Government

The Security Fund was created by the California State Legislature, which enacted legislation regarding ongoing regulatory coordination and oversight of both the Security Fund and its members.

The Default Process

The DIR monitors each self-insured entity and determines if and when a self-insured is in default, which most often occurs in connection with a Chapter 7 bankruptcy or a company insolvency. When this occurs, the DIR can issue a formal “order of default” and direct the Security Fund to commence administration of the claims.  In such cases, the workers’ compensation claims are then turned over to the Fund to manage and administer until all of the defaulted employer’s claim obligations are settled and/or legally closed.

At the time of default, the self-insured employer relinquishes all membership rights in the Security Fund, as well as any rights to obtain the return of any collateral left on deposit.

Also, upon an order of default the Security Fund has 30 days in which to commence benefit administration.  Claim administrators who handled the claims for the defaulting employer are required to provide claim files and other records to the Security Fund within a reasonable time of the default.