3700.1.

 As used in this article:

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

(b) “Fund” means the Self-Insurers’ Security Fund established pursuant to Section 3742.

(c) “Fund member” means a stand-alone self-insured employer which participates in the Self-Insurers’ Security Fund.

(d) “Fund trustees” means the Board of Trustees of 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.

(f) “Insolvent self-insurer” means a stand-alone self-insured employer whose certificate of consent to self-insure has been revoked by the director or whose security deposit has been used by the director pursuant to Section 3701.5.

(g) “Insolvent SIG” means a SIG whose certificate of consent to self-insure has been revoked by the director, which has failed to pay compensation, or whose security deposit has been used by the director pursuant to Section 3701.5.

(h) “Private self-insurer” and “private self-insured employer” mean any employer that has been issued a certificate of consent to self-insure by the director, whether as a stand-alone self-insured employer or as a member of a SIG which has secured the payment of compensation pursuant to subdivision (b) of Section 3700.

(i) “SIG” means a nonprofit mutual benefit corporation to which a group of private self-insured employers have transferred primary liability for their workers’ compensation obligations and has secured the payment of compensation pursuant to subdivision (b) of Section 3700.

(j) “SIG Fund” means the Self-Insured Group Security Fund established pursuant to Section 3742.5.

(k) “SIG Fund Member” means a SIG which participates in the SIG Fund.

(l) “SIG Fund Trustees” means the Board of Trustees of the SIG Fund.

(m) “Stand-alone self-insured employer” and “stand-alone self-insured” mean a private employer that retains primary liability for its own worker’s compensation obligations, whether alone or in connection with guarantors, and has secured the payment of compensation pursuant to subdivision (b) of Section 3700.

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 stand-alone self-insured employer 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 and the SIG 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, in the case of a stand-alone self-insured employer the Self-Insurers’ Security Fund, or in the case of a SIG the SIG 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.

(l) 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 or through the SIG Fund.

(m) The solvency risk and security deposit amount for each SIG shall be acceptable to the SIG Fund.

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 (SISF) in the case of a stand-alone self-insured employer or the consent of the SIG Fund in the case of a SIG, to be in excess of that needed to assure 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 SISF alternate composite deposit, the SIG alternate composite deposit, or to any security turned over to the Self-Insurers’ Security Fund or the SIG Fund following an order of default under Section 3701.5.

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, through the Self-Insurers’ Security Fund, or the SIG Fund, or any combination thereof. If the director arranges for administration and payment by any person other than the Self-Insurers’ Security Fund or the SIG Fund after a default is declared, the fund and the SIG Fund shall have no responsibility for claims administration or payment of the claims.

(c) (1) If the director determines the payment of benefits and claims administration shall be made through either the Self-Insurers’ Security Fund or the SIG 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 or the SIG Fund, with or without proceedings before the appeals board. Upon the assumption of obligations by the fund or the SIG Fund pursuant to the director’s determination, the fund or the SIG 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 or the SIG Fund together with the interest that has accrued since the date of the self-insured employer’s default or insolvency.

(2) The director shall promptly audit a self-insured employer upon making a determination under subdivision (a) or (b). The employer, any excess insurer, and any adjusting agency shall provide any relevant information in their possession. If the audit results in a preliminary estimate that liabilities exceed the amount of the security deposit, the director shall direct the custodian of the security deposit to liquidate it and provide all proceeds to the Self-Insurers’ Security Fund in the case of a stand-alone self-insurer or the SIG Fund in the case of a SIG. If the preliminary estimate is that liabilities are less than the security deposit, the director shall ensure the administration and payment of compensation pursuant to subdivision (b).

(d) The payment of benefits by the Self-Insurers’ Security Fund or the SIG 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 or the SIG 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 or the SIG 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 and the SIG 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, the Self-Insurers’ Security Fund, or the SIG 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.

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 against a stand-alone self-insured employer, or the director and the SIG Fund against a SIG.

(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 in the case of a self-insured stand-alone employer or the SIG Fund in the case of a SIG.

