Gilroy
– California farmers with exemplary safety records may soon have
some relief from punishing workers’ compensation premiums, but it
won’t be from Gov. Arnold Schwarzenegger’s much-touted reforms.
Gilroy – California farmers with exemplary safety records may soon have some relief from punishing workers’ compensation premiums, but it won’t be from Gov. Arnold Schwarzenegger’s much-touted reforms.
As of Jan. 1, farmers who meet eligibility requirements can join the state’s first self-insurance program for the agricultural industry. The plan is offered by California Self-Insured Groups (CALSIG), a network administrated by Self Insured Solutions, a Las Vegas company with offices in Ontario that specializes in high-risk industries.
“Workers’ compensation has been in crisis mode in California for three years,” Self Insured Solutions President Tom Wheeler said Tuesday. “There’s been a number of efforts at reform, but they haven’t been effective.”
The first round of reforms, made in 1993, authorized self-insured groups, but few blossomed as heavy competition among insurance carriers held premiums low.
But as rates reached crippling levels in the past few years, self-insured groups have mushroomed. There are now about 12 in the state, mostly in low-risk industries such as banking, credit unions and nursing homes.
Agriculture is one of the highest-risk industries. According to the California Department of Industrial Relations, 22,000 agriculture employees were injured in 2002, a rate of 5.3 per every 100 employees. The only industries with higher injury rates are manufacturing, transportation and construction.
CALSIG entered the California market with a construction group, which it claims saves California contractors more than $22 million a year in premiums and expenses.
“I hope this will help us,” said Kip Brundage, president of G & K Farms in Gilroy. “Agriculture is so much more costly in California. I don’t know how much longer the industry can continue at this level. How can we compete with other countries who can sell for so much less?”
Four years ago, Brundage was paying about $9,000 a year for workers’ compensation insurance for his 14 employees. This year, the bill came in at $101,000, even though G & K hasn’t filed any claims in that time.
A batch of reforms designed to protect companies from fraudulent claims and push down rates take effect with the new year, but Brundage said he’ll see minimal savings at best.
“Our rates have more than doubled in the last two years,” said Dennis Tarry of Dave Wilson Nursery in Hickman, just east of Modesto. The nursery is one of the first members of the new program. Tarry said he expects its rates to go down about 15 percent from the more than $500,00 it now pays to insure about 320 employees.
“We’ve been paying high rates and our employees have seen very little benefit,” he said. “Now we have a model that will more accurately reflect our own experience. Instead of being pooled in with every nursery in the state, we can be rewarded for being a responsible company.”
Currently, most farm operators are insured by the State Compensation Insurance Fund, a semiautonomous state-run agency that was established as a lender of last resort for farmers who had difficulty securing workers’ compensation insurance.
But over time, said DIR Spokesman Dean Fryer, the so-called State Fund has become the “primary provider in the state.”
“Premiums have gone up as insurance companies try to recoup their losses from bad investments. The early 90’s reforms brought a lot of players into the market but a lot of those companies have gone out of business,” Fryer said. “Agriculture is a good industry for self-insurance because of the nature of the work and the risks involved. It will help farmers have more control.”
That worries advocates for farm workers, who say that self-insurance groups can exacerbate problems that workers have filing claims.
“The issue with self-insurance is that it makes problems that already exist worse,” said Vanessa Alvarado of the Watsonville Law Center. “The process is so insulated that there’s no way to get an objective third-party involved.”
But Coll Thompson, a partner with Self Insured Solutions said that a smaller, self-insured group is a boon for employees, who won’t get caught in the standard bureaucratic machinations.
“The typical insurance company has a protocol and a play-list that it’s working from, but with a smaller group there’s no benefit to milking injuries,” he said. “Our message to farm workers is the same one we gave to the contracting group: Give us a chance. If we don’t take care of you, then you can get a lawyer.”
To qualify for CALSIG, a farm operator must pay more than $50,000 a year in premiums and have a loss ratio in the 30 percent range. For example, a farmer who pays a $100,000 premium and files $30,000 in claims, has a 30 percent loss ratio.
Wheeler said that in addition to parsing potential clients’ claim histories, CALSIG will physically walk properties to ensure they reflect a commitment to safety.
“This is a shared liability company,” he said. “We will pick and choose who gets in.”
Though the group gives fresh hope to farmers struggling with insurance rates, Jenny Derry, executive director of the Santa Clara Farm Bureau, said that it requires cautious optimism.
“Workers’ compensation has had a big impact on the bottom line,” Derry said. “It’s good somebody is trying to do something, but it’s brand new and we need to see if it will benefit farmers.”
