Senate Bill 2532e2

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    CS for SB 2532                                Second Engrossed



  1                      A bill to be entitled

  2         An act relating to workers' compensation;

  3         clarifying the legislative intent that the

  4         terms "net premiums written" and "net premiums

  5         collected" as used in ch. 440, F.S., include

  6         ceded reinsurance premiums in accord with

  7         original intent; amending s. 440.49, F.S.,

  8         relating to the assessment for the Special

  9         Disability Trust Fund; amending s. 440.51,

10         F.S., relating to the assessment for the

11         Workers' Compensation Administration Trust Fund

12         and to expenses of administration; prescribing

13         effect of deductions with respect to

14         retaliatory taxes; reducing the assessment rate

15         for calendar year 2001; creating a Task Force

16         on Workers' Compensation Administration to

17         study the way in which the workers'

18         compensation system is funded and administered;

19         amending s. 440.50, F.S.; revising the purpose

20         of the Workers' Compensation Administration

21         Trust Fund; amending s. 440.51, F.S.; defining

22         the terms "plan" and "fixed administrative

23         expenses" for purposes of administering the

24         workers' administration program; providing for

25         transfer of funds to the workers' compensation

26         joint underwriting plan, subject to

27         appropriation; amending s. 627.311, F.S.;

28         providing for funding a deficit in the workers'

29         compensation joint underwriting plan through

30         policyholder surplus; amending s. 440.38, F.S.;

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    CS for SB 2532                                Second Engrossed



  1         revising certain requirements relating to

  2         self-insurers; providing an effective date.

  3

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

  5

  6         Section 1.  Legislative intent.--It is the intent of

  7  the Legislature to clarify that the terms "net premiums

  8  written" and "net premiums collected" as used in chapter 440,

  9  Florida Statutes, have meant and continue to mean premiums

10  arising from workers' compensation policies issued by an

11  insurer in this state as the primary insurance carrier without

12  deduction for ceded reinsurance premiums transferred to an

13  insurance company for reinsurance purchased or any premium

14  expense attributable to purchasing reinsurance.

15         Section 2.  Paragraph (b) of subsection (9) of section

16  440.49, Florida Statutes, is amended to read:

17         440.49  Limitation of liability for subsequent injury

18  through Special Disability Trust Fund.--

19         (9)  SPECIAL DISABILITY TRUST FUND.--

20         (b)1.  The Special Disability Trust Fund shall be

21  maintained by annual assessments upon the insurance companies

22  writing compensation insurance in the state, the commercial

23  self-insurers under ss. 624.462 and 624.4621, the assessable

24  mutuals under s. 628.601, and the self-insurers under this

25  chapter, which assessments shall become due and be paid

26  quarterly at the same time and in addition to the assessments

27  provided in s. 440.51. The division shall estimate annually in

28  advance the amount necessary for the administration of this

29  subsection and the maintenance of this fund and shall make

30  such assessment in the manner hereinafter provided.

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    CS for SB 2532                                Second Engrossed



  1         2.  The annual assessment shall be calculated to

  2  produce during the ensuing fiscal year an amount which, when

  3  combined with that part of the balance in the fund on June 30

  4  of the current fiscal year which is in excess of $100,000, is

  5  equal to the average of:

  6         a.  The sum of disbursements from the fund during the

  7  immediate past 3 calendar years, and

  8         b.  Two times the disbursements of the most recent

  9  calendar year.

10

11  Such amount shall be prorated among the insurance companies

12  writing compensation insurance in the state and the

13  self-insurers. Provided however, for those carriers that have

14  excluded ceded reinsurance premiums from their assessments on

15  or before January 1, 2000, no assessments on ceded reinsurance

16  premiums shall be paid by those carriers until such time as

17  the division advises each of those carriers of the impact that

18  the inclusion of ceded reinsurance premiums has on their

19  assessment. The division may not recover any past

20  underpayments of assessments levied against any carrier that

21  on or before January 1, 2000, excluded ceded reinsurance

22  premiums from their assessment prior to the point that the

23  division advises of the appropriate assessment that should

24  have been paid.