(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.

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 stand-alone self-insured employers designated for full participation by the director shall collectively secure their aggregate incurred liabilities through the Self-Insurers’ Security Fund, which shall be known as the SISF Alternate Composite Deposit Program. The regulations shall provide for the director to set a total security requirement for these participating stand-alone self-insured employers in the SISF Alternate Composite Deposit Program 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 SISF alternate composite deposit. The noncash elements of the SISF Alternate Composite Deposit Program 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 stand-alone 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 SISF alternate composite deposit approved by the director, the Self-Insurers’ Security Fund shall assess, in a manner approved by the director, each fully participating private stand-alone self-insuring employer a deposit assessment payable within 30 days of assessment. The amount of the deposit assessment charged each fully participating stand-alone 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 SISF alternate composite deposit.

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

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

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

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

(c) Upon payment of the deposit assessment and except as provided herein, the stand-alone 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 stand-alone 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 SISF alternate 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 SISF alternate composite deposit in subsequent years. In the event that in any one year the Self-Insurers’ Security Fund fails to post the required SISF alternate composite deposit by the date set the by the director, and the director requires each private SISF alternate 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 stand-alone self-insuring employer that paid the deposit assessment.

(d) If any private stand-alone 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 stand-alone self-insuring employer fails to pay the deposit assessment in the time provided, the director shall order the stand-alone 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 stand-alone 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 SISF alternate composite deposit with the director, the deposit shall be held until the director determines that a private stand-alone 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 SISF alternate composite deposit necessary to pay the workers’ compensation benefits of the defaulting stand-alone 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 SISF alternate 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 SISF alternate 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 SISF alternate 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 stand-alone self-insured must meet in order to be a fully participating stand-alone self-insurer in the SISF Alternate Composite Deposit Program. In the event any stand-alone 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 stand-alone self-insuring employer from full participation in the SISF Alternate Composite Deposit Program. In the event a stand-alone self-insuring employer is excluded from full participation, the nonfully participating stand-alone 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 stand-alone 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 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 SISF Alternate Composite Deposit Program or the SIG Alternate Composite Deposit Program, and there shall not be any lapse in the security.

3701.85.

 (a) As an alternative to each private SIG securing its own incurred liabilities as provided in Section 3701, the director may provide by regulation for an alternative security system whereby all private SIGs designated for full participation by the director shall collectively secure their aggregate incurred liabilities through the Self-Insured Group Security Fund, which shall be known as the “SIG Alternate Composite Deposit Program.” The regulations shall provide for the director to set a total security requirement for these participating SIGs in the SIG Alternate Composite Deposit Program based on a review of their annual reports and any other self-insurer information as may be specified by the director. The Self-Insured Group 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 Unless otherwise permitted by regulation, the deposit shall be an amount equal to the self-insurer’s project 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.

(b) 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 by the director pursuant to Section 3702.10. Upon approvalby the director and posting by the Self-Insured Group Security Fund on or before the date set by the director, that combination shall be the SIG Alternate Composite Deposit. The noncash elements of the SIG Alternate Composite Deposit Program may be one-year or multiple-year instruments. If the Self-Insured Group 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 SIG shall secure its incurred liabilities in the manner required by Section 3701. Self-insured SIGs not designated for full participation by the director shall meet all requirements as may be set by the director pursuant to subdivision (g) (h).

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

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

(2) The SIG’s paid or incurred liabilities as reflected in its annual report.

(3) The financial strength and creditworthiness of the SIG.

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

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

(d) Upon payment of the deposit assessment and except as provided herein, the SIG loses all right, title, and interest in the deposit assessment. To the extent that in any one year the deposit assessment paid by SIGs 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 SIG alternate 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 SIG alternate composite deposit in subsequent years. In the event that in any one year the Self-Insured Group Security Fund fails to post the required SIG alternate composite deposit by the date set the by the director, and the director requires each private SIG 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 SIG that paid the deposit assessment.

