House Bill hb0319e1
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CS/CS/HB 319, First Engrossed/ntc
1 A bill to be entitled
2 An act relating to self-insurers; amending s.
3 440.24, F.S.; providing for the sale of
4 securities on deposit to satisfy a compensation
5 order; 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 Insurance;
12 revising and clarifying requirements and
13 procedures; providing powers and duties of the
14 association and the department; 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 the powers and duties of the
24 Department of Labor and Employment Security
25 relating to the association to the Department
26 of Insurance and revising such powers and
27 duties; providing additional powers and duties
28 of the Department of Insurance; providing for
29 oversight of the association by the department;
30 deleting certain provisions relating to
31 detection and prevention of employer
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1 insolvencies; amending s. 440.386, F.S.;
2 providing parity for the association with the
3 Department of Insurance relating to proceedings
4 for delinquency, liquidation, and conservation
5 of assets; amending s. 440.51, F.S.;
6 eliminating provisions authorizing the
7 Department of Insurance to require that
8 self-insurers make certain reports; eliminating
9 provisions authorizing certain audits;
10 transferring the powers, duties, functions,
11 rules, records, and property relating to the
12 regulation of individual, self-insured
13 employers by the Department of Labor and
14 Employment Security to the Department of
15 Insurance; providing an appropriation;
16 eliminating specified positions; providing an
17 effective date.
18
19 Be It Enacted by the Legislature of the State of Florida:
20
21 Section 1. Subsection (3) of section 440.24, Florida
22 Statutes, is amended to read:
23 440.24 Enforcement of compensation orders;
24 penalties.--
25 (3) In any case where the employer is a self-insurer
26 and fails to comply with any compensation order of a judge of
27 compensation claims or court within 10 days after such order
28 becomes final, the Department of Insurance division may
29 suspend or revoke any authorization previously given to the
30 employer to be become a self-insurer, and the Florida
31 Self-Insurers Guaranty Association, Incorporated, division may
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1 call or sue upon the surety bond or exercise its rights under
2 the letter of credit sell such of the securities deposited by
3 the such self-insurer with the association as a qualifying
4 security deposit division as may be necessary to satisfy the
5 such order.
6 Section 2. Subsections (1), (2), and (3) of section
7 440.38, Florida Statutes, are amended to read:
8 440.38 Security for compensation; insurance carriers
9 and self-insurers.--
10 (1) Every employer shall secure the payment of
11 compensation under this chapter:
12 (a) By insuring and keeping insured the payment of
13 such compensation with any stock company or mutual company or
14 association or exchange, authorized to do business in the
15 state;
16 (b) By furnishing satisfactory proof to the Florida
17 Self-Insurers Guaranty Association, Incorporated, created in
18 s. 440.385, that it has the financial strength necessary to
19 ensure timely payment of all current and future claims
20 division of its financial ability to pay such compensation
21 individually and on behalf of its subsidiary and affiliated
22 companies with employees in this state and receiving an
23 authorization from the Department of Insurance division to pay
24 such compensation directly. The association shall review the
25 financial strength of applicants for membership, current
26 members, and former members and make recommendations to the
27 Department of Insurance regarding their qualifications to
28 self-insure in accordance with this section and ss. 440.385
29 and 440.386. The department shall act in accordance with the
30 recommendations unless it finds by clear and convincing
31
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1 evidence that the recommendations are erroneous. the following
2 provisions:
3 1. As a condition of authorization under paragraph
4 (a), the association division may recommend that the
5 Department of Insurance require an employer to deposit with
6 the association division a qualifying security deposit. The
7 association division shall recommend determine the type and
8 amount of the qualifying security deposit and shall prescribe
9 conditions for the qualifying security deposit, which shall
10 include authorization for the association division to call the
11 qualifying security deposit in the case of default to pay
12 compensation awards and related expenses of the association.
