Justices consider who controls workers fund

Justices with the Utah Supreme Court on Tuesday challenged the state's contention that because the state created the Workers Compensation Fund, it must be under state purview.

The hearing resulted from a long-standing legal battle over whether the WCF, which provides insurance for workers who are injured on the job, is under state control as a state agency, or if it should be considered a private corporation doing public service.

The state claims a lower district court erred when it ruled the state has no more ownership interest in WCF than any of the fund's 30,000 policy holders.

During oral arguments, Assistant Attorney General Thom Roberts said there were some serious constitutional questions over whether the state can create a private corporation.

Mark Hindley, attorney for WCF, argued several Supreme Court rulings already have established the insurance company as an independent and quasi-private corporation that receives no money from the state. In one such ruling in 1977, the high court ruled the Utah Legislature had no right to take money from the WCF injury fund to cover budgetary shortfalls in other state agencies. The fund is paid into by Utah employers who, by law, must provide insurance for their workers.

Several industry associations, such as the Utah Manufacturers, Utah Food Industry and Utah Trucking associations, have expressed concern that the insurance fund would prove too tempting for the Legislature to leave alone during tight budget times. The associations have filed a friend-of-the-court brief outlining their concerns.

Driven by its desire to distance the state from quasi-governmental corporations after the thrift and loan debacle in the late 1980s, the Legislature in 1988 designated the WCF a quasi-public corporation.

But Roberts countered that the WCF cannot deny its government ties. He pointed to the fact that when WCF applied for a federal tax exemption with the IRS, it claimed it was providing a "government function" in being the carrier of last resort (which means when no other private insurance company will offer an employer insurance, WCF must provide coverage).

WCF officials counter that by taking the burden of carrier of last resort, a tax break is justified — but that hardly means WCF is a governmental agency.

Roberts also pointed to WCF's dissolution charter, which states that if the insurance fund were to ever fold, all assets would go to the state.

But justices questioned why the state was drawing such a black-and-white argument. Chief Justice Christine Durham said there are plenty of quasi-government corporations which function outside the state's control yet provide a public service.

Durham said the state, by law, cannot take over the assets of a county, school district or water district just because they are quasi-governmental in nature.

Hindley said in the world of corporate law, control and ownership issues are not simple. He said WCF is simply a trustee of the injury fund and does not see itself as the owner, but rather the individual policy holders are its owners.

The court is expected to issue a ruling in the following weeks.

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E-mail: gfattah@desnews.com