fund against a stand-alone self-insured employer, or the
director and the SIG Fund against a SIG.
(d) A certificate of consent to self-insure shall not be granted
to an applicant that has had a period of unlawful uninsurance without
the written approval of the Self-Insurers' Security Fund in the case
of a self-insured stand-alone employer or the SIG Fund in the case
of a SIG.
(e) An employer may retrospectively insure the outstanding
liabilities arising out of the uninsured period, either before or
after an application for self-insurance has been approved. Upon proof
of insurance acceptable to the director, no deposit shall be
required for the period of uninsurance.
The penalties to be paid to the Uninsured Employers Fund shall
consist of a one-time payment of 20 percent of the outstanding
liabilities for the period of uninsurance remaining unpaid at the
time of application, in lieu of any other penalty for being
unlawfully uninsured pursuant to this code.
(f) In the case of a subsidiary which meets all of the following
conditions, a certificate shall issue without penalty:
(1) The subsidiary has never had a certificate revoked for reasons
set forth in Section 3702.
(2) Employee injuries were reported to the Office of
Self-Insurance Plans in annual reports.
(3) The security deposit of the certificate holder was calculated
to include the entity's compensation liabilities.
(4) Application for a separate certificate or corrected
certificate is made within 90 days and completed within 180 days of
notice from the Office of Self-Insurance Plans. If the requirements
of this subdivision are not met, all penalties pursuant to
subdivision (b) of Section 3702.9 shall apply.
(g) The director may approve an application on the date the
application is substantially completed, subject to completion
requirements, and may make the certificate effective on an earlier
date, covering a period of uninsurance, if the employer complies with
the requirements of this section.
(h) Any decision by the director may be contested by an entity in
the manner provided in Section 3701.5.
(i) Nothing in this section shall abrogate the right of an
employee to bring an action against an uninsured employer pursuant to
Section 3706.
(j) Nothing in this statute shall abrogate the right of a
self-insured employer to insure against known or unknown claims
arising out of the self-insurance period.
SEC. 6. Section 3701.8 of the Labor Code is amended to read:
3701.8. (a) As an alternative to each private self-insuring
employer securing its own incurred liabilities as provided in Section
3701, the director may provide by regulation for an alternative
security system whereby all stand-alone self-insured employers
designated for full participation by the director shall collectively
secure their aggregate incurred liabilities through the Self-Insurers'
Security Fund, which shall be known as the SISF Alternate Composite
Deposit Program. The regulations shall provide for the director to
set a total security requirement for these participating stand-alone
self-insured employers in the SISF Alternate Composite Deposit
Program based on a review of their annual reports and any other
self-insurer information as may be specified by the director. The
Self-Insurers' Security Fund shall propose to the director a
combination of cash and securities, surety bonds, irrevocable letters
of credit, insurance, or other financial instruments or guarantees
satisfactory to the director sufficient to meet the security
requirement set by the director. Upon approval by the director and
posting by the Self-Insurers' Security Fund on or before the date set
by the director, that combination shall be the SISF alternate
composite deposit. The noncash elements of the SISF Alternate
Composite Deposit Program may be one-year or multiple-year
instruments. If the Self-Insurers' Security Fund fails to post the
required composite deposit by the date set by the director, then
within 30 days after that date, each private stand-alone
self-insuring employer shall secure its incurred liabilities in the
manner required by Section 3701. Self-insured employers not
designated for full participation by the director shall meet all
requirements as may be set by the director pursuant to subdivision
(g).
(b) In order to provide for the SISF alternate composite deposit
approved by the director, the Self-Insurers' Security Fund shall
assess, in a manner approved by the director, each fully
participating private stand-alone self-insuring employer a deposit
assessment payable within 30 days of assessment. The amount of the
deposit assessment charged each fully participating stand-alone
self-insured employer shall be set by the Self-Insurers' Security
Fund, based on its reasonable consideration of all the following
factors:
(1) The total amount needed to provide the SISF alternate
composite deposit.
(2) The stand-alone self-insuring employer's paid or incurred
liabilities as reflected in its annual report.
(3) The financial strength and creditworthiness of the stand-alone
self-insured.
(4) Any other reasonable factors as may be authorized by
regulation.
(5) In order to make a SISF alternate composite deposit proposal
to the director and set the deposit assessment to be charged each
fully participating stand-alone self-insured, the Self-Insurers'
Security Fund shall have access to the annual reports and other
information submitted by all stand-alone self-insuring employers to
the director, under terms and conditions as may be set by the
director, to preserve the confidentiality of the stand-alone
self-insured's financial information.
(c) Upon payment of the deposit assessment and except as provided
herein, the stand-alone self-insuring employer loses all right,
title, and interest in the deposit assessment. To the extent that in
any one year the deposit assessment paid by stand-alone self-insurers
is not exhausted in the purchase of securities, surety bonds,
irrevocable letters of credit, insurance, or other financial
instruments to post with the director as part of the SISF alternate
composite deposit, the surplus shall remain posted with the director,
and the principal and interest earned on that surplus shall remain
as part of the SISF alternate composite deposit in subsequent years.
In the event that in any one year the Self-Insurers' Security Fund
fails to post the required SISF alternate composite deposit by the
date set the by the director, and the director requires each private
SISF alternate self-insuring employer to secure its incurred
liabilities in the manner required by Section 3701, then any deposit
assessment paid in that year shall be refunded to the stand-alone
self-insuring employer that paid the deposit assessment.
