Senate Bill sb1140c1
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Florida Senate - 2001 CS for SB 1140
By the Committee on Banking and Insurance; and Senator
Villalobos
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1 A bill to be entitled
2 An act relating to self-insurers; amending s.
3 440.38, F.S.; transferring operation of
4 provisions requiring the securing of payment of
5 compensation by employers from the Division of
6 Workers' Compensation of the Department of
7 Labor and Employment Security to the Florida
8 Self-Insurer's Guaranty Association,
9 Incorporated, and the Department of Insurance;
10 revising and clarifying requirements and
11 procedures; providing powers and duties of the
12 association and the departments; providing for
13 allocation or payment of state funds to the
14 association for certain purposes; providing
15 rulemaking authority; amending s. 440.385,
16 F.S.; revising and clarifying provisions
17 relating to the association's creation, board
18 of directors, powers and duties, insolvency
19 fund, and plan of operation; providing
20 additional powers of the association;
21 transferring the powers and duties of the
22 Department of Labor and Employment Security
23 relating to the association to the Department
24 of Insurance and revising such powers and
25 duties; providing additional powers and duties
26 of the Department of Insurance; providing for
27 oversight of the association by the department;
28 deleting certain provisions relating to
29 detection and prevention of employer
30 insolvencies; amending s. 440.386, F.S.;
31 providing parity for the association with the
1
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1 Department of Insurance relating to proceedings
2 for delinquency, liquidation, and conservation
3 of assets; amending s. 440.24, F.S.; providing
4 for the sale of securities on deposit to
5 satisfy a compensation order; providing an
6 effective date.
7
8 Be It Enacted by the Legislature of the State of Florida:
9
10 Section 1. Subsections (1), (2), and (3) of section
11 440.38, Florida Statutes, are amended to read:
12 440.38 Security for compensation; insurance carriers
13 and self-insurers.--
14 (1) Every employer shall secure the payment of
15 compensation under this chapter:
16 (a) By insuring and keeping insured the payment of
17 such compensation with any stock company or mutual company or
18 association or exchange, authorized to do business in the
19 state;
20 (b) By furnishing satisfactory proof to the Florida
21 Self-Insurers Guaranty Association, Incorporated, created in
22 s. 440.385, that it has the financial strength necessary to
23 assure timely payment of all current and future claims
24 division of its financial ability to pay such compensation
25 individually and on behalf of its subsidiary and affiliated
26 companies with employees in this state and receiving an
27 authorization from the Department of Insurance, division to
28 pay such compensation directly. The association shall review
29 the financial strength of applicants for membership, current
30 members, and former members and make recommendations to the
31 department regarding their qualifications to self-insure in
2
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1 accordance with this act and ss. 440.385 and 440.386. The
2 department shall consult with the association on any
3 recommendation before taking action. the following provisions:
4 1. The association division may recommend that the
5 Department of Insurance, as a condition to such authorization,
6 require an such employer to deposit with in a depository
7 designated by the association a qualifying deposit. The
8 association shall recommend the type and amount of the
9 qualifying security deposit and shall division either an
10 indemnity bond or securities, at the option of the employer,
11 of a kind and in an amount determined by the division and
12 subject to such conditions as the division may prescribe
13 conditions for the qualifying security deposit, which shall
14 include authorization for to the association to call the
15 qualifying security deposit division in the case of default to
16 sell any such securities sufficient to pay compensation awards
17 and related expenses of the association or to bring suit upon
18 such bonds, to procure prompt payment of compensation under
19 this chapter. In addition, the division shall require, As a
20 condition to authorization to self-insure, the employer shall
21 provide proof that the employer has provided for competent
22 personnel with whom to deliver benefits and to provide a safe
23 working environment. Further, The employer division shall
24 also provide evidence of require such employer to carry
25 reinsurance at levels that will ensure the financial strength
26 and actuarial soundness of such employer in accordance with
27 rules adopted promulgated by the Department of Insurance
28 division. The Department of Insurance division may by rule
29 require that, in the event of an individual self-insurer's
30 insolvency, such qualifying security deposits indemnity bonds,
31 securities, and reinsurance policies are shall be payable to
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1 the association Florida Self-Insurers Guaranty Association,
2 Incorporated, created pursuant to s. 440.385. Any employer
3 securing compensation in accordance with the provisions of
4 this paragraph shall be known as a self-insurer and shall be
5 classed as a carrier of her or his own insurance. All such
6 employers shall, if requested, provide the association an
7 actuarial report signed by a member of the American Academy of
8 Actuaries providing an opinion of the appropriate present
9 value of the reserves for current and future compensation
10 claims. If any member or former member of the association
11 refuses to timely provide such a report, the association may
12 obtain an order from a circuit court requiring the member to
13 produce such a report and ordering such other relief as the
14 court determines appropriate. The association shall be
15 entitled to recover all reasonable costs and attorney's fees
16 in such proceedings.
17 2. If the employer fails to maintain the foregoing
18 requirements, the association division shall recommend to the
19 Department of Insurance that it revoke the employer's
20 authority to self-insure, unless the employer provides to the
21 association division the certified opinion of an independent
22 actuary who is a member of the American Academy Society of
23 Actuaries as to the actuarial present value of the employer's
24 determined and estimated future compensation payments based on
25 cash reserves, using a 4-percent discount rate, and a
26 qualifying security deposit equal to 1.5 times the value so
27 certified. The employer shall thereafter annually provide such
28 a certified opinion until such time as the employer meets the
29 requirements of subparagraph 1. The qualifying security
30 deposit shall be adjusted at the time of each such annual
31 report. Upon the failure of the employer to timely provide
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1 such opinion or to timely provide a security deposit in an
2 amount equal to 1.5 times the value certified in the latest
3 opinion, the association shall provide such information to the
4 department along with a recommendation, and the Department of
5 Insurance division shall then revoke an such employer's
6 authorization to self-insure., and such Failure to comply with
7 this provision shall be deemed to constitute an immediate
8 serious danger to the public health, safety, or welfare
9 sufficient to justify the summary suspension of the employer's
10 authorization to self-insure pursuant to s. 120.68.
