House Bill hb0319c1
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
By the Committee on Insurance and Representative Clarke
1 A bill to be entitled
2 An act relating to self-insurers; amending s.
3 440.24, F.S.; providing for sales of securities
4 on deposit to satisfy a compensation order;
5 amending s. 440.38, F.S.; transferring
6 operation of provisions requiring the securing
7 of payment of compensation by employers from
8 the Division of Workers' Compensation of the
9 Department of Labor and Employment Security to
10 the Florida Self-Insurers Guaranty Association,
11 Incorporated, and the Department of Revenue;
12 revising and clarifying requirements and
13 procedures; providing powers and duties of the
14 association and the departments; providing for
15 allocation or payment of state funds to the
16 association for certain purposes; providing
17 rulemaking authority; amending s. 440.385,
18 F.S.; revising and clarifying provisions
19 relating to the association's creation, board
20 of directors, powers and duties, insolvency
21 fund, and plan of operation; providing
22 additional powers of the association;
23 transferring powers and duties of the
24 Department of Labor and Employment Security
25 relating to the association to the Department
26 of Revenue; revising such powers and duties;
27 providing additional powers and duties of the
28 Department of Revenue; providing for oversight
29 of the association by the department; deleting
30 certain provisions relating to detection and
31 prevention of employer insolvencies; amending
1
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 s. 440.386, F.S.; providing parity for the
2 association with the Department of Revenue
3 relating to proceedings for delinquency,
4 liquidation, and conservation of assets;
5 repealing s. 440.51(6)(b), F.S., relating to
6 certain reports required by the Department of
7 Insurance; amending s. 440.515, F.S.;
8 correcting a cross reference, to conform;
9 providing an effective date.
10
11 Be It Enacted by the Legislature of the State of Florida:
12
13 Section 1. Subsection (3) of section 440.24, Florida
14 Statutes, is amended to read:
15 440.24 Enforcement of compensation orders;
16 penalties.--
17 (3) In any case where the employer is a self-insurer
18 and fails to comply with any compensation order of a judge of
19 compensation claims or court within 10 days after such order
20 becomes final, the Department of Revenue division may suspend
21 or revoke any authorization previously given to the employer
22 to be become a self-insurer, and the Florida Self-Insurers
23 Guaranty Association, Incorporated, division may call or sue
24 upon the surety bond or exercise its rights under a letter of
25 credit sell such of the securities deposited by the such
26 self-insurer with the Florida Self-Insurers Guaranty
27 Association, Incorporated, as a qualifying security deposit
28 division as may be necessary to satisfy the such order.
29 Section 2. Subsections (1), (2), and (3) of section
30 440.38, Florida Statutes, are amended to read:
31
2
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
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 (a) By insuring and keeping insured the payment of
6 such compensation with any stock company or mutual company or
7 association or exchange, authorized to do business in the
8 state;
9 (b) By furnishing satisfactory proof to the Florida
10 Self-Insurers Guaranty Association, Incorporated, created in
11 s. 440.385, that the employer has the financial strength
12 necessary to ensure timely payment of all current and future
13 claims division of its financial ability to pay such
14 compensation individually and on behalf of its subsidiary and
15 affiliated companies with employees in this state and
16 receiving an authorization from the Department of Revenue
17 division to pay such compensation directly. The association
18 shall review the financial strength of applicants for
19 membership, current members, and former members and make
20 recommendations to the Department of Revenue regarding their
21 qualifications to self-insure in accordance with this section
22 and ss. 440.385 and 440.386. The Department of Revenue shall
23 act in accordance with such recommendation unless the
24 department determines by clear and convincing evidence that
25 the recommendation is erroneous. The action of the Department
26 of Revenue is subject to review under chapter 120. the
27 following provisions:
28 1. The association division may recommend that the
29 Department of Revenue, as a condition to such authorization,
30 require an employer to deposit with the association division a
31 qualifying security deposit. The association division shall
3
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 recommend determine the type and amount of the qualifying
2 security deposit and shall prescribe conditions for the
3 qualifying security deposit, which shall include authorization
4 for the association division to call the qualifying security
5 deposit in the case of default to pay compensation awards and
6 related expenses of the association. In addition, the division
7 shall require, As a condition to authorization to self-insure,
8 the employer shall provide proof that the employer has
9 provided for competent personnel with whom to deliver benefits
10 and to provide a safe working environment. Further, The
11 employer division shall also provide evidence of require such
12 employer to carry reinsurance at levels that will ensure the
13 financial strength and actuarial soundness of such employer in
14 accordance with rules adopted promulgated by the Department of
15 Revenue division. The Department of Revenue division may by
16 rule require that, in the event of an individual
17 self-insurer's insolvency, such qualifying security deposits
18 and reinsurance policies are payable to the Florida
19 Self-Insurers Guaranty association, Incorporated, created
20 pursuant to s. 440.385. Any employer securing compensation in
21 accordance with the provisions of this paragraph shall be
22 known as a self-insurer and shall be classed as a carrier of
23 her or his own insurance. All such employers shall, if
24 requested, provide to the association the certified opinion of
25 an independent actuary who is a member of the American Academy
26 of Actuaries of the actuarial present value of the determined
27 and estimated future compensation payments of the employer for
28 claims incurred while the member exercised the privilege of
29 self-insurance, using a discount rate of 4 percent. If any
30 member or former member of the association refuses to timely
31 provide such report, the association may obtain an order from
4
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 a circuit court requiring the member to produce such report
2 and ordering such other relief as the court determines
3 appropriate. The association shall be entitled to recover all
4 reasonable costs and attorney's fees in such proceedings.
