Judge’s Key Ruling Favors CDI in Trial Concerning Regulatory Authority over State Fund

December 14, 2004

In an important development Dec. 13, Judge Paul Alvarado issued a tentative ruling affirming that the State Compensation Insurance Fund (State Fund) is subject to the Department of Insurance’s authority under the state’s Risk Based Capital (RBC) statute. In May, 2003, State Fund sued the Department in San Francisco Superior Court, contending among other things that it was not subject to RBC laws. Monday’s ruling ensures that the Department can continue to scrutinize and regulate State Fund’s financial condition and operations. Commissioner Garamendi commented on Judge Alvarado’s ruling:

“This decision by Judge Alvarado is good news for the businesses of California. The Department’s authority to regulate State Fund under the RBC statute is critical to maintaining a healthy and effective State Fund. As the market leader, with nearly 60 percent of all workers’ compensation insurance business in California, it is essential that State Fund achieve a level of health that allows it to pass on the reform savings. The Department’s use of the RBC tool, which the judge’s tentative ruling affirms, allows it to conduct important analysis of the financial condition and operating efficiency of State Fund, and to direct corrective action when necessary. Today, the judge’s decision clarifies that State Fund, like all other insurers, is subject to the law and the regulation of the Department of Insurance.”

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