13 In addition, the division shall require, As a condition to
14 authorization to self-insure, the employer shall provide proof
15 that the employer has provided for competent personnel with
16 whom to deliver benefits and to provide a safe working
17 environment. Further, The employer division shall also
18 provide evidence that it carries require such employer to
19 carry reinsurance at levels that will ensure the financial
20 strength and actuarial soundness of such employer in
21 accordance with rules adopted promulgated by the Department of
22 Insurance division. The Department of Insurance division may
23 by rule require that, in the event of an individual
24 self-insurer's insolvency, such qualifying security deposits
25 and reinsurance policies are payable to the Florida
26 Self-Insurers Guaranty association, Incorporated, created
27 pursuant to s. 440.385. Any employer securing compensation in
28 accordance with the provisions of this paragraph shall be
29 known as a self-insurer and shall be classed as a carrier of
30 her or his own insurance. The employer shall, if requested,
31 provide the association an actuarial report signed by a member
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1 of the American Academy of Actuaries providing an opinion of
2 the appropriate present value of the reserves, using a
3 4-percent discount rate, for current and future compensation
4 claims. If any member or former member of the association
5 refuses to timely provide such a report, the association may
6 obtain an order from a circuit court requiring the member to
7 produce such a report and ordering any other relief that the
8 court determines is appropriate. The association may recover
9 all reasonable costs and attorney's fees in such proceedings.
10 2. If the employer fails to maintain the foregoing
11 requirements, the association division shall recommend to the
12 Department of Insurance that the department revoke the
13 employer's authority to self-insure, unless the employer
14 provides to the association division the certified opinion of
15 an independent actuary who is a member of the American Academy
16 Society of Actuaries as to the actuarial present value of the
17 employer's determined and estimated future compensation
18 payments based on cash reserves, using a 4-percent discount
19 rate, and a qualifying security deposit equal to 1.5 times the
20 value so certified. The employer shall thereafter annually
21 provide such a certified opinion until such time as the
22 employer meets the requirements of subparagraph 1. The
23 qualifying security deposit shall be adjusted at the time of
24 each such annual report. Upon the failure of the employer to
25 timely provide such opinion or to timely provide a security
26 deposit in an amount equal to 1.5 times the value certified in
27 the latest opinion, the association shall provide that
28 information to the Department of Insurance along with a
29 recommendation, and the Department of Insurance division shall
30 then revoke such employer's authorization to self-insure., and
31 such Failure to comply with this subparagraph constitutes
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1 shall be deemed to constitute an immediate serious danger to
2 the public health, safety, or welfare sufficient to justify
3 the summary suspension of the employer's authorization to
4 self-insure pursuant to s. 120.68.
5 3. Upon the suspension or revocation of the employer's
6 authorization to self-insure, the employer shall provide to
7 the division and to the Florida Self-Insurers Guaranty
8 association, Incorporated, created pursuant to s. 440.385 the
9 certified opinion of an independent actuary who is a member of
10 the American Academy Society of Actuaries of the actuarial
11 present value of the determined and estimated future
12 compensation payments of the employer for claims incurred
13 while the member exercised the privilege of self-insurance,
14 using a discount rate of 4 percent. The employer shall provide
15 such an opinion at 6-month intervals thereafter until such
16 time as the latest opinion shows no remaining value of claims.
17 With each such opinion, the employer shall deposit with the
18 association division a qualifying security deposit in an
19 amount equal to the value certified by the actuary. The
20 association has a cause of action against an employer, and
21 against any successor of the employer, who fails to timely
22 provide such opinion or who fails to timely maintain the
23 required security deposit with the association division. The
24 association shall recover a judgment in the amount of the
25 actuarial present value of the determined and estimated future
26 compensation payments of the employer for claims incurred
27 while the employer exercised the privilege of self-insurance,
28 together with attorney's fees. For purposes of this section,
29 the successor of an employer means any person, business
30 entity, or group of persons or business entities, which holds
31
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1 or acquires legal or beneficial title to the majority of the
2 assets or the majority of the shares of the employer.
3 4. A qualifying security deposit shall consist, at the
4 option of the employer, of:
5 a. Surety bonds, in a form and containing such terms
6 as prescribed by the association division, issued by a
7 corporation surety authorized to transact surety business by
8 the Department of Insurance, and whose policyholders' and
9 financial ratings, as reported in A.M. Best's Insurance
10 Reports, Property-Liability, are not less than "A" and "V",
11 respectively.
12 b. Irrevocable letters of credit in favor of the
13 association division issued by financial institutions located
14 within this state, the deposits of which are insured through
15 the Federal Deposit Insurance Corporation.
