California fund pays over $11 million in defaulted workers' comp claims
SAN FRANCISCO - California
Department of Industrial Relations Director Stephen J. Smith ordered the state's
Self Insurers' Security Fund to take over payment of HomeBase, Inc. and San
Francisco French Bread Company workers' compensation claims, following the bankruptcies
of both companies and subsequent default on more than 600 self insured claims.
On Nov. 13 the San Francisco French
Bread Company was turned over to the Self Insurers' Security Fund following
its Oct. 24 default to pay its nearly 100 workers' compensation claims estimated
at approximately $2 million. On Oct. 24 its workers' compensation insurance
carrier, Reliance, had been declared insolvent by the state of Pennsylvania
and ordered to discontinue payment on the claims.
While Labor Code Section 3702.8 does permit a self insured employer to sell off their workers' compensation claims to a carrier, it must be done by a Special Excess Workers' Compensation Insurance Policy. San Francisco French Bread Company chose to sell off the liabilities without entering into this type of policy, thereby retaining liability for its claims.
On Nov. 19 Director Smith ordered
the Self Insurers' Security Fund to take over payment of HomeBase, Inc. workers'
compensation liability resulting from the company's default on its claims. HomeBase,
Inc., operators of 42 House2Home home decorating superstores throughout California,
filed a Chapter 11 bankruptcy petition Nov. 7, 2001. The company is liquidating
all its stores. HomeBase self insured its workers' compensation claims in California
and currently has about 500 claims being handled by Gallagher Bassett. Liabilities
were estimated at approximately $9.1 million.
The Security Fund is a private,
nonprofit mutual benefit corporation that guarantees the payment of all self
insured workers' compensation claims in California. The state has one of the
largest workers' compensation self insurance programs in the nation. Employers
choose to self insure their workers' compensation liabilities on behalf of their
employees for reasons of cost effectiveness, greater control over their claims
program, and increased safety incentives with improved loss control results.
For more information on self insurance, visit www.dir.ca.gov/SIP/sip.html