25         3.  The net premiums written by the companies for

26  workers' compensation in this state and the net premium

27  written applicable to the self-insurers in this state are the

28  basis for computing the amount to be assessed as a percentage

29  of net premiums. Such payments shall be made by each carrier

30  insurance company and self-insurer to the division for the

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    CS for SB 2532                                Second Engrossed



  1  Special Disability Trust Fund in accordance with such

  2  regulations as the division prescribes.

  3         4.  The Treasurer is authorized to receive and credit

  4  to such Special Disability Trust Fund any sum or sums that may

  5  at any time be contributed to the state by the United States

  6  under any Act of Congress, or otherwise, to which the state

  7  may be or become entitled by reason of any payments made out

  8  of such fund.

  9         Section 3.  Subsections (1), (2), (3), and (5) of

10  section 440.51, Florida Statutes, are amended to read:

11         440.51  Expenses of administration.--

12         (1)  The division shall estimate annually in advance

13  the amounts necessary for the administration of this chapter,

14  in the following manner.

15         (a)  The division shall, by July 1 of as soon as

16  practicable after July 1 in each year, notify carriers and

17  self-insurers of the assessment rate, which shall be based on

18  determine the anticipated expenses expense of the

19  administration of this chapter for the next calendar preceding

20  fiscal year. Such assessment rate shall take effect January 1

21  of the next calendar year and shall be included in workers'

22  compensation rate filings approved by the Department of

23  Insurance which become effective on or after January 1 of the

24  next calendar year. Assessments shall become due and be paid

25  quarterly. The expense of administration for such preceding

26  fiscal year shall be used as the basis for determining the

27  amount to be assessed against each carrier in order to provide

28  for the expenses of the administration of this chapter for the

29  current fiscal year.

30         (b)  The total expenses of administration shall be

31  prorated among the carriers insurance companies writing


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    CS for SB 2532                                Second Engrossed



  1  compensation insurance in the state and self-insurers.  The

  2  net premiums collected by carriers the companies and the

  3  amount of premiums calculated by the division for self-insured

  4  employers a self-insurer would have to pay if insured are the

  5  basis for computing the amount to be assessed. When reporting

  6  deductible policy premium for purposes of computing

  7  assessments levied after July 1, 2001, full policy premium

  8  value must be reported prior to application of deductible

  9  discounts or credits.  This amount may be assessed as a

10  specific amount or as a percentage of net premiums payable as

11  the division may direct, provided such amount so assessed

12  shall not exceed 2.75 4 percent, beginning January 1, 2001,

13  except during the interim period from July 1, 2000, through

14  December 31, 2000, such assessments shall not exceed 4 percent

15  of such net premiums.  The carriers insurance companies may

16  elect to make the payments required under s. 440.15(1)(f) s.

17  440.15(1)(e) rather than having these payments made by the

18  division.  In that event, such payments will be credited to

19  the carriers insurance companies, and the amount due by the

20  carrier insurance company under this section will be reduced

21  accordingly.

22         (2)  The division shall provide by regulation for the

23  collection of the amounts assessed against each carrier.  Such

24  amounts shall be paid within 30 days from the date that notice

25  is served upon such carrier.  If such amounts are not paid

26  within such period, there may be assessed for each 30 days the

27  amount so assessed remains unpaid, a civil penalty equal to 10

28  percent of the amount so unpaid, which shall be collected at

29  the same time and a part of the amount assessed. For those

30  carriers who excluded ceded reinsurance premiums from their

31  assessments prior to January 1, 2000, the division shall not


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    CS for SB 2532                                Second Engrossed



  1  recover any past underpayments of assessments related to ceded

  2  reinsurance premiums prior to January 1, 2001, against such

  3  carriers.

  4         (3)  If any carrier fails to pay the amounts assessed

  5  against him or her under the provisions of this section within

  6  60 days from the time such notice is served upon him or her,

  7  the Department of Insurance upon being advised by the division

  8  may suspend or revoke the authorization to insure compensation

  9  in accordance with the procedure in s. 440.38(3)(a). The

10  division may permit a carrier to remit any underpayment of

11  assessments for assessments levied after January 1, 2001.