16 5. The qualifying security deposit shall be held by
17 the association division exclusively for the benefit of
18 workers' compensation claimants. The security shall not be
19 subject to assignment, execution, attachment, or any legal
20 process whatsoever, except as necessary to guarantee the
21 payment of compensation under this chapter. No surety bond
22 may be terminated, and no letter of credit may be allowed to
23 expire, without 90 days' prior written notice to the
24 association division and deposit by the self-insuring employer
25 of some other qualifying security deposit of equal value
26 within 10 business days after such notice. Failure to provide
27 such written notice or failure to timely provide qualifying
28 replacement security after such notice shall constitute
29 grounds for the association division to call or sue upon the
30 surety bond or to exercise its rights under a letter of
31 credit. Current self-insured employers must comply with this
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1 section on or before December 31, 2001, or upon the maturity
2 of existing security deposits, whichever occurs later. The
3 Department of Insurance division may specify by rule the
4 amount of the qualifying security deposit required prior to
5 authorizing an employer to self-insure and the amount of net
6 worth required for an employer to qualify for authorization to
7 self-insure;
8 (c) By entering into a contract with a public utility
9 under an approved utility-provided self-insurance program as
10 set forth in s. 624.46225 in effect as of July 1, 1983. The
11 division shall adopt rules to implement this paragraph;
12 (d) By entering into an interlocal agreement with
13 other local governmental entities to create a local government
14 pool pursuant to s. 624.4622;
15 (e) In accordance with s. 440.135, an employer, other
16 than a local government unit, may elect coverage under the
17 Workers' Compensation Law and retain the benefit of the
18 exclusiveness of liability provided in s. 440.11 by obtaining
19 a 24-hour health insurance policy from an authorized property
20 and casualty insurance carrier or an authorized life and
21 health insurance carrier, or by participating in a fully or
22 partially self-insured 24-hour health plan that is established
23 or maintained by or for two or more employers, so long as the
24 law of this state is not preempted by the Employee Retirement
25 Income Security Act of 1974, Pub. L. No. 93-406, or any
26 amendment to that law, which policy or plan must provide, for
27 at least occupational injuries and illnesses, medical benefits
28 that are comparable to those required by this chapter. A local
29 government unit, as a single employer, in accordance with s.
30 440.135, may participate in the 24-hour health insurance
31 coverage plan referenced in this paragraph. Disputes and
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1 remedies arising under policies issued under this section are
2 governed by the terms and conditions of the policies and under
3 the applicable provisions of the Florida Insurance Code and
4 rules adopted under the insurance code and other applicable
5 laws of this state. The 24-hour health insurance policy may
6 provide for health care by a health maintenance organization
7 or a preferred provider organization. The premium for such
8 24-hour health insurance policy shall be paid entirely by the
9 employer. The 24-hour health insurance policy may use
10 deductibles and coinsurance provisions that require the
11 employee to pay a portion of the actual medical care received
12 by the employee. If an employer obtains a 24-hour health
13 insurance policy or self-insured plan to secure payment of
14 compensation as to medical benefits, the employer must also
15 obtain an insurance policy or policies that provide indemnity
16 benefits as follows:
17 1. If indemnity benefits are provided only for
18 occupational-related disability, such benefits must be
19 comparable to those required by this chapter.
20 2. If indemnity benefits are provided for both
21 occupational-related and nonoccupational-related disability,
22 such benefits must be comparable to those required by this
23 chapter, except that they must be based on 60 percent of the
24 average weekly wages.
25 3. The employer shall provide for each of its
26 employees life insurance with a death benefit of $100,000.
27 4. Policies providing coverage under this subsection
28 must use prescribed and acceptable underwriting standards,
29 forms, and policies approved by the Department of Insurance.
30 If any insurance policy that provides coverage under this
31 section is canceled, terminated, or nonrenewed for any reason,
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1 the cancellation, termination, or nonrenewal is ineffective
2 until the self-insured employer or insurance carrier or
3 carriers notify the division and the Department of Insurance
4 of the cancellation, termination, or nonrenewal, and until the
5 division has actually received the notification. The division
6 must be notified of replacement coverage under a workers'
7 compensation and employer's liability insurance policy or plan
8 by the employer prior to the effective date of the
9 cancellation, termination, or nonrenewal; or
10 (f) By entering into a contract with an individual
11 self-insurer under an approved individual
12 self-insurer-provided self-insurance program as set forth in
13 s. 624.46225. The division may adopt rules to administer this
14 subsection.
