House Bill 4703

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    Florida House of Representatives - 1998                HB 4703

        By the Committee on Financial Services and Representatives
    Safley, Lippman, Tamargo, Effman, Rayson, Bainter, Lawson,
    Flanagan and Dennis




  1                      A bill to be entitled

  2         An act relating to the workers' compensation

  3         joint underwriting plan; amending s. 627.311,

  4         F.S., relating to joint underwriters and joint

  5         reinsurers; revising the composition of the

  6         board of governors of the workers' compensation

  7         joint underwriting plan; prohibiting insurers

  8         from providing workers' compensation insurance

  9         to persons under certain circumstances;

10         deleting an obsolete provision; providing an

11         effective date.

12

13  Be It Enacted by the Legislature of the State of Florida:

14

15         Section 1.  Subsection (4) of section 627.311, Florida

16  Statutes, is amended to read:

17         627.311  Joint underwriters and joint reinsurers.--

18         (4)(a)  Effective upon this act becoming a law, the

19  department shall, after consultation with insurers, approve a

20  joint underwriting plan of insurers which shall operate as a

21  nonprofit entity. For the purposes of this subsection, the

22  term "insurer" includes group self-insurance funds authorized

23  by s. 624.4621, commercial self-insurance funds authorized by

24  s. 624.462, assessable mutual insurers authorized under s.

25  628.6011, and insurers licensed to write workers' compensation

26  and employer's liability insurance in this state. The purpose

27  of the plan is to provide workers' compensation and employer's

28  liability insurance to applicants who are required by law to

29  maintain workers' compensation and employer's liability

30  insurance and who are in good faith entitled to but who are

31  unable to purchase such insurance through the voluntary

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  1  market. The joint underwriting plan shall issue policies

  2  beginning January 1, 1994. The plan must have actuarially

  3  sound rates that assure that the plan is self-supporting. The

  4  operation of the plan is subject to the supervision of a

  5  13-member board of governors. The board of governors shall be

  6  comprised of 5 domestic insurers, 1 of whom shall be the

  7  assessable mutual insurer or other domestic insurer which has

  8  the largest voluntary written premium for workers'

  9  compensation and employer's liability insurance as of December

10  31, 1993, 1 of whom shall be the commercial self-insurance

11  fund which has the largest voluntary written premium for

12  workers' compensation and employer's liability insurance, as

13  of December 31, 1993, and 3 of whom shall be the 3 of the 5

14  group self-insurers' funds, authorized by s. 440.57, which

15  have the largest voluntary written premium for workers'

16  compensation and employer's liability insurance, as of

17  December 31, 1993; and 5 of the 20 foreign insurers which are

18  defined in s. 624.06(2) with the largest voluntary written

19  premium in this state for workers' compensation and employer's

20  liability insurance, for the latest year for which data are

21  available, as selected by those 20 foreign insurers. If the

22  assessable mutual insurer or the commercial self-insurance

23  fund, described in this paragraph, decline to serve on, or

24  resign from, the board of governors, such position on the

25  board of governors shall be filled by appointment by a

26  committee comprised of the 10 assessable mutual insurers,

27  commercial self-insurance funds, and group self-insurers'

28  funds, authorized by s. 440.57, which have the largest

29  voluntary written premium for workers' compensation and

30  employer's liability insurance, as of December 31, 1993. No

31  board member shall be an insurer which provides service to the

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  1  plan or which has an affiliate which provides services to the

  2  plan or which is serviced by a service company or third-party

  3  administrator which provides services to the plan or which has

  4  an affiliate which provides services to the plan. The board of

  5  governors shall have a chair, who shall be named by the

  6  Insurance Commissioner. The board of governors shall include

  7  one representative appointed by the largest property and

  8  casualty insurance agents' association in this state. The

  9  consumer advocate appointed under s. 627.0613 shall be a

10  member of the board of governors. The minutes, audits, and

11  procedures of the board of governors are subject to chapter

12  119.

13         (b)  The operation of the plan is subject to the

14  supervision of a 13-member board of governors which shall

15  consist of the following:

16         1.  Five of the 20 domestic insurers, as defined in s.

17  624.06, with the largest voluntary direct premiums written in

18  this state for workers' compensation and employer's liability

19  insurance, which shall be elected by those 20 domestic

20  insurers.

21         2.  Five of the 20 foreign insurers, as defined in s.

22  624.06, with the largest voluntary direct premiums written in

23  this state for workers' compensation and employer's liability

24  insurance, which shall be elected by those 20 foreign

25  insurers.

26         3.  One person, who shall serve as the chair, appointed

27  by the Insurance Commissioner.

