Code Section Group

Labor Code - LAB

DIVISION 4. WORKERS' COMPENSATION AND INSURANCE [3200 - 6002]

  ( Heading of Division 4 amended by Stats. 1979, Ch. 373. )

PART 1. SCOPE AND OPERATION [3200 - 4418]

  ( Part 1 enacted by Stats. 1937, Ch. 90. )

CHAPTER 4. Compensation Insurance and Security [3700 - 3823]

  ( Chapter 4 enacted by Stats. 1937, Ch. 90. )

ARTICLE 1. Insurance and Security [3700 - 3709.5]
  ( Article 1 enacted by Stats. 1937, Ch. 90. )

3700.
  

Every employer except the state shall secure the payment of compensation in one or more of the following ways:

(a) By being insured against liability to pay compensation by one or more insurers duly authorized to write compensation insurance in this state.

(b) By securing from the Director of Industrial Relations a certificate of consent to self-insure either as an individual employer, or as one employer in a group of employers, which may be given upon furnishing proof satisfactory to the Director of Industrial Relations of ability to self-insure and to pay any compensation that may become due to his or her employees.

(c) For any county, city, city and county, municipal corporation, public district, public agency, or any political subdivision of the state, including each member of a pooling arrangement under a joint exercise of powers agreement (but not the state itself), by securing from the Director of Industrial Relations a certificate of consent to self-insure against workers’ compensation claims, which certificate may be given upon furnishing proof satisfactory to the director of ability to administer workers’ compensation claims properly, and to pay workers’ compensation claims that may become due to its employees. On or before March 31, 1979, a political subdivision of the state which, on December 31, 1978, was uninsured for its liability to pay compensation, shall file a properly completed and executed application for a certificate of consent to self-insure against workers’ compensation claims. The certificate shall be issued and be subject to the provisions of Section 3702.

For purposes of this section, “state” shall include the superior courts of California.

(Amended by Stats. 2002, Ch. 905, Sec. 10. Effective January 1, 2003.)

3700.1.
  

As used in this article:

(a) “Director” means the Director of Industrial Relations.

(b) “Private self-insurer” means a private employer which has secured the payment of compensation pursuant to Section 3701.

(c) “Trustees” means the Board of Trustees of the Self-Insurers’ Security Fund.

(d) “Member” means a private self-insurer which participates in the Self-Insurers’ Security Fund.

(e) “Incurred liabilities for the payment of compensation” means the sum of an estimate of future compensation, as compensation is defined by Section 3207, plus an estimate of the amount necessary to provide for the administration of claims, including legal costs.

(Amended by Stats. 2012, Ch. 363, Sec. 10. (SB 863) Effective January 1, 2013.)

3700.5.
  

(a) The failure to secure the payment of compensation as required by this article by one who knew, or because of his or her knowledge or experience should be reasonably expected to have known, of the obligation to secure the payment of compensation, is a misdemeanor punishable by imprisonment in the county jail for up to one year, or by a fine of up to double the amount of premium, as determined by the court, that would otherwise have been due to secure the payment of compensation during the time compensation was not secured, but not less than ten thousand dollars ($10,000), or by both that imprisonment and fine.

(b) A second or subsequent conviction shall be punished by imprisonment in the county jail for a period not to exceed one year, by a fine of triple the amount of premium, or by both that imprisonment and fine, as determined by the court, that would otherwise have been due to secure the payment of compensation during the time payment was not secured, but not less than fifty thousand dollars ($50,000).

(c) Upon a first conviction of a person under this section, the person may be charged the costs of investigation at the discretion of the court. Upon a subsequent conviction, the person shall be charged the costs of investigation in addition to any other penalties pursuant to subdivision (b). The costs of investigation shall be paid only after the payment of any benefits that may be owed to injured workers, any reimbursement that may be owed to the director for benefits provided to the injured worker pursuant to Section 3717, and any other penalty assessments that may be owed.

(Amended by Stats. 2004, 4th Ex. Sess., Ch. 2, Sec. 3. Effective March 6, 2005.)

3701.
  

(a) Each year every private self-insuring employer shall secure incurred liabilities for the payment of compensation and the performance of the obligations of employers imposed under this chapter by renewing the prior year’s security deposit or by making a new deposit of security. If a new deposit is made, it shall be posted within 60 days of the filing of the self-insured employer’s annual report with the director, but in no event later than May 1.

(b) The solvency risk and security deposit amount for each private and group self-insurer shall be acceptable to the Self-Insurers’ Security Fund.

(c) Unless otherwise permitted by regulation, the deposit shall be an amount equal to the self-insurer’s projected losses, net of specific excess insurance coverage, if any, and inclusive of incurred but not reported (IBNR) liabilities, allocated loss adjustment expense, and unallocated loss adjustment expense, calculated as of December 31 of each year. The calculation of projected losses and expenses shall be reflected in a written actuarial report that projects ultimate liabilities of the private self-insured employer at the expected actuarial confidence level, to ensure that all claims and associated costs are recognized. The written actuarial report shall be prepared by an actuary meeting the qualifications prescribed by the director in regulation.

(d) In determining the amount of the deposit required to secure incurred liabilities for the payment of compensation and the performance of obligations of a self-insured employer imposed under this chapter, the director shall offset estimated future liabilities for the same claims covered by a self-insured plan under the federal Longshore and Harbor Workers’ Compensation Act (33 U.S.C. Sec. 901 et seq.), but in no event shall the offset exceed the estimated future liabilities for the claims under this chapter.