11 3. Upon the suspension or revocation of the employer's
12 authorization to self-insure, the employer shall provide to
13 the division and to the Florida Self-Insurers Guaranty
14 association, Incorporated, created pursuant to s. 440.385 the
15 certified opinion of an independent actuary who is a member of
16 the American Academy Society of Actuaries of the actuarial
17 present value of the determined and estimated future
18 compensation payments of the employer for claims incurred
19 while the member exercised the privilege of self-insurance,
20 using a discount rate of 4 percent. The employer shall provide
21 such an opinion at 6-month intervals thereafter until such
22 time as the latest opinion shows no remaining value of claims.
23 With each such opinion, the employer shall deposit with the
24 association division a qualifying security deposit in an
25 amount equal to the value certified by the actuary. The
26 association has a cause of action against an employer, and
27 against any successor of the employer, who fails to timely
28 provide such opinion or who fails to timely maintain the
29 required security deposit with the association division. The
30 association shall recover a judgment in the amount of the
31 actuarial present value of the determined and estimated future
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1 compensation payments of the employer for claims incurred
2 while the employer exercised the privilege of self-insurance,
3 together with attorney's fees. For purposes of this section,
4 the successor of an employer means any person, business
5 entity, or group of persons or business entities, which holds
6 or acquires legal or beneficial title to the majority of the
7 assets or the majority of the shares of the employer.
8 4. A qualifying security deposit shall consist, at the
9 option of the employer, of:
10 a. Surety bonds, in a form and containing such terms
11 as prescribed by the association division, issued by a
12 corporation surety authorized to transact surety business by
13 the Department of Insurance, and whose policyholders' and
14 financial ratings, as reported in A.M. Best's Insurance
15 Reports, Property-Liability, are not less than "A" and "V",
16 respectively.
17 b. Certificates of deposit with financial
18 institutions, the deposits of which are insured through the
19 Federal Deposit Insurance Corporation or the Federal Savings
20 and Loan Insurance Corporation.
21 b.c. Irrevocable letters of credit in favor of the
22 association division issued by financial institutions located
23 within this state, the deposits of which are insured through
24 the Federal Deposit Insurance Corporation described in
25 sub-subparagraph b.
26 d. Direct obligations of the United States Treasury
27 backed by the full faith and credit of the United States.
28 e. Securities issued by this state and backed by the
29 full faith and credit of this state.
30 5. The qualifying security deposit shall be held by
31 the association division, or by a depository authorized by the
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1 division, exclusively for the benefit of workers' compensation
2 claimants. The security shall not be subject to assignment,
3 execution, attachment, or any legal process whatsoever, except
4 as necessary to guarantee the payment of compensation under
5 this chapter. No surety bond may be terminated, and no letter
6 of credit other qualifying security may be allowed to expire
7 lapse, without 90 days' prior written notice to the
8 association division and the deposit by the self-insuring
9 employer of some other qualifying security deposit of equal
10 value within 10 business days after such notice. Failure to
11 provide such written notice or failure to timely provide
12 qualifying replacement security after such notice shall
13 constitute grounds for the association division to call or sue
14 upon the surety bond, or to act with respect to other pledged
15 security in any manner necessary to preserve its value for the
16 purposes intended by this section, including the exercise its
17 of rights under a letter of credit. Current self-insured
18 employers must comply with this section on or before December
19 31, 2001, or upon maturity of existing security deposits,
20 whichever occurs later the sale of any security at then
21 prevailing market rates, or the withdrawal of any funds
22 represented by any certificate of deposit forming part of the
23 qualifying security deposit. The Department of Insurance
24 division may specify by rule the amount of the qualifying
25 security deposit required prior to authorizing an employer to
26 self-insure and the amount of net worth required for an
27 employer to qualify for authorization to self-insure;
28 (c) By entering into a contract with a public utility
29 under an approved utility-provided self-insurance program as
30 set forth in s. 624.46225 440.571 in effect as of July 1,
31
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1 1983. The Department of Insurance division shall adopt rules
2 to implement this paragraph;
3 (d) By entering into an interlocal agreement with
4 other local governmental entities to create a local government
5 pool pursuant to s. 624.4622;
6 (e) In accordance with s. 440.135, an employer, other
7 than a local government unit, may elect coverage under the
8 Workers' Compensation Law and retain the benefit of the
9 exclusiveness of liability provided in s. 440.11 by obtaining
10 a 24-hour health insurance policy from an authorized property
11 and casualty insurance carrier or an authorized life and
12 health insurance carrier, or by participating in a fully or
13 partially self-insured 24-hour health plan that is established
14 or maintained by or for two or more employers, so long as the
15 law of this state is not preempted by the Employee Retirement
16 Income Security Act of 1974, Pub. L. No. 93-406, or any
17 amendment to that law, which policy or plan must provide, for
18 at least occupational injuries and illnesses, medical benefits
19 that are comparable to those required by this chapter. A local
20 government unit, as a single employer, in accordance with s.