(e) If any private SIG 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 SIG fails to pay the deposit assessment in the time provided, the director shall order the SIG 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-Insured Group Security Fund. The director may also revoke the certificate of consent to self-insure of any SIG who fails to pay the deposit assessment in the time provided.

(f) Upon the posting by the Self-Insured Group Security Fund of the SIG alternate composite deposit with the director, the deposit shall be held until the director determines that a private SIG has failed to pay workers’ compensation as required by this division, and the director orders the Self-Insured Group Security Fund to commence payment. Upon ordering the Self-Insured Group Security Fund to commence payment, the director shall make available to the fund that portion of the SIG alternate composite deposit necessary to pay the workers’ compensation benefits of the defaulting SIG. 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-Insured Group Security Fund any portions of the SIG alternate composite deposit as may be needed to pay those benefits. In making the deposit available to the Self-Insured Group 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.

(g) The cash portion of the SIG alternate 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-Insured Group Security Fund and the injured workers of 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-Insured Group Security Fund to hold, invest, and draw upon the cash portion of the SIG alternate composite deposit as prescribed by regulation.

(h) Notwithstanding any other provision of this section, the director shall, by regulation, set minimum credit, financial, or other conditions that a private SIG must meet in order to be a fully participating SIG in the SIG Alternate Composite Deposit Program. In the event any private SIG is unable to meet the conditions set by the director, or upon application of the Self-Insured Group Security Fund to exclude an employer for credit or financial reasons, the director shall exclude the SIG from full participation in the SIG Alternate Composite Deposit Program. In the event a SIG is excluded from full participation, the nonfully participating private SIG 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 SIG post a separate security deposit to secure a portion of its incurred liabilities and pay a deposit assessment set by the director.

(i) 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-Insured Group 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) (h) for nonfully participating private self-insurers.

(j) At all times, a self-insured employer shall have secured its incurred workers’ compensation liabilities either in the manner required by Section 3701, through the SISF Alternate Composite Deposit Program or through the SIG Alternate Composite Deposit Program, and there shall not be any lapse in the security.

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, a recommendation by the SIG 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 or the SIG 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.

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 and the SIG Fund in the Self-Insurance Plans Fund.

(c) 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.

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 in the case of a stand-alone self-insurer, or the SIG Fund in the case of a SIG, without recourse or liability to the Self-Insurer’s Security Fund or the SIG 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, the SIG 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, the Self-Insurers’ Security Fund, or the SIG Fund, as appropriate, shall be advised by the director whenever a special excess workers’ compensation insurance policy is posted.

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 the court, the Self-Insurers’ Security Fund, or the SIG 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.

3740.5.

 It is the intent of the Legislature in enacting this article and Article 1 (commencing with Section 3700) to provide for the continuation of workers’ compensation benefits delayed due to the failure of a private stand-alone self-insured employer or a SIG to meet its compensation obligations when the employers’ security deposit is either inadequate or not immediately accessible for the payment of benefits. With respect to the continued liability of a surety for claims that arose under a bond after termination of that bond and to a surety’s liability for the cost of administration of claims, it is the intent of the Legislature to clarify existing law. The Legislature finds and declares that the establishment of two security funds, the Self-Insurers’ Security Fund for stand-alone self-insured employers and the Self-Insured Group Security Fund for groups of self-insured employers is a necessary component of a complete system of workers’ compensation, required by Section 4 of Article XIV of the California Constitution, to have adequate provisions for the comfort, health and safety, and general welfare of any and all workers and their dependents to the extent of relieving the consequences of any industrial injury or death, and full provision for securing the payment of compensation.

3740.

 The Legislature finds and declares as follows:

(a) A Self-Insured Group is a nonprofit mutual benefit corporation whose members have transferred their primary workers’ compensation liabilities to the SIG.

(b) Group self-insurance is different from stand-alone self-insurance because group self-insurance involves the transfer of the primary risk of an occurrence from one entity to another.

(c) Members of SIG are jointly and severally liable for the amounts required to pay the workers’ compensation liabilities of all the members of the group, and they may be assessed to cover any shortfall in the group even if their own experience is loss free, a scenario sometimes called “last man standing.”