15 (2)(a) The Department of Insurance division shall
16 adopt rules by which businesses may become qualified to
17 provide underwriting claims-adjusting, loss control, and
18 safety engineering services to self-insurers.
19 (b) The Department of Insurance division shall adopt
20 rules requiring self-insurers to file any reports necessary to
21 fulfill the requirements of this chapter. Any self-insurer
22 who fails to file any report as prescribed by the rules
23 adopted by the Department of Insurance division shall be
24 subject to a civil penalty not to exceed $100 for each such
25 failure.
26 (3)(a) The license of any stock company or mutual
27 company or association or exchange authorized to do insurance
28 business in the state shall for good cause, upon
29 recommendation of the division, be suspended or revoked by the
30 Department of Insurance. No suspension or revocation shall
31 affect the liability of any carrier already incurred.
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1 (b) The Department of Insurance division shall suspend
2 or revoke any authorization to a self-insurer for failure to
3 comply with this section or for good cause, as defined by rule
4 of the Department of Insurance division. No suspension or
5 revocation shall affect the liability of any self-insurer
6 already incurred.
7 (c) Violation of s. 440.381 by a self-insurance fund
8 shall result in the imposition of a fine not to exceed $1,000
9 per audit if the self-insurance fund fails to act on said
10 audits by correcting errors in employee classification or
11 accepted applications for coverage where it knew employee
12 classifications were incorrect. Such fines shall be levied by
13 the division and deposited into the Workers' Compensation
14 Administration Trust Fund.
15 Section 3. Section 440.385, Florida Statutes, is
16 amended to read:
17 440.385 Florida Self-Insurers Guaranty Association,
18 Incorporated.--
19 (1) CREATION OF ASSOCIATION.--
20 (a) There is created a nonprofit corporation to be
21 known as the "Florida Self-Insurers Guaranty Association,
22 Incorporated," hereinafter referred to as "the association."
23 Upon incorporation of the association, all individual
24 self-insurers as defined in ss. 440.02(23)(a) and
25 440.38(1)(b), other than individual self-insurers which are
26 public utilities or governmental entities, shall be members of
27 the association as a condition of their authority to
28 individually self-insure in this state. The association shall
29 perform its functions under a plan of operation as established
30 and approved under subsection (5) and shall exercise its
31 powers and duties through a board of directors as established
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1 under subsection (2). The association corporation shall have
2 those powers granted or permitted corporations not for profit,
3 as provide in chapter 617. The activities of the association
4 shall be subject to review by the Department of Insurance. The
5 Department of Insurance shall have oversight responsibility as
6 set forth in this section. The association is specifically
7 authorized to enter into agreements with this state to perform
8 specified services.
9 (b) A member may voluntarily withdraw from the
10 association when the member voluntarily terminates the
11 self-insurance privilege and pays all assessments due to the
12 date of such termination. However, the withdrawing member
13 shall continue to be bound by the provisions of this section
14 relating to the period of his or her membership and any claims
15 charged pursuant thereto. The withdrawing member who is a
16 member on or after January 1, 1991, shall also be required to
17 provide to the association division upon withdrawal, and at
18 12-month intervals thereafter, satisfactory proof, including,
19 if requested by the association, a report of known and
20 potential claims certified by a member of the American Academy
21 of Actuaries, that it continues to meet the standards of s.
22 440.38(1)(b)1. in relation to claims incurred while the
23 withdrawing member exercised the privilege of self-insurance.
24 Such reporting shall continue until the withdrawing member
25 demonstrates to satisfies the association division that there
26 is no remaining value to claims incurred while the withdrawing
27 member was self-insured. If a withdrawing member fails or
28 refuses to timely provide an actuarial report to the
29 association, the association may obtain an order from a
30 circuit court requiring the member to produce such a report
31 and ordering any other relief that the court determines
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1 appropriate. The association is entitled to recover all
2 reasonable costs and attorney's fees expended in such
3 proceedings. If during this reporting period the withdrawing
4 member fails to meet the standards of s. 440.38(1)(b)1., the
5 withdrawing member who is a member on or after January 1,
6 1991, shall thereupon, and at 6-month intervals thereafter,
7 provide to the division and the association the certified
8 opinion of an independent actuary who is a member of the
9 American Academy Society of Actuaries of the actuarial present
10 value of the determined and estimated future compensation
11 payments of the member for claims incurred while the member
12 was a self-insurer, using a discount rate of 4 percent. With
13 each such opinion, the withdrawing member shall deposit with
14 the association division security in an amount equal to the
15 value certified by the actuary and of a type that is
16 acceptable for qualifying security deposits under s.