5 2. If the employer fails to maintain the foregoing
6 requirements, the association division shall recommend to the
7 Department of Revenue that the department revoke the
8 employer's authority to self-insure, unless the employer
9 provides to the association division the certified opinion of
10 an independent actuary who is a member of the American Academy
11 Society of Actuaries as to the actuarial present value of the
12 employer's determined and estimated future compensation
13 payments of the employer for claims incurred while the member
14 exercised the privilege of self-insurance based on cash
15 reserves, using a discount rate of 4-percent discount rate,
16 and a qualifying security deposit equal to 1.5 times the value
17 so certified. The employer shall thereafter annually provide
18 such a certified opinion until such time as the employer meets
19 the requirements of subparagraph 1. The qualifying security
20 deposit shall be adjusted at the time of each such annual
21 report. Upon the failure of the employer to timely provide
22 such opinion or to timely provide a security deposit in an
23 amount equal to 1.5 times the value certified in the latest
24 opinion, the association shall provide such information to the
25 Department of Revenue, together with a recommendation, and the
26 department division shall then revoke the such employer's
27 authorization to self-insure., and such Failure to comply with
28 this provision shall be deemed to constitute an immediate
29 serious danger to the public health, safety, or welfare
30 sufficient to justify the summary suspension of the employer's
31 authorization to self-insure pursuant to s. 120.68.
5
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 3. Upon the suspension or revocation of the employer's
2 authorization to self-insure, the employer shall provide to
3 the division and to the Florida Self-Insurers Guaranty
4 association, Incorporated, created pursuant to s. 440.385 the
5 certified opinion of an independent actuary who is a member of
6 the American Academy Society of Actuaries of the actuarial
7 present value of the determined and estimated future
8 compensation payments of the employer for claims incurred
9 while the member exercised the privilege of self-insurance,
10 using a discount rate of 4-percent. The employer shall provide
11 such an opinion at 6-month intervals thereafter until such
12 time as the latest opinion shows no remaining value of claims.
13 With each such opinion, the employer shall deposit with the
14 association division a qualifying security deposit in an
15 amount equal to the value certified by the actuary. The
16 association has a cause of action against an employer, and
17 against any successor of the employer, who fails to timely
18 provide such opinion or who fails to timely maintain the
19 required security deposit with the association division. The
20 association shall recover a judgment in the amount of the
21 actuarial present value of the determined and estimated future
22 compensation payments of the employer for claims incurred
23 while the employer exercised the privilege of self-insurance,
24 together with attorney's fees. For purposes of this section,
25 the successor of an employer means any person, business
26 entity, or group of persons or business entities, which holds
27 or acquires legal or beneficial title to the majority of the
28 assets or the majority of the shares of the employer.
29 4. A qualifying security deposit shall consist, at the
30 option of the employer, of:
31
6
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 a. Surety bonds, in a form and containing such terms
2 as prescribed by the association division, issued by a
3 corporation surety authorized to transact surety business by
4 the Department of Insurance, and whose policyholders' and
5 financial ratings, as reported in A.M. Best's Insurance
6 Reports, Property-Liability, are not less than "A" and "V",
7 respectively.
8 b. Irrevocable letters of credit in favor of the
9 association division issued by financial institutions located
10 within this state, the deposits of which are insured through
11 the Federal Deposit Insurance Corporation.
