State-run insurer fires 2 top officers
The board of California’s largest insurer abruptly fired two top officials Tuesday as part of an ongoing investigation into the troubled state agency that provides workers’ compensation insurance for 230,000 employers.
The dismissals by the State Compensation Insurance Fund -- which included the agency’s president -- were related in part to the fund’s selling of discounted group policies to individual employers, said Jeanne Caine, chairwoman of the insurer’s board.
Tuesday’s action stemmed from an internal review of operations, she said.
“The results of the review convinced the board that a leadership change is in the best interest of the organization and, most importantly, for our policyholders,” said Cain, a vice president at the California Chamber of Commerce.
She declined to elaborate, calling the firings confidential personnel matters.
Out are President James Tudor and Renee Koren, a vice president in charge of group insurance programs. Neither could be reached for comment.
The departures came less than six months after two of the fund’s five board members quit amid concerns over possible conflicts of interest involving the group insurance programs. In addition, the agency has been under scrutiny in recent years by the Bureau of State Audits, the Legislature, the California Department of Insurance and the office of Gov. Arnold Schwarzenegger.
Known as State Fund, the state-run operation is the largest insurer in California, with more than $6 billion a year in premiums. The San Francisco-based provider, a cross between a traditional state agency and a private company, operates much as a privately owned insurer. Although it is a state agency, critics complain, State Fund operates out of public scrutiny, claiming it is exempt from public-record and open-meeting laws.
State Fund serves as the insurer of last resort for small and medium-sized companies, who are required to purchase workers’ compensation coverage for their employees. The top workers’ comp insurance provider in the country, the agency also handles claims for all state employees.
State officials familiar with the inquiry said the board had hired an outside legal team, including forensic accountants, to look at State Fund’s reliance on unsophisticated accounting techniques, its poor internal controls and lack of financial transparency. The officials requested anonymity, citing the sensitivity of the probe.
Tudor was a 35-year State Fund employee. He held civil service status before being named interim president in February 2005 and president in September 2006.
At the time, Cain said the five-person board voted unanimously for Tudor after a four-month nationwide search.
“Jim has the vision that this board believes is critical to lead State Fund through current and future market challenges,” Cain said in a news release announcing the hiring.
Cain sent out a less upbeat message to State Fund employees Tuesday, telling them that Tudor and Koren were “no longer involved in any aspect of State Fund Operations” and “therefore, all communications with them regarding State Fund matters must cease.”
Cain is expected to announce today a new interim president, insurance consultant Lawrence E. Mulryan. He was executive director of the California Insurance Guarantee Assn. from 1992 to 2006. During that time, the association, which is funded by surcharges on policies, handled claims for dozens of failed insurance companies that had been seized by state regulators.
Cain said the board would conduct another national search for a new permanent president.
The changes in management and the dismissals of Tudor and Koren are being closely followed by the California Department of Insurance, the fund’s primary regulator.
“The Department of Insurance has been concerned about the governance and management of [State Fund] for many years, and clearly this incident underscores that concern,” Insurance Commissioner Steve Poizner’s office said. “California’s businesses and injured workers depend on [State Fund] to operate in an effective and accountable manner.”
A spokesman for Schwarzenegger said the governor “supports the board’s actions and its ongoing oversight of State Fund operations.”
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