(d) If any private stand-alone self-insuring employer objects to
the calculation, posting, or any other aspect of its deposit
assessment, upon payment of the assessment in the time provided, the
employer shall have the right to appeal the assessment to the
director, who shall have exclusive jurisdiction over this dispute. If
any private stand-alone self-insuring employer fails to pay the
deposit assessment in the time provided, the director shall order the
stand-alone self-insuring employer to pay a penalty of not less than
10 percent of its deposit assessment, plus interest on any unpaid
amount at the prejudgment rate, and to post a separate security
deposit in the manner provided by Section 3701. The penalty and
interest shall be paid directly to the Self-Insurers' Security Fund.
The director may also revoke the certificate of consent to
self-insure of any stand-alone self-insuring employer who fails to
pay the deposit assessment in the time provided.
(e) Upon the posting by the Self-Insurers' Security Fund of the
SISF alternate composite deposit with the director, the deposit shall
be held until the director determines that a private stand-alone
self-insured employer has failed to pay workers' compensation as
required by this division, and the director orders the Self-Insurers'
Security Fund to commence payment. Upon ordering the Self-Insurers'
Security Fund to commence payment, the director shall make available
to the fund that portion of the SISF alternate composite deposit
necessary to pay the workers' compensation benefits of the defaulting
stand-alone self-insuring employer. In the event additional funds
are needed in subsequent years to pay the workers' compensation
benefits of any self-insuring employer who defaulted in earlier
years, the director shall make available to the Self-Insurers'
Security Fund any portions of the SISF alternate composite deposit as
may be needed to pay those benefits. In making the deposit available
to the Self-Insurers' Security Fund, the director shall also allow
any amounts as may be reasonably necessary to pay for the
administrative and other activities of the fund.
(f) The cash portion of the SISF alternate composite deposit shall
be segregated from all other funds held by the director, and shall
be invested by the director for the sole benefit of the Self-Insurers'
Security Fund and the injured workers of private self-insured
employers, and may not be used for any other purpose by the state.
Alternatively, the director, in his discretion, may allow the
Self-Insurers' Security Fund to hold, invest, and draw upon the cash
portion of the SISF alternate composite deposit as prescribed by
regulation.
(g) Notwithstanding any other provision of this section, the
director shall, by regulation, set minimum credit, financial, or
other conditions that a stand-alone self-insured must meet in order
to be a fully participating stand-alone self-insurer in the SISF
Alternate Composite Deposit Program. In the event any stand-alone
self-insuring employer is unable to meet the conditions set by the
director, or upon application of the Self-Insurers' Security Fund to
exclude an employer for credit or financial reasons, the director
shall exclude the stand-alone self-insuring employer from full
participation in the SISF Alternate Composite Deposit Program. In the
event a stand-alone self-insuring employer is excluded from full
participation, the nonfully participating stand-alone self-insuring
employer shall post a separate security deposit in the manner
provided by Section 3701 and pay a deposit assessment set by the
director. Alternatively, the director may order that the nonfully
participating stand-alone self-insuring employer post a separate
security deposit to secure a portion of its incurred liabilities and
pay a deposit assessment set by the director.
(h) An employer whose certificate to self-insure has been revoked
may fully participate in the alternative security system if both the
director and the Self-Insurers' Security Fund approve the
participation of the self-insurer. If not approved for full
participation, or if an employer is issued a certificate to
self-insure after the composite deposit is posted, the employer shall
satisfy the requirements of subdivision (g) for nonfully
participating private self-insurers.
(i) At all times, a self-insured employer shall have secured its
incurred workers' compensation liabilities either in the manner
required by Section 3701
or through the SISF Alternate Composite Deposit Program or the SIG
Alternate Composite Deposit Program, and there shall not be any lapse
in the security.
SEC. 7. Section 3701.85 is added to the Labor Code, to read:
3701.85. (a) As an alternative to each private SIG securing its
own incurred liabilities as provided in Section 3701, the director
may provide by regulation for an alternative security system whereby
all private SIGs designated for full participation by the director
shall collectively secure their aggregate incurred liabilities
through the Self-Insured Group Security Fund, which shall be known as
the "SIG Alternate Composite Deposit Program." The regulations shall
provide for the director to set a total security requirement for
these participating SIGs in the SIG Alternate Composite Deposit
Program based on a review of their annual reports and any other
self-insurer information as may be specified by the director.
The Self-Insured Group Security Fund shall propose to the
director a combination of cash and securities, surety bonds,
irrevocable letters of credit, insurance, or other financial
instruments or guarantees satisfactory to the director sufficient to
meet the security requirement set by the director. Upon
Unless otherwise permitted by regulation, the deposit shall be
an amount equal to the self-insurer's project losses, net of specific
excess insurance coverage, if any, and inclusive of incurred but not
reported (IBNR) liabilities, allocated loss adjustment expense, and
unallocated loss adjustment expense, calculated as of December 31 of
each year. The calculation of projected losses and expenses shall be
reflected in a written actuarial report that projects ultimate
liabilities of the private self-insured employer at the expected
actuarial confidence level, to ensure that all claims and associated
costs are recognized. The written actuarial report shall be prepared
by an actuary meeting the qualifications prescribed by the
director in regulation.
(b) The director may only accept as
security, and the employer shall deposit as security, cash,
securities, surety bonds, or irrevocable letters of credit in any
combination the director, in his or her discretion, deems adequate
security. The current deposit shall include any amounts covered by
terminated surety bonds or excess insurance policies, as shall be set
forth in regulations by the director pursuant to Section 3702.10.
Upon approvalby the director and posting by the Self-Insured
Group Security Fund on or before the date set by the director, that
combination shall be the SIG Alternate Composite Deposit. The noncash
elements of the SIG Alternate Composite Deposit Program may be
one-year or multiple-year instruments. If the Self-Insured Group
Security Fund fails to post the required composite deposit by the
date set by the director, then within 30 days after that date, each
private SIG shall secure its incurred liabilities in the manner
required by Section 3701. Self-insured SIGs not designated for full
participation by the director shall meet all requirements as may be
set by the director pursuant to subdivision (g)
(h) .