(d) SIGs have the potential to serve the interests of California employers and employees by promptly providing workers’ compensation benefits to injured workers at reasonable cost while enabling and encouraging employers to improve safety and provide the earliest appropriate return to work for injured employees.

(e) Smaller employers may generally receive the benefits of self-insurance only through membership in a SIG because SIG members do not have to prove their capacity to individually pay their liabilities.

(f) SIGs have become an integral part of California’s workers’ compensation system, providing coverage for more than 4,500 employers, 350,000 employees, and $4.8 billion in payroll.

(g) The expansion and increased availability of group self-insurance will further stabilize and facilitate the funding of workers’ compensation benefits.

(h) SIGs involve a lower risk of default than individual self-insurance because there is recourse to the members of the SIG for the recovery of assessments to pay unfunded workers’ compensation liabilities.

(i) A separate security fund will allow different risk pools for SIGs and stand-alone self-insured employers.

(j) Providing a separate security fund for SIGs will facilitate the development of distinct techniques for assessing and responding to the risks that SIGs bring to their security fund.

(k) The pooling of risk among SIGs in a separate security fund will have the salutary effect of promoting higher standards for SIGs because each SIG will have a stronger interest in assuring the financial integrity of all SIGs.

3741.

 As used in this article:

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

(b) “Fund” means the Self-Insurers’ Security Fund established pursuant to Section 3742.

(c) “Fund member” means a stand-alone self-insured employer which participates in the Self-Insurers’ Security Fund.

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

(e) “Insolvent SIG” means a SIG whose certificate of consent to self-insure has been revoked by the director, or who has failed to pay compensation, or whose security deposit has been called by the director pursuant to Section 3701.5.

(f) “Insolvent self-insurer” means a stand-alone self-insurer whose certificate of consent to self-insure has been revoked by the director, or who has failed to pay compensation, or whose security deposit has been called by the director pursuant to Section 3701.5.

(g) “Private self-insurer” and “private self-insured employer” mean any employer that has been issued a certificate of consent to self-insure by the director, whether as a stand-alone self-insured employer or as a member of a SIG and has secured the payment of compensation pursuant to subdivision (b) of Section 3700.

(h) “SIG” means a nonprofit mutual benefit corporation to which a group of private self-insured employers have transferred primary liability for their workers’ compensation obligations and have secured the payment of compensation pursuant to subdivision (b) of Section 3700.

(i) “SIG Fund” means the Self-Insured Group Security Fund established pursuant to Section 3742.5.

(j) “SIG Fund member” means a SIG which participates in the SIG Fund.

(k) “SIG Fund trustees” means the Board of Trustees of the SIG Fund.

(l) “Stand-alone self-insured employer” and “stand-alone self-insured” mean a private employer that retains primary liability for its own worker’s compensation obligations, whether alone or in connection with guarantors, and has secured the payment of compensation pursuant to subdivision (b) of Section 3700.

3742.

 (a) The Self-Insurers’ Security Fund shall be established as a Nonprofit Mutual Benefit Corporation pursuant to Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code and this article. If any provision of the Nonprofit Mutual Benefit Corporation Law conflicts with any provision of this article, the provisions of this article shall apply. Each stand-alone self-insured employer shall participate as a member in the fund, unless its liabilities have been turned over to the fund pursuant to Section 3701.5, at which time its membership in the fund is relinquished.

(b) The fund shall be governed by a board of trustees with no more than eight members, as established by the bylaws of the Self-Insurers’ Security Fund. The director shall hold ex officio status, with full powers equal to those of a trustee, except that the director shall not have a vote. The director, or a delegate authorized in writing to act as the director’s representative on the board of trustees, shall carry out exclusively the responsibilities set forth in Division 1 (commencing with Section 50) through Division 4 (commencing with Section 3200) and shall not have the obligations of a trustee under the Nonprofit Mutual Benefit Corporation Law. The fund shall adopt bylaws to segregate the director from all matters that may involve fund litigation against the department or fund participation in legal proceedings before the director. Although not voting, the director or a delegate authorized in writing to represent the director, shall be counted toward a quorum of trustees. The remaining trustees shall be representatives of private self-insurers. The self-insurer trustees shall be elected by the members of the fund, each member having one vote. Trustees shall be elected to four-year terms, and shall serve until their successors are elected and assume office pursuant to the bylaws of the fund.