(e) The director may only accept as security, and the employer shall deposit as security, cash, securities, surety bonds, or irrevocable letters of credit in any combination the director, in his or her discretion, deems adequate security. The current deposit shall include any amounts covered by terminated surety bonds or excess insurance policies, as shall be set forth in regulations adopted by the director pursuant to Section 3702.10.

(f) Surety bonds, irrevocable letters of credit, and documents showing issuance of any irrevocable letter of credit shall be deposited with, and be in a form approved by, the director, shall be exonerated only according to its terms and, in no event, by the posting of additional security.

(g) The director may accept as security a joint security deposit that secures an employer’s obligation under this chapter and that also secures that employer’s obligations under the federal Longshore and Harbor Workers’ Compensation Act.

(h) The liability of the Self-Insurers’ Security Fund, with respect to any claims brought under both this chapter and under the federal Longshore and Harbor Workers’ Compensation Act, to pay for shortfalls in a security deposit shall be limited to the amount of claim liability owing the employee under this chapter offset by the amount of any claim liability owing under the federal Longshore and Harbor Workers’ Compensation Act, but in no event shall the liability of the fund exceed the claim liability under this chapter. The employee shall be entitled to pursue recovery under either or both the state and federal programs.

(i) Securities shall be deposited on behalf of the director by the self-insured employer with the Treasurer. Securities shall be accepted by the Treasurer for deposit and shall be withdrawn only upon written order of the director.

(j) Cash shall be deposited in a financial institution approved by the director, and in the account assigned to the director. Cash shall be withdrawn only upon written order of the director.

(k) Upon the sending by the director of a request to renew, request to post, or request to increase or decrease a security deposit, a perfected security interest is created in the private self-insured’s assets in favor of the director and the Self-Insurers’ Security Fund to the extent of any then unsecured portion of the self-insured’s incurred liabilities. That perfected security interest is transferred to any cash or securities thereafter posted by the private self-insured with the director and is released only upon either of the following:

(1) The acceptance by the director of a surety bond or irrevocable letter of credit for the full amount of the incurred liabilities for the payment of compensation.

(2) The return of cash or securities by the director.

The private self-insured employer loses all right, title, and interest in, and any right to control, all assets or obligations posted or left on deposit as security. The director may liquidate the deposit as provided in Section 3701.5 and apply it to the self-insured employer’s incurred liabilities either directly or through the Self-Insurers’ Security Fund.

(Amended by Stats. 2012, Ch. 363, Sec. 11. (SB 863) Effective January 1, 2013.)

3701.3.
  

The director shall return to a private self-insured employer all individual security determined, with the consent of the Self-Insurers’ Security Fund, to be in excess of that needed to ensure the administration of the employer’s self insuring, including legal fees, and the payment of any future claims. This section shall not apply to any security posted as part of the composite deposit, or to any security turned over to the Self-Insurers’ Security Fund following an order of default under Section 3701.5.

(Amended by Stats. 2012, Ch. 363, Sec. 12. (SB 863) Effective January 1, 2013.)

3701.5.
  

(a) If the director determines that a private self-insured employer has failed to pay workers’ compensation as required by this division, the security deposit shall be utilized to administer and pay the employer’s compensation obligations.

(b) If the director determines the security deposit has not been immediately made available for the payment of compensation, the director shall determine the method of payment and claims administration as appropriate, which may include, but is not limited to, payment by a surety that issued the bond, or payment by an issuer of an irrevocable letter of credit, and administration by a surety or by an adjusting agency, or through the Self-Insurers’ Security Fund, or any combination thereof. If the director arranges for administration and payment by any person other than the Self-Insurers’ Security Fund after a default is declared, the fund shall have no responsibility for claims administration or payment of the claims.

(c) If the director determines the payment of benefits and claims administration shall be made through the Self-Insurers’ Security Fund, the fund shall commence payment of the private self-insured employer’s obligations for which it is liable under Section 3743 within 30 days of notification. Payments shall be made to claimants whose entitlement to benefits can be ascertained by the fund, with or without proceedings before the appeals board. Upon the assumption of obligations by the fund pursuant to the director’s determination, the fund shall have a right to immediate possession of any posted security and the custodian, surety, or issuer of any irrevocable letter of credit shall turn over the security to the fund together with the interest that has accrued since the date of the self-insured employer’s default or insolvency.

(d) The payment of benefits by the Self-Insurers’ Security Fund from security deposit proceeds shall release and discharge any custodian of the security deposit, surety, any issuer of a letter of credit, and the self-insured employer, from liability to fulfill obligations to provide those same benefits as compensation, but does not release any person from any liability to the fund for full reimbursement. Payment by a surety constitutes a full release of the surety’s liability under the bond to the extent of that payment, and entitles the surety to full reimbursement by the principal or his or her estate. Full reimbursement includes necessary attorney fees and other costs and expenses, without prior claim or proceedings on the part of the injured employee or other beneficiaries. Any decision or determination made, or any settlement approved, by the director or by the appeals board under subdivision (f) shall conclusively be presumed valid and binding as to any and all known claims arising out of the underlying dispute, unless an appeal is made within the time limit specified in Section 5950.

