Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) An
irrevocable standby letter of credit may be accepted by the Manager as all or
part of the security deposit for a private self insurer. The Manager shall
determine whether the letter of credit submitted is acceptable and if its
language and format meets the requirements of this Section.
(b) Irrevocable letters of credit shall be
issued by and payable at a branch in the continental United States, Alaska or
Hawaii. The issuing bank or financial institution shall meet the requirements
of this section and may be:
(1) A State of
California chartered bank or savings institution; or
(2) A federally chartered bank or savings
institution; or
(3) Any other
foreign or domestic bank or savings institution; or
(4) A group (syndication) of domestic or
foreign banks or savings institutions.
(5) A federally chartered or State of
California chartered credit union
(c) The Manager shall provide a model letter
of credit format and language that will meet the requirements for acceptance.
The letter of credit shall include, but not be limited to, the following
provisions:
(1) The letter of credit will be
automatically extended without amendment for an additional one year from the
expiry date or any subsequent expiry date unless, at least 45 days before the
expiry date, the Manager is notified in writing by the bank or financial
institution that the letter of credit will not be renewed;
(2) The letter of credit can be called if the
self insurer fails to pay its workers' compensation liabilities; or the self
insurer files bankruptcy; or the self insurer fails to renew or substitute
acceptable security by ten days prior to the expiry date of the letter of
credit; or any combination of these events;
(3) The letter of credit is not subject to
any qualification or condition by the issuing or confirming bank or financial
institution and is the bank or financial institution's individual obligation
which is in no way contingent upon reimbursement;
(4) Payment of any amount under the letter of
credit shall be made only by wire transfer in the name of "The Department of
Industrial Relations In Trust For [the legal name of the self insurer]" to an
account of the State Controller, State of California, at a designated
bank;
(5) All letters of credit
shall include a statement that if legal proceedings are initiated by any party
with respect to the payment of any letter of credit, it is agreed that such
proceedings shall be subject to the jurisdiction of California courts and
administrative agencies and subject to California law; and
(6) Letters of credit shall be subject to the
Uniform Customs and Practices for Documentary Credits, UCP600, 2007 Revision,
ICC Publication No. 600, which is hereby incorporated by reference, and a
reference to this publication shall be included within the text of the letter
of credit.
(7) Discrepancy fees, if
any, shall be payable by the self insurer.
NOTE: A model single bank letter of credit (Revised 7/94)
is contained in Plate I of the Appendix following the last Article in these
Subchapter 2 regulations.
(d) A syndicated letter of credit shall
include all the language of the single bank or financial institution issued
letter of credit and in addition:
(1)
Authorize all demands for payment to be presented at a designated branch
("agent bank" or "agent") of one of the participating banks or financial
institutions;
(2) Include a draft
to be presented for payment of all or part of the credit available under the
letter of credit;
(3) Permit any
participating bank's or financial institution's portion of the total credit
available to be drawn upon if the participating bank's or financial
institution's credit rating falls below the acceptable credit rating level
specified in subsection (e) of this Section; and
(4) State that the obligations of the banks
or financial institutions issuing a syndicated letter of credit are several and
not joint, and neither the agent bank or financial institution or any other
participating bank or financial institution shall be responsible for or
otherwise liable for the failure of any other participating bank or financial
institution to perform its obligations under the syndicated letter of credit.
The failure of any participating bank or financial institution to perform its
obligations under the syndicated letter of credit shall also not relieve any
other participating bank or financial institution of its obligations under the
syndicated letter of credit.
(e) The issuing bank(s) or financial
institution(s) or the parent holding corporation of an unrated bank or
financial institution issuing a letter of credit shall have at the time of
issuance of the letter of credit an acceptable credit rating as set forth
below:
(1) An "Aaa", "Aa", "A" long term
certificate of deposit (CD) rating for the bank or financial institution in the
current monthly edition of "Moody's Statistical Handbook" prepared by Moody's
Investors Service, Inc., New York; or
(2) An "AAA", "AA" or "A" long term
certificate of deposit (CD) rating for the bank or financial institution in the
current quarterly edition or monthly supplement of "Financial Institutions
Ratings" prepared by Standard & Poor's Corporation, New York; or
(3) An "AAA", "AA+" or "AA" credit quality
rating for the issuing financial institution along with a CD/Debt Credit Limit
Code above the dollar amount of the letter of credit as well as a Credit Limit
Maturity Code of "a, b, c or d" in the current annual edition of "GFI Credit
Ratings", or the latest monthly "GFI Bank Letter" supplement thereto;
or
(4) If applicable, be backed by
federally chartered instrumentalities of the United States operating under
authority of the Farm Credit Act of 1971, as amended, or be a state or
federally chartered credit union whose shares are insured by the National
Credit Union Share Insurance Fund.
(f) A letter of credit issued by a bank or
financial institution or syndication of banks or financial institutions that
does not meet the credit rating set forth in subsection (e) at the time of
issuance shall be accepted by the Manager with a confirming letter of credit
issued by a bank or financial institution meeting the criteria of subsection
(e). The confirming letter of credit shall state that the confirming bank or
financial institution is primarily obligated to pay on demand the full amount
of the letter of credit regardless of reimbursement from the bank or financial
institution whose letter of credit is being confirmed.
NOTE: Advising letters of credit shall not be accepted in
lieu of the confirmation requirement for the letter of credit bank with a
unacceptable credit rating.
(g) If a bank or financial institution's
rating subsequent to the issuance of the letter of credit falls below the
acceptable rating level as set forth in subsection (e), the Manager shall,
within 60 days of the publication of the lower credit rating, require the self
insurer to:
(1) Replace the letter of credit
with a new letter of credit issued by a bank or financial institution with an
acceptable credit rating; or
(2)
Confirm the letter of credit by a bank or financial institution with an
acceptable rating.
1. New
section filed 12-22-92; operative 1-21-93 (Register 93, No. 2).
2.
New subsection (e)(3) and subsection redesignation, and amendment of
subsections (e)(1) and (2) filed 3-24-94; operative 4-25-94 (Register 94, No.
12).
3. Amendment of subsection (c)(6) and (c)(7) NOTE filed
12-1-94; operative 1-2-95 (Register 94, No. 48).
4. Amendment filed
3-2-2009; operative 3-2-2009 pursuant to Government Code section 11343.4
(Register 2009, No. 10).
Note: Authority cited: Sections
54,
55 and 3702.10, Labor Code.
Reference: Sections 59,
3700,
3701, 3701.5,
3702, 3702.3, 3702.6, 3702.10,
3740,
3741 and
3742, Labor
Code.
