Self Insured Mess In California
The California Workers Comp self insured situation should be considered a total mess. I was reading an article at www.wcexec.com on the recent collapse The Contractors Access Program of California (CAP), a self insured group of contractors, is scheduled to be seized by California’s Office of Self Insurance Plans.
The complicating factor is that members of self insured groups are jointly and severally liable for each other’s claims and for the claims of the group. The 200 plus mostly small employers in this group will be liable for a reserves shortfall through a special assessment of the members for as much as $12M to $60M. Past members are on the hook for the years during which they participated. I find it fascinating that members that are now not participating can be assessed.
Liberty had held the bond, but cancelled it earlier this year. There is a $15.7 million bond in place for the prior years. The bond figure would only cover a small portion when compared to the size of the self insurance group and the liabilities in place.
Not to throw salt in the wound, but agents that recommended participation in the group can also be liable? It was noted that the agents’ E&O excludes self insurance plan recommendations for their clients. I do not think that blaming agents in necessarily a great thing.
I have received the question very often – why do I mention a state on the west coast when we are on the east coast – what happens elsewhere may not apply to me. As I have said often, what happens in a certain state, especially CA, will be coming to state near you. For example, in our home state of North Carolina, there was a similar situation with a company called GRIT (Government Reinsurance Insurance Trust). They went under and the governmental entities were stuck with their own claims. One of my good friends working for a certain carrier said boxes and boxes of files were brought in by a semi truck to their offices when they agreed to handle them.
Everything in insurance repeats itself over and over, with a slight twist.