17 440.38(1)(b). The withdrawing member shall continue to
18 provide such opinions and to provide such security until such
19 time as the latest opinion shows no remaining value of claims.
20 The association has a cause of action against a withdrawing
21 member, and against any successor of a withdrawing member, who
22 fails to timely provide the required opinion or who fails to
23 maintain the required deposit with the association division.
24 The association shall be entitled to recover a judgment in the
25 amount of the actuarial present value of the determined and
26 estimated future compensation payments of the withdrawing
27 member for claims incurred during the time that the
28 withdrawing member exercised the privilege of self-insurance,
29 together with reasonable attorney's fees. The association is
30 also entitled to recover reasonable attorney's fees in any
31 action to compel production of any actuarial report required
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1 by this section. For purposes of this section, the successor
2 of a withdrawing member means any person, business entity, or
3 group of persons or business entities, which holds or acquires
4 legal or beneficial title to the majority of the assets or the
5 majority of the shares of the withdrawing member.
6 (2) BOARD OF DIRECTORS.--The board of directors of the
7 association shall consist of nine persons and shall be
8 organized as established in the plan of operation. All board
9 members shall be experienced in self-insurance in this state.
10 With respect to initial appointments, the Secretary of Labor
11 and Employment Security shall, by July 15, 1982, approve and
12 appoint to the board persons who are experienced with
13 self-insurance in this state and who are recommended by the
14 individual self-insurers in this state required to become
15 members of the association pursuant to the provisions of
16 paragraph (1)(a). In the event the secretary finds that any
17 person so recommended does not have the necessary
18 qualifications for service on the board and a majority of the
19 board has been appointed, the secretary shall request the
20 directors thus far approved and appointed to recommend another
21 person for appointment to the board. Each director shall serve
22 for a 4-year term and may be reappointed. Appointments after
23 January 1, 2002, other than initial appointments shall be made
24 by the Department of Insurance Secretary of Labor and
25 Employment Security upon recommendation of members of the
26 association. Any vacancy on the board shall be filled for the
27 remaining period of the term in the same manner as
28 appointments other than initial appointments are made. Each
29 director shall be reimbursed for expenses incurred in carrying
30 out the duties of the board on behalf of the association.
31 (3) POWERS AND DUTIES.--
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1 (a) Upon creation of the Insolvency Fund pursuant to
2 the provisions of subsection (4), the association is obligated
3 for payment of compensation under this chapter to insolvent
4 members' employees resulting from incidents and injuries
5 existing prior to the member becoming an insolvent member and
6 from incidents and injuries occurring within 30 days after the
7 member has become an insolvent member, provided the incidents
8 giving rise to claims for compensation under this chapter
9 occur during the year in which such insolvent member is a
10 member of the guaranty fund and was assessable pursuant to the
11 plan of operation, and provided the employee makes timely
12 claim for such payments according to procedures set forth by a
13 court of competent jurisdiction over the delinquency or
14 bankruptcy proceedings of the insolvent member. Such
15 obligation includes only that amount due the injured worker or
16 workers of the insolvent member under this chapter. In no
17 event is the association obligated to a claimant in an amount
18 in excess of the obligation of the insolvent member. The
19 association shall be deemed the insolvent employer for
20 purposes of this chapter to the extent of its obligation on
21 the covered claims and, to such extent, shall have all rights,
22 duties, and obligations of the insolvent employer as if the
23 employer had not become insolvent. However, in no event shall
24 the association be liable for any penalties or interest.
25 (b) The association may:
26 1. Employ or retain such persons as are necessary to
27 handle claims and perform other duties of the association.
28 2. Borrow funds necessary to effect the purposes of
29 this section in accord with the plan of operation.