12 5. The qualifying security deposit shall be held by
13 the association division exclusively for the benefit of
14 workers' compensation claimants. The security shall not be
15 subject to assignment, execution, attachment, or any legal
16 process whatsoever, except as necessary to guarantee the
17 payment of compensation under this chapter. No surety bond
18 may be terminated, and no letter of credit may be allowed to
19 expire, without 90 days' prior written notice to the
20 association division and the deposit by the self-insuring
21 employer of some other qualifying security deposit of equal
22 value within 10 business days after such notice. Failure to
23 provide such written notice or failure to timely provide
24 qualifying replacement security after such notice shall
25 constitute grounds for the association division to call or sue
26 upon the surety bond or to exercise its rights under a letter
27 of credit. Current self-insured employers must comply with
28 this section on or before December 31, 2002 2001, or upon the
29 maturity of existing security deposits, whichever occurs
30 later. The Department of Revenue division may specify by rule
31 the amount of the qualifying security deposit required prior
7
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 to authorizing an employer to self-insure and the amount of
2 net worth required for an employer to qualify for
3 authorization to self-insure;
4 (c) By entering into a contract with a public utility
5 under an approved utility-provided self-insurance program as
6 set forth in s. 624.46225 in effect as of July 1, 1983. The
7 division shall adopt rules to implement this paragraph;
8 (d) By entering into an interlocal agreement with
9 other local governmental entities to create a local government
10 pool pursuant to s. 624.4622;
11 (e) In accordance with s. 440.135, an employer, other
12 than a local government unit, may elect coverage under the
13 Workers' Compensation Law and retain the benefit of the
14 exclusiveness of liability provided in s. 440.11 by obtaining
15 a 24-hour health insurance policy from an authorized property
16 and casualty insurance carrier or an authorized life and
17 health insurance carrier, or by participating in a fully or
18 partially self-insured 24-hour health plan that is established
19 or maintained by or for two or more employers, so long as the
20 law of this state is not preempted by the Employee Retirement
21 Income Security Act of 1974, Pub. L. No. 93-406, or any
22 amendment to that law, which policy or plan must provide, for
23 at least occupational injuries and illnesses, medical benefits
24 that are comparable to those required by this chapter. A local
25 government unit, as a single employer, in accordance with s.
26 440.135, may participate in the 24-hour health insurance
27 coverage plan referenced in this paragraph. Disputes and
28 remedies arising under policies issued under this section are
29 governed by the terms and conditions of the policies and under
30 the applicable provisions of the Florida Insurance Code and
31 rules adopted under the insurance code and other applicable
8
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 laws of this state. The 24-hour health insurance policy may
2 provide for health care by a health maintenance organization
3 or a preferred provider organization. The premium for such
4 24-hour health insurance policy shall be paid entirely by the
5 employer. The 24-hour health insurance policy may use
6 deductibles and coinsurance provisions that require the
7 employee to pay a portion of the actual medical care received
8 by the employee. If an employer obtains a 24-hour health
9 insurance policy or self-insured plan to secure payment of
10 compensation as to medical benefits, the employer must also
11 obtain an insurance policy or policies that provide indemnity
12 benefits as follows:
13 1. If indemnity benefits are provided only for
14 occupational-related disability, such benefits must be
15 comparable to those required by this chapter.
16 2. If indemnity benefits are provided for both
17 occupational-related and nonoccupational-related disability,
18 such benefits must be comparable to those required by this
19 chapter, except that they must be based on 60 percent of the
20 average weekly wages.
21 3. The employer shall provide for each of its
22 employees life insurance with a death benefit of $100,000.
23 4. Policies providing coverage under this subsection
24 must use prescribed and acceptable underwriting standards,
25 forms, and policies approved by the Department of Insurance.
26 If any insurance policy that provides coverage under this
27 section is canceled, terminated, or nonrenewed for any reason,
28 the cancellation, termination, or nonrenewal is ineffective
29 until the self-insured employer or insurance carrier or
30 carriers notify the division and the Department of Insurance
31 of the cancellation, termination, or nonrenewal, and until the
9
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 division has actually received the notification. The division
2 must be notified of replacement coverage under a workers'
3 compensation and employer's liability insurance policy or plan
4 by the employer prior to the effective date of the
5 cancellation, termination, or nonrenewal; or
6 (f) By entering into a contract with an individual
7 self-insurer under an approved individual
8 self-insurer-provided self-insurance program as set forth in
9 s. 624.46225. The division may adopt rules to administer this
10 subsection.
11 (2)(a) The Department of Revenue division shall adopt
12 rules by which businesses may become qualified to provide
13 underwriting claims-adjusting, loss control, and safety
14 engineering services to self-insurers.
15 (b) The Department of Revenue division shall adopt
16 rules requiring self-insurers to file any reports necessary to
17 fulfill the requirements of this chapter. Any self-insurer
18 who fails to file any report as prescribed by the rules
19 adopted by the department division shall be subject to a civil
20 penalty not to exceed $100 for each such failure.
21 (3)(a) The license of any stock company or mutual
22 company or association or exchange authorized to do insurance
23 business in the state shall for good cause, upon
24 recommendation of the division, be suspended or revoked by the
25 Department of Insurance. No suspension or revocation shall
26 affect the liability of any carrier already incurred.
27 (b) The Department of Revenue division shall suspend
28 or revoke any authorization to a self-insurer for failure to
29 comply with this act or for good cause, as defined by rule of
30 the department division. No suspension or revocation shall
31 affect the liability of any self-insurer already incurred.