(e) The director shall advise the Self-Insurers’ Security Fund promptly after receipt of information indicating that a private self-insured employer may be unable to meet its compensation obligations. The director shall also advise the Self-Insurers’ Security Fund of all determinations and directives made or issued pursuant to this section. All financial, actuarial, or claims information received by the director from any self-insurer may be shared by the director with the Self-Insurers’ Security Fund.

(f) Disputes concerning the posting, renewal, termination, exoneration, or return of all or any portion of the security deposit, or any liability arising out of the posting or failure to post security, or adequacy of the security or reasonableness of administrative costs, including legal fees, and arising between or among a surety, the issuer of an agreement of assumption and guarantee of workers’ compensation liabilities, the issuer of a letter of credit, any custodian of the security deposit, a self-insured employer, or the Self-Insurers’ Security Fund shall be resolved by the director. An appeal from the director’s decision or determination may be taken to the appropriate superior court by petition for writ of mandate. Payment of claims from the security deposit or by the Self-Insurers’ Security Fund shall not be stayed pending the resolution of the disputes unless and until the superior court issues a determination staying a payment of claims decision or determination of the director.

(Amended by Stats. 2012, Ch. 363, Sec. 13. (SB 863) Effective January 1, 2013.)

3701.7.
  

Where any employer requesting coverage under a new or existing certificate of consent to self-insure has had a period of unlawful uninsurance, either for an applicant in its entirety or for a subsidiary or member of a joint powers authority legally responsible for its own workers’ compensation obligations, the following special conditions shall apply before the director may determine if the requesting employer can operate under a certificate of consent to self-insure:

(a) The director may require a deposit of not less than 200 percent of the outstanding liabilities remaining unpaid at the time of application, which had been incurred during the uninsurance period.

(b) At the discretion of the director, where a public or private employer has been previously totally uninsured for workers’ compensation pursuant to Section 3700, the director may require an additional deposit not to exceed 100 percent of the total outstanding liabilities for the uninsured period, or the sum of two hundred fifty thousand dollars ($250,000), whichever is greater.

(c) In addition to the deposits required by subdivisions (a) and (b), a penalty shall be paid to the Uninsured Employers Fund of 10 percent per year of the remaining unpaid liabilities, for every year liabilities remain outstanding. In addition, an additional application fee, not to exceed one thousand dollars ($1,000), plus assessments, pursuant to Section 3702.5 and subdivision (b) of Section 3745, may be imposed by the director and the Self-Insurers’ Security Fund, respectively, against private self-insured employers.

(d) A certificate of consent to self-insure shall not be granted to an applicant that has had a period of unlawful uninsurance without the written approval of the Self-Insurers’ Security Fund.

(e) An employer may retrospectively insure the outstanding liabilities arising out of the uninsured period, either before or after an application for self-insurance has been approved. Upon proof of insurance acceptable to the director, no deposit shall be required for the period of uninsurance.

The penalties to be paid to the Uninsured Employers Fund shall consist of a one-time payment of 20 percent of the outstanding liabilities for the period of uninsurance remaining unpaid at the time of application, in lieu of any other penalty for being unlawfully uninsured pursuant to this code.

(f) In the case of a subsidiary which meets all of the following conditions, a certificate shall issue without penalty:

(1) The subsidiary has never had a certificate revoked for reasons set forth in Section 3702.

(2) Employee injuries were reported to the Office of Self-Insurance Plans in annual reports.

(3) The security deposit of the certificate holder was calculated to include the entity’s compensation liabilities.

(4) Application for a separate certificate or corrected certificate is made within 90 days and completed within 180 days of notice from the Office of Self-Insurance Plans. If the requirements of this subdivision are not met, all penalties pursuant to subdivision (b) of Section 3702.9 shall apply.

(g) The director may approve an application on the date the application is substantially completed, subject to completion requirements, and may make the certificate effective on an earlier date, covering a period of uninsurance, if the employer complies with the requirements of this section.

(h) Any decision by the director may be contested by an entity in the manner provided in Section 3701.5.

(i) Nothing in this section shall abrogate the right of an employee to bring an action against an uninsured employer pursuant to Section 3706.

(j) Nothing in this statute shall abrogate the right of a self-insured employer to insure against known or unknown claims arising out of the self-insurance period.

(Amended by Stats. 2012, Ch. 363, Sec. 14. (SB 863) Effective January 1, 2013.)

3701.8.
  

(a) As an alternative to each private self-insuring employer securing its own incurred liabilities as provided in Section 3701, the director may provide by regulation for an alternative security system whereby all private self-insureds designated for full participation by the director shall collectively secure their aggregate incurred liabilities through the Self-Insurers’ Security Fund. The regulations shall provide for the director to set a total security requirement for these participating self-insured employers based on a review of their annual reports and any other self-insurer information as may be specified by the director. The Self-Insurers’ Security Fund shall propose to the director a combination of cash and securities, surety bonds, irrevocable letters of credit, insurance, or other financial instruments or guarantees satisfactory to the director sufficient to meet the security requirement set by the director. Upon approval by the director and posting by the Self-Insurers’ Security Fund on or before the date set by the director, that combination shall be the composite deposit. The noncash elements of the composite deposit may be one-year or multiple-year instruments. If the Self-Insurers’ Security Fund fails to post the required composite deposit by the date set by the director, then within 30 days after that date, each private self-insuring employer shall secure its incurred liabilities in the manner required by Section 3701. Self-insured employers not designated for full participation by the director shall meet all requirements as may be set by the director pursuant to subdivision (g).