21 440.135, may participate in the 24-hour health insurance
22 coverage plan referenced in this paragraph. Disputes and
23 remedies arising under policies issued under this section are
24 governed by the terms and conditions of the policies and under
25 the applicable provisions of the Florida Insurance Code and
26 rules adopted under the insurance code and other applicable
27 laws of this state. The 24-hour health insurance policy may
28 provide for health care by a health maintenance organization
29 or a preferred provider organization. The premium for such
30 24-hour health insurance policy shall be paid entirely by the
31 employer. The 24-hour health insurance policy may use
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1 deductibles and coinsurance provisions that require the
2 employee to pay a portion of the actual medical care received
3 by the employee. If an employer obtains a 24-hour health
4 insurance policy or self-insured plan to secure payment of
5 compensation as to medical benefits, the employer must also
6 obtain an insurance policy or policies that provide indemnity
7 benefits as follows:
8 1. If indemnity benefits are provided only for
9 occupational-related disability, such benefits must be
10 comparable to those required by this chapter.
11 2. If indemnity benefits are provided for both
12 occupational-related and nonoccupational-related disability,
13 such benefits must be comparable to those required by this
14 chapter, except that they must be based on 60 percent of the
15 average weekly wages.
16 3. The employer shall provide for each of its
17 employees life insurance with a death benefit of $100,000.
18 4. Policies providing coverage under this subsection
19 must use prescribed and acceptable underwriting standards,
20 forms, and policies approved by the Department of Insurance.
21 If any insurance policy that provides coverage under this
22 section is canceled, terminated, or nonrenewed for any reason,
23 the cancellation, termination, or nonrenewal is ineffective
24 until the self-insured employer or insurance carrier or
25 carriers notify the division and the Department of Insurance
26 of the cancellation, termination, or nonrenewal, and until the
27 Department of Insurance division has actually received the
28 notification. The Department of Insurance division must be
29 notified of replacement coverage under a workers' compensation
30 and employer's liability insurance policy or plan by the
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1 employer prior to the effective date of the cancellation,
2 termination, or nonrenewal; or
3 (f) By entering into a contract with an individual
4 self-insurer under an approved individual
5 self-insurer-provided self-insurance program as set forth in
6 s. 624.46225. The Department of Insurance division may adopt
7 rules to implement this subsection.
8 (2)(a) The Department of Insurance division shall
9 adopt rules by which businesses may become qualified to
10 provide underwriting claims-adjusting, loss control, and
11 safety engineering services to self-insurers.
12 (b) The Department of Insurance division shall adopt
13 rules requiring self-insurers to file any reports necessary to
14 fulfill the requirements of this chapter. Any self-insurer
15 who fails to file any report as prescribed by the rules
16 adopted by the department division shall be subject to a civil
17 penalty not to exceed $100 for each such failure.
18 (3)(a) The license of any stock company or mutual
19 company or association or exchange authorized to do insurance
20 business in the state shall for good cause, upon
21 recommendation of the division, be suspended or revoked by the
22 Department of Insurance. No suspension or revocation shall
23 affect the liability of any carrier already incurred.
24 (a)(b) The Department of Insurance division shall
25 suspend or revoke any authorization to a self-insurer for
26 failure to comply with this act or for good cause, as defined
27 by rule of the department division. No suspension or
28 revocation shall affect the liability of any self-insurer
29 already incurred.
30 (b)(c) Violation of s. 440.381 by a self-insurance
31 fund shall result in the imposition of a fine not to exceed
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1 $1,000 per audit if the self-insurance fund fails to act on
2 said audits by correcting errors in employee classification or
3 accepted applications for coverage where it knew employee
4 classifications were incorrect. Such fines shall be levied by
5 the Department of Insurance division and deposited into the
6 Workers' Compensation Administration Trust Fund.
7 Section 2. Section 440.385, Florida Statutes, is
8 amended to read:
9 440.385 Florida Self-Insurers Guaranty Association,
10 Incorporated.--
11 (1) CREATION OF ASSOCIATION.--
12 (a) There is created a nonprofit corporation to be
13 known as the "Florida Self-Insurers Guaranty Association,
14 Incorporated," hereinafter referred to as "the association."
15 Upon incorporation of the association, all individual
16 self-insurers as defined in ss. 440.02(23)(a) and
17 440.38(1)(b), other than individual self-insurers which are
18 public utilities or governmental entities, shall be members of
19 the association as a condition of their authority to
20 individually self-insure in this state. The association
21 corporation shall perform its functions under a plan of
22 operation as established and approved under subsection (5) and
23 shall exercise its powers and duties through a board of
24 directors as established under subsection (2). The association
25 corporation shall have those powers granted or permitted
26 associations corporations not for profit, as provided in
27 chapter 617. The activities of the association shall be
28 subject to review by the Department of Insurance. The
29 Department of Insurance shall have oversight responsibility as
30 set forth in this act. The association is specifically
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1 authorized to enter into agreements with the State of Florida
2 to perform specified services.
3 (b) A member may voluntarily withdraw from the
4 association when the member voluntarily terminates the
5 self-insurance privilege and pays all assessments due to the
6 date of such termination. However, the withdrawing member
7 shall continue to be bound by the provisions of this section
8 relating to the period of his or her membership and any claims
9 charged pursuant thereto. The withdrawing member who is a
10 member on or after January 1, 1991, shall also be required to
11 provide to the association division upon withdrawal, and at
12 12-month intervals thereafter, satisfactory proof, including,
13 if requested by the association, a report of known and
14 potential claims certified by a member of the American Academy
15 of Actuaries, that it continues to meet the standards of s.
16 440.38(1)(b)1. in relation to claims incurred while the
17 withdrawing member exercised the privilege of self-insurance.
