CompSource Oklahoma, formerly State Insurance Fund

Discussion of the State Insurance Fund (SIF), now CompSource Oklahoma from the case of Fehring v. State Insurance Fund, 2001 OK 11, 19 P.3d 276:

The issue of whether SIF is a State entity covered by the GTCA [Governmental Tort Claims Act] is a first impression question. A review of pertinent GTCA provisions, statutes creating SIF, other relevant statutes and our prior case law lead to the conclusion it is a State entity intended to be covered by the GTCA, notwithstanding the fact SIF has certain characteristics of a private insurance carrier. The GTCA defines "agency" as: "[] any board, commission, committee, department or other instrumentality or entity designated to act in behalf of the state or a political subdivision[.]" 51 O.S. Supp. 1994, § 152(2)[now 51 O.S. Supp. 2000, § 152(2)]. State is defined in the GTCA as: "[] the State of Oklahoma or any office, department, agency, authority, commission, board, institution, hospital, college, university, public trust created pursuant to Title 60 of the Oklahoma Statutes of which the State of Oklahoma is the beneficiary, or other instrumentality thereof[.]" § 152(10).

SIF's purpose, powers, duties and structure are primarily set out in 85 O.S. 1991, § 131 et seq., as amended - part of our workers' compensation laws. It was created by 1933 legislation [O. K. Constr. Co. v. Burwell, 1939 OK 248, 93 P.2d 1092, 1093] to satisfy the need for workers' compensation insurance for employers unable to procure coverage from private insurance companies and in high risk industries. Moran v. State ex rel. Derryberry, 1975 OK 69, 534 P.2d 1282, 1284. Today, SIF's general purpose is simply to insure employers against liability for workers' compensation claims and to assure employees entitled to benefits under our workers compensation laws that they receive such benefits through the insurance. 85 O.S. Supp. 1995, § 131. SIF provides such insurance to both private and public employers. Also, SIF's governing statutes plainly indicate, although it is to be fairly competitive with private insurance carriers providing such insurance, SIF is generally a non-profit endeavor [§ 131(c)], and its ability to decline to insure an employer for purposes of the employer's workers' compensation liability is restricted. 85 O.S. Supp. 1996, § 134(A)(2).

Supervision over administration/operation of SIF is conducted by a Board of Managers. 85 O.S. Supp. 1996, § 131a. The nine Board members are: Director of State Finance or a designee; Lieutenant Governor or a designee; State Auditor and Inspector or a designee; Director of Central Purchasing of the Department of Central Services; and five other members - one appointed by the Governor and two each by the Speaker of the Oklahoma House of Representatives and the President Pro Tempore of the Oklahoma Senate. The members are entitled to reimbursement for proper expenses under the State Travel Reimbursement Act, 74 O.S. 1991, § 500.1 et seq., as amended. § 131a(C).

Day-to-day management is handled by the State Insurance Fund Commissioner, whom the Board of Managers appoints. 85 O.S. 1991, § 131b and § 132; § 134. The Commissioner is expressly recognized as a state officer or employee for purposes of the surety bond required by 74 O.S. Supp. 1994, § 85.29, part of the Oklahoma Central Purchasing Act (OCPA), 74 O.S. 1991, § 85.1 et seq., as amended. The Oklahoma Attorney General has opined that SIF is a State agency for purposes of the OCPA. Okl. A. G. Opin. No. 88-61, 20 Okl. Op. Atty. Gen. 142, 1988 WL 424296 (Okl. A. G.).

The operational expenses of SIF and the payment of compensation awards to injured workers are funded through premiums charged to covered employers and any investment income received by SIF. § 131(a) & (b). All money received by SIF (except investment income) is deposited in the SIF fund in the State Treasury. 85 O.S. Supp. 1994, § 135(A). SIF's administrative expenses are required to be paid on warrants issued by the State Treasurer against claims filed as prescribed by law with the State Finance Director. 85 O.S. Supp. 1997, § 139. The Finance Director is also responsible for prescribing all forms, systems and procedures for administering SIF's petty cash fund. 85 O.S. 1991, § 135.1.

Title 74 O.S. Supp. 1994, § 840-5.10(A) - part of the Oklahoma Personnel Act (OPA), 74 O.S. Supp. 1994, § 840-1.1 et seq., as amended - provides that SIF shall be under the Oklahoma merit system, a part of the OPA; generally its employees are in the classified State service; and § 840-5.10(B) sets out those offices, positions and personnel employed by it that shall be in the unclassified service. In other words, by statute SIF employees are considered State employees. A law concerning State government [74 O.S. Supp. 1999, § 3601(B)] sets the maximum annual salary of the SIF Commissioner, as well as the maximum number of SIF employees.

