NOTICE IS HEREBY GIVEN that the Department of Industrial Relations, pursuant to rulemaking authority granted by Sections 55 and 3702.10 of the Labor Code, in order to implement and make specific sections 3700 and 3701 of the Labor Code, proposes to amend section 15212, relating to surety bonds.

NO PUBLIC HEARING has been scheduled on this proposed action. However, the Department will hold a hearing if it receives a written request for a public hearing from any interested person, or his or her authorized representative, no later than 15 days before the close of the written comment period.

WRITTEN COMMENT PERIOD: Any interested person, or his or her authorized representative, may submit written comments relevant to the proposed regulatory action to Mark B. Ashcraft, Manager, Self Insurance Plans, 2265 Watt Avenue, Suite 1, Sacramento CA 95825. The written comment period closes at 5:00 p.m. on June 11,2001.

Written comments may also be sent to Mark B. Ashcraft, Manager
Via fax (916)483-3392 or via electronic mail at

Contact Person: Nonsubstantive inquiries concerning this action, such as request for copies of the text of the proposed regulations, may be directed to Becky Swafford at (916) 483-3392 extension 3008. The backup contact person is Tina Freese at (916)483-3392 extension 3012 or email at Inquiries regarding the substance of the proposed regulations may be directed to Mark Ashcraft at (916)483-3392.


Existing Labor Code Section 3701 requires every private self insuring employer to post a security deposit to secure incurred worker's compensation liabilities and requires the security deposit to be cash, securities, surety bonds or irrevocable letters of credit, in any combination.

Existing Section 15212 provides the specific requirements for a surety bond to be an acceptable security deposit.

This proposal would add a requirement that the surety company issuing a surety bond for self insurance worker's compensation liabilities have a financial strength credit rating of A or better with Standard and Poors Insurer Financial Service or a B+ or better with A. M. Best Company.

The proposal would also require replacement of a surety bond security deposit, if the ratings fall below the acceptable levels at any time. Companies that are unrated or are below the acceptable ratings, would not be able to issue a surety bond for a self insured company.

This proposal would provide that Self Insurance Plans only accept surety bonds from admitted surety insurers that have an acceptable credit rating and will require replacement of any bond that is issued by an "insurer' that credit ratings have dropped below the acceptable rating levels.


Costs or Savings To State Agencies
No costs or savings to state agencies will result as a consequence of the proposed action.

Determination of Mandate: The proposed regulatory action will not impose a mandate on local agencies or school districts, or a mandate which requires reimbursement pursuant to part 7 (commencing with Section 17500) of Division 4 of the Government Code because the proposed amendment will not require local agencies or school districts to incur additional costs in complying with the proposal.

Costs or Savings to Local Agencies or School Districts Required to be Reimbursed
No costs to local agencies or school are required to be reimbursed in accordance with Government Code Sections 17500 through 17630.

Other Nondiscretionary Cost Or Savings Imposed On Local Agencies
This proposal does not impose nondiscretionary cost or savings imposed on local agencies.

Cost or Savings in Federal Funding to the State
This proposal will not result in costs or savings in federal funding to the state.

Impact on Housing Costs
The Department of Industrial Relations has made an initial determination that the amendment of this regulation will not have a significant effect on housing costs.

Cost Impact on Representative Private Persons or Businesses:
The department is not aware of any cost impacts that a representative private person or business would necessarily incur in reasonable compliance with the proposed action.

Impact on Business
The Department of Industrial Relations has made an initial determination that the amendment of this regulation will not have a significant, statewide adverse economic impact directly affecting business, including the ability of California business to compete with businesses in other states.


It has been determined that the amendment of these regulations will not affect small business because the regulations only apply to businesses in the Self Insurance Program. The businesses that qualify for the Self Insurance Program are not small businesses as defined by Government Code Section 11342.610. In addition, the insurance carriers affected by this proposal are not small businesses as defined by Government Code Section 11342.610.


The express terms of the proposal written in plain English have been prepared pursuant to Government Code Section 11346.2(a)(1).


Our Department must determine that no reasonable alternative considered by us or that has otherwise been identified and brought to the attention of our department would be more effective in carrying out the purpose for which the action is proposed or would be as effective and less burdensome to affected private persons than the proposed action.


The adoption of the proposed amendments to these regulations will neither create nor eliminate jobs in the State of California nor result in the elimination of existing businesses or create or expand businesses in the State of California.

AVAILABILITY OF INITIAL STATEMENT OF REASONS AND TEXT OF PROPOSED REGULATIONS: A copy of the express terms of the proposed changes in strikeout-underline format and an initial statement of reasons describing the specific purpose and necessity for the proposed regulations is available upon request to the agency representative listed above and may be requested in hardcopy by US Mail or by e-mail at the address above. These documents are also available on the SIP Website at, the SIP Rulemaking Section.

The copy of the final statement of reasons will be prepared after the close of the public comment period. To obtain a copy of the final statement of reasons, contact Tina Freese at the address above. All persons that submit comments, will receive a copy of the final statement of reasons by US Mail, unless otherwise notified. In addition, a copy of the final statement of reasons will be available on the SIP Website at, under the SIP Rulemaking Section.


If modifications are made to the proposed regulations as a result of the public hearing and/or public comments received, the modified text with changes clearly indicated shall be made available to the public for at least 15 days prior to the date on which the Director adopts the regulations.

A copy of this notice will automatically be sent to those persons on the Self Insurance Plans' Public and Private self insurer's mailing list, to all third party administrators and to the Self Insurer's Security Fund and to any persons that have filed a request to be notified of regulatory actions concerning this particular program.

The rulemaking file for the proposed action is open to the public Monday through Friday, from 8:00 a.m. to 5:00 p.m. at the Office of Self Insurance Plans, 2265 Watt Avenue, Suite 1, Sacramento, California.