18 Such reporting shall continue until the withdrawing member
19 demonstrates to satisfies the association division that there
20 is no remaining value to claims incurred while the withdrawing
21 member was self-insured. If a withdrawing member fails or
22 refuses to timely provide an actuarial report to the
23 association, the association may obtain an order from a
24 circuit court requiring the member to produce such a report
25 and ordering such other relief as the court determines
26 appropriate. The association shall be entitled to recover all
27 reasonable costs and attorney's fees expended in such
28 proceedings. If during this reporting period the withdrawing
29 member fails to meet the standards of s. 440.38(1)(b)1., the
30 withdrawing member who is a member on or after January 1,
31 1991, shall thereupon, and at 6-month intervals thereafter,
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1 provide to the division and the association the certified
2 opinion of an independent actuary who is a member of the
3 American Academy Society of Actuaries of the actuarial present
4 value of the determined and estimated future compensation
5 payments of the member for claims incurred while the member
6 was a self-insurer, using a discount rate of 4 percent. With
7 each such opinion, the withdrawing member shall deposit with
8 the association division security in an amount equal to the
9 value certified by the actuary and of a type that is
10 acceptable for qualifying security deposits under s.
11 440.38(1)(b). The withdrawing member shall continue to
12 provide such opinions and to provide such security until such
13 time as the latest opinion shows no remaining value of claims.
14 The association has a cause of action against a withdrawing
15 member, and against any successor of a withdrawing member, who
16 fails to timely provide the required opinion or who fails to
17 maintain the required deposit with the division. The
18 association shall be entitled to recover a judgment in the
19 amount of the actuarial present value of the determined and
20 estimated future compensation payments of the withdrawing
21 member for claims incurred during the time that the
22 withdrawing member exercised the privilege of self-insurance,
23 together with reasonable attorney's fees. The association is
24 also entitled to recover reasonable attorney's fees in any
25 action to compel production of any actuarial report required
26 by this statute. For purposes of this section, the successor
27 of a withdrawing member means any person, business entity, or
28 group of persons or business entities, which holds or acquires
29 legal or beneficial title to the majority of the assets or the
30 majority of the shares of the withdrawing member.
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1 (2) BOARD OF DIRECTORS.--The board of directors of the
2 association shall consist of nine persons and shall be
3 organized as established in the plan of operation. All board
4 members shall be experienced in self-insurance in this state.
5 With respect to initial appointments, the Secretary of Labor
6 and Employment Security shall, by July 15, 1982, approve and
7 appoint to the board persons who are experienced with
8 self-insurance in this state and who are recommended by the
9 individual self-insurers in this state required to become
10 members of the association pursuant to the provisions of
11 paragraph (1)(a). In the event the secretary finds that any
12 person so recommended does not have the necessary
13 qualifications for service on the board and a majority of the
14 board has been appointed, the secretary shall request the
15 directors thus far approved and appointed to recommend another
16 person for appointment to the board. Each director shall serve
17 for a 4-year term and may be reappointed. Appointments after
18 March 21, 2001, other than initial appointments shall be made
19 by the Insurance Commissioner Secretary of Labor and
20 Employment Security upon recommendation of members of the
21 association. Any vacancy on the board shall be filled for the
22 remaining period of the term in the same manner as
23 appointments other than initial appointments are made. Each
24 director shall be reimbursed for expenses incurred in carrying
25 out the duties of the board on behalf of the association.
26 (3) POWERS AND DUTIES.--
27 (a) Upon creation of the Insolvency Fund pursuant to
28 the provisions of subsection (4), the association is obligated
29 for payment of compensation under this chapter to insolvent
30 members' employees resulting from incidents and injuries
31 existing prior to the member becoming an insolvent member and
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1 from incidents and injuries occurring within 30 days after the
2 member has become an insolvent member, provided the incidents
3 giving rise to claims for compensation under this chapter
4 occur during the year in which such insolvent member is a
5 member of the guaranty fund and was assessable pursuant to the
6 plan of operation, and provided the employee makes timely
7 claim for such payments according to procedures set forth by a
8 court of competent jurisdiction over the delinquency or
9 bankruptcy proceedings of the insolvent member. Such
10 obligation includes only that amount due the injured worker or
11 workers of the insolvent member under this chapter. In no
12 event is the association obligated to a claimant in an amount
13 in excess of the obligation of the insolvent member. The
14 association shall be deemed the insolvent employer for
15 purposes of this chapter to the extent of its obligation on
16 the covered claims and, to such extent, shall have all rights,
17 duties, and obligations of the insolvent employer as if the
18 employer had not become insolvent. However, in no event shall
19 the association be liable for any penalties or interest.
20 (b) The association may:
21 1. Employ or retain such persons as are necessary to
22 handle claims and perform other duties of the association.
23 2. Borrow funds necessary to effect the purposes of
24 this section in accord with the plan of operation.
25 3. Sue or be sued.
26 4. Negotiate and become a party to such contracts as
27 are necessary to carry out the purposes of this section.
28 5. Purchase such reinsurance as is determined
29 necessary pursuant to the plan of operation.
30 6. Review all applicants for membership in the
31 association to determine whether the applicant is qualified
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1 for membership under the law. The association shall recommend
2 to the Department of Insurance that the application be
3 accepted or rejected based on the criteria set forth in s.
4 440.38(1)(b). The department shall approve or disapprove the
5 application. Prior to a final determination by the Division of
6 Workers' Compensation as to whether or not to approve any
7 applicant for membership in the association, the association
8 may issue opinions to the division concerning any applicant,
9 which opinions shall be considered by the division prior to
10 any final determination.
11 7. Collect and review financial information from
12 employers and make recommendations to the Department of
13 Insurance regarding the appropriate security deposit and
14 reinsurance amounts necessary for an employer to demonstrate
15 that it has the financial strength necessary to assure the
16 timely payment of all current and future claims. The
17 association may audit and examine an employer to verify the
18 financial strength of its current and former members. If the
19 association determines that a current or former self-insured
20 employer does not have the financial strength necessary to
21 assure the timely payment of all current and estimated future
22 claims, the association may recommend to the department that
23 the department:
24 a. Revoke the employer's self-insurance privilege.
