State to Press Probe of Workers’ Comp Insurers : Insurance: Others face overcharging allegations after state’s largest compensation carrier agrees to $22.8-million refund.

State officials, fresh from extracting a record refund from California’s leading workers’ compensation insurer, said Thursday that they are investigating other possible cases of overcharging in the industry.

Insurance Commissioner John Garamendi said about 10 other workers’ compensation insurers in California are being probed for overcharging practices similar to those attributed to the State Compensation Insurance Fund, also known as SCIF.

“This is part of an ongoing effort on our part to make sure the workers’ compensation insurance industry is playing fairly with its customers,” Garamendi said in an interview.

In what they called the biggest settlement of its kind ever negotiated by California insurance regulators, state officials formally announced Thursday that SCIF agreed to return $22.8 million in refunds and credits to as many as 26,500 business owners.

SCIF officials contend the total payout could be far lower. But they said they have already issued more than 14,000 business owners refunds averaging $493. That amounts to $7.2 million, which in itself is an apparent record for an insurance refund in the state.

State officials claimed that SCIF required unfairly high deposits and slapped excessive surcharges on many new policyholders from mid-1992 to mid-1993. SCIF covers more than 250,000 employers in California, about half the employers who buy workers’ compensation coverage.

Surcharges are extra fees charged to employers who, at least in theory, are expected to incur relatively high costs for workers’ compensation claims. Deposits are the initial sums paid when employers buy their insurance.

SCIF was not accused of breaking any state laws or regulations. However, Garamendi said the company’s actions were “out of line. They were charging more than they should have.”

He said the problems stemmed from a “systems breakdown” rather than an intentional effort to deceive.

Although both sides agreed that SCIF cooperated with state authorities in the investigation, the insurer took issue with many of the Insurance Department’s comments. SCIF spokeswoman Renee Koren said the dispute stemmed from increased charges that the fund began imposing on new customers in mid-1992--at the encouragement of state insurance officials--when it was hit with skyrocketing claims costs.

Now that workers’ compensation claims have fallen throughout the state, she said, the fund has no objection to reducing its surcharges and deposits.

“We are admitting no wrongdoing,” she said. “We feel that the actions we took in 1992 were appropriate for the environment then, and we feel the actions we’re taking now are appropriate for the current environment. And we would not be taking these actions if we didn’t see a turnaround in our losses.”

The Insurance Department’s squabble with SCIF is actually a dispute between two groups of state employees. SCIF was founded by the Legislature in 1914 to ensure that all California employers would be able to buy workers’ compensation insurance. While SCIF is an independent, nonprofit enterprise, its staff members are state civil service employees.