12         (5)  Any amount so assessed against and paid by an

13  insurance carrier, self-insurer authorized pursuant to s.

14  440.57, or commercial self-insurance fund authorized under ss.

15  624.460-624.488 shall be allowed as a deduction against the

16  amount of any other tax levied by the state upon the premiums,

17  assessments, or deposits for workers' compensation insurance

18  on contracts or policies of said insurance carrier,

19  self-insurer, or commercial self-insurance fund. Any insurance

20  carrier claiming such a deduction against the amount of any

21  such tax shall not be required to pay any additional

22  retaliatory tax levied pursuant to s. 624.5091 as a result of

23  claiming such deduction. Because deductions under this

24  paragraph are available to insurance carriers, s. 624.5091

25  does not limit such deductions in any manner.

26         Section 4.  (1)  Effective upon this act becoming a

27  law, there is created the Task Force on Workers' Compensation

28  Administration for the purpose of examining the way in which

29  the workers' compensation system is funded and administered.

30  The Task Force shall consist of seven members appointed as

31  follows:  three members appointed by the Governor, one of whom


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    CS for SB 2532                                Second Engrossed



  1  shall serve as chair; two members appointed by the President

  2  of the Senate, and two members appointed by the Speaker of the

  3  House of Representatives.  Appointments shall be made no later

  4  than July 1, 2000.

  5         (2)  The Task Force shall submit recommendations to the

  6  Governor, the President of the Senate, and the Speaker of the

  7  House of Representatives by January 15, 2001 concerning:

  8         (a)  Whether the administration of the workers'

  9  compensation system should be funded through assessments,

10  general revenue, or some other source, and to what extent.

11         (b)  How the funds should be used to accomplish the

12  goal of administering the workers' compensation system in the

13  most cost-effective manner.

14         (c)  What services, functions, or entities, including

15  the Workers' Compensation Oversight Board, should be funded as

16  part of the administration of the workers' compensation

17  system.

18         (d)  What services and functions, including workplace

19  safety, if any, should be housed within the Division of

20  Workers' Compensation.

21         (e)  What cost savings could be achieved in the

22  administration of the workers' compensation system, including

23  the operations of the Division of Workers' Compensation.

24         (f)  What organizational changes affecting the

25  administration of the workers' compensation system, if any,

26  should be made to make it more efficient.

27         (3)  To assist the task force in its work, the

28  Executive Office of the Governor shall contract for the

29  completion of a budgetary and operational analysis of the

30  Division of Workers' Compensation, detailing the staffing of

31  the division, receipt and expenditure of revenues,


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    CS for SB 2532                                Second Engrossed



  1  reliability of financial records and reports, and the

  2  efficiency of internal controls and procedures.  The Executive

  3  Office of the Governor shall arrange for the study to be

  4  completed and transmitted to the task force by September 1,

  5  2000.

  6         (4)  The sum of $250,000 is appropriated from the

  7  Workers' Compensation Administration Trust Fund to the

  8  Executive Office of the Governor for the purpose of funding

  9  the study required in subsection (3).

10         Section 5.  If any provision of this act or its

11  application to any person or circumstance is held invalid, the

12  invalidity does not affect other provisions or applications of

13  the act which can be given effect without the invalid

14  provision or application, and to this end the provisions of

15  this act are severable.

16         Section 6.  Paragraph (a) of subsection (1) of section

17  440.50, Florida Statutes, is amended to read:

18         440.50  Workers' Compensation Administration Trust

19  Fund.--

20         (1)(a)  There is established in the State Treasury a

21  special fund to be known as the "Workers' Compensation

22  Administration Trust Fund" for the purpose of providing for

23  the payment of all expenses in respect to the administration

24  of this chapter, including the vocational rehabilitation of

25  injured employees as provided in s. 440.49 and the payments

26  due under s. 440.15(1)(f), the funding of the fixed

27  administrative expenses of the plan, and the funding of the

28  Bureau of Workers' Compensation Fraud within the Department of

29  Insurance.  Such fund shall be administered by the division.

30         Section 7.  Subsections (13) and (14) are added to

31  section 440.51, Florida Statutes, to read:


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    CS for SB 2532                                Second Engrossed



  1         440.51  Expenses of administration.--

  2         (13)  As used in s. 440.50 and this section, the term:

  3         (a)  "Plan" means the workers' compensation joint

  4  underwriting plan provided for in s. 627.311(4).

