Insurance Commissioner Sues California|To Stop $1 Billion Raid on Workers Comp

     SACRAMENTO (CN) – California’s insurance commissioner has sued the state to prevent a $1 billion raid on the fund that pays claims to injured workers. Gov. Arnold Schwarzenegger wants to use the money to close the state’s yawning budget deficit.

     In his Superior Court complaint, Insurance Commissioner Steve Poizner said the proposed sale of assets from the State Compensation Insurance Fund would be an “improper diversion of money from the state’s Worker’s Compensation system,” in violation of the California Constitution.
     Poizner said the money grab would lead to skyrocketing workers’ compensation costs for the 175,000 businesses for whom it serves as the insurer of last resort.
     Poizner also says the sale – which was approved by the Legislature and endorsed by Schwarzenegger in July – violates Proposition 103, because its enabling legislation transfers powers from Poizner to state Finance Director Michael Genest.
     Passed in 1988, Proposition 103 put oversight of the fund in the hands of an elected insurance commissioner, rather than a gubernatorial appointee, who might be subject to pressure from the governor.
     Poizner seeks an injunction to block the sale of the assets and their transfer to the general fund, a second injunction to block the transfer of power from his office to the finance director, and a declaration that the enabling legislation for both actions is invalid.
     The state has estimated the Insurance Fund is worth $20 billion, with more than $5 billion of it reserves.
     In published reports, several state officials said the proposed sale of $1 billion of those assets would go a long way toward resolving California’s budget crisis, and still leave the fund with plenty of money.
     But Poizner insists the state constitution requires the Legislature to enact “appropriate legislation” to establish a “complete system of workers’ compensation.”
     ABX4 12, the enabling legislation that was part of the state’s July budget revision, is not “appropriate legislation,” Poizner says.
     Poizner claims the sale would “irreparably injure the (insurance fund), its hundreds of thousands of policyholders and the public,” because it would violate the fund’s 96-year mandate to be a self-supporting entity, and force the fund to raise its premiums to stay afloat.
     Poizner is represented by Steven Mayer with Howard Rice & Nemerovski.

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