Calif. State Fund Severs Ties with Group Administrator

California’s State Compensation Insurance Fund has terminated its relationship with Western Insurance Administrators (WIA), State Fund Spokeswoman Jennifer Vargen has confirmed.

Based in Long Beach, Calif., WIA previously was the administrator for eight SCIF safety groups and touted it was State Fund’s largest program manager with more than 25,000 participating employers.

The termination of WIA comes six months after SCIF’s board of directors terminated its president, James Tudor, and another senior manager over what it termed as their “unacceptable” operation of the insurer’s administrative fee program that compensates organizations such as WIA to place State Fund policies at discounted group rates.

In March, Nanci Clarence of the San Francisco law firm of Clarence & Dyer LLP, which is overseeing SCIF’s internal review, told an oversight hearing of the Senate Banking, Finance and Insurance Committee that the inquiry is focused on the administrative fee program. The program began in 1993 to provide group members discounts to reflect lower risk due to workplace safety programs run by the groups, Clarence told the committee.

Also in March, California Insurance Commissioner Steve Poizner ordered an audit of State Fund. Jennifer Kerns, a spokeswoman for Poizner, said the audit will be completed in October.

Meanwhile, the insurer is also developing a code of ethics and guidelines on financial conflicts of interest for board members, officers and employees and has established a whistleblower hotline operated by an outside company.

More details on this story will be published in Insurance Journal West Region’s Oct. 8 issue.