Judge Expected To Rule State Compensation Insurance Fund Subject to Same Requirements as Other Insurers
San Francisco Superior Court Judge Paul Alvarado said he will rule that the State Compensation Insurance Fund must comply with the same financial standards as other insurers, according to Insurance Commissioner John Garamendi (D), the Sacramento Bee reports. Garamendi on Monday said Alvarado made his intention known in a meeting with attorneys. However, a final ruling has not been entered on the matter, and Alvarado has until Jan. 7 -- when the ruling is scheduled for release -- to reconsider (Chan, Sacramento Bee, 12/14).
State Fund in May 2003 filed a lawsuit against Garamendi and his agency alleging that the state was illegally regulating the fund. Garamendi had ordered State Fund to refuse to provide insurance to some employers, to change premiums that he determined and to change its business practices. Also at issue was a state regulation requiring all insurers to maintain at least $1 in reserves for every $3 in premiums to cover claims losses and provide a financial cushion. Because of recent growth, State Fund's 2002 surplus of $1.8 billion was only about half of what the state requires.
A preliminary injunction that would have barred the Department of Insurance from regulating the fund's finances was denied in August 2003 (California Healthline, 8/6/03).
Alvarado's decision "clarifies that State Fund, like all other insurers, is subject to the law and the regulation of the Department of Insurance," Garamendi said in a statement.
State Fund spokesperson Jim Zelinski said the company is reviewing the matter (Sacramento Bee, 12/14).