(b)
(c) In order to provide for the SIG alternate composite
deposit approved by the director, the Self-Insured Group Security
Fund shall assess, in a manner approved by the director, each fully
participating private SIG a deposit assessment payable within 30 days
of assessment. The amount of the deposit assessment charged each
fully participating SIG shall be set by the Self-Insured Group
Security Fund based on its reasonable consideration of all the
following factors:
(1) The total amount needed to provide the SIG alternate composite
deposit.
(2) The SIG's paid or incurred liabilities as reflected in its
annual report.
(3) The financial strength and creditworthiness of the SIG.
(4) Any other reasonable factors as may be authorized by
regulation.
(5) In order to make a SIG alternate composite deposit proposal to
the director and set the deposit assessment to be charged each fully
participating SIG, the Self-Insured Group Security Fund shall have
access to the annual reports and other information submitted by all
SIGs to the director, under terms and conditions as may be set by the
director, to preserve the confidentiality of the SIG's financial
information.
(c)
(d) Upon payment of the deposit assessment and except
as provided herein, the SIG loses all right, title, and interest in
the deposit assessment. To the extent that in any one year the
deposit assessment paid by SIGs is not exhausted in the purchase of
securities, surety bonds, irrevocable letters of credit, insurance,
or other financial instruments to post with the director as part of
the SIG alternate composite deposit, the surplus shall remain posted
with the director, and the principal and interest earned on that
surplus shall remain as part of the SIG alternate composite deposit
in subsequent years. In the event that in any one year the
Self-Insured Group Security Fund fails to post the required SIG
alternate composite deposit by the date set the by the director, and
the director requires each private SIG to secure its incurred
liabilities in the manner required by Section 3701, then any deposit
assessment paid in that year shall be refunded to the SIG that paid
the deposit assessment.
(d)
(e) If any private SIG objects to the calculation,
posting, or any other aspect of its deposit assessment, upon payment
of the assessment in the time provided, the employer shall have the
right to appeal the assessment to the director, who shall have
exclusive jurisdiction over this dispute. If any private SIG fails to
pay the deposit assessment in the time provided, the director shall
order the SIG to pay a penalty of not less than 10 percent of its
deposit assessment, plus interest on any unpaid amount at the
prejudgment rate, and to post a separate security deposit in the
manner provided by Section 3701. The penalty and interest shall be
paid directly to the Self-Insured Group Security Fund. The director
may also revoke the certificate of consent to self-insure of any SIG
who fails to pay the deposit assessment in the time provided.
(e)
(f) Upon the posting by the Self-Insured Group Security
Fund of the SIG alternate composite deposit with the director, the
deposit shall be held until the director determines that a private
SIG has failed to pay workers' compensation as required by this
division, and the director orders the Self-Insured Group Security
Fund to commence payment. Upon ordering the Self-Insured Group
Security Fund to commence payment, the director shall make available
to the fund that portion of the SIG alternate composite deposit
necessary to pay the workers' compensation benefits of the defaulting
SIG. In the event additional funds are needed in subsequent years to
pay the workers' compensation benefits of any self-insuring employer
who defaulted in earlier years, the director shall make available to
the Self-Insured Group Security Fund any portions of the SIG
alternate composite deposit as may be needed to pay those benefits.
In making the deposit available to the Self-Insured Group Security
Fund, the director shall also allow any amounts as may be reasonably
necessary to pay for the administrative and other activities of the
fund.
(f)
(g) The cash portion of the SIG alternate composite
deposit shall be segregated from all other funds held by the
director, and shall be invested by the director for the sole benefit
of the Self-Insured Group Security Fund and the injured workers of
self-insured employers, and may not be used for any other purpose by
the state. Alternatively, the director, in his discretion, may allow
the Self-Insured Group Security Fund to hold, invest, and draw upon
the cash portion of the SIG alternate composite deposit as prescribed
by regulation.
(g)
(h) Notwithstanding any other provision of this
section, the director shall, by regulation, set minimum credit,
financial, or other conditions that a private SIG must meet in order
to be a fully participating SIG in the SIG Alternate Composite
Deposit Program. In the event any private SIG is unable to meet the
conditions set by the director, or upon application of the
Self-Insured Group Security Fund to exclude an employer for credit or
financial reasons, the director shall exclude the SIG from full
participation in the SIG Alternate Composite Deposit Program. In the
event a SIG is excluded from full participation, the nonfully
participating private SIG shall post a separate security deposit in
the manner provided by Section 3701 and pay a deposit assessment set
by the director. Alternatively, the director may order that the
nonfully participating private SIG post a separate security deposit
to secure a portion of its incurred liabilities and pay a deposit
assessment set by the director.
(h)
(i) An employer whose certificate to self-insure has
been revoked may fully participate in the alternative security system
if both the director and the Self-Insured Group Security Fund
approve the participation of the self-insurer. If not approved for
full participation, or if an employer is issued a certificate to
self-insure after the composite deposit is posted, the employer shall
satisfy the requirements of subdivision (g)
(h) for nonfully participating private self-insurers.
(i)
(j) At all times, a self-insured employer shall have
secured its incurred workers' compensation liabilities either in the
manner required by Section 3701, through the SISF Alternate Composite
Deposit Program or through the SIG Alternate Composite Deposit
Program, and there shall not be any lapse in the security.