10
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 (c) Violation of s. 440.381 by a self-insurance fund
2 shall result in the imposition of a fine not to exceed $1,000
3 per audit if the self-insurance fund fails to act on said
4 audits by correcting errors in employee classification or
5 accepted applications for coverage where it knew employee
6 classifications were incorrect. Such fines shall be levied by
7 the division and deposited into the Workers' Compensation
8 Administration Trust Fund.
9 Section 3. Section 440.385, Florida Statutes, is
10 amended to read:
11 440.385 Florida Self-Insurers Guaranty Association,
12 Incorporated.--
13 (1) CREATION OF ASSOCIATION.--
14 (a) There is created a nonprofit corporation to be
15 known as the "Florida Self-Insurers Guaranty Association,
16 Incorporated," hereinafter referred to as "the association."
17 Upon incorporation of the association, all individual
18 self-insurers as defined in ss. 440.02(23)(a) and
19 440.38(1)(b), other than individual self-insurers which are
20 public utilities or governmental entities, shall be members of
21 the association as a condition of their authority to
22 individually self-insure in this state. The association shall
23 perform its functions under a plan of operation as established
24 and approved under subsection (5) and shall exercise its
25 powers and duties through a board of directors as established
26 under subsection (2). The association corporation shall have
27 those powers granted or permitted corporations not for profit,
28 as provided in chapter 617. The activities of the association
29 shall be subject to review by the Department of Revenue. The
30 department shall have oversight responsibility as set forth in
31
11
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 this act. The association is specifically authorized to enter
2 into agreements with this state 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 the association satisfies the division that
20 there is no remaining value to claims incurred while the
21 withdrawing member was self-insured. If a withdrawing member
22 fails or 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 report and
25 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,
12
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
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 association division.
18 The 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 section. 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.
31
13
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
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 January 1, 2002, other than initial appointments shall be made
19 by the Department of Revenue Secretary of Labor and Employment
20 Security upon recommendation of members of the association.
21 Any vacancy on the board shall be filled for the remaining
22 period of the term in the same manner as appointments other
23 than initial appointments are made. Each director shall be
24 reimbursed for expenses incurred in carrying out the duties of
25 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
14
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
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
15
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 for membership under the law. The association shall recommend
2 to the Department of Revenue that the application be accepted
3 or rejected based on the criteria set forth in s.
4 440.38(1)(b). The department shall approve or disapprove the
5 application as provided in paragraph (6)(a). Prior to a final
6 determination by the Division of Workers' Compensation as to
7 whether or not to approve any applicant for membership in the
8 association, the association may issue opinions to the
9 division concerning any applicant, which opinions shall be
10 considered by the division prior to any final determination.
11 7. Collect and review financial information from
12 employers and make recommendations to the Department of
13 Revenue regarding the appropriate security deposit and
14 reinsurance amounts necessary for an employer to demonstrate
15 that the employer has the financial strength necessary to
16 ensure the timely payment of all current and future claims.
17 The association may audit and examine an employer to verify
18 the financial strength of the employer's current and former
19 members. If the association determines that a current or
20 former self-insured employer does not have the financial
21 strength necessary to assure the timely payment of all current
22 and estimated future claims, the association may recommend to
23 the department that 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
16
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 necessary to ensure payment of compensation claims. The
2 Department of Revenue shall act on such recommendations as
3 provided in paragraph (6)(a). The association has a cause of
4 action against an employer, and against any successor of an
5 employer, who fails to provide an additional security deposit
6 required by the department. The association shall recover a
7 judgment in the amount of the requested additional security
8 deposit together with reasonable attorney's fees. For the
9 purposes of this section, the successor of an employer is any
10 person or business entity or group of persons or business
11 entities that holds or acquires legal or beneficial title to
12 the majority of the assets or the majority of the shares of
13 the employer.
14 8.7. Charge fees to any member of the association to
15 cover the actual costs of examining the financial and safety
16 conditions of that member.
17 9.8. Charge an applicant for membership in the
18 association a fee sufficient to cover the actual costs of
19 examining the financial condition of the applicant.
20 10. Implement any and all procedures necessary to
21 ensure compliance with regulatory actions taken by the
22 Department of Revenue.
23 (c)1. To the extent necessary to secure funds for the
24 payment of covered claims and also to pay the reasonable costs
25 to administer them, the association, subject to approval by
26 the Department of Revenue Labor and Employment Security, upon
27 certification of the board of directors, shall levy
28 assessments based on the annual written normal premium each
29 employer would have paid had the employer not been
30 self-insured. Every assessment shall be made as a uniform
31 percentage of the figure applicable to all individual
17
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 self-insurers, provided that the assessment levied against any
2 self-insurer in any one year shall not exceed 1 percent of the
3 annual written normal premium during the calendar year
4 preceding the date of the assessment. Assessments shall be
5 remitted to and administered by the board of directors in the
6 manner specified by the approved plan. Each employer so
7 assessed shall have at least 30 days' written notice as to the
8 date the assessment is due and payable. The association shall
9 levy assessments against any newly admitted member of the
10 association so that the basis of contribution of any newly
11 admitted member is the same as previously admitted members,
12 provision for which shall be contained in the plan of
13 operation.