28         4.  One person appointed by the largest property and

29  casualty insurance agents' association in this state.

30         5.  The consumer advocate appointed under s. 627.0613

31  or the consumer advocate's designee.

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  1         (c)  Each member of the board of governors shall serve

  2  terms of 4 years and may serve consecutive terms.

  3         (d)  No board member shall be an insurer which provides

  4  services to the plan or which has an affiliate which provides

  5  services to the plan.

  6         (e)  The minutes, audits, and procedures of the board

  7  of governors are subject to chapter 119.

  8         (f)(b)  The operation of the plan shall be governed by

  9  a plan of operation that is prepared at the direction of the

10  board of governors. The plan of operation may be changed at

11  any time by the board of governors or upon request of the

12  department. The plan of operation and all changes thereto are

13  subject to the approval of the department. The plan of

14  operation shall:

15         1.  Authorize the board to engage in the activities

16  necessary to implement this subsection, including, but not

17  limited to, borrowing money.

18         2.  Develop criteria for eligibility for coverage by

19  the plan, including, but not limited to, documented rejection

20  by at least two insurers which reasonably assures that

21  insureds covered under the plan are unable to acquire coverage

22  in the voluntary market. Any insured may voluntarily elect to

23  accept coverage from an insurer for a premium equal to or

24  greater than the plan premium if the insurer writing the

25  coverage adheres to the provisions of s. 627.171.

26         3.  Require notice from the agent to the insured at the

27  time of the application for coverage that the application is

28  for coverage with the plan and that coverage may be available

29  through an insurer, group self-insurers' fund, commercial

30  self-insurance fund, or assessable mutual insurer through

31  another agent at a lower cost.

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  1         4.  Establish programs to encourage insurers to provide

  2  coverage to applicants of the plan in the voluntary market and

  3  to insureds of the plan, including, but not limited to:

  4         a.  Establishing procedures for an insurer to use in

  5  notifying the plan of the insurer's desire to provide coverage

  6  to applicants to the plan or existing insureds of the plan and

  7  in describing the types of risks in which the insurer is

  8  interested. The description of the desired risks must be on a

  9  form developed by the plan.

10         b.  Developing forms and procedures that provide an

11  insurer with the information necessary to determine whether

12  the insurer wants to write particular applicants to the plan

13  or insureds of the plan.

14         c.  Developing procedures for notice to the plan and

15  the applicant to the plan or insured of the plan that an

16  insurer will insure the applicant or the insured of the plan,

17  and notice of the cost of the coverage offered; and developing

18  procedures for the selection of an insuring entity by the

19  applicant or insured of the plan.

20         d.  Provide for a market-assistance plan to assist in

21  the placement of employers. All applications for coverage in

22  the plan received 45 days before the effective date for

23  coverage shall be processed through the market-assistance

24  plan. A market-assistance plan specifically designed to serve

25  the needs of small good policyholders as defined by the board

26  must be finalized by January 1, 1994.

27         5.  Provide for policy and claims services to the

28  insureds of the plan of the nature and quality provided for

29  insureds in the voluntary market.

30

31

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  1         6.  Provide for the review of applications for coverage

  2  with the plan for reasonableness and accuracy, using any

  3  available historic information regarding the insured.

  4         7.  Provide for procedures for auditing insureds of the

  5  plan which are based on reasonable business judgment and are

  6  designed to maximize the likelihood that the plan will collect

  7  the appropriate premiums.

  8         8.  Authorize the plan to terminate the coverage of and

  9  refuse future coverage for any insured that submits a

10  fraudulent application to the plan or provides fraudulent or

11  grossly erroneous records to the plan or to any service

12  provider of the plan in conjunction with the activities of the

13  plan.

14         9.  Establish service standards for agents who submit

15  business to the plan.

16         10.  Establish criteria and procedures to prohibit any

17  agent who does not adhere to the established service standards

18  from placing business with the plan or receiving, directly or

19  indirectly, any commissions for business placed with the plan.

20         11.  Provide for the establishment of reasonable safety

21  programs for all insureds in the plan. At the direction of the

22  board, the Division of Safety shall provide inspection to

23  insureds and applicants for coverage in the plan identified as

24  high-risk insureds by the board or its designee.

25         12.  Authorize the plan to terminate the coverage of

26  and refuse future coverage to any insured who fails to pay

27  premiums or surcharges when due; who, at the time of

28  application, is delinquent in payments of workers'

29  compensation or employer's liability insurance premiums or

30  surcharges owed to an insurer, group self-insurers' fund,

31  commercial self-insurance fund, or assessable mutual insurer

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  1  licensed to write such coverage in this state; or who refuses

  2  to substantially comply with any safety programs recommended

  3  by the plan.