SEC. 8. Section 3702 of the Labor Code is amended to read:
3702. (a) A certificate of consent to self-insure may be revoked
by the director at any time for good cause after a hearing. Good
cause includes, among other things, a recommendation by the
Self-Insurers' Security Fund to revoke the certificate of consent, a
recommendation by the SIG Fund to revoke the certificate of consent,
the impairment of the solvency of the employer to the extent that
there is a marked reduction of the employer's financial strength,
failure to maintain a security deposit as required by Section 3701,
failure to pay assessments of the Self-Insurers' Security Fund or the
SIG Fund, frequent or flagrant violations of state safety and health
orders, the failure or inability of the employer to fulfill his or
her obligations, or any of the following practices by the employer or
his or her agent in charge of the administration of obligations
under this division:
(1) Habitually and as a matter of practice and custom inducing
claimants for compensation to accept less than the compensation due
or making it necessary for them to resort to proceedings against the
employer to secure compensation due.
(2) Where liability for temporary disability indemnity is not in
dispute, intentionally failing to pay temporary disability indemnity
without good cause in order to influence the amount of permanent
disability benefits due.
(3) Intentionally refusing to comply with known and legally
indisputable compensation obligations.
(4) Discharging or administering his or her compensation
obligations in a dishonest manner.
(5) Discharging or administering his or her compensation
obligations in such a manner as to cause injury to the public or
those dealing with the employer.
(b) Where revocation is in part based upon the director's finding
of a marked reduction of the employer's financial strength or the
failure or inability of the employer to fulfill his or her
obligations, or a practice of discharging obligations in a dishonest
manner, it is a condition precedent to the employer's challenge or
appeal of the revocation that the employer have in effect insurance
against liability to pay compensation.
(c) The director may hold a hearing to determine whether good
cause exists to revoke an employer's certificate of consent to
self-insure if the employer is cited for a willful, or repeat serious
violation of the standard adopted pursuant to Section 6401.7 and the
citation has become final.
SEC. 9. Section 3702.5 of the Labor Code is amended to read:
3702.5. (a) (1) The cost of administration of the public
self-insured program by the Director of Industrial Relations shall be
borne by the Workers' Compensation Administration Revolving Fund.
(2) The cost of administration of the private self-insured program
by the Director of Industrial Relations shall be borne by the
private self-insurers through payment of certificate fees which shall
be established by the director in broad ranges based on the
comparative numbers of employees insured by the private self-insurers
and the number of adjusting locations. The director may assess other
fees as necessary to cover the costs of special audits or services
rendered to private self-insured employers. The director may assess a
civil penalty for late filing as set forth in subdivision (a) of
Section 3702.9.
(b) All revenues from fees and penalties paid by private
self-insured employers shall be deposited into the Self-Insurance
Plans Fund, which is hereby created for the administration of the
private self-insurance program. Any unencumbered balance in
subdivision (a) of Item 8350-001-001 of the Budget Act of 1983 shall
be transferred to the Self-Insurance Plans Fund. The director shall
annually eliminate any unused surplus in the Self-Insurance Plans
Fund by reducing certificate fee assessments by an appropriate amount
in the subsequent year. Moneys paid into the Self-Insurance Plans
Fund for administration of the private self-insured program shall not
be used by any other department or agency or for any purpose other
than administration of the private self-insurance program. Detailed
accountability shall be maintained by the director for any security
deposit or other funds held in trust for the Self-Insurer's Security
Fund and the SIG Fund in the Self-Insurance Plans Fund.
(c) Moneys held by the director shall be invested in the Surplus
Money Investment Fund. Interest shall be paid on all moneys
transferred to the General Fund in accordance with Section 16310 of
the Government Code. The Treasurer's and Controller's administrative
costs may be charged to the interest earnings upon approval of the
director.
SEC. 10. Section 3702.8 of the Labor Code is amended to read:
3702.8. (a) Employers who have ceased to be self-insured
employers shall discharge their continuing obligations to secure the
payment of workers' compensation that accrued during the period of
self-insurance, for purposes of Sections 3700, 3700.5, 3706, and
3715, and shall comply with all of the following obligations of
current certificate holders:
(1) Filing annual reports as deemed necessary by the director to
carry out the requirements of this chapter.
(2) In the case of a private employer, depositing and maintaining
a security deposit for accrued liability for the payment of any
workers' compensation that may become due, pursuant to subdivision
(b) of Section 3700 and Section 3701, except as provided in
subdivision (c).
(3) Paying within 30 days all assessments of which notice is sent,
pursuant to subdivision (b) of Section 3745, within 36 months from
the last day the employer's certificate of self-insurance was in
effect. Assessments shall be based on the benefits paid by the
employer during the last full calendar year of self-insurance on
claims incurred during that year.
(b) In addition to proceedings to establish liabilities and
penalties otherwise provided, a failure to comply may be the subject
of a proceeding before the director. An appeal from the director's
determination shall be taken to the appropriate superior court by
petition for writ of mandate.
(c) Notwithstanding subdivision (a), any employer who is currently
self-insured or who has ceased to be self-insured may purchase a
special excess workers' compensation policy to discharge any or all
of the employer's continuing obligations as a self-insurer to pay
compensation or to secure the payment of compensation.
(1) The special excess workers' compensation insurance policy
shall be issued by an insurer authorized to transact workers'
compensation insurance in this state.
(2) Each carrier's special excess workers' compensation policy
shall be approved as to form and substance by the Insurance
Commissioner, and rates for special excess workers' compensation
insurance shall be subject to the filing requirements set forth in
Section 11735 of the Insurance Code.
(3) Each special excess workers' compensation insurance policy
shall be submitted by the employer to the director. The director
shall adopt and publish minimum insurer financial rating standards
for companies issuing special excess workers' compensation policies.
