State Fund Wants a Judge to Put Garamendi in His Place By Robert Warne - May 29, 2003After carrying California through one of the greatest work comp droughts in recent history, State Fund is not going to be the Executive Life of Insurance Commissioner John Garamendi’s second term. So in response to all of the California Department of Insurance’s (CDI) “sky is falling” doomsday rhetoric and power struggle, State Fund dropped a lawsuit on the department and Garamendi, May 27.
Filed in San Francisco County Superior Court, State Fund is suing for clarification on the commissioner’s and CDI’s authority and to have a judge determine if risk based capitol (RBC) statutes apply to them.
The suit claims that Garamendi's efforts to exert control over State Fund is illegal and unwarranted because it is solvent and has adequate claims reserves to meet its obligations.
According to the Los Angeles Times, the lawsuit alleges that Garamendi has "exceeded his authority" and "unlawfully interfered with the management" of State Fund by demanding that the insurer refuse to cover certain segments of employers, fire its president and legislative advocate and charge premium rates set by Garamendi.
State Fund reported that the suit also seeks to block Garamendi and the CDI from "falsely asserting they are in control of State Fund." Over the past several months, the media has reported that Garamendi has claimed State Fund is close to insolvency and is already under the control of the CDI. State Fund has consistently denied these assertions.
State Fund admits its surplus has not kept pace with its unprecedented growth since 2000 when thousands of employers turned to it to obtain coverage unavailable through other carriers.
State Fund President, Dianne Oki said, "We have averted a full-blown crisis of coverage availability in the last several years and in doing so prevented collapse of California's workers' compensation insurance system."
Garameni’s response to the suit is that the allegations are false and that the suit is a distraction and does nothing to solve California’s workers’ compensation crisis.
State Fund is due to release the results of a recent audit within the next few days. It is expected that audit will provide Garamendi with the ammo he needs to fare well in the battle.
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