  4         13.  Authorize the board of governors to provide the

  5  services required by the plan through staff employed by the

  6  plan, through reasonably compensated service providers who

  7  contract with the plan to provide services as specified by the

  8  board of governors, or through a combination of employees and

  9  service providers.

10         14.  Provide for service standards for service

11  providers, methods of determining adherence to those service

12  standards, incentives and disincentives for service, and

13  procedures for terminating contracts for service providers

14  that fail to adhere to service standards.

15         15.  Provide procedures for selecting service providers

16  and standards for qualification as a service provider that

17  reasonably assure that any service provider selected will

18  continue to operate as an ongoing concern and is capable of

19  providing the specified services in the manner required.

20         16.  Provide for reasonable accounting and

21  data-reporting practices.

22         17.  Provide for annual review of costs associated with

23  the administration and servicing of the policies issued by the

24  plan to determine alternatives by which costs can be reduced.

25         18.  Authorize the acquisition of such excess insurance

26  or reinsurance as is consistent with the purposes of the plan.

27         19.  Provide for an annual report to the department on

28  a date specified by the department and containing such

29  information as the department reasonably requires.

30         20.  Establish multiple rating plans for various

31  classifications of risk which reflect risk of loss, hazard

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  1  grade, actual losses, size of premium, and compliance with

  2  loss control. At least one of such plans must be a

  3  preferred-rating plan to accommodate small-premium

  4  policyholders with good experience as defined in

  5  sub-subparagraph 22.a.

  6         21.  Establish agent commission schedules.

  7         22.  Establish three subplans as follows:

  8         a.  Subplan "A" must include those insureds whose

  9  annual premium does not exceed $2,500 and who have neither

10  incurred any lost-time claims nor incurred medical-only claims

11  exceeding 50 percent of their premium for the immediate 2

12  years.

13         b.  Subplan "B" must include insureds that are

14  employers identified by the board of governors as high-risk

15  employers due solely to the nature of the operations being

16  performed by those insureds and for whom no market exists in

17  the voluntary market, and whose experience modifications are

18  less than 1.00.

19         c.  Subplan "C" must include all other insureds within

20  the plan.

21         (g)(c)  The plan must be funded through actuarially

22  sound premiums charged to insureds of the plan. The plan may

23  issue assessable policies only to those insureds in subplan

24  "C." Those assessable policies must be clearly identified as

25  assessable by containing, in contrasting color and in not less

26  than 10-point type, the following statements: "This is an

27  assessable policy. If the plan is unable to pay its

28  obligations, policyholders will be required to contribute on a

29  pro rata earned premium basis the money necessary to meet any

30  assessment levied." The plan may issue assessable policies

31  with differing terms and conditions to different groups within

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  1  the plan when a reasonable basis exists for the

  2  differentiation. The plan may offer rating, dividend plans,

  3  and other plans to encourage loss prevention programs.

  4         (h)(d)  The plan shall establish and use its rates and

  5  rating plans, and the plan may establish and use changes in

  6  rating plans at any time, but no more frequently than two

  7  times per any rating class for any calendar year. By December

  8  1, 1993, and December 1 of each year thereafter, the board

  9  shall establish and use actuarially sound rates for use by the

10  plan to assure that the plan is self-funding while those rates

11  are in effect. Such rates and rating plans must be filed with

12  the department within 30 calendar days after their effective

13  dates, and shall be considered a "use and file" filing. Any

14  disapproval by the department must have an effective date that

15  is at least 60 days from the date of disapproval of the rates

16  and rating plan and must have prospective effect only. The

17  plan may not be subject to any order by the department to

18  return to policyholders any portion of the rates disapproved

19  by the department. The department may not disapprove any rates

20  or rating plans unless it demonstrates that such rates and

21  rating plans are excessive, inadequate, or unfairly

22  discriminatory.

23         (i)(e)  No later than June 1 of each year, the plan

24  shall obtain an independent actuarial certification of the

25  results of the operations of the plan for prior years, and

26  shall furnish a copy of the certification to the department.

27  If, after the effective date of the plan, the projected

28  ultimate incurred losses and expenses and dividends for prior

29  years exceed collected premiums, accrued net investment

30  income, and prior assessments for prior years, the

31

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  1  certification is subject to review and approval by the

  2  department before it becomes final.