(4) Upon acceptance by the director, a special excess workers'
compensation policy shall provide coverage for all or any portion of
the purchasing employer's claims for compensation arising out of
injuries occurring during the period the employer was self-insured in
accordance with Sections 3755, 3756, and 3757 of the Labor Code and
Sections 11651 and 11654 of the Insurance Code. The director's
acceptance shall discharge the Self-Insurer's Security Fund in the
case of a stand-alone self-insurer, or the SIG Fund in the case of a
SIG, without recourse or liability to the Self-Insurer's Security
Fund or the SIG Fund, of any continuing liability for the claims
covered by the special excess workers' compensation insurance policy.
(5) For public employers, no security deposit or financial
guarantee bond or other security shall be required. The director
shall set minimum financial rating standards for insurers issuing
special excess workers' compensation policies for public employers.
(d) (1) In order for the special excess workers' compensation
insurance policy to discharge the full obligations of a private
employer to maintain a security deposit with the director for the
payment of self-insured claims, applicable to the period to be
covered by the policy, the special excess policy shall provide
coverage for all claims for compensation arising out of that
liability. The employer shall maintain the required deposit for the
period covered by the policy with the director for a period of three
years after the issuance date of the special excess policy.
(2) If the special workers' compensation insurance policy does not
provide coverage for all of the continuing obligations for which the
private self-insured employer is liable, to the extent the employer'
s obligations are not covered by the policy a private employer shall
maintain the required deposit with the director. In addition, the
employer shall maintain with the director the required deposit for
the period covered by the policy for a period of three years after
the issuance date of the special excess policy.
(e) The director shall adopt regulations pursuant to Section
3702.10 that are reasonably necessary to implement this section in
order to reasonably protect injured workers, employers, the
Self-Insurers' Security Fund, the SIG Fund, and the California
Insurance Guarantee Association.
(f) The posting of a special excess workers' compensation
insurance policy with the director shall discharge the obligation of
the Self-Insurer's Security Fund pursuant to Section 3744 to pay
claims in the event of an insolvency of a private employer to the
extent of coverage of compensation liabilities under the special
excess workers' compensation insurance policy. The California
Insurance Guarantee Association, the Self-Insurers' Security Fund, or
the SIG Fund, as appropriate, shall be advised by the director
whenever a special excess workers' compensation insurance policy is
posted.
SEC. 11. Section 3702.10 of the Labor Code is amended to read:
3702.10. The director, in accordance with Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code, may adopt, amend, and repeal rules and regulations
reasonably necessary to carry out the purposes of Section 129 and
Article 1 (commencing with Section 3700), Article 2 (commencing with
Section 3710), and Article 2.5 (commencing with Section 3740). This
authorization includes, but is not limited to, the adoption of
regulations to do all of the following:
(a) Specifying what constitutes ability to self-insure and to pay
any compensation which may become due under Section 3700.
(b) Specifying what constitutes a marked reduction of an employer'
s financial strength.
(c) Specifying what constitutes a failure or inability to fulfill
the employer's obligations under Section 3702.
(d) Interpreting and defining the terms used.
(e) Establishing procedures and standards for hearing and
determinations, and providing for those determinations to be appealed
to the appeals board.
(f) Specifying the standards, form, and content of agreements,
forms, and reports between parties who have obligations pursuant to
this chapter.
(g) Providing for the combinations and relative liabilities of
security deposits, assumptions, and guarantees used pursuant to this
chapter.
(h) Disclosing otherwise confidential financial information
concerning self-insureds to the court, the Self-Insurers' Security
Fund, or the SIG Fund, and specifying appropriate safeguards for that
information.
(i) Requiring an amount to be added to each security deposit to
secure the cost of administration of claims and to pay all legal
costs.
(j) Regulating the workers' compensation self-insurance
obligations of self-insurance groups and professional employer
organizations, leasing employers as defined in Section 606.5 of the
Unemployment Insurance Code, or temporary services employers, as
defined in Section 606.5 of the Unemployment Insurance Code, holding
certificates of consent to self-insure.
SEC. 12. Section 3740 of the Labor Code is amended and renumbered
to read:
3740.5. It is the intent of the Legislature in enacting this
article and Article 1 (commencing with Section 3700) to provide for
the continuation of workers' compensation benefits delayed due to the
failure of a private stand-alone self-insured employer or a SIG to
meet its compensation obligations when the employers' security
deposit is either inadequate or not immediately accessible for the
payment of benefits. With respect to the continued liability of a
surety for claims that arose under a bond after termination of that
bond and to a surety's liability for the cost of administration of
claims, it is the intent of the Legislature to clarify existing law.
The Legislature finds and declares that the establishment of two
security funds, the Self-Insurers' Security Fund for stand-alone
self-insured employers and the Self-Insured Group Security Fund for
groups of self-insured employers is a necessary component of a
complete system of workers' compensation, required by Section 4 of
Article XIV of the California Constitution, to have adequate
provisions for the comfort, health and safety, and general welfare of
any and all workers and their dependents to the extent of relieving
the consequences of any industrial injury or death, and full
provision for securing the payment of compensation.
SEC. 13. Section 3740 is added to the Labor Code, to read:
3740. The Legislature finds and declares as follows:
(a) A Self-Insured Group is a nonprofit mutual benefit corporation
whose members have transferred their primary workers' compensation
liabilities to the SIG.
(b) Group self-insurance is different from stand-alone
self-insurance because group self-insurance involves the transfer of
the primary risk of an occurrence from one entity to another.
(c) Members of SIG are jointly and severally liable for the
amounts required to pay the workers' compensation liabilities of all
the members of the group, and they may be assessed to cover any
shortfall in the group even if their own experience is loss free, a
scenario sometimes called "last man standing."
