Workers’ Compensation

In 1855, Georgia and Alabama passed Employer Liability Acts. 26 other states passed similar acts between 1855 and 1907. These acts permitted injured employees to sue the employers and then prove a negligent act or omission.

In the US the first status re workers’ compensation law was passed in Maryland in 1902 and the first law covering federal employees was passed in 1906.

At the turn of the 20th century workers compensation laws were voluntary for several reasons. An Elective law made passage easier and some argued that compulsory workers compensation laws would violate the 14th Amendment due process clause of the US Constitution. Some worker compensation mandated benefits without regard for fault or negligence, many felt that compulsory participation would deprive the employer of property.
The State Compensation Insurance Fund (State Fund) is a workers’ compensation insurer that was created as a “public enterprise fund” by the U.S. state of California, and today has partial autonomy from the rest of the state government. It is required by state law to maintain its headquarters in San Francisco, but has regional offices all over the state.

State Fund was created by the Boynton Act of 1913, and it started operations in 1914.The Legislature passes the Boynton Act, which creates a no-fault workers’ compensation system and mandates that all employers (with a few exceptions) provide such coverage for their employees. Among its many provisions, the Act establishes a “minimum rate” law to ensure that premiums charged will be sufficient to provide financial stability for the system. Around that same time, the voters amended the California Constitution by initiative to strengthen the constitutionality of the state workers’ compensation system. This was necessary because American employers during the early 20th century often challenged mandatory workers’ compensation statutes as an unconstitutional invasion of freedom of contract, an argument which had strong persuasive force during the Lochner era. State Fund’s constitutional basis is found at Article 14, Section 4 of the state constitution:

“ The Legislature is hereby expressly vested with plenary power, unlimited by any provision of this Constitution, to create, and enforce a complete system of workers’ compensation…including the establishment and management of a state compensation insurance fund… ”
State Fund has over $22 billion in assets and employs approximately 7,500 people (the number varies based on State Fund’s current percentage of the market), of whom over 500 are attorneys. Historically it has insured an average of 23 percent of the market each year since its creation by the Legislature in 1914. Its market share spiked to over 50 percent in years 2002–2004 when a large number of private carriers left the market. In keeping with its mission, State Fund has an open-door policy, writing insurance for California businesses who need workers’ compensation insurance. State Fund insures approximately one in five businesses in California. State Fund also serves as a third-party administrator, adjusting claims for almost all of the state agencies.

California is one of 21 states with a competitive state fund in the workers’ compensation insurance market. Several state funds serve as insurers of last resort and act as an example for private companies. Nevertheless, to keep them from crowding out private companies, they operate as non-profits and return surplus money to policy-holders after paying off claims and operating costs. Most write only workers’ compensation insurance and only in their home state.

As part of a continuing cost-cutting and restructuring plan, State Fund announced on October 6, 2011 plans to lay off approximately 1,800 employees, about a fourth of its workforce. State Fund kept its senior executive team and some parts of the legal and finance departments in San Francisco, but moved them to leased space at 333 Bush Street. To save money, all other administrative and managerial functions were reallocated to regional campuses in Vacaville and Pleasanton which have lower rent and less operating costs.


Significant experience designing risk financing structures
Tailored collateralization review
Access to ARM underwriters in nine major locations, nationwide
Ability to partner with a broad array of other ACE USA product offerings

Flexibility to unbundle claims services to a number of pre-qualified third party administrators
Close Out option available at binding for Workers Compensation (WC) and Automobile Liability (AL), which outlines pre-determined loss development factors (typically executed at 54 or 66 months from inception)
Fully bundled claims management and loss prevention programs through ESIS®, Inc.. ACE’s risk management services company
MinimumsLimitsClient Profile
Minimum deductible/retention: $100,000 per accident for WC
Lower retentions or guaranteed cost may be considered for General Liability (GL) and Auto Liability

Insurance provided by ACE American Insurance Company, ACE Fire Underwriters Insurance Company, ACE Property & Casualty Insurance Company, Indemnity Insurance Company of North America, Philadelphia, PA, and, in some jurisdictions, other insurance companies within the ACE Group. The product information above is a summary only. The insurance policy actually issued contains the terms and conditions of the contract. All products may not be available in all states. Surplus lines insurance sold only through licensed surplus lines producers.

ESIS, Inc, a claims and risk management services company, is part of ACE USA, the U.S.-based retail operating division of the ACE Group of Companies. ESIS risk control services may be sold directly to ESIS’s clients, or part of insurance underwriting. Risk control activities conducted on behalf of the insurer are not intended as a direct benefit or service to ACE insureds.

ACE Risk Management’s (ARM) Commercial Accounts program is designed to provide customized risk financing programs that meet each company’s individual needs. Major accounts reflect loss picks between $1 – $5 million; select accounts reflect loss picks between $0 – $1 million.

The 20 Largest Workers’ Compensation Insurers:
1. The number of the right of the company names below represents the insurer’ 2010 direct premium written in billions of dollars.

1. Liberty Mutual Holding Co. $4.1
2. American International Group $3.6
3. Travelers Cos $2.8
4. Hartford Financial Services $2.6
5. Zurich Financial Service $2.4
6. State Insurance Funds Workers Comp (NY) $1.3
7. State Compensation Ins. Fund (CA) $1.1
8. Ace Ltd. $1.1
9. Old Republic International $0.9
10. CNA Finance Corp $0.8
11. Accident Fund Group $0.7
12. Chubb Corp $0.7
13. W. R. Buckley Corp $0.7
14. Fairfax Financial Holding Ltd $0.6
15. Texas Mutual Ins. Co. $0.6
16. Berkshire Hathaway Inc. $0.5
17. Am Trust Financial Services $0.5
18. NJ Manufacturers Ins. Co. $0.4
19. Pinnocol Assurance $0.3
20. SAIF Corp $0.3