Chapter 13 State Fund

• Library: The Law of Workers’ Compensation Insurance in South Carolina (SCBar) (2019 Ed.)

Chapter 13 State Fund

I. History and Purpose

The State Workers' Compensation Fund was created in 1943, and continued in effect from year to year by various acts of the General Assembly. In 1947, the law governing the State Fund became a permanent act and is now codified in Section 42-7-10 through 42-7-100.¹

The State Fund provides workers' compensation coverage for public employees of municipal, county and state agencies. The statute governing the State Fund allows for establishment of rates. The minimum premiums, classification rates may be modified to produce rates for individual employers in accordance with rating laws, which establish standards for measuring any variation in hazards or expense provisions, or both, that can be demonstrated to have probable effect upon losses or expenses.²

The State Fund is allowed to insure only employees of municipal, county,³ and state agencies.⁴ However, as an alternative to the State Fund, all but state agencies may choose to obtain coverage from private insurance carriers or they may self-insure. The State Highway Department is self-insured and not covered by the State Fund.⁵ No State Fund capital or operating funds are derived from general funds of the state. Operating capital and funds are derived from premiums which are deposited in the State Treasury. Interest earnings on premiums generated by the State Fund are credited to the Fund as follows:

One-third of the investment income generated in Fiscal Year 1990-91 and two-thirds of the income generated in Fiscal Year 1991-92 must be credited to the State Fund in those years respectively. Thereafter all such income must be credited to the State Fund except that the State Treasury may charge the State Fund, and credit to the general fund, the customary investment management fee.⁶

On February 24, 1982, the State Workers' Compensation Insolvency Fund was established within the State Fund to insure payment of awards of workers' compensation benefits which were not paid because of the insolvency of employers who failed to acquire necessary coverage for employees.⁷ Effective April 24, 1989, the State Workers' Compensation Insolvency Fund was transferred from the State Fund to the South Carolina Second Injury Fund.⁸ Effective June 12, 1990, Section 42-7-20 was substantially rewritten and the State Workers' Compensation Insolvency Fund was replaced with the South Carolina Workers' Compensation Uninsured Employer's Fund ("SCUEF"). Pursuant to the 2007 Workers' Compensation Reform Act, the SCUEF was transferred back under the control of the State Accident Fund. This takes effect July 1, 2013.⁹ There is no longer a requirement under the new Fund that the employer be insolvent.¹⁰

II. Administration, Funding, Expenditures and Legal Representation

A. Administration

The State Fund is administered by a director appointed by the Governor for a six-year term with the advice and consent of the Senate.

The administration shall provide for employment of office and field personnel necessary for the proper conduct of the business of the fund, to the extent of appropriations therefore, including the determination of the amount of and the collection of annual charges, the issuance of certificates of compliance with this article, the investigation of claims, the adjustment and payment of claims and awards, the inspection of risks, study and investigation with respect to safety provisions with recommendations to employers as to means of preventing injuries, medical examination of employees and the prosecution of subrogation rights against any third party. The director may inspect and audit records of employers for the purpose of determining or verifying the amount of annual charges against such employers.¹¹

B. Funding

The State Fund consists of annual premium charges, recoveries from the Second Injury Fund, recoveries by subrogation and the income or revenues derived from investing these funds.¹²

C. Expenditures

The State Fund is authorized to expend funds: (1) For the payment of any award under this article made by the Commission in connection with accidental injury or death of any official or employee of the State, any county or municipality therein, any political subdivision thereof or any agency or institution of the State or a county, municipality or political subdivision thereof participating hereunder; or (2) Any other expenses authorized by law or approved by the Budget and Control Board.¹³

D. Legal Representation

Legal representation for the State Fund is provided by a chief counsel and any staff attorneys as are appointed by the Director of the Fund with the approval of the Attorney General. The Director may retain, with the approval of the Attorney General, non-staff attorneys, whose fees and expenses are approved by the Director.¹⁴ At present, the legal staff of the State Fund consists of a Chief Counsel and some staff attorneys. The Fund also retains non-staff attorneys, who are geographically located throughout the state.

III. Coverage of the State

The State Fund is created in Article 1, Chapter 7 of Title 42. Article 1 applies to state employees, including State Guard and the National Guard, but excluding the State Highway Department.¹⁵ Every employer who accepts the provisions of the Act is required to secure the payment of workers' compensation benefits to his employees.¹⁶ The Act defines "employer" to include "the State and all political subdivisions thereof, all public and quasi-public corporations therein... ."¹⁷ The State is accordingly required to secure the payment of workers' compensation to its employees.

IV. Coverage of Subdivisions of the State

The Act provides that:

Any county or municipality in the State or any agency or institution thereof shall have the option of participating under the provisions of this article but no county, municipality, agency or institution thereof shall be covered by the workers' compensation insurance provided in this article until payment of the annual charge provided in this article until payment of the annual charge provided in this Title shall have been made to the fund, nor shall any county, municipality, agency or institution thereof be covered by this insurance after the lapse of the period for which the annual charge has been paid. The director shall notify each county, municipality, agency or institution thereof at least thirty days before the expiration date of its coverage in order that the county, municipality, agency, or institution may keep its insurance in force continuously.¹⁸

Like the state, a county or city must secure the payment of workers' compensation benefits for its employees,¹⁹ and cannot exempt itself and reject the provisions of the Act.²⁰

V. Officers and Employees Covered

A. General

The term "employment" is defined in the Act to include "employment by the State, all political subdivisions thereof, [and] all public and quasi-public corporations therein...