Could SCIF be for Sale?

Friday, May 22, 2009 | 0

By Julius Young


That's one idea that's been mentioned by Governor Schwarzenegger as he announced possible budget solutions to the current crisis.

SCIF would join California landmarks targeted by the Guv: San Quentin, Cal Expo, Del Mar fairgrounds, the L.A. Coliseum, etc. But as bloggers Jerry Roberts and Phil Trounstine have suggested, why stop there?

The list could be expanded to some other gems, including Hearst Castle, Fort Tejon, Old Town San Diego, Asilomar and the La Brea Tar Pits: http://calbuzzer.blogspot.com/

For the most part it ain't gonna happen. With a few exceptions, unloading some of these properties would be exceedingly difficult and would constitute the ultimate gimmick to solve structural budget problems.

Yet, Sacramento is in crisis. I was at the legislature last week and I have never heard so much panic and doom and gloom. Legislators are petrified that they will need to ax programs near and dear to their core constituencies.

But back to SCIF. Could it be sold in whole or part? Could it's "book of business" be sold?

Exactly how this would work isn't clear. It's unlikely anyone would want the "runoff" exposure attached to past underwriting, particularly if loss ratios are deteriorating for that book of business.

Would other insurers pay for access to SCIF's small business base or its underwriting and claims handling staff?

This observer is having a hard time wrapping my head around that concept. Keep in mind that SCIF's market share has plumented over the last 5 years and is now probably less than half of where it was before the '03 and '04 reforms.

"Safety groups" have been a problem for SCIF. SCIF is a hybrid, subject to special rules. Recent efforts to furlough
SCIF personnel were rejected by the courts.

The California Constitution includes language providing for a state compensation insurance fund:
http://www.leginfo.ca.gov/.const/.article_14

SCIF goes back to the time of the Boynton Act, in the early 1900s. For a history of SCIF, click here:
http://www.scif.com/about/History.html

So any sale of SCIF or it's "book of business" might involve issues under the California Constitution as well as union contractual issues and State Personnel Board issues.

All of that could make it a minefield even if there was a ready buyer or there was the legislative will to pursue this.

It's clear that we're on the verge of some previously "unthinkable" solutions, however.

Take a look at this piece by Dan Weintraub of the Sacramento Bee that summarizes the enormity of the problem:
http://www.sacbee.com/325/story/1866188 ... ia Forum



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Julius Young is an applicants' attorney with Boxer & Gerson LLP in Oakland. This column was reprinted with his permission from his blog, http://www.workerscompzone.com
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