14 2. If, in any one year, funds available from such
15 assessments, together with funds previously raised, are not
16 sufficient to make all the payments or reimbursements then
17 owing, the funds available shall be prorated, and the unpaid
18 portion shall be paid as soon thereafter as sufficient
19 additional funds become available.
20 3. Funds may be allocated or paid from the Workers'
21 Compensation Administration Trust Fund to contract with the
22 association to perform services required by contract under
23 paragraph (6)(b). However, no state funds of any kind shall be
24 allocated or paid to the association or any of its accounts
25 for payment of covered claims or related expenses except those
26 state funds accruing to the association by and through the
27 assignment of rights of an insolvent employer. The Department
28 of Revenue shall not levy any assessment under this section on
29 the Florida Self-Insurance Guaranty Association, Incorporated.
30 (4) INSOLVENCY FUND.--Upon the adoption of a plan of
31 operation or the adoption of rules by the Department of Labor
18
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 and Employment Security pursuant to subsection (5), there
2 shall be created an Insolvency Fund to be managed by the
3 association.
4 (a) The Insolvency Fund is created for purposes of
5 meeting the obligations of insolvent members incurred while
6 members of the association and after the exhaustion of any
7 security deposit bond, as required under this chapter.
8 However, if such security deposit bond, surety, or reinsurance
9 policy is payable to the Florida Self-Insurers Guaranty
10 Association, the association shall commence to provide
11 benefits out of the Insolvency Fund and be reimbursed from the
12 security deposit bond, surety, or reinsurance policy. The
13 method of operation of the Insolvency Fund shall be defined in
14 the plan of operation as provided in subsection (5).
15 (b) The Department of Revenue shall have the authority
16 to audit the financial soundness of the Insolvency Fund
17 annually.
18 (c) The Department of Revenue may offer certain
19 amendments to the plan of operation to the board of directors
20 of the association for purposes of assuring the ongoing
21 financial soundness of the Insolvency Fund and its ability to
22 meet the obligations of this section.
23 (d) The department actuary may make certain
24 recommendations to improve the orderly payment of claims.
25 (5) PLAN OF OPERATION.--The association shall operate
26 pursuant to a plan of operation approved by the board of
27 directors. The plan of operation in effect on January 1,
28 2002, and approved by the Department of Labor and Employment
29 Security shall remain in effect. However, any amendments to
30 the plan shall not become effective until approved by the
31 Department of Revenue. By September 15, 1982, the board of
19
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 directors shall submit to the Department of Labor and
2 Employment Security a proposed plan of operation for the
3 administration of the association and the Insolvency Fund.
4 (a) The purpose of the plan of operation shall be to
5 provide the association and the board of directors with the
6 authority and responsibility to establish the necessary
7 programs and to take the necessary actions to protect against
8 the insolvency of a member of the association. In addition,
9 the plan shall provide that the members of the association
10 shall be responsible for maintaining an adequate Insolvency
11 Fund to meet the obligations of insolvent members provided for
12 under this act and shall authorize the board of directors to
13 contract and employ those persons with the necessary expertise
14 to carry out this stated purpose. By January 1, 2003, the
15 board of directors shall submit to the Department of Revenue a
16 proposed plan of operation for the administration of the
17 association. The department shall approve the plan by order,
18 consistent with this act. The department shall approve any
19 amendments to the plan, by order consistent with this act,
20 determined appropriate to carry out the duties and
21 responsibilities of the association.
22 (b) The plan of operation, and any amendments thereto,
23 shall take effect upon approval in writing by the department.
24 If the board of directors fails to submit a plan by September
25 15, 1982, or fails to make required amendments to the plan
26 within 30 days thereafter, the department shall promulgate
27 such rules as are necessary to effectuate the provisions of
28 this subsection. Such rules shall continue in force until
29 modified by the department or superseded by a plan submitted
30 by the board of directors and approved by the department.
31
20
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 (b)(c) All member employers shall comply with the plan
2 of operation.
3 (c)(d) The plan of operation shall:
4 1. Establish the procedures whereby all the powers and
5 duties of the association under subsection (3) will be
6 performed.
7 2. Establish procedures for handling assets of the
8 association.
9 3. Establish the amount and method of reimbursing
10 members of the board of directors under subsection (2).
11 4. Establish procedures by which claims may be filed
12 with the association and establish acceptable forms of proof
13 of covered claims. Notice of claims to the receiver or
14 liquidator of the insolvent employer shall be deemed notice to
15 the association or its agent, and a list of such claims shall
16 be submitted periodically to the association or similar
17 organization in another state by the receiver or liquidator.
18 5. Establish regular places and times for meetings of
19 the board of directors.
20 6. Establish procedures for records to be kept of all
21 financial transactions of the association and its agents and
22 the board of directors.
