New Workers' Comp Plan Launched in California

By Jack Shinar
A new workers' compensation insurance program for California's backstretches went into effect Friday with the promise of bringing costs back to manageable levels.

California racing has been dealing with by far the highest worker compensation premiums in the country for some time. The situation was exacerbated in February when the last private insurer quit accepting policies, forcing stable operations to seek coverage from the last remaining source, the government-backed State Fund.

The impact of the new deal will be immediate for some barns, but others around the state won't see a great improvement initially, said Ed Halpern, executive director of the California Thoroughbred Trainers. Halpern helped negotiate the new agreement with AIG, along with the Thoroughbred Owners of California and the track associations, who are providing funds that would offset claim costs.

"(Brokers) can start writing policies today," Halpern said.

The base rate of $31.28 per $100 of payroll and $73.81 per jockey mount being offered by insurance giant American International Group provides a 30 to 35 percent reduction from the base rate trainers are currently charged ($48.40 per $100 and $107 per mount) with the State Fund. Halpern said that discounts available to barns with clean claim records could reduce the payroll rate to 25 percent or lower, in some cases, and to as little as $50 per mount.

Halpern could not give an estimate on how many of the state's roughly 500 Thoroughbred trainers will switch to AIG immediately. But he expected the plan to pick up steam as the State Fund sends out renewal notices that are expected to contain increases over the current rates of 20 to 25 percent.

Broker John Patrick Unick, national sales manager for Maroevich, O'Shea and Coghlan of San Francisco, estimated that about $8 million in premiums will be committed to the new plan by the end of the next enrollment period in January. That's a little more than half of the $15 million at stake statewide.

Unick said some insurance brokers, who realize a 5 percent commission through the State Fund but receive only 3 percent in retail transactions, are misleading many trainers about the AIG program and creating uncertainty about the plan.

"I believe brokers have a fiduciary duty to provide (policies) that are in their clients' best interests," he said. "That's not what's happening. I would encourage trainers to get their facts straight and to be sure that their retail broker is telling them everything."

Trainers who cut off their State Fund coverage to go with the new plan won't be penalized, Halpern noted. However, smaller operations may find themselves strapped if they try to switch because of the delay in receiving their deposit refunds. Enrollment in the AIG fund could exceed $10,000 in many cases.

Immediate relief aside, Halpern said the new program gives the industry an opportunity to reduce costs more significantly in the future. "This gives us the opportunity to control our own fate by monitoring safety standards and claims," he said.

Backstretch safety guidelines will be established and the program will also monitor claims for consistency and keep better track of payroll records, areas that had been abused in the past, Halpern noted.

"There will be a greater emphasis on accident prevention and getting those who file claims back to work quicker," he said.

Through state legislation, the Thoroughbred owners organization and the racetrack associations have freed up to $5 million in purse funds to help cover claims. Some trainers who would not see immediate benefit by going to the new program are taking a wait-and-see attitude.

Unick believes once the industry can get control of workers' comp claims they will see tremendous improvement in their rates within two or three years.

"We have to get the ship to steer in the right direction," he said. "There are a lot of people who think this problem can go away with a snap of a finger, but that's not realistic."