25 b. Require the employer to provide a certified opinion
26 of an independent actuary who is a member of the American
27 Academy of Actuaries as to the actuarial present value of the
28 employer's estimated current and future compensation payments,
29 using a 4-percent discount rate.
30 c. Require an increase in the employer's security
31 deposit in an amount determined by the association to be
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1 necessary to assure payment of compensation claims. The
2 department shall act on such recommendations. The association
3 has a cause of action against an employer, and against any
4 successor of an employer, who fails to provide an additional
5 security deposit required by the department. The association
6 shall recover a judgment in the amount of the requested
7 additional security deposit together with reasonable
8 attorney's fees. For the purposes of this section, the
9 successor of an employer is any person, business entity, or
10 group of persons or business entities that holds or acquires
11 legal or beneficial title to the majority of the assets or the
12 majority of the shares of the employer.
13 8.7. Charge fees to any member of the association to
14 cover the actual costs of examining the financial and safety
15 conditions of that member.
16 9.8. Charge an applicant for membership in the
17 association a fee sufficient to cover the actual costs of
18 examining the financial condition of the applicant.
19 10. Implement any and all procedures necessary to
20 ensure compliance with regulatory actions taken by the
21 department.
22 (c)1. To the extent necessary to secure funds for the
23 payment of covered claims and also to pay the reasonable costs
24 to administer them, the association, subject to approval by
25 the Department of Insurance Labor and Employment Security,
26 upon certification of the board of directors, shall levy
27 assessments based on the annual written normal premium each
28 employer would have paid had the employer not been
29 self-insured. Every assessment shall be made as a uniform
30 percentage of the figure applicable to all individual
31 self-insurers, provided that the assessment levied against any
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1 self-insurer in any one year shall not exceed 1 percent of the
2 annual written normal premium during the calendar year
3 preceding the date of the assessment. Assessments shall be
4 remitted to and administered by the board of directors in the
5 manner specified by the approved plan. Each employer so
6 assessed shall have at least 30 days' written notice as to the
7 date the assessment is due and payable. The association shall
8 levy assessments against any newly admitted member of the
9 association so that the basis of contribution of any newly
10 admitted member is the same as previously admitted members,
11 provision for which shall be contained in the plan of
12 operation.
13 2. If, in any one year, funds available from such
14 assessments, together with funds previously raised, are not
15 sufficient to make all the payments or reimbursements then
16 owing, the funds available shall be prorated, and the unpaid
17 portion shall be paid as soon thereafter as sufficient
18 additional funds become available.
19 3. Funds may be allocated or paid from the Workers'
20 Compensation Administration Trust Fund to contract with the
21 association to perform services required by law. However, no
22 state funds of any kind shall be allocated or paid to the
23 association or any of its accounts for payment of covered
24 claims or related expenses except those state funds accruing
25 to the association by and through the assignment of rights of
26 an insolvent employer. The department shall not levy any
27 assessment on the Florida Self-Insurance Guaranty Association.
28 (4) INSOLVENCY FUND.--Upon the adoption of a plan of
29 operation or the adoption of rules by the Department of Labor
30 and Employment Security pursuant to subsection (5), there
31
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1 shall be created an Insolvency Fund to be managed by the
2 association.
3 (a) The Insolvency Fund is created for purposes of
4 meeting the obligations of insolvent members incurred while
5 members of the association and after the exhaustion of any
6 security deposit bond, as required under this chapter.
7 However, if such security deposit bond, surety, or reinsurance
8 policy is payable to the Florida Self-Insurers Guaranty
9 Association, the association shall commence to provide
10 benefits out of the Insolvency Fund and be reimbursed from the
11 security deposit bond, surety, or reinsurance policy. The
12 method of operation of the Insolvency Fund shall be defined in
13 the plan of operation as provided in subsection (5).
14 (b) The department shall have the authority to audit
15 the financial soundness of the Insolvency Fund annually.
16 (c) The department may offer certain amendments to the
17 plan of operation to the board of directors of the association
18 for purposes of assuring the ongoing financial soundness of
19 the Insolvency Fund and its ability to meet the obligations of
20 this section.
21 (d) The department actuary may make certain
22 recommendations to improve the orderly payment of claims.
23 (5) PLAN OF OPERATION.--The association shall operate
24 pursuant to a plan of operation approved by the board of
25 directors. The plan of operation in effect on March 1, 2001,
26 and approved by the Department of Labor and Employment
27 Security shall remain in effect. However, any amendments to
28 the plan shall not become effective until approved by the
29 Department of Insurance. By September 15, 1982, the board of
30 directors shall submit to the Department of Labor and
31
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1 Employment Security a proposed plan of operation for the
2 administration of the association and the Insolvency Fund.
3 (a) The purpose of the plan of operation shall be to
4 provide the association and the board of directors with the
5 authority and responsibility to establish the necessary
6 programs and to take the necessary actions to protect against
7 the insolvency of a member of the association. In addition,
8 the plan shall provide that the members of the association
9 shall be responsible for maintaining an adequate Insolvency
10 Fund to meet the obligations of insolvent members provided for
11 under this act and shall authorize the board of directors to
12 contract and employ those persons with the necessary expertise
13 to carry out this stated purpose. By January 1, 2002, the
14 board of directors shall submit to the Department of Insurance
15 a proposed plan of operation for the administration of the
16 association. The Department of Insurance shall approve the
17 plan by order, consistent with this act. The Department of
18 Insurance shall approve any amendments to the plan, by order
19 consistent with this act, and determined appropriate to carry
20 out the duties and responsibilities of the association.
21 (b) The plan of operation, and any amendments thereto,
22 shall take effect upon approval in writing by the department.