23 7. Provide that any member employer aggrieved by any
24 final action or decision of the association may appeal to the
25 Department of Revenue within 30 days after the action or
26 decision.
27 8. Establish the procedures whereby recommendations of
28 candidates for the board of directors shall be submitted to
29 the Department of Revenue.
30 9. Contain additional provisions necessary or proper
31 for the execution of the powers and duties of the association.
21
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 (d)(e) The plan of operation may provide that any or
2 all of the powers and duties of the association, except those
3 specified under subparagraphs (c)(d)1. and 2., be delegated to
4 a corporation, association, or other organization which
5 performs or will perform functions similar to those of this
6 association or its equivalent in two or more states. Such a
7 corporation, association, or organization shall be reimbursed
8 as a servicing facility would be reimbursed and shall be paid
9 for its performance of any other functions of the association.
10 A delegation of powers or duties under this subsection shall
11 take effect only with the approval of both the board of
12 directors and the Department of Revenue and may be made only
13 to a corporation, association, or organization which extends
14 protection which is not substantially less favorable and
15 effective than the protection provided by this section.
16 (6) POWERS AND DUTIES OF DEPARTMENT OF REVENUE LABOR
17 AND EMPLOYMENT SECURITY.--
18 (a) The Department of Revenue shall:
19 (a) Review recommendations of the association
20 concerning whether current or former self-insured employers or
21 members of the association have the financial strength
22 necessary to ensure the timely payment of all current and
23 estimated future claims. If the association determines an
24 employer does not have the financial strength necessary to
25 ensure the timely payment of all current and future claims and
26 recommends action pursuant to paragraph (3)(b), the department
27 may take such action as necessary to order the employer to
28 comply with the recommendation unless the department
29 determines by clear and convincing evidence that the
30 recommendation is erroneous. The action of the Department of
31 Revenue is subject to review under chapter 120.
22
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 1. Notify the association of the existence of an
2 insolvent employer not later than 3 days after it receives
3 notice of the determination of insolvency.
4 2. Upon request of the board of directors, provide the
5 association with a statement of the annual normal premiums of
6 each member employer.
7 (b) Contract with the association for services, which
8 shall include, but not be limited to, the following:
9 1. Process applications for self-insurance.
10 2. Collect and review financial statements and loss
11 reserve information from individual self-insurers.
12 3. Collect and maintain files for original security
13 deposit documents and reinsurance policies from individual
14 self-insurers and, if necessary, perfect security interests in
15 security deposits.
16 4. Process compliance documentation for individual
17 self-insurers and provide such documentation to the Division
18 of Workers' Compensation.
19 5. Collect all data necessary to calculate annual
20 premium for all individual self-insurers, including individual
21 self-insurers that are public utilities or governmental
22 entities, and provide such calculated annual premium to the
23 Division of Workers' Compensation for assessment purposes.
24 6. Inspect and audit annually, if necessary, the
25 payroll and other records of each individual self-insurer,
26 including individual self-insurers that are public utilities
27 or governmental entities, in order to determine the wages paid
28 by each individual self-insurer, the premium such individual
29 self-insurer would have to pay if insured, and all payments of
30 compensation made by such individual self-insurer during each
31 prior period, and provide the results of such audit to the
23
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 Division of Workers' Compensation. For the purposes of this
2 section, the payroll records of each individual self-insurer
3 shall be open to inspection and audit by the association, an
4 authorized representative of the association, or the
5 Department of Revenue during regular business hours.
6 7. Process applications and make recommendations
7 regarding the qualifications of businesses to be approved to
8 provide or continue to provide underwriting, claims adjusting,
9 loss control, and safety engineering services to individual
10 self-insurers.
11 8. Provide legal representation to implement the
12 administration and audit of individual self-insurers and make
13 recommendations regarding prosecution of any administrative or
14 legal proceedings necessitated by the department's regulation
15 of the individual self-insurers.
16 (c) Contract with an attorney or attorneys recommended
17 by the association for representation of the department in any
18 administrative or legal proceedings necessitated by the
19 recommended regulation of the individual self-insurers.
20 (d) Direct the association to require from each
21 individual self-insurer, at such time and in accordance with
22 such regulations as the department prescribes, reports with
23 respect to wages paid, the amount of premiums such individual
24 self-insurer would have to pay if insured, and all payments of
25 compensation made by such individual self-insurer during each
26 prior period and determine the amounts paid by each individual
27 self-insurer and the amounts paid by all individual
28 self-insurers during such period. For the purposes of this
29 section, the payroll records of each individual self-insurer
30 shall be open to annual inspection and audit by the
31 association or the department, or an authorized representative
24
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 of the association or department, during regular business
2 hours and, if any audit of such records of an individual
3 self-insurer discloses a deficiency in the amount reported to
4 the association or in the amounts paid to the Division of
5 Workers' Compensation by an individual self-insurer for its
6 assessment for the Workers' Compensation Administration Trust
7 Fund, the Department of Revenue or the association may assess
8 the cost of such audit against the individual self-insurer.