(d) SIGs have the potential to serve the interests of California
employers and employees by promptly providing workers' compensation
benefits to injured workers at reasonable cost while enabling and
encouraging employers to improve safety and provide the earliest
appropriate return to work for injured employees.
(e) Smaller employers may generally receive the benefits of
self-insurance only through membership in a SIG because SIG members
do not have to prove their capacity to individually pay their
liabilities.
(f) SIGs have become an integral part of California's workers'
compensation system, providing coverage for more than 4,500
employers, 350,000 employees, and $4.8 billion in payroll.
(g) The expansion and increased availability of group
self-insurance will further stabilize and facilitate the funding of
workers' compensation benefits.
(h) SIGs involve a lower risk of default than individual
self-insurance because there is recourse to the members of the SIG
for the recovery of assessments to pay unfunded workers' compensation
liabilities.
(i) A separate security fund will allow different risk pools for
SIGs and stand-alone self-insured employers.
(j) Providing a separate security fund for SIGs will facilitate
the development of distinct techniques for assessing and responding
to the risks that SIGs bring to their security fund.
(k) The pooling of risk among SIGs in a separate security fund
will have the salutary effect of promoting higher standards for SIGs
because each SIG will have a stronger interest in assuring the
financial integrity of all SIGs.
SEC. 14. Section 3741 of the Labor Code is amended to read:
3741. As used in this article:
(a) "Director" means the Director of Industrial Relations.
(b) "Fund" means the Self-Insurers' Security Fund established
pursuant to Section 3742.
(c) "Fund member" means a stand-alone self-insured employer which
participates in the Self-Insurers' Security Fund.
(d) "Fund trustees" means the Board of Trustees of the
Self-Insurers' Security Fund.
(e) "Insolvent SIG" means a SIG whose certificate of consent to
self-insure has been revoked by the director, or who has failed to
pay compensation, or whose security deposit has been called by the
director pursuant to Section 3701.5.
(f) "Insolvent self-insurer" means a
stand-alone self-insurer whose certificate of consent to self-insure
has been revoked by the director, or who has failed to pay
compensation, or whose security deposit has been called by the
director pursuant to Section 3701.5.
(g) "Private self-insurer" and "private self-insured employer"
mean any employer that has been issued a certificate of consent to
self-insure by the director, whether as a stand-alone self-insured
employer or as a member of a SIG and has secured the payment of
compensation pursuant to subdivision (b) of Section 3700.
(h) "SIG" means a nonprofit mutual benefit corporation to which a
group of private self-insured employers have transferred primary
liability for their workers' compensation obligations and have
secured the payment of compensation pursuant to subdivision (b) of
Section 3700.
(i) "SIG Fund" means the Self-Insured Group Security Fund
established pursuant to Section 3742.5.
(j) "SIG Fund member" means a SIG which participates in the SIG
Fund.
(k) "SIG Fund trustees" means the Board of Trustees of the SIG
Fund.
(l) "Stand-alone self-insured employer" and "stand-alone
self-insured" mean a private employer that retains primary liability
for its own worker's compensation obligations, whether alone or in
connection with guarantors, and has secured the payment of
compensation pursuant to subdivision (b) of Section 3700.
SEC. 15. Section 3742 of the Labor Code is amended to read:
3742. (a) The Self-Insurers' Security Fund shall be established
as a Nonprofit Mutual Benefit Corporation pursuant to Part 3
(commencing with Section 7110) of Division 2 of Title 1 of the
Corporations Code and this article. If any provision of the Nonprofit
Mutual Benefit Corporation Law conflicts with any provision of this
article, the provisions of this article shall apply. Each stand-alone
self-insured employer shall participate as a member in the fund,
unless its liabilities have been turned over to the fund pursuant to
Section 3701.5, at which time its membership in the fund is
relinquished.
(b) The fund shall be governed by a board of trustees with no more
than eight members, as established by the bylaws of the
Self-Insurers' Security Fund. The director shall hold ex officio
status, with full powers equal to those of a trustee, except that the
director shall not have a vote. The director, or a delegate
authorized in writing to act as the director's representative on the
board of trustees, shall carry out exclusively the responsibilities
set forth in Division 1 (commencing with Section 50) through Division
4 (commencing with Section 3200) and shall not have the obligations
of a trustee under the Nonprofit Mutual Benefit Corporation Law. The
fund shall adopt bylaws to segregate the director from all matters
that may involve fund litigation against the department or fund
participation in legal proceedings before the director. Although not
voting, the director or a delegate authorized in writing to represent
the director, shall be counted toward a quorum of trustees. The
remaining trustees shall be representatives of private self-insurers.
The self-insurer trustees shall be elected by the members of the
fund, each member having one vote. Trustees shall be elected to
four-year terms, and shall serve until their successors are elected
and assume office pursuant to the bylaws of the fund.
(c) The fund shall establish bylaws as are necessary to effectuate
the purposes of this article and to carry out the responsibilities
of the fund, including, but not limited to, any obligations imposed
by the director pursuant to Section 3701.8. The fund may carry out
its responsibilities directly or by contract, and may purchase
services and insurance and borrow funds as it deems necessary for the
protection of the members and their employees. The fund may receive
confidential information concerning the financial condition of
self-insured employers whose liabilities to pay compensation may
devolve upon it and shall adopt bylaws to prevent dissemination of
that information.
(d) The director may also require fund members to subscribe to
financial instruments or guarantees to be posted with the director in
order to satisfy the security requirements set by the director
pursuant to Section 3701.8.
SEC. 16. Section 3742.5 is added to the Labor Code, to read:
3742.5. (a) The Self-Insured Group Security Fund shall be
established as a Nonprofit Mutual Benefit Corporation pursuant to
Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the
Corporations Code and this article. If any provision of the
Nonprofit Mutual Benefit Corporation Law conflicts with any provision
of this article, the provisions of this article shall apply. Each
SIG shall participate as a member in the SIG Fund as a condition of
maintaining its certificate of consent to self-insure.
