ACIC Opposes Guarantee Fund Bill

June 10, 2004

The Association of California Insurance Companies (ACIC) is opposed to legislation that would retroactively make California consumers pay for faltering self-insurance programs instituted by school districts. The bill is pending before the Assembly Insurance Committee.

SB 574, authored by Sen. Dede Alpert (D-San Diego), would make the guarantee fund liable for coverage never envisioned under the law and for which the guarantee fund could not and did not plan, said Jeffrey J. Fuller, vice president and general counsel for ACIC.

“It would be unfair to ask policyholders who purchase insurance from the regulated market to subsidize those who have chosen to self-insure,” Fuller said.

The California Insurance Guarantee Association (CIGA), long established in state law, collects surcharges on insurance policies written in California. The money collected is used to pay claims pending against insolvent insurers.

A number of private and public entities, such as school districts, choose to self-insure rather than buy traditional policies from licensed insurers. Those who self-insure do not pay a surcharge to CIGA. As a result, they are not eligible for CIGA assistance if and when they falter financially.

“Now some California school districts want to change the law so they will obtain guarantee fund coverage retroactively even though they had not purchased workers’ compensation policies subject to the guarantee fund surcharges,” Fuller said.

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