- Associated Press - Tuesday, March 11, 2014

OKLAHOMA CITY (AP) - The Oklahoma Supreme Court Tuesday upheld a plan to convert the state workers’ compensation insurance agency into a mutual company.

The decision by the state’s highest court affirms legislation adopted by state lawmakers last year to convert CompSource Oklahoma into the CompSource Mutual Insurance Co. The new company would be organized under state law, but independent of the state. The change goes into effect on Jan. 1.

The legislation was challenged in a lawsuit filed by the Tulsa Stockyards Inc., which alleged it was unconstitutional and that CompSource is a state agency whose money and other assets, valued at about $265 million, belong to the people of Oklahoma.

Among other things, the lawsuit alleged that converting CompSource from a department of the state to an independent, licensed mutual insurance company without providing that the state retain ownership of CompSource’s assets violates the Oklahoma Constitution’s prohibition against gifts of public money and the prohibition against money being paid out of the state treasury except by legislative appropriation.

But in a 28-page decision written by Justice Steven Taylor of McAlester, the Supreme Court ruled that CompSource’s assets are held in trust for the benefit of employers and employees protected by insurance issued by CompSource.

“The Oklahoma Constitution does not prohibit the Legislature from placing CompSource’s money and other assets in trust with a domestic mutual insurer,” the decision states.

An attorney for Tulsa Stockyards, former state Senate President Pro Tem Stratton Taylor of Claremore, did not immediately return a telephone call seeking comment.

In a statement, Attorney General Scott Pruitt, whose office defended the new law, said the legal challenge was part of ongoing attempts by workers’ compensation attorneys to save the previous system.

“The Legislature took this action as part of a series of reforms to improve and modernize the state’s costly and antiquated workers’ compensation system,” Pruitt said. “We are thankful the court sided unanimously with us.”

Supporters of the legislation said mutualizing CompSource would remove many of the competitive advantages it enjoyed. The agency writes about one-third of Oklahoma’s workers’ compensation policies.

Among other things, the legislation requires that CompSource be regulated by the state Department of Insurance like private workers’ compensation insurers and be required to pay insurance premium taxes.

Opponents expressed concern that the changes will hamper CompSource’s role as the state’s insurer of last resort.

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