(b) The SIG Fund shall be governed by a seven-member board of
trustees and shall include the director ex officio, with full powers
equal to those of a trustee, except that the director shall not have
a vote. The director, or a delegate authorized in writing to act as
the director's representative on the board of trustees, shall carry
out exclusively the responsibilities set forth in Division 1
(commencing with Section 50) through Division 4 (commencing with
Section 3200), inclusive, and shall not have the obligations of a
trustee under the Nonprofit Mutual Benefit Corporation Law. The SIG
Fund shall adopt bylaws to segregate the director from all matters
that may involve SIG Fund litigation against the department or SIG
Fund participation in legal proceedings before the director. Although
not voting, the director or a delegate authorized in writing to
represent the director, shall be counted toward a quorum of trustees.
Three of the remaining six trustees shall be representatives
selected from individual SIG boards of trustees and three shall be
representatives of SIG administrators. The six trustees shall be
elected by the SIG Fund members, each SIG Fund member having one
vote. The three SIG Fund trustees selected from the SIG boards and
initially elected by the members shall serve two-year terms, and the
three SIG administrator SIG Fund trustees shall serve four-year
terms. Thereafter, SIG Fund trustees selected from SIG boards shall
be elected to two-year terms, and the SIG Fund trustees selected from
the SIG administrators shall be elected to four-year terms and shall
serve until their successors are elected and assume office pursuant
to the bylaws of the SIG Fund.
(c) The SIG Fund shall establish bylaws as are necessary to
effectuate the purposes of this article and to carry out the
responsibilities of the SIG Fund, including, but not limited to, any
obligations imposed by the director pursuant to Section 3701.8. The
SIG Fund may carry out its responsibilities directly or by contract,
and may purchase services and insurance and borrow funds as it deems
necessary for the protection of the SIG Fund members and their
employees. The SIG Fund may receive confidential information
concerning the financial condition of self-insured employers whose
liabilities to pay compensation may devolve upon it and shall adopt
bylaws to prevent dissemination of that information.
(d) The director may also require SIG Fund members to subscribe to
financial instruments or guarantees to be posted with the director
in order to satisfy the security requirements set by the director
pursuant to Section 3701.8.
SEC. 17. Section 3743 of the Labor Code is amended to read:
3743. (a) Upon order of the director pursuant to Section 3701.5,
the fund shall assume the workers' compensation obligations of an
insolvent self-insurer.
(b) Notwithstanding subdivision (a), the fund shall not be liable
for the payment of any penalties assessed for any act or omission on
the part of any person other than the fund, including, but not
limited to, the penalties provided in Section 132a, 3706, 4553, 4554,
4556, 4557, 4558, 4601.5, 5814, or 5814.1.
(c) The fund shall be a party in interest in all proceedings
involving compensation claims against an insolvent self-insurer whose
compensation obligations have been paid or assumed by the fund. The
fund shall have the same rights and defenses as the insolvent
self-insurer, including, but not limited to, all of the following:
(1) To appear, defend, and appeal claims.
(2) To receive notice of, investigate, adjust, compromise, settle,
and pay claims.
(3) To investigate, handle, and deny claims.
(d) This section shall remain in effect only until July 1, 2014,
and as of that date is repealed, unless a later enacted statute, that
is enacted before July 1, 2014, deletes or extends that date.
SEC. 18. Section 3743 is added to the Labor Code, to read:
3743. (a) Upon order of the director pursuant to Section 3701.5,
the fund shall assume the workers' compensation obligations of an
insolvent stand-alone self-insurer.
(b) Upon order of the director pursuant to Section 3701.5, the SIG
Fund shall assume the workers' compensation obligations of an
insolvent SIG.
(c) Notwithstanding subdivision (a), neither the fund nor the SIG
Fund shall be liable for the payment of any penalties assessed for
any act or omission on the part of any person other than the fund or
the SIG Fund, respectively, including, but not limited to, the
penalties provided in Section 132a, 3706, 4553, 4554, 4556, 4557,
4558, 4601.5, 5814, or 5814.1.
(d) The fund shall be a party in interest in all proceedings
involving compensation claims against an insolvent stand-alone
self-insurer whose compensation obligations have been paid or assumed
by the fund. The fund shall have the same rights and defenses as the
insolvent self-insurer, including, but not limited to, all of the
following:
(1) To appear, defend, and appeal claims.
(2) To receive notice of, investigate, adjust, compromise, settle,
and pay claims.
(3) To investigate, handle, and deny claims.
(e) The SIG Fund shall be a party in interest in all proceedings
involving compensation claims against an insolvent self-insured group
whose compensation obligations have been paid or assumed by the SIG
Fund. The SIG Fund shall have the same rights and defenses as the
insolvent self-insurer, including, but not limited to, all of the
following:
(1) To appear, defend, and appeal claims.
(2) To receive notice of, investigate, adjust, compromise, settle,
and pay claims.
(3) To investigate, handle, and deny claims.
(f) The Self-Insurer's Security Fund shall retain the workers'
compensation obligations for every self-insured employer and SIG that
either became insolvent, or was issued a notice of intent to revoke
its certificate of consent to self-insure by the director, before
July 1, 2014.
(g) This section shall become operative on July 1, 2014.