  3         (j)(f)  Whenever a deficit exists, the plan shall,

  4  within 90 days, provide the department with a program to

  5  eliminate the deficit within a reasonable time. The deficit

  6  may be funded both through increased premiums charged to

  7  insureds of the plan for subsequent years and through

  8  assessments on insureds in the plan if the plan uses

  9  assessable policies.

10         (k)(g)  Any premium or assessments collected by the

11  plan in excess of the amount necessary to fund projected

12  ultimate incurred losses and expenses of the plan and not paid

13  to insureds of the plan in conjunction with loss prevention or

14  dividend programs shall be retained by the plan for future

15  use.

16         (l)(h)  The decisions of the board of governors do not

17  constitute final agency action and are not subject to chapter

18  120.

19         (m)(i)  Policies for insureds shall be issued by the

20  plan.

21         (n)(j)  The plan created under this subsection is

22  liable only for payment for losses arising under policies

23  issued by the plan with dates of accidents occurring on or

24  after January 1, 1994.

25         (o)(k)  Plan losses are the sole and exclusive

26  responsibility of the plan, and payment for such losses must

27  be funded in accordance with this subsection and must not

28  come, directly or indirectly, from insurers or any guaranty

29  association for such insurers.

30         (p)(l)  Each joint underwriting plan or association

31  created under this section is not a state agency, board, or

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  1  commission. However, for the purposes of s. 199.183(1) only,

  2  the joint underwriting plan is a political subdivision of the

  3  state and is exempt from the corporate income tax.

  4         (q)(m)  Each joint underwriting plan or association may

  5  elect to pay premium taxes on the premiums received on its

  6  behalf or may elect to have the member insurers to whom the

  7  premiums are allocated pay the premium taxes if the member

  8  insurer had written the policy. The joint underwriting plan or

  9  association shall notify the member insurers and the

10  Department of Revenue by January 15 of each year of its

11  election for the same year. As used in this paragraph, the

12  term "premiums received" means the consideration for

13  insurance, by whatever name called, but does not include any

14  policy assessment or surcharge received by the joint

15  underwriting association as a result of apportioning losses or

16  deficits of the association pursuant to this section.

17         (r)(n)  Effective midnight, December 31, 1993, the

18  Florida Workers' Compensation Insurance Plan, administered by

19  the National Council on Compensation Insurance, shall

20  terminate, except with respect to workers' compensation

21  policies issued pursuant to such Florida Workers' Compensation

22  Insurance Plan with inception dates on or before December 31,

23  1993.

24         (s)(o)  Neither the plan nor any member of the board of

25  governors is liable for monetary damages to any person for any

26  statement, vote, decision, or failure to act, regarding the

27  management or policies of the plan, unless:

28         1.  The member breached or failed to perform her or his

29  duties as a member; and

30         2.  The member's breach of, or failure to perform,

31  duties constitutes:

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  1         a.  A violation of the criminal law, unless the member

  2  had reasonable cause to believe her or his conduct was

  3  unlawful. A judgment or other final adjudication against a

  4  member in any criminal proceeding for violation of the

  5  criminal law estops that member from contesting the fact that

  6  her or his breach, or failure to perform, constitutes a

  7  violation of the criminal law; but does not estop the member

  8  from establishing that she or he had reasonable cause to

  9  believe that her or his conduct was lawful or had no

10  reasonable cause to believe that her or his conduct was

11  unlawful;

12         b.  A transaction from which the member derived an

13  improper personal benefit, either directly or indirectly; or

14         c.  Recklessness or any act or omission that was

15  committed in bad faith or with malicious purpose or in a

16  manner exhibiting wanton and willful disregard of human

17  rights, safety, or property. For purposes of this

18  sub-subparagraph, the term "recklessness" means the acting, or

19  omission to act, in conscious disregard of a risk:

20         (I)  Known, or so obvious that it should have been

21  known, to the member; and

22         (II)  Known to the member, or so obvious that it should

23  have been known, to be so great as to make it highly probable

24  that harm would follow from such act or omission.

25         (t)  No insurer shall provide workers' compensation and

26  employer's liability insurance to any person who is delinquent

27  in the payment of premiums, assessments, penalties, or

28  surcharges owed to the plan.

29         (p)  The provisions of this subsection shall be

30  reviewed by the Legislature before July 1, 1996.

31

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  1         Section 2.  This act shall take effect October 1 of the

  2  year in which enacted.

  3

  4            *****************************************

  5                          HOUSE SUMMARY

  6
      Revises the composition of the board of governors of the
  7    workers' compensation joint underwriting plan and
      prohibits insurers from providing workers' compensation
  8    and employer's liability insurance to persons who are
      delinquent in plan payments.
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