Califorina Workers Compensaton Self Insured Group Failure

Written by on 11/19/2010 5:16 AM . It has 0 Comments.

California Workers comp is in a state of up roar.  As it is every 4-5 years.  In CA there has always been failures in these cycles.  In fact on my book case here in my office I have an entire book on the CA Workers Compensation Mess…   

California Workers Compensation Fears? Call GDI 888-991-2929

The issue with Self Insured Groups is that most require a business owner to sign a Joint and Several Liability clause which makes every member of the group responsible for the losses of the group!

 As you see below… the first California workers compensation company to fail is a self insured group, and the members have reason to be concerned.  They didn’t just lose their insurance!

 We have good options that are fully insured and less expensive!  I always tell my clients to make sure they want to "make this bet" and gamble.  Especially with worker compensation in CA....  I have always wondered why anyone would pay more for a self insured group, assume the liability associated with it, for a chance of a small dividend? 

My fear has always been that the insurance sales person puts to much empysis on the potential money gain, and doesnt really explain what joint and several liability means...  Why bet your business?

California's self-insured group (SIG) industry suffered its first official failure yesterday when Department of Industrial Relations director John Duncan declared the Contractors Access Program of California (CAP) in default due to insufficient funds. The workers' comp SIG had less than half of the funding required by the state and efforts to correct the deficit by collecting from members who are jointly and severally liable, have been unsuccessful.

 With the declaration of default, DIR transferred responsibility for benefit payments for injured workers to the Self-Insurers' Security Fund (SISF). Duncan said he understood the seriousness of the action for CAP's member employers, but maintains it was necessary after remedial actions failed to correct a deficit that exceeds 50% of the group's required funding. He noted that member employers will be addressed "fairly and equitably."

 The group's daily operations have been under the control of Bickmore Risk Services since May when DIR wrested control of the SIG from New York-based Compensation Risk Managers (CRM), which now operates as Majestic Capital. While SISF now has responsibility for claims payment it also has access to the group's remaining assets and security deposit. Additionally, efforts to recoup additional funds from the group's member employers are expected to continue.

 The full scope of the members' financial liability has not been made public, but DIR says that it had less than 50% of the funding required by state law. A lawsuit filed by 11 members of the group against CRM and brokers is seeking tens of millions of dollars in damages to help off-set their joint and several liability that's estimated to be in excess of $20 million.


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