23 If the board of directors fails to submit a plan by September
24 15, 1982, or fails to make required amendments to the plan
25 within 30 days thereafter, the department shall promulgate
26 such rules as are necessary to effectuate the provisions of
27 this subsection. Such rules shall continue in force until
28 modified by the department or superseded by a plan submitted
29 by the board of directors and approved by the department.
30 (b)(c) All member employers shall comply with the plan
31 of operation.
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1 (c)(d) The plan of operation shall:
2 1. Establish the procedures whereby all the powers and
3 duties of the association under subsection (3) will be
4 performed.
5 2. Establish procedures for handling assets of the
6 association.
7 3. Establish the amount and method of reimbursing
8 members of the board of directors under subsection (2).
9 4. Establish procedures by which claims may be filed
10 with the association and establish acceptable forms of proof
11 of covered claims. Notice of claims to the receiver or
12 liquidator of the insolvent employer shall be deemed notice to
13 the association or its agent, and a list of such claims shall
14 be submitted periodically to the association or similar
15 organization in another state by the receiver or liquidator.
16 5. Establish regular places and times for meetings of
17 the board of directors.
18 6. Establish procedures for records to be kept of all
19 financial transactions of the association and its agents and
20 the board of directors.
21 7. Provide that any member employer aggrieved by any
22 final action or decision of the association may appeal to the
23 department within 30 days after the action or decision.
24 8. Establish the procedures whereby recommendations of
25 candidates for the board of directors shall be submitted to
26 the department.
27 9. Contain additional provisions necessary or proper
28 for the execution of the powers and duties of the association.
29 (d)(e) The plan of operation may provide that any or
30 all of the powers and duties of the association, except those
31 specified under subparagraphs (c)(d)1. and 2., be delegated to
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1 a corporation, association, or other organization which
2 performs or will perform functions similar to those of this
3 association or its equivalent in two or more states. Such a
4 corporation, association, or organization shall be reimbursed
5 as a servicing facility would be reimbursed and shall be paid
6 for its performance of any other functions of the association.
7 A delegation of powers or duties under this subsection shall
8 take effect only with the approval of both the board of
9 directors and the department and may be made only to a
10 corporation, association, or organization which extends
11 protection which is not substantially less favorable and
12 effective than the protection provided by this section.
13 (6) POWERS AND DUTIES OF DEPARTMENT OF INSURANCE LABOR
14 AND EMPLOYMENT SECURITY.--
15 (a) The department shall:
16 1. review recommendations of the association
17 concerning whether current or former self-insured employers or
18 members of the association have the financial strength
19 necessary to ensure the timely payment of all current and
20 estimated future claims. If the association determines an
21 employer does not have the financial strength necessary to
22 ensure the timely payment of all current and future claims and
23 recommends action pursuant to paragraph (3)(b), the Department
24 of Insurance may take such action as necessary to order the
25 employer to comply with the recommendation. Notify the
26 association of the existence of an insolvent employer not
27 later than 3 days after it receives notice of the
28 determination of insolvency.
29 (b) The department may:
30 1. Contract with the association for services, which
31 may include, but not be limited to, the following:
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1 a. Process applications for self-insurance.
2 b. Collect and review financial statements and loss
3 reserve information from individual self-insurers.
4 c. Collect and maintain files for original security
5 deposit documents and reinsurance policies from individual
6 self-insurers and, if necessary, perfect security interests in
7 security deposits.
8 d. Process compliance documentation for individual
9 self-insurers and provide same to the Department of Insurance.
10 e. Collect all data necessary to calculate annual
11 premium for all individual self-insurers, including individual
12 self-insurers that are public utilities or governmental
13 entities, and provide such calculated annual premium to the
14 Department of Insurance for assessment purposes.
15 f. Inspect and audit annually, if necessary, the
16 payroll and other records of each individual self-insurer,
17 including individual self-insurers that are public utilities
18 or governmental entities, in order to determine the wages paid
19 by each individual self-insurer, the premium such individual
20 self-insurer would have to pay if insured, and all payments of
21 compensation made by such individual self-insurer during each
22 prior period with the results of such audit provided to the
23 Department of Insurance. For the purposes of this section,
24 the payroll records of each individual self-insurer shall be
25 open to inspection and audit by the association, the
26 department, or their authorized representative, during regular
27 business hours.
28 g. Provide legal representation to implement the
29 administration and audit of individual self-insurers and make
30 recommendations regarding prosecution of any administrative or
31
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1 legal proceedings necessitated by the department's regulation
2 of the individual self-insurers.
3 2. Contract with an attorney or attorneys recommended
4 by the association for representation of the department in any
5 administrative or legal proceedings necessitated by the
6 recommended regulation of the individual self-insurers. Upon
7 request of the board of directors, provide the association
8 with a statement of the annual normal premiums of each member
9 employer.
10 (b) The department may:
11 3.1. Direct the association to require from each
12 individual self-insurer, at such time and in accordance with
13 such regulations as the department prescribes, reports in
14 respect to wages paid, the amount of premiums such individual
15 self-insurer would have to pay if insured, and all payments of
16 compensation made by such individual self-insurer during each
17 prior period and determine the amounts paid by each individual
18 self-insurer and the amounts paid by all individual
19 self-insurers during such period. For the purposes of this
20 section, the payroll records of each individual self-insurer
21 shall be open to annual inspection and audit by the
22 association, the department, or their authorized
23 representative, during regular business hours, and if any
24 audit of such records of an individual self-insurer discloses
25 a deficiency in the amount reported to the association or in
26 the amounts paid to the Department of Insurance by an
27 individual self-insurer for its assessment for the Workers'
28 Compensation Administration Trust Fund, the Department of
29 Insurance or the association may assess the cost of such audit
30 against the individual self-insurer.
