Section 3701 Of Article 1. Insurance And Security From California Labor Code >> Division 4. >> Part 1. >> Chapter 4. >> Article 1.
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.