9 The department may:
10 (e)1. Require that the association notify the member
11 employers and any other interested parties of the
12 determination of insolvency and of their rights under this
13 section. Such notification shall be by mail at the last known
14 address thereof when available; but, if sufficient information
15 for notification by mail is not available, notice by
16 publication in a newspaper of general circulation shall be
17 sufficient.
18 (f)2. Suspend or revoke the authority of any member
19 employer failing to pay an assessment when due or failing to
20 comply with the plan of operation to self-insure in this
21 state. As an alternative, the department may levy a fine on
22 any member employer failing to pay an assessment when due.
23 Such fine shall not exceed 5 percent of the unpaid assessment
24 per month, except that no fine shall be less than $100 per
25 month.
26 (g)3. Revoke the designation of any servicing facility
27 if the department finds that claims are being handled
28 unsatisfactorily.
29 (7) EFFECT OF PAID CLAIMS.--
30 (a) Any person who recovers from the association under
31 this section shall be deemed to have assigned his or her
25
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 rights to the association to the extent of such recovery.
2 Every claimant seeking the protection of this section shall
3 cooperate with the association to the same extent as such
4 person would have been required to cooperate with the
5 insolvent member. The association shall have no cause of
6 action against the employee of the insolvent member for any
7 sums the association has paid out, except such causes of
8 action as the insolvent member would have had if such sums had
9 been paid by the insolvent member. In the case of an
10 insolvent member operating on a plan with assessment
11 liability, payments of claims by the association shall not
12 operate to reduce the liability of the insolvent member to the
13 receiver, liquidator, or statutory successor for unpaid
14 assessments.
15 (b) The receiver, liquidator, or statutory successor
16 of an insolvent member shall be bound by settlements of
17 covered claims by the association or a similar organization in
18 another state. The court having jurisdiction shall grant such
19 claims priority against the assets of the insolvent member
20 equal to that to which the claimant would have been entitled
21 in the absence of this section. The expense of the association
22 or similar organization in handling claims shall be accorded
23 the same priority as the expenses of the liquidator.
24 (c) The association shall file periodically with the
25 receiver or liquidator of the insolvent member statements of
26 the covered claims paid by the association and estimates of
27 anticipated claims on the association, which shall preserve
28 the rights of the association against the assets of the
29 insolvent member.
30 (8) NOTIFICATION PREVENTION OF INSOLVENCIES.--To aid
31 in the detection and prevention of employer insolvencies,:
26
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 (a) upon determination by majority vote that any
2 member employer may be insolvent or in a financial condition
3 hazardous to the employees thereof or to the public, it shall
4 be the duty of the board of directors to notify the Department
5 of Revenue Labor and Employment Security of any information
6 indicating such condition.
7 (b) The board of directors may, upon majority vote,
8 request that the department determine the condition of any
9 member employer which the board in good faith believes may no
10 longer be qualified to be a member of the association. Within
11 30 days of the receipt of such request or, for good cause
12 shown, within a reasonable time thereafter, the department
13 shall make such determination and shall forthwith advise the
14 board of its findings. Each request for a determination shall
15 be kept on file by the department, but the request shall not
16 be open to public inspection prior to the release of the
17 determination to the public.
18 (c) It shall also be the duty of the department to
19 report to the board of directors when it has reasonable cause
20 to believe that a member employer may be in such a financial
21 condition as to be no longer qualified to be a member of the
22 association.
23 (d) The board of directors may, upon majority vote,
24 make reports and recommendations to the department upon any
25 matter which is germane to the solvency, liquidation,
26 rehabilitation, or conservation of any member employer. Such
27 reports and recommendations shall not be considered public
28 documents.
29 (e) The board of directors may, upon majority vote,
30 make recommendations to the department for the detection and
31 prevention of employer insolvencies.
27
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 (f) The board of directors shall, at the conclusion of
2 any member's insolvency in which the association was obligated
3 to pay covered claims, prepare a report on the history and
4 cause of such insolvency, based on the information available
5 to the association, and shall submit such report to the
6 department.
7 (9) EXAMINATION OF THE ASSOCIATION.--The association
8 shall be subject to examination and regulation by the
9 Department of Revenue Labor and Employment Security. No later
10 than March 30 of each year, the board of directors shall
11 submit an audited a financial statement report for the
12 preceding calendar year in a form approved by the department.
13 (10) IMMUNITY.--There shall be no liability on the
14 part of, and no cause of action of any nature shall arise
15 against, any member employer, the association or its agents or
16 employees, the board of directors, or the Department of
17 Revenue Labor and Employment Security or its representatives
18 for any action taken by them in the performance of their
19 powers and duties under this section.
