A group of nearly 50 Southern California-based Thoroughbred trainers met at Hollywood Park Tuesday to discuss the specifics of their new workers' compensation policies, one day after all trainers were required to renew with either the state-run State Fund insurance program or insurance giant American Insurance Group, which is supported by the California Thoroughbred Trainers, Thoroughbred Owners of California and the various racing associations within the state.
According to a fact sheet handed out by CTT executive director Ed Halpern, members of the AIG program will pay a base rate of $34.94 for every $100 of payroll and $103.73 for each jockey start, less a discount of up to 14.4 percent based on the total amount of premiums paid by each trainer. Additionally, premiums may be discounted or increased depending on an individual experience modification.
An individual experience modification is calculated by the State Insurance Rating Bureau and is based on premium size history and the number and severity of injuries suffered by employees.
State Fund's rates were not discussed at the meeting, largely because the company didn't release them until the last minute on Monday, the final day to sign up for either company.
While many trainers expected to discuss a potential illegal boycott of the Hollywood Park entry box in order to draw attention to the situation at state levels, that possibility took a backseat to dialogue on how they, as a group, can work together to come up with solutions to reduce costs which have risen to the highest level in state history.
One major problem, all trainers agreed, is the responsibility of covering jockeys under their individual workers' compensation plans. Thanks to a 1941 California Supreme Court case (Drillon vs. Industrial Accident Commission), jockeys are considered employees because they receive instructions from the trainer before each race. In most other states, jockeys are considered independent contractors and therefore not a factor in determining workers' compensation premiums.
Halpern said changing the law would be difficult, but that an attorney had been hired to review the possibility of having the State Racing Bureau ignore jockey accidents when calculating a trainer's experience modification rate. This approach would prevent a trainer's rate from increasing just because a jockey was hurt on that trainer's horse.
But most trainers expressed belief that changing the law would be the best and most realistic possibility for long-term cost relief.
"The fact is we have one insurance company," trainer Eric Kruljac said. "And the reason we have only one insurance company is because we have to cover the jockeys. Other insurance companies don't want to compete in this market because we have to cover the jockeys. We have to get together, however long it takes, to change the legislature."
Several trainers supported the idea of going directly to the jockeys' groups for, at the very least, some short-term help, something Halpern admits not having done previously, but for good reason.
"I didn't go to the jockeys' groups because I didn't feel (getting them to voluntarily self-insure or contribute to trainers' workers' compensation funds) was going to happen," Halpern said. "The realities are that it's unlikely to be successful."
An estimated $3.95 million to $4.5 million will be put into the AIG program by the TOC and racing organizations over the course of the 2003-2004 policy period, depending on how much premium is written in. The money contributed is used to pay claims that exceed the insurance loss pools, which breaks down to 53 percent of premiums. Any monies not used to pay claims will be refunded over a period of up to seven years.
One possibility for further insurance funding suggested during Tuesday's meeting was seeking out additional monies from the California Marketing Fund, from which $1 million is already ear-marked for workers' compensation premiums. The fund is budgeted at $6 million over the course of a year, meaning more remains as potential aid to help cover workers' compensation costs.
According to Halpern, close to $1 million in workers' compensations claims have been filed since AIG started underwriting policies for trainers back in December, with the possibility that claims could balloon to an estimated $2 million to $3 million within the next two to three years. But the days of rampant workers' compensation fraud are numbered, Halpern said, thanks to strict monitoring by the CTT and AIG.
"AIG is very aggressive in investigating all claims and following up on all claims," Halpern said. "And the CHSA has hired a full-time administrator who will be checking monthly on claimants and follow up on all claims. We now have two bodies investigating for potential fraud, which will be extremely helpful."