(c) The fund shall establish bylaws as are necessary to effectuate the purposes of this article and to carry out the responsibilities of the fund, including, but not limited to, any obligations imposed by the director pursuant to Section 3701.8. The fund may carry out its responsibilities directly or by contract, and may purchase services and insurance and borrow funds as it deems necessary for the protection of the members and their employees. The fund may receive confidential information concerning the financial condition of self-insured employers whose liabilities to pay compensation may devolve upon it and shall adopt bylaws to prevent dissemination of that information.

(d) The director may also require fund members to subscribe to financial instruments or guarantees to be posted with the director in order to satisfy the security requirements set by the director pursuant to Section 3701.8.

3742.5.

 (a) The Self-Insured Group Security Fund shall be established as a Nonprofit Mutual Benefit Corporation pursuant to Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code and this article. If any provision of the Nonprofit Mutual Benefit Corporation Law conflicts with any provision of this article, the provisions of this article shall apply. Each SIG shall participate as a member in the SIG Fund as a condition of maintaining its certificate of consent to self-insure.

(b) The SIG Fund shall be governed by a seven-member board of trustees and shall include the director ex officio, with full powers equal to those of a trustee, except that the director shall not have a vote. The director, or a delegate authorized in writing to act as the director’s representative on the board of trustees, shall carry out exclusively the responsibilities set forth in Division 1 (commencing with Section 50) through Division 4 (commencing with Section 3200), inclusive, and shall not have the obligations of a trustee under the Nonprofit Mutual Benefit Corporation Law. The SIG Fund shall adopt bylaws to segregate the director from all matters that may involve SIG Fund litigation against the department or SIG Fund participation in legal proceedings before the director. Although not voting, the director or a delegate authorized in writing to represent the director, shall be counted toward a quorum of trustees. Three of the remaining six trustees shall be representatives selected from individual SIG boards of trustees and three shall be representatives of SIG administrators. The six trustees shall be elected by the SIG Fund members, each SIG Fund member having one vote. The three SIG Fund trustees selected from the SIG boards and initially elected by the members shall serve two-year terms, and the three SIG administrator SIG Fund trustees shall serve four-year terms. Thereafter, SIG Fund trustees selected from SIG boards shall be elected to two-year terms, and the SIG Fund trustees selected from the SIG administrators shall be elected to four-year terms and shall serve until their successors are elected and assume office pursuant to the bylaws of the SIG Fund.

(c) The SIG Fund shall establish bylaws as are necessary to effectuate the purposes of this article and to carry out the responsibilities of the SIG Fund, including, but not limited to, any obligations imposed by the director pursuant to Section 3701.8. The SIG Fund may carry out its responsibilities directly or by contract, and may purchase services and insurance and borrow funds as it deems necessary for the protection of the SIG Fund members and their employees. The SIG Fund may receive confidential information concerning the financial condition of self-insured employers whose liabilities to pay compensation may devolve upon it and shall adopt bylaws to prevent dissemination of that information.

(d) The director may also require SIG Fund members to subscribe to financial instruments or guarantees to be posted with the director in order to satisfy the security requirements set by the director pursuant to Section 3701.8.

3743.

 (a) Upon order of the director pursuant to Section 3701.5, the fund shall assume the workers’ compensation obligations of an insolvent self-insurer.

(b) Notwithstanding subdivision (a), the fund shall not be liable for the payment of any penalties assessed for any act or omission on the part of any person other than the fund, including, but not limited to, the penalties provided in Section 132a, 3706, 4553, 4554, 4556, 4557, 4558, 4601.5, 5814, or 5814.1.

