Article 1 - Organization and Powers

California Insurance Code — §§ 11770-11805

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Sections (34)

Amended by Stats. 2012, Ch. 46, Sec. 76. (SB 1038) Effective June 27, 2012.

(a)The State Compensation Insurance Fund is continued in existence, to be administered by its board of directors for the purpose of transacting workers’ compensation insurance, and insurance against the expense of defending any suit for serious and willful misconduct, against an employer or his or her agent, and insurance to employees and other persons of the compensation fixed by the workers’ compensation laws for employees and their dependents. Any appropriation made therefrom or thereto before the effective date of this code shall continue to be available for the purposes for which it was made.

(b)(1) The Board of Directors of the State Compensation

Insurance Fund is composed of 11 members, nine of whom shall be appointed by the Governor. The Governor shall appoint the chairperson. One of the members appointed by the Governor shall be from organized labor. The members appointed by the Governor, other than the labor member, shall have substantial experience in positions involving workers’ compensation, legal, investment, financial, corporate governance and management, accounting, or auditing responsibilities with entities of sufficient size as to make their qualifications relevant to an enterprise of the financial and operational size of the State Compensation Insurance Fund. At all times the board shall have a member with auditing background for the purposes of fulfilling the responsibility of the chair of the audit committee. A quorum is a majority of those appointed, provided that at no time shall a quorum be established with fewer than five members.

(2)The Speaker of the Assembly shall

appoint one member who shall represent organized labor, and the Senate Committee on Rules shall appoint one member who shall have been a policyholder of the State Compensation Insurance Fund, or an officer or employee of a policyholder, for one year immediately preceding the appointment, and must continue in this status during the period of his or her membership.

(3)The Director of Industrial Relations shall be an ex officio, nonvoting member of the board, and shall not be counted as members of the board for quorum purposes or any other purpose.

(4)Notwithstanding subdivision (c), the initial term of the members of the board added in the 2008 portion of the 2007–08 Regular Session shall be as follows:

(A)One of the members appointed by the Governor shall serve an initial term of two years, one shall serve an

initial term of four years, and two shall serve an initial term of five years.

(B)The member appointed by the Senate Committee on Rules shall serve an initial term of four years.

(C)The member appointed by the Speaker of the Assembly shall serve an initial term of three years.

(c)The term of office of the members of the board, other than that of the director, shall be five years and they shall hold office until the appointment and qualification of their successors.

(d)(1) Each member of the board shall receive his or her actual and necessary traveling expenses incurred in the performance of his or her duties as a member and, with the exception of the ex officio members, one hundred dollars ($100) for each day of his or her

actual attendance at meetings of the board.

(2)(A) Each member of the board appointed pursuant to paragraphs (1) and (2) of subdivision (b) shall receive the compensation fixed pursuant to subparagraph (B).

(B)Each board member described in subparagraph (A) shall be paid an annual compensation of fifty thousand dollars ($50,000), to be automatically adjusted beginning January 1, 2010, by multiplying the compensation in effect the prior June 30 by the percentage of inflation that occurred during the previous year, adding this amount to the annual compensation from the previous year, and rounding off the result to the nearest dollar. “Percentage of inflation” means the percentage of inflation specified in the Consumer Price Index for All Urban Consumers, as published by the Department of Industrial Relations, or its successor index.

(e)Each member of the board of directors shall attend training approved by the board of directors that covers topics, including, but not limited to, the duties and obligations of members of a board of directors, corporate governance, ethics, board of director legal issues, insurance, finance and investment, and information technology. The training shall be conducted by persons or entities not affiliated with the State Compensation Insurance Fund.

(f)No person who has had a direct or indirect interest in any transaction with the State Compensation Insurance Fund since the beginning of the last fiscal year of the fund, or who has a direct or indirect material interest in any proposed transaction with the fund, where the amount involved in the transaction exceeds one hundred twenty thousand dollars ($120,000) shall be eligible for appointment as a member of the board of directors of

the fund. Once appointed, no member of the board of directors shall have a financial conflict of interest, as defined in Chapter 7 of Title 9 (commencing with Section 87100) of the Government Code, and every member shall be subject to Article 4 (commencing with Section 1090) of Chapter 1 of Division 4 of Title 1 of the Government Code, provided that the existence of a contract of insurance between the State Compensation Insurance Fund and the policyholder member appointed by the Senate Committee on Rules shall not constitute a conflict of interest pursuant to this subdivision. For purposes of board actions affecting generally applicable rates, a member of the board of directors shall not be deemed to have a financial interest, as defined in Article 4 (commencing with Section 1090) of Chapter 1 of Division 4 of Title 1 of, or pursuant to Chapter 7 (commencing with Section 87100) of Title 9 of, the Government Code, in a contract of insurance between the State Compensation Insurance Fund and an organization of

which any member of the board of directors is an owner, officer, or employee.

(g)The appointing authority of a member of the board may remove the member and make an appointment replacing the member for the duration of the term if the member ceases to discharge the duties of his or her office for the period of three consecutive board meetings.

