State Compensation Insurance Fund

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State Fund's current San Francisco home office at 333 Bush Street
State Fund's former San Francisco home office
State Fund's Los Angeles branch office

The State Compensation Insurance Fund (State Fund) is a workers' compensation insurer that was created as a "public enterprise fund" by the U.S. state of California, and today has partial autonomy from the rest of the state government. It is required by state law to maintain its headquarters in San Francisco, but has regional offices all over the state.

State Fund was created by the Boynton Act of 1913, and it started operations in 1914. Around that same time, the voters amended the California Constitution by initiative to strengthen the constitutionality of the state workers' compensation system. This was necessary because American employers during the early 20th century often challenged mandatory workers' compensation statutes as an unconstitutional invasion of freedom of contract, an argument which had strong persuasive force during the Lochner era. State Fund's constitutional basis is found at Article 14, Section 4 of the state constitution:

The Legislature is hereby expressly vested with plenary power, unlimited by any provision of this Constitution, to create, and enforce a complete system of workers' compensation...including the establishment and management of a state compensation insurance fund...

State Fund has over $22 billion in assets[when?] and employs approximately 7,500 people (the number varies based on State Fund's current percentage of the market), of whom over 500 are attorneys. Historically it has insured an average of 23 percent of the market each year since its creation by the Legislature in 1914. Its market share spiked to over 50 percent in years 2002–2004 when a large number of private carriers left the market. In keeping with its mission, State Fund has an open-door policy, writing insurance for California businesses who need workers' compensation insurance. State Fund insures approximately one in five businesses in California. State Fund also serves as a third-party administrator, adjusting claims for almost all of the state agencies.

California is one of 21 states with a competitive state fund in the workers' compensation insurance market.[1] Several state funds serve as insurers of last resort and act as an example for private companies. Nevertheless, to keep them from crowding out private companies, they operate as non-profits and return surplus money to policy-holders after paying off claims and operating costs. Most write only workers' compensation insurance and only in their home state.

As part of a continuing cost-cutting and restructuring plan, State Fund announced on October 6, 2011 plans to lay off approximately 1,800 employees, about a fourth of its workforce.[2] State Fund kept its senior executive team and some parts of the legal and finance departments in San Francisco, but moved them to leased space at 333 Bush Street. To save money, all other administrative and managerial functions were reallocated to regional campuses in Vacaville and Pleasanton which have lower rent and less operating costs.

Notes[edit]

  1. ^ AASCIF explanation of types of state funds.
  2. ^ http://www.latimes.com/business/la-fi-state-fund-layoffs-20111007,0,1293553.story

External links[edit]