Last month, the governor proposed and the Legislature approved selling part of the State Compensation Insurance Fund to get $1 billion to help balance the state calamitous budget.
But Poizner vowed to fight it. "This is bad politics; it's illegal, and I'm going to stop it," said the wealthy, former tech entrepreneur from Silicon Valley who is seeking the Republican nomination for governor in 2010.
Poizner said he expects to file a lawsuit today in Sacramento County Superior Court asking a judge for an injunction preventing any sale.
The governor's office countered that the proposed sale of the company -- known as State Fund -- is legal and necessary.
"We continue to believe we can achieve a higher value for the state by selling a portion of State Fund that will maintain a stable workers' compensation system for California," said Rachel Cameron, a spokeswoman for Gov. Schwarzenegger.
State Fund is California's biggest workers' compensation carrier and provides coverage for about 200,000 mainly small and medium-sized employers. It controls about one-fifth of the market.
But selling a big chunk of State Fund's total $20 billion in assets would violate a provision of the state Constitution approved by voters in 1918 that set up a legal system for providing medical care and compensation to injured workers, Poizner said.
State Fund's board of directors has gone on record as opposing the sale of its assets solely for the purpose of balancing the state budget.
The insurer's holdings can only be used to operate a self-sufficient company "for the benefit of policyholders, injured workers and employees," the board said in a July 21 resolution.