SEC. 19. Section 3744 of the Labor Code is amended to read:
3744. (a) (1) The fund shall have the right and obligation to
obtain reimbursement from an insolvent stand-alone self-insurer up to
the amount of the self-insurer's workers' compensation obligations
paid and assumed by the fund, including reasonable administrative and
legal costs. This right includes, but is not limited to, a right to
claim for wages and other necessities of life advanced to claimants
as subrogee of the claimants in any action to collect against the
self-insured as debtor. For purposes of this section, "insolvent
stand-alone self-insurer" includes the entity to which the
certificate of consent to self-insure was issued, any guarantor of
the entity's liabilities under the certificate, any member of a
self-insurance group to which the certificate was issued, and any
employer who obtained employees from a self-insured employer under
subdivision (d) of Section 3602.
(2) The Legislature finds and declares that the amendments made to
this subdivision by the act adding this paragraph are declaratory of
existing law.
(b) The SIG Fund shall have the right and obligation to obtain
reimbursement from every member of the insolvent SIG, jointly and
severally, up to the amount of the self-insurer's workers'
compensation obligations paid and assumed by the SIG Fund, including
reasonable administrative and legal costs. This right includes, but
is not limited to, a right to claim for wages and other necessities
of life advanced to claimants as subrogee of the claimants in any
action to collect against the self-insured as debtor.
(c) The fund shall have the right and obligation to obtain from
the security deposit of an insolvent stand-alone self-insurer the
amount of the self-insurer's compensation obligations, including
reasonable administrative and legal costs, paid or assumed by the
fund. Reimbursement of administrative costs, including legal costs,
shall be subject to approval by a majority vote of the fund's
trustees. The fund shall be a party in interest in any action to
obtain the security deposit for the payment of compensation
obligations of an insolvent stand-alone self-insurer.
(d) The SIG Fund shall have the right and obligation to obtain
from the security deposit of an insolvent SIG the amount of the SIG's
compensation obligations, including reasonable administrative and
legal costs, paid or assumed by the SIG Fund. Reimbursement of
administrative costs, including legal costs, shall be subject to
approval by a majority vote of the SIG Fund's trustees. The SIG Fund
shall be a party in interest in any action to obtain the security
deposit for the payment of compensation obligations of an insolvent
self-insurer.
(e) The fund shall have the right to bring an action against any
person to recover compensation paid and liability assumed by the
fund, including, but not limited to, any excess insurance carrier of
the self-insured employer, and any person whose negligence or breach
of any obligation contributed to any underestimation of the
stand-alone self-insured employer's total accrued liability as
reported to the director.
(f) The SIG Fund shall have the right to bring an action against
any person to recover compensation paid and liability assumed by the
SIG Fund, including, but not limited to, any excess insurance carrier
of the self-insured employer, and any person whose negligence or
breach of any obligation contributed to any underestimation of the
SIG's total accrued liability as reported to the director.
(g) The fund may be a party in interest in any action brought by
any other person seeking damages resulting from the failure of an
insolvent stand-alone self-insurer to pay workers' compensation
required pursuant to this division.
(h) The SIG Fund may be a party in interest in any action brought
by any other person seeking damages resulting from the failure of an
insolvent SIG to pay workers' compensation required pursuant to this
division.
(i) At the election of the Self-Insurers' Security Fund, venue
shall be in the Superior Court for the State of California, County of
Sacramento, for any action under this section. All actions in which
the Self-Insurers' Security Fund and two or more members or former
members of one self-insurance group are parties shall be consolidated
if requested by the Self-Insurers' Security Fund.
(j) At the election of the SIG Security Fund, venue shall be in
the Superior Court for the State of California, County of Sacramento,
for any action under this section. All actions in which the SIG
Security Fund and two or more members or former members of one
self-insurance group are parties shall be consolidated if requested
by the SIG Security Fund.
SEC. 20. Section 3745 of the Labor Code is amended to read:
3745. (a) The fund and the SIG Fund shall each maintain cash,
readily marketable securities, or other assets, or a line of credit,
approved by the director, sufficient to immediately continue the
payment of the compensation obligations of an insolvent stand-alone
self-insurer or insolvent SIG pending assessment of the members. The
director may establish the minimum amount to be maintained by, or
immediately available to, the fund for this purpose.
(b) The fund may assess each of its members a pro rata share of
the funding necessary to carry out the purposes of this article.
Funds obtained by assessments pursuant to this subdivision may only
be used for the purposes of this article.
(c) The SIG Fund may assess each of its members a pro rata share
of the funding necessary to carry out its obligations and the
purposes of this article. However, no member shall be assessed at one
time in excess of 1.5 percent of the benefits paid by the member for
claims incurred during the previous calendar year as a self-insurer,
and total annual assessments in any calendar year shall not exceed 2
percent of the benefits paid for claims incurred during the previous
calendar year. Funds obtained by assessments pursuant to this
subdivision may only be used for the purposes of this article.
(d) The fund trustees shall certify to the director the collection
and receipt of all moneys from assessments, noting any
delinquencies. The fund trustees shall take any action deemed
appropriate to collect any delinquent assessments.
(e) The SIG Fund trustees shall certify to the director the
collection and receipt of all moneys from assessments, noting any
delinquencies. The SIG Fund trustees shall take any action deemed
appropriate to collect any delinquent assessments.
(f) All initial assessments payable to the SIG Fund shall be due
and payable by May 1, 2014.
SEC. 21. Section 3746 of the Labor Code is amended to read:
3746. (a) The fund shall annually contract for an independent
certified audit of the financial activities of the fund. An annual
report on the financial status of the fund as of June 30 shall be
submitted to the director and to each member, or at the election of
the fund, posted on the fund's Internet Web site.
(b) The SIG Fund trustees shall annually contract for an
independent certified audit of the financial activities of the SIG
Fund. An annual report on the financial status of the SIG Fund as of
June 30 shall be submitted to the director and to each SIG Fund
member.
