California Governor Gray Davis has signed a measure that guarantees employers and injured workers will continue to receive workers’ compensation benefits if an insurance carrier becomes insolvent, according to the American Insurance Association (AIA).
“This new law maintains an important backup benefit system for California’s employers and injured workers,” Mark Sektnan, AIA assistant vice president, state affairs, said. “The Department of Insurance has the necessary tools and systems in place to prevent carriers from becoming insolvent; but when that regulatory system fails, we must have an alternative system to protect employers and employees.”
The bill, AB 2007 authored by Assemblyman Tom Calderon (D), will continue the two percent assessment charged to workers’ compensation insurance premiums until 2007. These funds are deposited into the California Insurance Guaranty Fund (CIGA), which pays the outstanding claims of insolvent workers’ compensation carriers. California enacted a measure in 2001 to raise the surcharge from one percent to two percent. This increased surcharge is scheduled to sunset at the end of 2002.
“Most other states already support their guaranty funds with a two percent assessment,” Sektnan remarked. “This measure brings California in line with the rest of the country.”
The State Assembly approved AB 2007 on a vote of 53 to 24 and the state Senate voted 25 to 12 to approve the measure. The new law will take effect Jan. 1, 2003.
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