The Oklahoma Attorney General has opined that SIF is an "agency" of the State under the OPA [Okl. A. G. Opin. No. 95-36, 25 Okl. Op. Atty. Gen. 83, 1995 WL 647525 (Okl. A. G.)] which defines "agency" as: "[] any office, department, board, commission or institution of the executive branch of state government[.]" 74 O.S. Supp. 1999, § 840-1.3(1). After Opin. No. 95-36, legislation was enacted exempting SIF from an OPA hiring freeze provision, but no legislation was passed generally exempting it from the OPA's terms. 1996 Okla. Sess. Laws, Ch. 363, § 17; 74 O.S. Supp. 1996, § 840-2.14(D).

Although this Court has recognized that generally the funds of SIF are not State funds, but are trust funds held for the benefit of the employers/employees protected by the insurance issued by SIF to provide coverage in conformity with our workers' compensation laws [Moran v. State ex rel. Derryberry, supra], the Court has, nonetheless, unequivocally held SIF is a department of the State, over which the State, through legislative enactment, wields absolute control of its functions, powers and duties. O. K. Constr. Co. v. Burwell, supra, 93 P.2d at 1094. Burwell held SIF was a State of Oklahoma department for purposes of exempting State entities from posting an appeal bond under what is now 12 O.S. Supp. 1999, § 66.

We also note SIF is charged with administration and protection of the Multiple Injury Trust Fund (MITF) [85 O.S. Supp. 1999, § 175; Special Indemnity Fund v. Barnes, 1967 OK 216, 434 P.2d 218, 220], formerly known as the Special Indemnity Fund. 85 O.S. Supp. 2000, § 173. The Special Indemnity Fund Act, passed in 1943 [Special Indemnity Fund v. Archer, 1993 OK 14, 847 P.2d 791, 794], shifted the burden of paying the additional permanent disability due to the fact an injured employee was a physically impaired person from the employer or his insurance carrier to the MITF. Special Indemnity Fund v. Davidson, 1945 OK 287, 162 P.2d 1016, 1017-1018.

As stated above, SIF is generally funded through premiums paid by employers to which SIF issues workers' compensation insurance policies. The MITF is funded differently. Currently, the MITF is generally funded by 1) payments from SIF and other insurers writing workers' compensation insurance, the payments based on a percentage of the total gross direct premiums written for workers' compensation risks located in Oklahoma and 2) payments by own-risk employers and group self-insurance associations, the payments based on a percentage assessment of the total compensation for permanent total and partial disability, and death benefits, paid out during each calendar year quarter by said employers and associations. § 173(A). The payments are made to the Oklahoma Tax Commission [§ 173(A) & (C)], then remitted to the State Treasurer for proper disposition. A portion of the funds go to the Attorney General's Workers' Compensation Fraud Unit Revolving Fund; the Oklahoma Department of Labor for safety consultation and public employee safety regulation; and the State Department of Vocational and Technical Education; as well as to the MITF. § 173(G). The MITF is also authorized to receive and expend monies appropriated by the Legislature [§ 173(B)] and has received direct legislative appropriation of funds. 1988 Okla. Sess. Laws, Ch. 119, § 15 ($1.5 million appropriated from General Revenue Cash-flow Reserve Fund).

Although the funds obtained by SIF in regard to workers' compensation insurance policies issued by it and funds administered on behalf of the MITF are generally kept separate, the fact SIF administers the MITF cannot be wholly discounted for purposes of deciding if SIF is a State entity covered by the GTCA. Further, though the record does not indicate appellants are suing SIF in its capacity as the MITF administrator, or that they seek funds from the MITF, the fact it administers the MITF, in our view, is relevant to SIF's GTCA status. Plainly, its position as the MITF administrator provides support for the view SIF was intended by the Legislature to be included within the definition of a State "agency" under the GTCA. At a minimum, as the MITF administrator - the MITF being a fund receiving legislative appropriation(s) - there can be no question it acts in behalf of the State.

Further, although State ex rel. State Insurance Fund v. Bone, 1959 OK 135, 344 P.2d 562 held - prior to the GTCA's enactment - that SIF was not within the traditional immunity afforded the sovereign because it was an agency or instrumentality of the State engaged in a business enterprise, as distinguished from a purely governmental function, Bone was decided when a distinction was made between governmental and proprietary functions of governmental entities for sovereign immunity purposes. See Vanderpool v. State, 1983 OK 82, 672 P.2d 1153 (general discussion of governmental/proprietary function issue) and Hershel v. University Hospital Foundation, 1980 OK 60, 610 P.2d 237, 242 (recognizing the Court's treatment of SIF in Bone involved a holding that SIF was a State enterprise engaged in a proprietary function not entitled to sovereign immunity). The previous distinction existing in sovereign immunity law by virtue of a State entity being engaged in a proprietary function - rather than a governmental one - no longer applies because, under 51 O.S. 1991, § 166, the GTCA's provisions are applicable to both governmental and proprietary functions of State entities within its sphere.

In the final analysis, we believe SIF is a State entity coming within the term "agency" as used in the GTCA and it was intended to be covered by the provisions of that Act by the Oklahoma Legislature. Its employees are categorized as State employees and its entire structure is permeated with control and direction by the legislative and executive arms of State government, the latter of which it is a part. Thus, we hold SIF is a State entity falling within the GTCA.

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