California Code of Regulations
Title 8 - Industrial Relations
Division 1 - Department of Industrial Relations
Chapter 8 - Office of the Director
Subchapter 2 - Administration of Self-Insurance Plans
Article 3 - Security Deposit Requirements
Section 15216 - Administration of Defaulted Self-Insurer's Claims

(a) In the event the self-insurer fails to pay workers' compensation benefits due, the cost of administration and legal expenses of existing and new claims shall be made from the security deposit set aside for this purpose pursuant to Labor Code Section 3701.5.

(b) If claims have been administered from out of state, the Director may order all remaining and future claims to be administered from California or may turn them over to the Self-Insurer's Security Fund.

(c) If it is necessary for the Director to call or cash any security deposit, a trust shall be established by the Chief to receive the funds from the deposit, except in the following situations:

(d) In the event of a default, all security deposits, regardless of form that is posted by the self-insured employer, shall be the first in order to be called upon to pay benefits due. If any portion of the defaulting self-insurer's liabilities are secured in whole or part by an alternative composite deposit posted by the Security Fund, the alternative composite deposit shall be next in order to be called upon to pay benefits due. The Director may at his/her discretion call any portion of the entire security deposit posted at any time without waiting for the exhaustion of all funds in the prior level or call order contained in this subsection.

(e) The Chief shall advise the Self-Insurers' Security Fund of the receipt of any verified information indicating a self-insurer's failure to pay benefits due, the filing of bankruptcy, or inability to post and maintain required security deposit.

(f) The Director, at his/her discretion, may order the Security Fund to assume full liability for any self-insurer's insolvency or failure to pay benefits regardless of whether or not there is a shortfall in the deposit to pay benefits due.

(g) When responsibility for claims is turned over to the Self-Insurers' Security Fund pursuant to Labor Code section 3701.5, the Self-Insurers' Security Fund shall not be liable for the payment of penalties assessed for any act or omission on the part of any person or entity other than the Self-Insurers' Security Fund.