30 3. Sue or be sued.
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1 4. Negotiate and become a party to such contracts as
2 are necessary to carry out the purposes of this section.
3 5. Purchase such reinsurance as is determined
4 necessary pursuant to the plan of operation.
5 6. Review all applicants for membership in the
6 association to determine whether the applicant is qualified
7 for membership under the law. The association shall recommend
8 to the Department of Insurance that the application be
9 accepted or rejected based on the criteria set forth in s.
10 440.38(1)(b). The Department of Insurance shall approve or
11 disapprove the application as provided in paragraph (6)(a).
12 Prior to a final determination by the Division of Workers'
13 Compensation as to whether or not to approve any applicant for
14 membership in the association, the association may issue
15 opinions to the division concerning any applicant, which
16 opinions shall be considered by the division prior to any
17 final determination.
18 7. Collect and review financial information from
19 employers and make recommendations to the Department of
20 Insurance regarding the appropriate security deposit and
21 reinsurance amounts necessary for an employer to demonstrate
22 that it has the financial strength necessary to ensure the
23 timely payment of all current and future claims. The
24 association may audit and examine an employer to verify the
25 financial strength of its current and former members. If the
26 association determines that a current or former self-insured
27 employer does not have the financial strength necessary to
28 ensure the timely payment of all current and estimated future
29 claims, the association may recommend to the Department of
30 Insurance that the department:
31 a. Revoke the employer's self-insurance privilege.
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1 b. Require the employer to provide a certified opinion
2 of an independent actuary who is a member of the American
3 Academy of Actuaries as to the actuarial present value of the
4 employer's estimated current and future compensation payments,
5 using a 4-percent discount rate.
6 c. Require an increase in the employer's security
7 deposit in an amount determined by the association to be
8 necessary to ensure payment of compensation claims. The
9 Department of Insurance shall act on such recommendations as
10 provided in paragraph (6)(a). The association has a cause of
11 action against an employer, and against any successor of an
12 employer, who fails to provide an additional security deposit
13 required by the Department of Insurance. The association
14 shall file an action in circuit court to recover a judgment in
15 the amount of the requested additional security deposit
16 together with reasonable attorney's fees. For the purposes of
17 this section, the successor of an employer is any person,
18 business entity, or group of persons or business entities
19 which holds or acquires legal or beneficial title to the
20 majority of the assets or the majority of the shares of the
21 employer.
22 8.7. Charge fees to any member of the association to
23 cover the actual costs of examining the financial and safety
24 conditions of that member.
25 9.8. Charge an applicant for membership in the
26 association a fee sufficient to cover the actual costs of
27 examining the financial condition of the applicant.
28 10. Implement any procedures necessary to ensure
29 compliance with regulatory actions taken by the Department of
30 Insurance.
31
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1 (c)1. To the extent necessary to secure funds for the
2 payment of covered claims and also to pay the reasonable costs
3 to administer them, the association, subject to approval by
4 the Department of Insurance Labor and Employment Security,
5 upon certification of the board of directors, shall levy
6 assessments based on the annual written normal premium each
7 employer would have paid had the employer not been
8 self-insured. Every assessment shall be made as a uniform
9 percentage of the figure applicable to all individual
10 self-insurers, provided that the assessment levied against any
11 self-insurer in any one year shall not exceed 1 percent of the
12 annual written normal premium during the calendar year
13 preceding the date of the assessment. Assessments shall be
14 remitted to and administered by the board of directors in the
15 manner specified by the approved plan. Each employer so
16 assessed shall have at least 30 days' written notice as to the
17 date the assessment is due and payable. The association shall
18 levy assessments against any newly admitted member of the
19 association so that the basis of contribution of any newly
20 admitted member is the same as previously admitted members,
21 provision for which shall be contained in the plan of
22 operation.
23 2. If, in any one year, funds available from such
24 assessments, together with funds previously raised, are not
25 sufficient to make all the payments or reimbursements then
26 owing, the funds available shall be prorated, and the unpaid
27 portion shall be paid as soon thereafter as sufficient
28 additional funds become available.
