California Officials Review Workers' Comp Proposal

by Jack Shinar

California racing officials were unable to come to an agreement Monday on a formal proposal for a statewide workers' compensation insurance plan, but a representative for horse owners said progress was made following an afternoon-long session at Santa Anita.

Officials representing the tracks, horse owners and trainers discussed details of the proposal, made by major insurer American International Group.

"I came away cautiously optimistic," said Jim Ghidella, who represented the Thoroughbred Owners of California. "Overall, I sensed a guarded willingness to proceed."

Ghidella added, "There were genuine issues brought out that needed to be resolved."

He said the parties would attempt to iron out problems this week.

"By next week, we'll know a lot more," Ghidella said

The proposal from AIG is the most concrete plan yet offered to help solve the state racing industry's ongoing workers' compensation crisis for its backstretch workers and jockeys.

But while the plan would provide substantial reductions for trainers in state--estimated at about 30% for most operations--it could carry a hefty $7.2 million annual refundable security deposit that would be shared equally by the tracks and the Thoroughbred Owners of California.

That figure took Jack Liebau, Magna Entertainment's director of California racing, by surprise.

"I was discouraged to see the cost of the program has accelerated by 30% in the last week," Liebau said.

Most of the cost would be covered through purse funds previously earmarked for vanning and stabling approved recently under state legislation. The legislation is awaiting the signature of Gov. Gray Davis.

Liebau said he questioned other aspects of the plan, including one provision requiring that 95% of the state's 800 or so Thoroughbred trainers participate.

"I don't think that's even possible," Liebau said. "It seems like I'm the (track representative) who has been most involved with this, so maybe that's why I'm the one who is the most confused by it. But we'll see how everyone else feels."

Ghidella is a strong proponent of the AIG proposal. He noted that the plan is the only alternative to the high-priced State Fund, which has been insuring the state's stables at a base rate approaching $50 per $100 of payroll. He said that after the first of the year, the rates would increase again to as much as $60, regardless of claim histories.

Questioning the AIG proposal "is like saying you want to pick which pair of shoes to wear when you only have one pair," Ghidella said.

He admitted the AIG security is extremely high, but noted that the non-used portion would be refunded for future use.

"AIG is an extremely conservative company," he said. "The deposit is so high because they are projecting losses that would be double the worst year we've ever had" for workers' compensation claims.

Ghidella also said there were some attractive features. "Most of the plans we've looked at set administrative expenses at 50%," he said. "AIG has whittled its share down to 39%."

AIG would also cap at $300,000 the amount the industry would have to pay out on any single catastrophic claim. The carrier would pick up the rest of the claim.

"That means the fund wouldn't be wiped out by a single claim," Ghidella said. "That's something that no one has ever offered before."