Improvement Seen in California Workers' Comp Crisis

California racing has "definitely turned a corner" on the workers' compensation insurance crisis, the leader of the state's trainer association said, but a reduction in premiums is at least a year away.

Ed Halpern, executive director of the California Thoroughbred Trainers, credits the racing industry and insurance giant American International Group, which negotiated a captive program in December, with improving a bleak outlook.

"We have a program in place, and as long as we have that program, we can look forward to the long term," Halpern said. "In a year or two, we'll see the benefits (in lower workers' compensation rates)."

The current agreement with AIG, which has signed up about 60% of the state's eligible trainers, expires June 30. Policies for the remaining trainers, nearly all of whom are insured through government-backed California State Fund Insurance, also are set to expire at that time.

Halpern said he expects nearly full enrollment in the AIG program among Thoroughbred trainers in spite of a 10% increase in the base rate (from $31.74 per $100 of payroll to $35.04) for the coming year. Though State Fund has not sent out renewal notices, he said the base rate is expected to be in the neighborhood of 60%.

Halpern said he isn't surprised by the AIG increases but knows it will be a bitter pill to swallow for trainers and their owners, who have been hit hard by spiraling workers' comp rates in the past 18 months due to skyrocketing medical costs and state laws affecting employee liability. A number of owners and trainers have relocated all or parts of their stables outside of the state. Others have left the business.

"I don't really know the justification for the rate increases," Halpern said. "Costs have gone up, and insurance due to increased benefits generally costs more. We know that's true. But the AIG rates are significantly better than State Fund's. In the long run, AIG will be more beneficial to all of us."

Jim Ghidella, Northern California representative for the Thoroughbred Owners of California, reported about $500,000 went out in claims from an original $2 million set aside for the first seven months of the AIG program. He credited the insurer's cost containment efforts.

"The claims handling has been much, much more professional than in the past," Ghidella said. "It's paying off for us. AIG is an absolutely first-class company, and we are really privileged to be associated with them."

Initial savings will be used to repay California racing associations that put up letters of credit to fund the original plan, Ghidella said.

Ghidella said he is optimistic the improved workers' comp atmosphere is bringing stability to the backstretch once more, but Halpern was cautious. He said slot machines and bigger purses elsewhere continue to attract the interest of hard-pressed California training operations.

"I can't say we've seen the end (of the exodus)," Halpern said. "We'll have to see how well the situation is controlled during the next year."