(b) In order to provide for the composite deposit approved by the director, the Self-Insurers’ Security Fund shall assess, in a manner approved by the director, each fully participating private self-insuring employer a deposit assessment payable within 30 days of assessment. The amount of the deposit assessment charged each fully participating self-insured employer shall be set by the Self-Insurers’ Security Fund, based on its reasonable consideration of all the following factors:

(1) The total amount needed to provide the composite deposit.

(2) The self-insuring employer’s paid or incurred liabilities as reflected in its annual report.

(3) The financial strength and creditworthiness of the self-insured.

(4) Any other reasonable factors as may be authorized by regulation.

(5) In order to make a composite deposit proposal to the director and set the deposit assessment to be charged each fully participating self-insured, the Self-Insurers’ Security Fund shall have access to the annual reports and other information submitted by all self-insuring employers to the director, under terms and conditions as may be set by the director, to preserve the confidentiality of the self-insured’s financial information.

(c) Upon payment of the deposit assessment and except as provided herein, the self-insuring employer loses all right, title, and interest in the deposit assessment. To the extent that in any one year the deposit assessment paid by self-insurers is not exhausted in the purchase of securities, surety bonds, irrevocable letters of credit, insurance, or other financial instruments to post with the director as part of the composite deposit, the surplus shall remain posted with the director, and the principal and interest earned on that surplus shall remain as part of the composite deposit in subsequent years. In the event that in any one year the Self-Insurers’ Security Fund fails to post the required composite deposit by the date set the by the director, and the director requires each private self-insuring employer to secure its incurred liabilities in the manner required by Section 3701, then any deposit assessment paid in that year shall be refunded to the self-insuring employer that paid the deposit assessment.

(d) If any private self-insuring employer objects to the calculation, posting, or any other aspect of its deposit assessment, upon payment of the assessment in the time provided, the employer shall have the right to appeal the assessment to the director, who shall have exclusive jurisdiction over this dispute. If any private self-insuring employer fails to pay the deposit assessment in the time provided, the director shall order the self-insuring employer to pay a penalty of not less than 10 percent of its deposit assessment, plus interest on any unpaid amount at the prejudgment rate, and to post a separate security deposit in the manner provided by Section 3701. The penalty and interest shall be paid directly to the Self-Insurers’ Security Fund. The director may also revoke the certificate of consent to self-insure of any self-insuring employer who fails to pay the deposit assessment in the time provided.

(e) Upon the posting by the Self-Insurers’ Security Fund of the composite deposit with the director, the deposit shall be held until the director determines that a private self-insured employer has failed to pay workers’ compensation as required by this division, and the director orders the Self-Insurers’ Security Fund to commence payment. Upon ordering the Self-Insurers’ Security Fund to commence payment, the director shall make available to the fund that portion of the composite deposit necessary to pay the workers’ compensation benefits of the defaulting self-insuring employer. In the event additional funds are needed in subsequent years to pay the workers’ compensation benefits of any self-insuring employer who defaulted in earlier years, the director shall make available to the Self-Insurers’ Security Fund any portions of the composite deposit as may be needed to pay those benefits. In making the deposit available to the Self-Insurers’ Security Fund, the director shall also allow any amounts as may be reasonably necessary to pay for the administrative and other activities of the fund.

(f) The cash portion of the composite deposit shall be segregated from all other funds held by the director, and shall be invested by the director for the sole benefit of the Self-Insurers’ Security Fund and the injured workers of private self-insured employers, and may not be used for any other purpose by the state. Alternatively, the director, in his discretion, may allow the Self-Insurers’ Security Fund to hold, invest, and draw upon the cash portion of the composite deposit as prescribed by regulation.

(g) Notwithstanding any other provision of this section, the director shall, by regulation, set minimum credit, financial, or other conditions that a private self-insured must meet in order to be a fully participating self-insurer in the alternative security system. In the event any private self-insuring employer is unable to meet the conditions set by the director, or upon application of the Self-Insurers’ Security Fund to exclude an employer for credit or financial reasons, the director shall exclude the self-insuring employer from full participation in the alternative security system. In the event a self-insuring employer is excluded from full participation, the nonfully participating private self-insuring employer shall post a separate security deposit in the manner provided by Section 3701 and pay a deposit assessment set by the director. Alternatively, the director may order that the nonfully participating private self-insuring employer post a separate security deposit to secure a portion of its incurred liabilities and pay a deposit assessment set by the director.

(h) An employer who self-insures through group self-insurance and an employer whose certificate to self-insure has been revoked may fully participate in the alternative security system if both the director and the Self-Insurers’ Security Fund approve the participation of the self-insurer. If not approved for full participation, or if an employer is issued a certificate to self-insure after the composite deposit is posted, the employer shall satisfy the requirements of subdivision (g) for nonfully participating private self-insurers.

(i) At all times, a self-insured employer shall have secured its incurred workers’ compensation liabilities either in the manner required by Section 3701 or through the alternative security system, and there shall not be any lapse in the security.

(Amended by Stats. 2012, Ch. 363, Sec. 15. (SB 863) Effective January 1, 2013.)

3701.9.
  

(a) A certificate of consent to self-insure shall not be issued after January 1, 2013, to any of the following:

(1) A professional employer organization.

(2) A leasing employer, as defined in Section 606.5 of the Unemployment Insurance Code.