(c) The fund shall be a party in interest in all proceedings involving compensation claims against an insolvent self-insurer whose compensation obligations have been paid or assumed by the fund. The fund shall have the same rights and defenses as the insolvent self-insurer, including, but not limited to, all of the following:

(1) To appear, defend, and appeal claims.

(2) To receive notice of, investigate, adjust, compromise, settle, and pay claims.

(3) To investigate, handle, and deny claims.

(d) This section shall remain in effect only until July 1, 2014, and as of that date is repealed, unless a later enacted statute, that is enacted before July 1, 2014, deletes or extends that date.

3743.

 (a) Upon order of the director pursuant to Section 3701.5, the fund shall assume the workers’ compensation obligations of an insolvent stand-alone self-insurer.

(b) Upon order of the director pursuant to Section 3701.5, the SIG Fund shall assume the workers’ compensation obligations of an insolvent SIG.

(c) Notwithstanding subdivision (a), neither the fund nor the SIG Fund shall be liable for the payment of any penalties assessed for any act or omission on the part of any person other than the fund or the SIG Fund, respectively, including, but not limited to, the penalties provided in Section 132a, 3706, 4553, 4554, 4556, 4557, 4558, 4601.5, 5814, or 5814.1.

(d) The fund shall be a party in interest in all proceedings involving compensation claims against an insolvent stand-alone self-insurer whose compensation obligations have been paid or assumed by the fund. The fund shall have the same rights and defenses as the insolvent self-insurer, including, but not limited to, all of the following:

(1) To appear, defend, and appeal claims.

(2) To receive notice of, investigate, adjust, compromise, settle, and pay claims.

(3) To investigate, handle, and deny claims.

(e) The SIG Fund shall be a party in interest in all proceedings involving compensation claims against an insolvent self-insured group whose compensation obligations have been paid or assumed by the SIG Fund. The SIG Fund shall have the same rights and defenses as the insolvent self-insurer, including, but not limited to, all of the following:

(1) To appear, defend, and appeal claims.

(2) To receive notice of, investigate, adjust, compromise, settle, and pay claims.

(3) To investigate, handle, and deny claims.

(f)  The Self-Insurer’s Security Fund shall retain the workers’ compensation obligations for every self-insured employer and SIG that either became insolvent, or was issued a notice of intent to revoke its certificate of consent to self-insure by the director, before July 1, 2014.

(g) This section shall become operative on July 1, 2014.

3744.

 (a) (1) The fund shall have the right and obligation to obtain reimbursement from an insolvent stand-alone self-insurer up to the amount of the self-insurer’s workers’ compensation obligations paid and assumed by the fund, including reasonable administrative and legal costs. This right includes, but is not limited to, a right to claim for wages and other necessities of life advanced to claimants as subrogee of the claimants in any action to collect against the self-insured as debtor. For purposes of this section, “insolvent stand-alone self-insurer” includes the entity to which the certificate of consent to self-insure was issued, any guarantor of the entity’s liabilities under the certificate, any member of a self-insurance group to which the certificate was issued, and any employer who obtained employees from a self-insured employer under subdivision (d) of Section 3602.

(2) The Legislature finds and declares that the amendments made to this subdivision by the act adding this paragraph are declaratory of existing law.

(b) The SIG Fund shall have the right and obligation to obtain reimbursement from every member of the insolvent SIG, jointly and severally, up to the amount of the self-insurer’s workers’ compensation obligations paid and assumed by the SIG Fund, including reasonable administrative and legal costs. This right includes, but is not limited to, a right to claim for wages and other necessities of life advanced to claimants as subrogee of the claimants in any action to collect against the self-insured as debtor.

(c) The fund shall have the right and obligation to obtain from the security deposit of an insolvent stand-alone self-insurer the amount of the self-insurer’s compensation obligations, including reasonable administrative and legal costs, paid or assumed by the fund. Reimbursement of administrative costs, including legal costs, shall be subject to approval by a majority vote of the fund’s trustees. The fund shall be a party in interest in any action to obtain the security deposit for the payment of compensation obligations of an insolvent stand-alone self-insurer.