31
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1 4. Require that the association notify the member
2 employers and any other interested parties of the
3 determination of insolvency and of their rights under this
4 section. Such notification shall be by mail at the last known
5 address thereof when available; but, if sufficient information
6 for notification by mail is not available, notice by
7 publication in a newspaper of general circulation shall be
8 sufficient.
9 5.2. Suspend or revoke the authority of any member
10 employer failing to pay an assessment when due or failing to
11 comply with the plan of operation to self-insure in this
12 state. As an alternative, the department may levy a fine on
13 any member employer failing to pay an assessment when due.
14 Such fine shall not exceed 5 percent of the unpaid assessment
15 per month, except that no fine shall be less than $100 per
16 month.
17 3. Revoke the designation of any servicing facility if
18 the department finds that claims are being handled
19 unsatisfactorily.
20 (7) EFFECT OF PAID CLAIMS.--
21 (a) Any person who recovers from the association under
22 this section shall be deemed to have assigned his or her
23 rights to the association to the extent of such recovery.
24 Every claimant seeking the protection of this section shall
25 cooperate with the association to the same extent as such
26 person would have been required to cooperate with the
27 insolvent member. The association shall have no cause of
28 action against the employee of the insolvent member for any
29 sums the association has paid out, except such causes of
30 action as the insolvent member would have had if such sums had
31 been paid by the insolvent member. In the case of an
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1 insolvent member operating on a plan with assessment
2 liability, payments of claims by the association shall not
3 operate to reduce the liability of the insolvent member to the
4 receiver, liquidator, or statutory successor for unpaid
5 assessments.
6 (b) The receiver, liquidator, or statutory successor
7 of an insolvent member shall be bound by settlements of
8 covered claims by the association or a similar organization in
9 another state. The court having jurisdiction shall grant such
10 claims priority against the assets of the insolvent member
11 equal to that to which the claimant would have been entitled
12 in the absence of this section. The expense of the association
13 or similar organization in handling claims shall be accorded
14 the same priority as the expenses of the liquidator.
15 (c) The association shall file periodically with the
16 receiver or liquidator of the insolvent member statements of
17 the covered claims paid by the association and estimates of
18 anticipated claims on the association, which shall preserve
19 the rights of the association against the assets of the
20 insolvent member.
21 (8) NOTIFICATION PREVENTION OF INSOLVENCIES.--To aid
22 in the detection and prevention of employer insolvencies:
23 (a) upon determination by majority vote that any
24 member employer may be insolvent or in a financial condition
25 hazardous to the employees thereof or to the public, it shall
26 be the duty of the board of directors to notify the Department
27 of Insurance Labor and Employment Security of any information
28 indicating such condition.
29 (b) The board of directors may, upon majority vote,
30 request that the department determine the condition of any
31 member employer which the board in good faith believes may no
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1 longer be qualified to be a member of the association. Within
2 30 days of the receipt of such request or, for good cause
3 shown, within a reasonable time thereafter, the department
4 shall make such determination and shall forthwith advise the
5 board of its findings. Each request for a determination shall
6 be kept on file by the department, but the request shall not
7 be open to public inspection prior to the release of the
8 determination to the public.
9 (c) It shall also be the duty of the department to
10 report to the board of directors when it has reasonable cause
11 to believe that a member employer may be in such a financial
12 condition as to be no longer qualified to be a member of the
13 association.
14 (d) The board of directors may, upon majority vote,
15 make reports and recommendations to the department upon any
16 matter which is germane to the solvency, liquidation,
17 rehabilitation, or conservation of any member employer. Such
18 reports and recommendations shall not be considered public
19 documents.
20 (e) The board of directors may, upon majority vote,
21 make recommendations to the department for the detection and
22 prevention of employer insolvencies.
23 (f) The board of directors shall, at the conclusion of
24 any member's insolvency in which the association was obligated
25 to pay covered claims, prepare a report on the history and
26 cause of such insolvency, based on the information available
27 to the association, and shall submit such report to the
28 department.
29 (9) EXAMINATION OF THE ASSOCIATION.--The association
30 shall be subject to examination and regulation by the
31 Department of Insurance Labor and Employment Security. No
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1 later than March 30 of each year, the board of directors shall
2 submit an audited a financial statement report for the
3 preceding calendar year in a form approved by the department.
4 (10) IMMUNITY.--There shall be no liability on the
5 part of, and no cause of action of any nature shall arise
6 against, any member employer, the association or its agents or
7 employees, the board of directors, or the Department of
8 Insurance Labor and Employment Security or its representatives
9 for any action taken by them in the performance of their
10 powers and duties under this section.
11 (11) STAY OF PROCEEDINGS; REOPENING OF DEFAULT
12 JUDGMENTS.--All proceedings in which an insolvent employer is
13 a party, or is obligated to defend a party, in any court or
14 before any quasi-judicial body or administrative board in this
15 state shall be stayed for up to 6 months, or for such
16 additional period from the date the employer becomes an
17 insolvent member, as is deemed necessary by a court of
18 competent jurisdiction to permit proper defense by the
19 association of all pending causes of action as to any covered
20 claims arising from a judgment under any decision, verdict, or
21 finding based on the default of the insolvent member. The
22 association, either on its own behalf or on behalf of the
23 insolvent member, may apply to have such judgment, order,
24 decision, verdict, or finding set aside by the same court or
25 administrator that made such judgment, order, decision,
26 verdict, or finding and shall be permitted to defend against
27 such claim on the merits. If requested by the association,
28 the stay of proceedings may be shortened or waived.