(3) A temporary services employer, as defined in Section 606.5 of the Unemployment Insurance Code.

(4) Any employer, regardless of name or form of organization, which the director determines to be in the business of providing employees to other employers.

(b) A certificate of consent to self-insure that has been issued to any employer described in subdivision (a) shall be revoked by the director not later than January 1, 2015.

(Added by Stats. 2012, Ch. 363, Sec. 16. (SB 863) Effective January 1, 2013.)

3702.
  

(a) A certificate of consent to self-insure may be revoked by the director at any time for good cause after a hearing. Good cause includes, among other things, a recommendation by the Self-Insurers’ Security Fund to revoke the certificate of consent, the impairment of the solvency of the employer to the extent that there is a marked reduction of the employer’s financial strength, failure to maintain a security deposit as required by Section 3701, failure to pay assessments of the Self-Insurers’ Security Fund, frequent or flagrant violations of state safety and health orders, the failure or inability of the employer to fulfill his or her obligations, or any of the following practices by the employer or his or her agent in charge of the administration of obligations under this division:

(1) Habitually and as a matter of practice and custom inducing claimants for compensation to accept less than the compensation due or making it necessary for them to resort to proceedings against the employer to secure compensation due.

(2) Where liability for temporary disability indemnity is not in dispute, intentionally failing to pay temporary disability indemnity without good cause in order to influence the amount of permanent disability benefits due.

(3) Intentionally refusing to comply with known and legally indisputable compensation obligations.

(4) Discharging or administering his or her compensation obligations in a dishonest manner.

(5) Discharging or administering his or her compensation obligations in such a manner as to cause injury to the public or those dealing with the employer.

(b) Where revocation is in part based upon the director’s finding of a marked reduction of the employer’s financial strength or the failure or inability of the employer to fulfill his or her obligations, or a practice of discharging obligations in a dishonest manner, it is a condition precedent to the employer’s challenge or appeal of the revocation that the employer have in effect insurance against liability to pay compensation.

(c) The director may hold a hearing to determine whether good cause exists to revoke an employer’s certificate of consent to self-insure if the employer is cited for a willful, or repeat serious violation of the standard adopted pursuant to Section 6401.7 and the citation has become final.

(Amended by Stats. 2012, Ch. 363, Sec. 17. (SB 863) Effective January 1, 2013.)

3702.1.
  

(a) No person, firm, or corporation, other than an insurer admitted to transact workers’ compensation insurance in this state, shall contract to administer claims of self-insured employers as a third-party administrator unless in possession of a certificate of consent to administer self-insured employers’ workers’ compensation claims.

(b) As a condition of receiving a certificate of consent, all persons given discretion by a third-party administrator to deny, accept, or negotiate a workers’ compensation claim shall demonstrate their competency to the director by written examination, or other methods approved by the director.

(c) A separate certificate shall be required for each adjusting location operated by a third-party administrator. A third-party administrator holding a certificate of consent shall be subject to regulation only under this division with respect to the adjustment, administration, and management of workers’ compensation claims for any self-insured employer.

(d) A third-party administrator retained by a self-insured employer to administer the employer’s workers’ compensation claims shall estimate the total accrued liability of the employer for the payment of compensation for the employer’s annual report to the director and shall make the estimate both in good faith and with the exercise of a reasonable degree of care. The use of a third-party administrator shall not, however, discharge or alter the employer’s responsibilities with respect to the report.

(Amended by Stats. 2009, Ch. 140, Sec. 137. (AB 1164) Effective January 1, 2010.)

3702.2.
  

(a) All self-insured employers shall file a self-insurer’s annual report in a form prescribed by the director. Public self-insured employers shall provide detailed information as the director determines necessary to evaluate the costs of administration, workers’ compensation benefit expenditures, and solvency and performance of the public self-insured employer workers’ compensation programs, on a schedule established by the director. The director may grant deferrals to public self-insured employers that are not yet capable of accurately reporting the information required, giving priority to bringing larger programs into compliance with the more detailed reporting.

(b) To enable the director to determine the amount of the security deposit required by subdivision (c) of Section 3701, the annual report of a self-insured employer who has self-insured both state and federal workers’ compensation liability shall also set forth (1) the amount of all compensation liability incurred, paid-to-date, and estimated future liability under both this chapter and under the federal Longshore and Harbor Workers’ Compensation Act (33 U.S.C. Sec. 901 et seq.), and (2) the identity and the amount of the security deposit securing the employer’s liability under state and federal self-insured programs.

(c) The director shall annually prepare an aggregated summary of all self-insured employer liability to pay compensation reported on the self-insurers’ employers annual reports, including a separate summary for public and private employer self-insurers. The summaries shall be in the same format as the individual self-insured employers are required to report that liability on the employer self-insurer’s annual report forms prescribed by the director. The aggregated summaries shall be made available to the public on the self-insurance section of the department’s Internet Web site. Nothing in this subdivision shall authorize the director to release or make available information that is aggregated by industry or business type, that identifies individual self-insured filers, or that includes any individually identifiable claimant information.

(d) The director may release a copy, or make available an electronic version, of the data contained in any public sector employer self-insurer’s annual reports received from an individual public entity self-insurer or from a joint powers authority employer and its membership. However, the release of any annual report information by the director shall not include any portion of any listing of open indemnity claims that contains individually identifiable claimant information, or any portion of excess insurance coverage information that contains any individually identifiable claimant information.

