California Fund Pays over $11 Million in Defaulted Workers' Comp Claims

Dec. 7, 2001
California's Self Insurers' Security Fund will take over payment of the workers' compensation claims of two companies following their bankruptcies and subsequent default on more than 600 self-insured claims.

California Department of Industrial Relations Director Stephen J. Smith ordered the state's Self Insurers' Security Fund to take over payment of HomeBase Inc. and San Francisco French Bread Co. workers' compensation claims, following the bankruptcies of both companies and subsequent default on more than 600 self-insured claims.

On Nov. 13, the San Francisco Bread Co. was turned over to the Self Insurers' Security Fund following its Oct. 24 default to pay its nearly 100 workers' compensation claims estimated at approximately $2 million. On Oct. 24, its workers' compensation insurance carrier, Reliance, was declared insolvent by the state of Pennsylvania and ordered to discontinue payment on the claims.

While California Labor Code Section 3702.8 does permit a self-insured employer to sell off their workers' compensation claims to a carrier, it must be done by a Special Excess Workers' Compensation Insurance Policy. San Francisco French Bread Co. chose to sell off the liabilities without entering into this type of policy, thereby retaining liability for its claims.

On Nov. 19, Smith ordered the Self Insurers' Security Fund to take over payment of HomeBase Inc. workers' compensation liability resulting from the company's default on its claims. HomeBase Inc., operators of 42 House2Home home decorating superstores throughout California, filed a Chapter 11 bankruptcy petition Nov. 7, 2001. The company is liquidating all its stores.

HomeBase self-insured its workers' compensation claims in California and currently has about 500 claims being handled by Gallagher Bassett. Liabilities were estimated at approximately $9.1 million.

The Security Fund is a private, nonprofit mutual benefit corporation that guarantees the payment of all self-insured workers' compensation claims in California. The state has one of the largest workers' compensation self-insurance programs in the nation. Employers choose to self-insure their workers' compensation liabilities on behalf of their employees for reasons of cost effectiveness, greater control over their claims program, and increased safety incentives with improved loss control results.

For more information on self insurance, visit

edited by Sandy Smith ([email protected])

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