  5         (b)  "Fixed administrative expenses" means the expenses

  6  of the plan, not to exceed $750,000, which are directly

  7  related to the plan's administration but which do not vary in

  8  direct relationship to the amount of premium written by the

  9  plan and which do not include loss adjustment premiums.

10         (14)  Before July 1 in each year, the plan shall notify

11  the division of the amount of the plan's gross written

12  premiums for the preceding calendar year. Whenever the plan's

13  gross written premiums reported to the division are less than

14  $30 million, the division shall transfer to the plan, subject

15  to appropriation by the Legislature, an amount not to exceed

16  the plan's fixed administrative expenses for the preceding

17  calendar year.

18         Section 8.  Paragraph (g) of subsection (4) of section

19  627.311, Florida Statutes, is amended to read:

20         627.311  Joint underwriters and joint reinsurers.--

21         (4)

22         (g)  Whenever a deficit exists, the plan shall, within

23  90 days, provide the department with a program to eliminate

24  the deficit within a reasonable time. The deficit may be

25  funded both through increased premiums charged to insureds of

26  the plan for subsequent years, through the use of policyholder

27  surplus attributable to any year, and through assessments on

28  insureds in the plan if the plan uses assessable policies.

29         Section 9.  Paragraph (b) of subsection (1) of section

30  440.38, Florida Statutes, is amended to read:

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    CS for SB 2532                                Second Engrossed



  1         440.38  Security for compensation; insurance carriers

  2  and self-insurers.--

  3         (1)  Every employer shall secure the payment of

  4  compensation under this chapter:

  5         (b)  By furnishing satisfactory proof to the division

  6  of its her or his financial ability to pay such compensation

  7  individually and on behalf of its subsidiary and affiliated

  8  companies with employees in this state and receiving an

  9  authorization from the division to pay such compensation

10  directly in accordance with the following provisions:

11         1.  The division may, as a condition to such

12  authorization, require such employer to deposit in a

13  depository designated by the division either an indemnity bond

14  or securities, at the option of the employer, of a kind and in

15  an amount determined by the division and subject to such

16  conditions as the division may prescribe, which shall include

17  authorization to the division in the case of default to sell

18  any such securities sufficient to pay compensation awards or

19  to bring suit upon such bonds, to procure prompt payment of

20  compensation under this chapter.  In addition, the division

21  shall require, as a condition to authorization to self-insure,

22  proof that the employer has provided for competent personnel

23  with whom to deliver benefits and to provide a safe working

24  environment.  Further, the division shall require such

25  employer to carry reinsurance at levels that will ensure the

26  actuarial soundness of such employer in accordance with rules

27  promulgated by the division.  The division may by rule require

28  that, in the event of an individual self-insurer's insolvency,

29  such indemnity bonds, securities, and reinsurance policies

30  shall be payable to the Florida Self-Insurers Guaranty

31  Association, Incorporated, created pursuant to s. 440.385.


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    CS for SB 2532                                Second Engrossed



  1  Any employer securing compensation in accordance with the

  2  provisions of this paragraph shall be known as a self-insurer

  3  and shall be classed as a carrier of her or his own insurance.