(d) The SIG Fund shall have the right and obligation to obtain from the security deposit of an insolvent SIG the amount of the SIG’s compensation obligations, including reasonable administrative and legal costs, paid or assumed by the SIG Fund. Reimbursement of administrative costs, including legal costs, shall be subject to approval by a majority vote of the SIG Fund’s trustees. The SIG Fund shall be a party in interest in any action to obtain the security deposit for the payment of compensation obligations of an insolvent self-insurer.

(e) The fund shall have the right to bring an action against any person to recover compensation paid and liability assumed by the fund, including, but not limited to, any excess insurance carrier of the self-insured employer, and any person whose negligence or breach of any obligation contributed to any underestimation of the stand-alone self-insured employer’s total accrued liability as reported to the director.

(f) The SIG Fund shall have the right to bring an action against any person to recover compensation paid and liability assumed by the SIG Fund, including, but not limited to, any excess insurance carrier of the self-insured employer, and any person whose negligence or breach of any obligation contributed to any underestimation of the SIG’s total accrued liability as reported to the director.

(g) The fund may be a party in interest in any action brought by any other person seeking damages resulting from the failure of an insolvent stand-alone self-insurer to pay workers’ compensation required pursuant to this division.

(h) The SIG Fund may be a party in interest in any action brought by any other person seeking damages resulting from the failure of an insolvent SIG to pay workers’ compensation required pursuant to this division.

(i) At the election of the Self-Insurers’ Security Fund, venue shall be in the Superior Court for the State of California, County of Sacramento, for any action under this section. All actions in which the Self-Insurers’ Security Fund and two or more members or former members of one self-insurance group are parties shall be consolidated if requested by the Self-Insurers’ Security Fund.

(j) At the election of the SIG Security Fund, venue shall be in the Superior Court for the State of California, County of Sacramento, for any action under this section. All actions in which the SIG Security Fund and two or more members or former members of one self-insurance group are parties shall be consolidated if requested by the SIG Security Fund.

3745.

 (a) The fund and the SIG Fund shall each maintain cash, readily marketable securities, or other assets, or a line of credit, approved by the director, sufficient to immediately continue the payment of the compensation obligations of an insolvent stand-alone self-insurer or insolvent SIG pending assessment of the members. The director may establish the minimum amount to be maintained by, or immediately available to, the fund for this purpose.

(b) The fund may assess each of its members a pro rata share of the funding necessary to carry out the purposes of this article. Funds obtained by assessments pursuant to this subdivision may only be used for the purposes of this article.

(c) The SIG Fund may assess each of its members a pro rata share of the funding necessary to carry out its obligations and the purposes of this article. However, no member shall be assessed at one time in excess of 1.5 percent of the benefits paid by the member for claims incurred during the previous calendar year as a self-insurer, and total annual assessments in any calendar year shall not exceed 2 percent of the benefits paid for claims incurred during the previous calendar year. Funds obtained by assessments pursuant to this subdivision may only be used for the purposes of this article.

(d) The fund trustees shall certify to the director the collection and receipt of all moneys from assessments, noting any delinquencies. The fund trustees shall take any action deemed appropriate to collect any delinquent assessments.

(e) The SIG Fund trustees shall certify to the director the collection and receipt of all moneys from assessments, noting any delinquencies. The SIG Fund trustees shall take any action deemed appropriate to collect any delinquent assessments.

(f) All initial assessments payable to the SIG Fund shall be due and payable by May 1, 2014.

3746.

 (a) The fund shall annually contract for an independent certified audit of the financial activities of the fund. An annual report on the financial status of the fund as of June 30 shall be submitted to the director and to each member, or at the election of the fund, posted on the fund’s Internet Web site.

(b) The SIG Fund trustees shall annually contract for an independent certified audit of the financial activities of the SIG Fund. An annual report on the financial status of the SIG Fund as of June 30 shall be submitted to the director and to each SIG Fund member.