(Amended by Stats. 2012, Ch. 363, Sec. 18. (SB 863) Effective January 1, 2013.)

3702.3.
  

Failure to submit reports or information as deemed necessary by the director to implement the purposes of Section 3701, 3702, or 3702.2 may result in the assessment of a civil penalty as set forth in subdivision (a) of Section 3702.9. Moneys collected shall be used for the administration of self-insurance plans.

(Amended by Stats. 1992, Ch. 532, Sec. 1. Effective January 1, 1993.)

3702.5.
  

(a) (1) The cost of administration of the public self-insured program by the Director of Industrial Relations shall be borne by the Workers’ Compensation Administration Revolving Fund.

(2) The cost of administration of the private self-insured program by the Director of Industrial Relations shall be borne by the private self-insurers through payment of certificate fees which shall be established by the director in broad ranges based on the comparative numbers of employees insured by the private self-insurers and the number of adjusting locations. The director may assess other fees as necessary to cover the costs of special audits or services rendered to private self-insured employers. The director may assess a civil penalty for late filing as set forth in subdivision (a) of Section 3702.9.

(b) All revenues from fees and penalties paid by private self-insured employers shall be deposited into the Self-Insurance Plans Fund, which is hereby created for the administration of the private self-insurance program. Any unencumbered balance in subdivision (a) of Item 8350-001-001 of the Budget Act of 1983 shall be transferred to the Self-Insurance Plans Fund. The director shall annually eliminate any unused surplus in the Self-Insurance Plans Fund by reducing certificate fee assessments by an appropriate amount in the subsequent year. Moneys paid into the Self-Insurance Plans Fund for administration of the private self-insured program shall not be used by any other department or agency or for any purpose other than administration of the private self-insurance program. Detailed accountability shall be maintained by the director for any security deposit or other funds held in trust for the Self-Insurer’s Security Fund in the Self-Insurance Plans Fund.

Moneys held by the director shall be invested in the Surplus Money Investment Fund. Interest shall be paid on all moneys transferred to the General Fund in accordance with Section 16310 of the Government Code. The Treasurer’s and Controller’s administrative costs may be charged to the interest earnings upon approval of the director.

(Amended by Stats. 2012, Ch. 363, Sec. 20. (SB 863) Effective January 1, 2013.)

3702.6.
  

(a) The director shall establish an audit program addressing the adequacy of estimates of future liability of claims for all private self-insured employers, and shall ensure that all private self-insured employers are audited within a three-year cycle by the Office of Self Insurance Plans.

(b) Each public self-insurer shall advise its governing board within 90 days after submission of the self-insurer’s annual report of the total liabilities reported and whether current funding of those workers’ compensation liabilities is in compliance with the requirements of Government Accounting Standards Board Publication No. 10.

(c) The director shall, upon a showing of good cause, order a special audit of any public self-insured employer to determine the adequacy of estimates of future liability of claims.

(d) For purposes of this section, “good cause” means that there exists circumstances sufficient to raise concerns regarding the adequacy of estimates of future liability of claims to justify a special audit.

(Amended by Stats. 1992, Ch. 532, Sec. 3. Effective January 1, 1993.)

3702.7.
  

A certificate of consent to administer claims of self-insured employers may be revoked by the director at any time for good cause after a hearing. Good cause includes, but is not limited to, the violation of subsection (1), (2), (3), (4), or (5) of subdivision (a) of Section 3702. In lieu of revocation of a certificate of consent, the director may impose a fine of not less than fifty dollars ($50) nor more than five hundred dollars ($500) for each violation.

(Added by Stats. 1984, Ch. 1521, Sec. 4. Operative July 1, 1985, by Sec. 5 of Ch. 1521.)

3702.8.
  

(a) Employers who have ceased to be self-insured employers shall discharge their continuing obligations to secure the payment of workers’ compensation that accrued during the period of self-insurance, for purposes of Sections 3700, 3700.5, 3706, and 3715, and shall comply with all of the following obligations of current certificate holders:

(1) Filing annual reports as deemed necessary by the director to carry out the requirements of this chapter.

(2) In the case of a private employer, depositing and maintaining a security deposit for accrued liability for the payment of any workers’ compensation that may become due, pursuant to subdivision (b) of Section 3700 and Section 3701, except as provided in subdivision (c).

(3) Paying within 30 days all assessments of which notice is sent, pursuant to subdivision (b) of Section 3745, within 36 months from the last day the employer’s certificate of self-insurance was in effect. Assessments shall be based on the benefits paid by the employer during the last full calendar year of self-insurance on claims incurred during that year.

(b) In addition to proceedings to establish liabilities and penalties otherwise provided, a failure to comply may be the subject of a proceeding before the director. An appeal from the director’s determination shall be taken to the appropriate superior court by petition for writ of mandate.

(c) Notwithstanding subdivision (a), any employer who is currently self-insured or who has ceased to be self-insured may purchase a special excess workers’ compensation policy to discharge any or all of the employer’s continuing obligations as a self-insurer to pay compensation or to secure the payment of compensation.

(1) The special excess workers’ compensation insurance policy shall be issued by an insurer authorized to transact workers’ compensation insurance in this state.

(2) Each carrier’s special excess workers’ compensation policy shall be approved as to form and substance by the Insurance Commissioner, and rates for special excess workers’ compensation insurance shall be subject to the filing requirements set forth in Section 11735 of the Insurance Code.