  4         2.  If the employer fails to maintain the foregoing

  5  requirements, the division shall revoke the employer's

  6  authority to self-insure, unless the employer provides to the

  7  division the certified opinion of an independent actuary who

  8  is a member of the American Society of Actuaries as to the

  9  actuarial present value of the employer's determined and

10  estimated future compensation payments based on cash reserves,

11  using a 4-percent discount rate, and a qualifying security

12  deposit equal to 1.5 times the value so certified. The

13  employer shall thereafter annually provide such a certified

14  opinion until such time as the employer meets the requirements

15  of subparagraph 1.  The qualifying security deposit shall be

16  adjusted at the time of each such annual report.  Upon the

17  failure of the employer to timely provide such opinion or to

18  timely provide a security deposit in an amount equal to 1.5

19  times the value certified in the latest opinion, the division

20  shall then revoke such employer's authorization to

21  self-insure, and such failure shall be deemed to constitute an

22  immediate serious danger to the public health, safety, or

23  welfare sufficient to justify the summary suspension of the

24  employer's authorization to self-insure pursuant to s. 120.68.

25         3.  Upon the suspension or revocation of the employer's

26  authorization to self-insure, the employer shall provide to

27  the division and to the Florida Self-Insurers Guaranty

28  Association, Incorporated, created pursuant to s. 440.385 the

29  certified opinion of an independent actuary who is a member of

30  the American Society of Actuaries of the actuarial present

31  value of the determined and estimated future compensation


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    CS for SB 2532                                Second Engrossed



  1  payments of the employer for claims incurred while the member

  2  exercised the privilege of self-insurance, using a discount

  3  rate of 4 percent. The employer shall provide such an opinion

  4  at 6-month intervals thereafter until such time as the latest

  5  opinion shows no remaining value of claims.  With each such

  6  opinion, the employer shall deposit with the division a

  7  qualifying security deposit in an amount equal to the value

  8  certified by the actuary.  The association has a cause of

  9  action against an employer, and against any successor of the

10  employer, who fails to timely provide such opinion or who

11  fails to timely maintain the required security deposit with

12  the division. The association shall recover a judgment in the

13  amount of the actuarial present value of the determined and

14  estimated future compensation payments of the employer for

15  claims incurred while the employer exercised the privilege of

16  self-insurance, together with attorney's fees.  For purposes

17  of this section, the successor of an employer means any

18  person, business entity, or group of persons or business

19  entities, which holds or acquires legal or beneficial title to

20  the majority of the assets or the majority of the shares of

21  the employer.

22         4.  A qualifying security deposit shall consist, at the

23  option of the employer, of:

24         a.  Surety bonds, in a form and containing such terms

25  as prescribed by the division, issued by a corporation surety

26  authorized to transact surety business by the Department of

27  Insurance, and whose policyholders' and financial ratings, as

28  reported in A.M. Best's Insurance Reports, Property-Liability,

29  are not less than "A" and "V", respectively.

30         b.  Certificates of deposit with financial

31  institutions, the deposits of which are insured through the


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    CS for SB 2532                                Second Engrossed



  1  Federal Deposit Insurance Corporation or the Federal Savings

  2  and Loan Insurance Corporation.

  3         c.  Irrevocable letters of credit in favor of the

  4  division issued by financial institutions described in

  5  sub-subparagraph b.

  6         d.  Direct obligations of the United States Treasury

  7  backed by the full faith and credit of the United States.

  8         e.  Securities issued by this state and backed by the

  9  full faith and credit of this state.

10         5.  The qualifying security deposit shall be held by

11  the division, or by a depository authorized by the division,

12  exclusively for the benefit of workers' compensation

13  claimants. The security shall not be subject to assignment,

14  execution, attachment, or any legal process whatsoever, except

15  as necessary to guarantee the payment of compensation under

16  this chapter.  No surety bond may be terminated, and no other

17  qualifying security may be allowed to lapse, without 90 days'

18  prior notice to the division and deposit by the self-insuring

19  employer of other qualifying security of equal value within 10

20  business days after such notice. Failure to provide such

21  notice or failure to timely provide qualifying replacement

22  security after such notice shall constitute grounds for the

23  division to call or sue upon the surety bond, or to act with

24  respect to other pledged security in any manner necessary to

25  preserve its value for the purposes intended by this section,

26  including the exercise of rights under a letter of credit, the

27  sale of any security at then prevailing market rates, or the

28  withdrawal of any funds represented by any certificate of

29  deposit forming part of the qualifying security deposit;

30         Section 10.  Except as otherwise expressly provided in

31  this act, this act shall take effect July 1, 2000.


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