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State Fund Drops Its Largest Safety Group

California's State Compensation Insurance Fund has cut off Western Insurance Administrators, its largest safety group administrator with some 25,000 employers as clients.

The move is notable, not only because of Western Insurance Administrators size, but also because who runs it: Frank DelRe, former State Fund board member. DelRe, who at one time worked for State Fund before forming a safety group, was forced to resign from the board last fall along with Kent Dagg, who runs Golden State Builders Exchanges and Shasta Builders Exchange. They were ushered out after Workers' Comp Executive raised conflict of interest questions when the two had voted as board members to increase commissions on safety group business.

"I can confirm that we no longer have a business relationship with WIA," says Jennifer Vargen, spokeswoman for State Fund. "We gave notification of it last week."

Dagg did not immediately return a phone call placed to his office. His secretary said he was on the phone when this reporter called.

WIA runs eight safety groups. Inside sources at State Fund speaking on condition of anonymity say that brokers have been told to find a new home for clients who belong to one of WIA's safety groups.

State Fund was paying WIA an administrative fee of 3 percent of the entire premium paid by its safety groups' members as it has with all groups of that size, based on fee schedules obtained earlier by Workers' Comp Executive. WIA at its zenith accounted for hundreds of thousands of dollars in premium – some sources say as much as $500 million in premium.

WIA's groups have a total of 25,000 employers all of which are insured by State Fund, which gives them all a premium discount of 6 percent. Its biggest group is Western Regional Master Builders Association, which has 16,000 employer members, all of them insured with State Fund. The other groups, according to WIA's website, are:

California Merchants Safety Association, consisting of 4,000 California wholesale and retail stores.

California Automotive Services Association, safety group for service stations and repair shops.

California Couriers Safety Association, which consists of delivery services.

California Auto Dealers Safety Association, which consists of car and truck dealers.

California Professional Electronics Association, which consists of appliance and electronics service and repair stores.

California Gaming Industry Safety Association, which consists of casinos.

California Oil & Petroleum Safety Association, which consists of gas and oil dealers and retail service stations.

DelRe once swung a big stick in his dealings with State Fund. Former president James C. Tudor was at his beck and call and would often scoot down to Long Beach if DelRe demanded it. Tudor was earlier this year fired and a three-pronged investigation with criminal implications is ongoing.

Filed by J. Nils Wright, executive editor

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