(3) Each special excess workers’ compensation insurance policy shall be submitted by the employer to the director. The director shall adopt and publish minimum insurer financial rating standards for companies issuing special excess workers’ compensation policies.

(4) Upon acceptance by the director, a special excess workers’ compensation policy shall provide coverage for all or any portion of the purchasing employer’s claims for compensation arising out of injuries occurring during the period the employer was self-insured in accordance with Sections 3755, 3756, and 3757 of the Labor Code and Sections 11651 and 11654 of the Insurance Code. The director’s acceptance shall discharge the Self-Insurer’s Security Fund, without recourse or liability to the Self-Insurer’s Security Fund, of any continuing liability for the claims covered by the special excess workers’ compensation insurance policy.

(5) For public employers, no security deposit or financial guarantee bond or other security shall be required. The director shall set minimum financial rating standards for insurers issuing special excess workers’ compensation policies for public employers.

(d) (1) In order for the special excess workers’ compensation insurance policy to discharge the full obligations of a private employer to maintain a security deposit with the director for the payment of self-insured claims, applicable to the period to be covered by the policy, the special excess policy shall provide coverage for all claims for compensation arising out of that liability. The employer shall maintain the required deposit for the period covered by the policy with the director for a period of three years after the issuance date of the special excess policy.

(2) If the special workers’ compensation insurance policy does not provide coverage for all of the continuing obligations for which the private self-insured employer is liable, to the extent the employer’s obligations are not covered by the policy a private employer shall maintain the required deposit with the director. In addition, the employer shall maintain with the director the required deposit for the period covered by the policy for a period of three years after the issuance date of the special excess policy.

(e) The director shall adopt regulations pursuant to Section 3702.10 that are reasonably necessary to implement this section in order to reasonably protect injured workers, employers, the Self-Insurers’ Security Fund, and the California Insurance Guarantee Association.

(f) The posting of a special excess workers’ compensation insurance policy with the director shall discharge the obligation of the Self-Insurer’s Security Fund pursuant to Section 3744 to pay claims in the event of an insolvency of a private employer to the extent of coverage of compensation liabilities under the special excess workers’ compensation insurance policy. The California Insurance Guarantee Association and the Self-Insurers’ Security Fund shall be advised by the director whenever a special excess workers’ compensation insurance policy is posted.

(Amended by Stats. 2012, Ch. 363, Sec. 21. (SB 863) Effective January 1, 2013.)

3702.9.
  

(a) In addition to remedies and penalties otherwise provided for a failure to secure the payment of compensation, the director may, after a determination that an obligation created in this article has been violated, also enter an order against any self-insured employer, including employers who are no longer self-insured, but who are required to comply with Section 3702.8, directing compliance, restitution for any losses, and a civil penalty in an amount not to exceed the following:

(1) For a failure to file a complete or timely annual report, an amount up to 5 percent of the incurred liabilities in the last report or one thousand five hundred dollars ($1,500), whichever is less, for each 30 days or portion thereof during which there is a failure.

(2) For failure to deposit and maintain a security deposit, an amount up to 10 percent of the increase not timely filed or five thousand dollars ($5,000), whichever is less, for each 30 days or portion thereof during which there is a failure.

(3) For a failure to timely or completely pay an assessment, an amount up to the assessment or two thousand five hundred dollars ($2,500), whichever is less, for each 30 days or portion thereof during which there is a failure.

(4) Where the failure was by an employer which knew or reasonably should have known of the obligation, the director shall, in addition, award reimbursement for all expenditures and costs by the fund or any intervening party, including a reasonable attorney fee.

(5) Where the failure was malicious, fraudulent, in bad faith, or a repeated violation, the director may award, as an additional civil penalty, liquidated damages of up to double the amounts assessed under paragraphs (1) to (4), inclusive, for deposit in the General Fund.

(b) An employer may deposit and maintain a security deposit or pay an assessment, reserving its right to challenge the amount or liability therefor at a hearing. If the director or the appeals board or a court, upon appeal, concludes that the employer is not liable or the amounts are excessive, then the director may waive, release, compromise, refund, or otherwise remit amounts which had been paid or deposited by an employer. The director may condition the waiver, release, compromise, refund, or remittance upon the present and continued future compliance with the obligations of subdivision (a) of Section 3702.8 for a period up to two years.

(c) Notwithstanding subdivision (b), where a violation has occurred, the director may waive, release, compromise, or otherwise reduce any civil penalty otherwise due upon a showing that a violation occurred through the employer’s mistake, inadvertence, surprise, or excusable neglect. Neglect is not excusable within the meaning of this subdivision where the employer knew, or reasonably should have known, of the obligations.

(Added by Stats. 1986, Ch. 1128, Sec. 12. Effective September 25, 1986.)

3702.10.
  

The director, in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, may adopt, amend, and repeal rules and regulations reasonably necessary to carry out the purposes of Section 129 and Article 1 (commencing with Section 3700), Article 2 (commencing with Section 3710), and Article 2.5 (commencing with Section 3740). This authorization includes, but is not limited to, the adoption of regulations to do all of the following:

(a) Specifying what constitutes ability to self-insure and to pay any compensation which may become due under Section 3700.

(b) Specifying what constitutes a marked reduction of an employer’s financial strength.

(c) Specifying what constitutes a failure or inability to fulfill the employer’s obligations under Section 3702.

(d) Interpreting and defining the terms used.