29 (12) LIMITATION ON CERTAIN ACTIONS.--Notwithstanding
30 any other provision of this chapter, a covered claim, as
31 defined herein, with respect to which settlement is not
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1 effected and pursuant to which suit is not instituted against
2 the insured of an insolvent member or the association within 1
3 year after the deadline for filing claims with the receiver of
4 the insolvent member, or any extension of the deadline, shall
5 thenceforth be barred as a claim against the association.
6 (13) CORPORATE INCOME TAX CREDIT.--Any sums acquired
7 by a member by refund, dividend, or otherwise from the
8 association shall be payable within 30 days of receipt to the
9 Department of Insurance for deposit with the Treasurer to the
10 credit of the General Revenue Fund. All provisions of chapter
11 220 relating to penalties and interest on delinquent corporate
12 income tax payments apply to payments due under this
13 subsection.
14 Section 3. Subsections (2), (3), and (4) of section
15 440.386, Florida Statutes, are amended to read:
16 440.386 Individual self-insurers' insolvency;
17 conservation; liquidation.--
18 (2) COMMENCEMENT OF DELINQUENCY PROCEEDING.--The
19 Department of Insurance or the Florida Self-Insurers Guaranty
20 Association, Incorporated, may commence a delinquency any such
21 proceeding by application to the court for an order directing
22 the individual self-insurer to show cause why the department
23 or association should not have the relief prayed for. The
24 Florida Self-Insurers Guaranty Association, Incorporated, may
25 petition the department to commence such proceedings, and upon
26 receipt of such petition, the department shall commence such
27 proceeding. On the return of such order to show cause, and
28 after a full hearing, the court shall either deny the
29 application or grant the application, together with such other
30 relief as the nature of the case and the interests of the
31 claimants, creditors, stockholders, members, subscribers, or
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1 public may require. The Department of Insurance and the
2 association shall give Florida Self-Insurers Guaranty
3 Association, Incorporated, shall be given reasonable written
4 notice to each other by the department of all hearings which
5 pertain to an adjudication of insolvency of a member
6 individual self-insurer.
7 (3) GROUNDS FOR LIQUIDATION.--The Department of
8 Insurance or the association may apply to the court for an
9 order appointing a receiver and directing the receiver to
10 liquidate the business of a domestic individual self-insurer
11 if such individual self-insurer is insolvent. Florida
12 Self-Insurers Guaranty Association, Incorporated, may petition
13 the department to apply to the court for such order. Upon
14 receipt of such petition, the department shall apply to the
15 court for such order.
16 (4) GROUNDS FOR CONSERVATION; FOREIGN INDIVIDUAL
17 SELF-INSURERS.--
18 (a) The Department of Insurance or the association may
19 apply to the court for an order appointing a receiver or
20 ancillary receiver, and directing the receiver to conserve the
21 assets within this state, of a foreign individual self-insurer
22 if such individual self-insurer is insolvent. Florida
23 Self-Insurers Guaranty Association, Incorporated, may petition
24 the department to apply for such order, and, upon receipt of
25 such petition, the department shall apply to the court for
26 such order.
27 (b) An order to conserve the assets of an individual
28 self-insurer shall require the receiver forthwith to take
29 possession of the property of the receiver within the state
30 and to conserve it, subject to the further direction of the
31 court.
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1 Section 4. Subsection (3) of section 440.24, Florida
2 Statutes, is amended to read:
3 440.24 Enforcement of compensation orders;
4 penalties.--
5 (3) In any case where the employer is a self-insurer
6 and fails to comply with any compensation order of a judge of
7 compensation claims or court within 10 days after such order
8 becomes final, the department division may suspend or revoke
9 any authorization previously given to the employer to become a
10 self-insurer, and the Florida Self-Insurer's Guaranty
11 Association division may sell such of the securities deposited
12 by such self-insurer with the Florida Self-Insurer's Guaranty
13 Association division as may be necessary to satisfy such
14 order.
15 Section 5. This act shall take effect October 1, 2001.
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1 STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
COMMITTEE SUBSTITUTE FOR
2 SB 1140
3
4 Revises the duties and authority of the Department of
Insurance (department) and the Florida Self-Insurers Guaranty
5 Association (association) relative to regulation of individual
self-insured employers, including the following:
6
Provides that the department shall consult with the
7 association regarding the association's recommendations for
actions to be taken with respect to sef-insured employers and
8 applicants for approval to self-insure, rather than requiring
the department to take such actions unless it determines by
9 clear and convincing evidence that the recommendations are
erroneous.
10
Provides that the department may, rather than shall, contract
11 with the association for specified services.
12 Strikes the specified amount of the fine that applies if a
self-insurer fails to file any report as prescribed by rules
13 adopted by the department.
14 Provides that either the department or the association may
audit a self-insured employer, rather than providing that the
15 association is the sole entity authorized to audit employers.
16 Specifies that assessments on self-insured employers are based
on annual ""written" premium each employer would have paid had
17 the employer not been self-insured.
18 Specifies that funds may be allocated or paid from the
Workers' Compensation Administration Trust Fund to contract
19 with the association to perform services required by law.
20 Specifies that the department shall not levy any assessment on
the association.
21
Provides that by January 1, 2002, the board of the association
22 shall submit to the department a proposed plan of operation
for approval by the department.
23
Retains current law that the department may require that the
24 association notify the member employers and any other
interested parties of the determination of insolvency and of
25 their rights under this section.
26 Retains the current law that the association notify the
department of any information indicating that a member
27 employer may be insolvent or in a financial condition
hazardous to the employees or to the public.
28
Amends s. 440.24, F.S., to authorize the department to suspend
29 or revoke any authorization of an employer to self-insure if
the employer fails to comply with ay compensation order of a
30 judge of compensation claims or court and to authorize the
association to sell such securities deposited by the
31 self-insurer with the association as may be necessary to
satisfy the order.
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