20 (11) STAY OF PROCEEDINGS; REOPENING OF DEFAULT
21 JUDGMENTS.--All proceedings in which an insolvent employer is
22 a party, or is obligated to defend a party, in any court or
23 before any quasi-judicial body or administrative board in this
24 state shall be stayed for up to 6 months, or for such
25 additional period from the date the employer becomes an
26 insolvent member, as is deemed necessary by a court of
27 competent jurisdiction to permit proper defense by the
28 association of all pending causes of action as to any covered
29 claims arising from a judgment under any decision, verdict, or
30 finding based on the default of the insolvent member. The
31 association, either on its own behalf or on behalf of the
28
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 insolvent member, may apply to have such judgment, order,
2 decision, verdict, or finding set aside by the same court or
3 administrator that made such judgment, order, decision,
4 verdict, or finding and shall be permitted to defend against
5 such claim on the merits. If requested by the association,
6 the stay of proceedings may be shortened or waived.
7 (12) LIMITATION ON CERTAIN ACTIONS.--Notwithstanding
8 any other provision of this chapter, a covered claim, as
9 defined herein, with respect to which settlement is not
10 effected and pursuant to which suit is not instituted against
11 the insured of an insolvent member or the association within 1
12 year after the deadline for filing claims with the receiver of
13 the insolvent member, or any extension of the deadline, shall
14 thenceforth be barred as a claim against the association.
15 (13) CORPORATE INCOME TAX CREDIT.--Any sums acquired
16 by a member by refund, dividend, or otherwise from the
17 association shall be payable within 30 days of receipt to the
18 Department of Revenue for deposit with the Treasurer to the
19 credit of the General Revenue Fund. All provisions of chapter
20 220 relating to penalties and interest on delinquent corporate
21 income tax payments apply to payments due under this
22 subsection.
23 Section 4. Subsections (2), (3), and (4) of section
24 440.386, Florida Statutes, are amended to read:
25 440.386 Individual self-insurers' insolvency;
26 conservation; liquidation.--
27 (2) COMMENCEMENT OF DELINQUENCY PROCEEDING.--The
28 Department of Revenue or the Florida Self-Insurers Guaranty
29 Association, Incorporated, may commence a delinquency any such
30 proceeding by application to the court for an order directing
31 the individual self-insurer to show cause why the department
29
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 or association should not have the relief prayed for. The
2 Florida Self-Insurers Guaranty Association, Incorporated, may
3 petition the department to commence such proceedings, and upon
4 receipt of such petition, the department shall commence such
5 proceeding. On the return of such order to show cause, and
6 after a full hearing, the court shall either deny the
7 application or grant the application, together with such other
8 relief as the nature of the case and the interests of the
9 claimants, creditors, stockholders, members, subscribers, or
10 public may require. The department and the Florida
11 Self-Insurers Guaranty association, Incorporated, shall give
12 be given reasonable written notice to each other by the
13 department of all hearings which pertain to an adjudication of
14 insolvency of a member individual self-insurer.
15 (3) GROUNDS FOR LIQUIDATION.--The Department of
16 Revenue or the association may apply to the court for an order
17 appointing a receiver and directing the receiver to liquidate
18 the business of a domestic individual self-insurer if such
19 individual self-insurer is insolvent. Florida Self-Insurers
20 Guaranty Association, Incorporated, may petition the
21 department to apply to the court for such order. Upon receipt
22 of such petition, the department shall apply to the court for
23 such order.
24 (4) GROUNDS FOR CONSERVATION; FOREIGN INDIVIDUAL
25 SELF-INSURERS.--
26 (a) The Department of Revenue or the association may
27 apply to the court for an order appointing a receiver or
28 ancillary receiver, and directing the receiver to conserve the
29 assets within this state, of a foreign individual self-insurer
30 if such individual self-insurer is insolvent. Florida
31 Self-Insurers Guaranty Association, Incorporated, may petition
30
CODING: Words stricken are deletions; words underlined are additions.
Florida House of Representatives - 2002 CS/HB 319
200-567-02
1 the department to apply for such order, and, upon receipt of
2 such petition, the department shall apply to the court for
3 such order.
4 (b) An order to conserve the assets of an individual
5 self-insurer shall require the receiver forthwith to take
6 possession of the property of the receiver within the state
7 and to conserve it, subject to the further direction of the
8 court.
9 Section 5. Paragraph (b) of subsection (6) of section
10 440.51, Florida Statutes, is repealed.
11 Section 6. Section 440.515, Florida Statutes, is
12 amended to read:
13 440.515 Reports from self-insurers;
14 confidentiality.--The Department of Insurance shall maintain
15 the reports filed in accordance with s. 440.51(6)(b) as
16 confidential and exempt from the provisions of s. 119.07(1),
17 and such reports shall be released only for bona fide research
18 or educational purposes or after receipt of consent from the
19 employer.
20 Section 7. This act shall take effect October 1, 2002.
21
22
23
24
25
26
27
28
29
30
31
31
CODING: Words stricken are deletions; words underlined are additions.