(e) Establishing procedures and standards for hearing and determinations, and providing for those determinations to be appealed to the appeals board.

(f) Specifying the standards, form, and content of agreements, forms, and reports between parties who have obligations pursuant to this chapter.

(g) Providing for the combinations and relative liabilities of security deposits, assumptions, and guarantees used pursuant to this chapter.

(h) Disclosing otherwise confidential financial information concerning self-insureds to courts or the Self-Insurers’ Security Fund and specifying appropriate safeguards for that information.

(i) Requiring an amount to be added to each security deposit to secure the cost of administration of claims and to pay all legal costs.

(j) Regulating the workers’ compensation self-insurance obligations of self-insurance groups and professional employer organizations, leasing employers as defined in Section 606.5 of the Unemployment Insurance Code, or temporary services employers, as defined in Section 606.5 of the Unemployment Insurance Code, holding certificates of consent to self-insure.

(Amended by Stats. 2012, Ch. 363, Sec. 22. (SB 863) Effective January 1, 2013.)

3703.
  

So long as the certificate has not been revoked, and the self-insurer maintains on deposit the requisite bond or securities, the self-insurer shall not be required or obliged to pay into the State Compensation Insurance Fund any sums covering liability for compensation excepting life pensions; and the self-insurer may fully administer any compensation benefits assessed against the self-insurer.

(Amended by Stats. 1959, Ch. 951.)

3705.
  

The Self-Insurers’ Security Fund or the surety making payment of compensation hereunder shall have the same preference over the other debts of the principal or his or her estate as is given by law to the person directly entitled to the compensation.

(Amended by Stats. 1986, Ch. 1128, Sec. 14. Effective September 25, 1986.)

3706.
  

If any employer fails to secure the payment of compensation, any injured employee or his dependents may bring an action at law against such employer for damages, as if this division did not apply.

(Amended by Stats. 1971, Ch. 1598.)

3706.5.
  

The provisions of this article and Sections 4553, 4554, and 4555, and any other penalty provided by law for failure to secure the payment of compensation for employees, shall not apply to individual members of a board or governing body of a public agency or to members of a private, nonprofit organization, if the agency or organization performs officiating services relating to amateur sporting events and those members are excluded from the definition of “employee” pursuant to paragraph (10) of subdivision (a) of Section 3352.

(Amended by Stats. 2017, Ch. 770, Sec. 6. (SB 189) Effective January 1, 2018.)

3707.
  

The injured employee or his dependents may in such action attach the property of the employer, at any time upon or after the institution of such action, in an amount fixed by the court, to secure the payment of any judgment which is ultimately obtained. The provisions of the Code of Civil Procedure, not inconsistent with this division, shall govern the issuance of, and proceedings upon such attachment.

(Enacted by Stats. 1937, Ch. 90.)

3708.
  

In such action it is presumed that the injury to the employee was a direct result and grew out of the negligence of the employer, and the burden of proof is upon the employer, to rebut the presumption of negligence. It is not a defense to the employer that the employee was guilty of contributory negligence, or assumed the risk of the hazard complained of, or that the injury was caused by the negligence of a fellow servant. No contract or regulation shall restore to the employer any of the foregoing defenses.

This section shall not apply to any employer of an employee, as defined in subdivision (d) of Section 3351, with respect to such employee, but shall apply to employers of employees described in subdivision (b) of Section 3715, with respect to such employees.

(Amended by Stats. 1977, Ch. 17.)

3708.5.
  

If an employee brings such an action for damages, the employee shall forthwith give a copy of the complaint to the Uninsured Employers Fund of the action by personal service or certified mail. Proof of such service shall be filed in such action. If a civil action has been initiated against the employer pursuant to Section 3717, the actions shall be consolidated.

(Added by Stats. 1980, Ch. 1091.)

3709.
  

If, as a result of such action for damages, a judgment is obtained against the employer, any compensation awarded, paid, or secured by the employer shall be credited against the judgment. The court shall allow as a first lien against such judgment the amount of compensation paid by the director from the Uninsured Employers Fund pursuant to Section 3716.

Such judgment shall include a reasonable attorney’s fee fixed by the court. The director, as administrator of the Uninsured Employers Fund, shall have a first lien against any proceeds of settlement in such action, before or after judgment, in the amount of compensation paid by the director from the Uninsured Employers Fund pursuant to Section 3716.

No satisfaction of a judgment in such action, in whole or in part, shall be valid as against the director without giving the director notice and a reasonable opportunity to perfect and satisfy his lien.

(Amended by Stats. 1980, Ch. 1091.)

3709.5.
  

After the payment of attorney’s fees fixed by the court, the employer shall be relieved from the obligation to pay further compensation to or on behalf of the employee under this division up to the entire amount of the balance of the judgment, if satisfied, or such portion as has been satisfied.

After the satisfaction by the employer of the attorney’s fees fixed by the court, the Uninsured Employers Fund shall be relieved from the obligation to pay further compensation to or on behalf of the employee pursuant to Section 3716, up to the entire amount of the balance of the judgment, if satisfied, or such portion as has been satisfied.

The appeals board shall allow as a credit to the employer and to the Uninsured Employers Fund, to be applied against the liability for compensation, the amount recovered by the employee in such action, either by settlement or after the judgment, as has not been applied to the expense of attorney’s fees and costs.

(Added by Stats. 1980, Ch. 1091.)

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