(h)The board of the State Compensation Insurance Fund shall create, at a minimum, an audit committee, an investment committee, a corporate governance committee, and other committees as the board determines are necessary.

§ 11771

Enacted by Stats. 1935, Ch. 145.

The State shall not be liable beyond the assets of the State Compensation Insurance Fund for any obligations in connection therewith.

§ 11771.5

Added by Stats. 2002, Ch. 6, Sec. 8. Effective January 1, 2003.

Any advertising of the State Compensation Insurance Fund shall include the following disclaimer: “The State Compensation Insurance Fund is not a branch of the State of California.”

§ 11772

Amended by Stats. 1945, Ch. 1431.

There shall not be any liability in a private capacity on the part of the board of directors or any member thereof, or any officer or employee of the fund for or on account of any act performed or obligation entered into in an official capacity, when done in good faith, without intent to defraud and in connection with the administration, management or conduct of the fund or affairs relating thereto.

§ 11773

Amended by Stats. 1979, Ch. 738.

The fund shall be organized as a public enterprise fund.

§ 11774

Enacted by Stats. 1935, Ch. 145.

The assets of the fund shall be applicable to the payment of losses sustained on account of insurance and to the payment of the salaries and other expenses charged against it in accordance with the provisions of this chapter.

§ 11775

Enacted by Stats. 1935, Ch. 145.

The fund shall, after a reasonable time during which it may establish a business, be fairly competitive with other insurers, and it is the intent of the Legislature that the fund shall ultimately become neither more nor less than self-supporting. For that purpose loss experience and expense shall be ascertained and dividends or credits may be made as provided in this article.

§ 11776

Enacted by Stats. 1935, Ch. 145.

The actual loss experience and expense of the fund shall be ascertained on or about the first of January in each year for the year preceding. If it is then shown that there exists an excess of assets over liabilities, necessary reserves, and a reasonable surplus for the catastrophe hazard, then a cash dividend may be declared to, or a credit allowed on the renewal premium of, each employer who has been insured with the fund.

§ 11777

Amended by Stats. 1947, Ch. 520.

Such cash dividend or credit is to be in an amount which the board of directors in its discretion considers to be the employer’s proportion of divisible surplus.

§ 11778

Amended by Stats. 2006, Ch. 740, Sec. 13.1. Effective January 1, 2007.

The fund may transact workers’ compensation insurance required or authorized by law of this state to the same extent as any other insurer. The fund shall be subject to the powers and authority of the commissioner to the same extent as any other insurer transacting workers’ compensation insurance, except where specifically exempted by reference. For purposes of Section 700, the fund shall be deemed admitted to transact this class of insurance.

§ 11779

Repealed and added by Stats. 1978, Ch. 507.

The fund may insure California employers against their liability for compensation or damages for injury or death under the United States Longshoremen’s and Harbor Workers’ Compensation Act, or other federal or maritime laws, as fully as any private insurer.

§ 11780

Amended by Stats. 1981, Ch. 714, Sec. 306.

The fund may also insure an employer against his or her liability for damages under the laws of the State of California arising out of bodily injury to or death of the employer’s employees occurring within the State of California if the fund also issues workers’ compensation insurance to the employer as to his or her employees.

§ 11780.5

Amended by Stats. 2016, Ch. 206, Sec. 1. (AB 2887) Effective January 1, 2017.

(a)The fund may also insure a California employer against his or her liability for workers’ compensation benefits, under the law of any other state, for California employees temporarily working outside of California on a specific assignment if the fund insures the employer’s other employees who work within California.

(b)(1) The fund is only authorized under this subdivision to insure an employer whose principal place of business is in California, provided the majority of the employer’s operations and employees are located within California, against his or her liability for workers’ compensation benefits, under the law of any other state, if the fund insures the employer’s employees who work within

California.

(2)The fund is only authorized pursuant to this subdivision to contract as a reinsurer with a ceding insurer that has responded to a request for proposal from the fund and is admitted to transact workers’ compensation insurance in California and in the out-of-state jurisdiction where the non-California employees are located. The fund may only contract for purposes of this subdivision if the ceding insurer meets all of the following criteria:

(A)The insurer has an A minus (A-) rating or better from A.M. Best Company.

(B)The insurer has substantial prior experience in transacting workers’ compensation business on another insurer’s behalf.

(C)The insurer has a minimum surplus of one hundred million dollars ($100,000,000).

(c)The fund shall not initiate paid advertising or solicit sponsorship of advertising campaigns to market or promote to prospective insureds the ability to insure qualified employers under the law of any other state.

§ 11781

Amended by Stats. 1945, Ch. 1431.

The board of directors is hereby vested with full power, authority and jurisdiction over the State Compensation Insurance Fund. The board of directors may perform all acts necessary or convenient in the exercise of any power, authority or jurisdiction over the fund, either in the administration thereof or in connection with the insurance business to be carried on by it under the provisions of this chapter, as fully and completely as the governing body of a private insurance carrier. The principal office for the transaction of the business of the State Compensation Insurance Fund is located in the City and County of San Francisco.

§ 11781.5

Added by Stats. 1946, 1st Ex. Sess., Ch. 54.

The State Compensation Insurance Fund may acquire and own real property for a branch office in the City of Los Angeles when so determined by the board of directors, and may, if necessary, construct suitable buildings thereon in accordance with law.

§ 11782

Amended by Stats. 1945, Ch. 1431.

All business and affairs of the fund shall be conducted in the name of the State Compensation Insurance Fund, and in that name, without any other name or title, the board of directors may perform the acts authorized by this chapter.

§ 11783

Amended by Stats. 2002, Ch. 6, Sec. 9. Effective January 1, 2003.

The State Compensation Insurance Fund may:

(a)Sue and be sued in all actions arising out of any act or omission in connection with its business or affairs.

(b)Enter into any contracts or obligations relating to the State Compensation Insurance Fund which are authorized or permitted by law.

(c)Invest and reinvest the moneys belonging to the fund as provided by this chapter.

(d)Conduct all business and affairs and perform all acts relating to the fund whether or not specifically designated in this chapter.

(e)Commission an independent study, with the assistance of an investment banking firm, to determine the feasibility of the State Compensation Insurance Fund issuing bonds or securities. The study may include, among other things, the purpose for issuing bonds and any potential adverse consequences that may arise from that issuance.

§ 11784

Amended by Stats. 2002, Ch. 6, Sec. 10. Effective January 1, 2003.

In conducting the business and affairs of the fund, the president of the fund may do any of the following:

(a)Enter into contracts of workers’ compensation insurance.

(b)Sell annuities covering compensation benefits.

(c)Decline to insure any risk in which the minimum requirements of the industrial accident prevention authorities with regard to construction, equipment, and operation are not complied with, or which is beyond the safe carrying of the fund. Otherwise, he or she shall not refuse to insure any workers’ compensation risk under state law, tendered with the premium therefor.

(d)Reinsure any risk or any part thereof.

(e)Cause to be inspected and audited the payrolls of employers applying to the fund for insurance.

(f)Make rules for the settlement of claims against the fund and determine to whom and through whom the payments of compensation are to be made.

(g)Contract with physicians and surgeons, and hospitals, for medical and surgical treatment and the care and nursing of injured persons entitled to benefits from the fund.

§ 11785

Amended by Stats. 2021, Ch. 615, Sec. 314. (AB 474) Effective January 1, 2022. Operative January 1, 2023, pursuant to Sec. 463 of Stats. 2021, Ch. 615.

(a)The board of directors shall appoint a president, a chief financial officer, a chief operating officer, a chief information technology officer, a chief investment officer, a chief risk officer, a general counsel, a chief medical officer, a chief actuarial officer, a chief claims operations officer, and a chief of internal affairs. The board may appoint a chief underwriting officer, a senior vice president of insurance services, an executive vice president of corporate claims, an executive vice president of strategic planning, and a pricing actuary. The board of directors shall set the salary for each position in amounts that are reasonably necessary to attract and retain individuals of superior qualifications. The board shall submit its

salary-setting criteria, including salary surveys, to the Department of Human Resources. These positions shall not be subject to otherwise applicable provisions of the Government Code and the Public Contract Code, and for those purposes the fund shall not be considered a state agency or other public entity. The president shall manage and conduct the business and affairs of the fund under the general direction and subject to the approval of the board of directors, and shall perform other duties as the board of directors prescribes.

(b)Section 87406 of the Government Code, the Milton Marks Postgovernment Employment Restrictions Act of 1990, shall apply to the fund. Members of the board, a person who held a position designated in subdivision (a), and any other person designated by the fund shall be deemed to be designated employees for the purpose

of that act.

(c)Both the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1 of

Division 3 of Title 2 of the Government Code) and the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code) shall apply to the fund.

(d)(1) The board shall, by September 1, 2018, and subsequently on a biennial basis, make a report to the Legislature and to the committees of the Senate and Assembly having jurisdiction over insurance that provides any salary-setting criteria and salary surveys submitted to the Department of Human Resources pursuant to subdivision (a), and the salary and total compensation of each position appointed pursuant to subdivision (a), for the previous two fiscal years.

(2)A report submitted pursuant to this subdivision shall be submitted in compliance with

Section 9795 of the Government Code.

§ 11785.5

Added by Stats. 2011, Ch. 53, Sec. 2. (AB 1263) Effective January 1, 2012.

(a)Notwithstanding any other provision of law to the contrary, the members of the Board of Directors of the State Compensation Insurance Fund and officers of the fund appointed by the board of directors, including, but not limited to, the president, chief financial officer, chief operating officer, chief information technology officer, chief investment officer, chief risk officer, and general counsel, are prohibited from lobbying the fund for two years after leaving employment with the fund.

(b)Notwithstanding any other provision of law to the contrary, any consulting for the fund by former members of the Board of Directors of

the State Compensation Insurance Fund and former officers of the fund appointed by the board of directors, including, but not limited to, the president, chief financial officer, chief operating officer, chief information technology officer, chief investment officer, chief risk officer, and general counsel, shall be approved by the board of directors.

§ 11786