29 3. Funds may be allocated or paid from the Workers'
30 Compensation Administration Trust Fund to contract with the
31 association to perform services required by law. However, no
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1 state funds of any kind shall be allocated or paid to the
2 association or any of its accounts for payment of covered
3 claims or related expenses except those state funds accruing
4 to the association by and through the assignment of rights of
5 an insolvent employer. The Department of Insurance may not
6 levy any assessment on the association.
7 (4) INSOLVENCY FUND.--Upon the adoption of a plan of
8 operation or the adoption of rules by the Department of Labor
9 and Employment Security pursuant to subsection (5), there
10 shall be created an Insolvency Fund to be managed by the
11 association.
12 (a) The Insolvency Fund is created for purposes of
13 meeting the obligations of insolvent members incurred while
14 members of the association and after the exhaustion of any
15 security deposit bond, as required under this chapter.
16 However, if such security deposit bond, surety, or reinsurance
17 policy is payable to the Florida Self-Insurers Guaranty
18 association, the association shall commence to provide
19 benefits out of the Insolvency Fund and be reimbursed from the
20 security deposit bond, surety, or reinsurance policy. The
21 method of operation of the Insolvency Fund shall be defined in
22 the plan of operation as provided in subsection (5).
23 (b) The Department of Insurance shall have the
24 authority to audit the financial soundness of the Insolvency
25 Fund annually.
26 (c) The Department of Insurance may offer certain
27 amendments to the plan of operation to the board of directors
28 of the association for purposes of assuring the ongoing
29 financial soundness of the Insolvency Fund and its ability to
30 meet the obligations of this section.
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1 (d) The department actuary may make certain
2 recommendations to improve the orderly payment of claims.
3 (5) PLAN OF OPERATION.--The association shall operate
4 pursuant to a plan of operation approved by the board of
5 directors. The plan of operation in effect on January 1,
6 2002, and approved by the Department of Labor and Employment
7 Security shall remain in effect. However, any amendments to
8 the plan shall not become effective until approved by the
9 Department of Insurance. By September 15, 1982, the board of
10 directors shall submit to the Department of Labor and
11 Employment Security a proposed plan of operation for the
12 administration of the association and the Insolvency Fund.
13 (a) The purpose of the plan of operation shall be to
14 provide the association and the board of directors with the
15 authority and responsibility to establish the necessary
16 programs and to take the necessary actions to protect against
17 the insolvency of a member of the association. In addition,
18 the plan shall provide that the members of the association
19 shall be responsible for maintaining an adequate Insolvency
20 Fund to meet the obligations of insolvent members provided for
21 under this act and shall authorize the board of directors to
22 contract and employ those persons with the necessary expertise
23 to carry out this stated purpose. By January 1, 2003, the
24 board of directors shall submit to the Department of Insurance
25 a proposed plan of operation for the administration of the
26 association. The Department of Insurance shall approve the
27 plan by order, consistent with this section. The Department of
28 Insurance shall approve any amendments to the plan, consistent
29 with this section, which are determined appropriate to carry
30 out the duties and responsibilities of the association.
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1 (b) The plan of operation, and any amendments thereto,
2 shall take effect upon approval in writing by the department.
3 If the board of directors fails to submit a plan by September
4 15, 1982, or fails to make required amendments to the plan
5 within 30 days thereafter, the department shall promulgate
6 such rules as are necessary to effectuate the provisions of
7 this subsection. Such rules shall continue in force until
8 modified by the department or superseded by a plan submitted
9 by the board of directors and approved by the department.
10 (b)(c) All member employers shall comply with the plan
11 of operation.
12 (c)(d) The plan of operation shall:
13 1. Establish the procedures whereby all the powers and
14 duties of the association under subsection (3) will be
15 performed.
16 2. Establish procedures for handling assets of the
17 association.
18 3. Establish the amount and method of reimbursing
19 members of the board of directors under subsection (2).
20 4. Establish procedures by which claims may be filed
21 with the association and establish acceptable forms of proof
22 of covered claims. Notice of claims to the receiver or
23 liquidator of the insolvent employer shall be deemed notice to
24 the association or its agent, and a list of such claims shall
25 be submitted periodically to the association or similar
26 organization in another state by the receiver or liquidator.
27 5. Establish regular places and times for meetings of
28 the board of directors.
29 6. Establish procedures for records to be kept of all
30 financial transactions of the association and its agents and
31 the board of directors.
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1 7. Provide that any member employer aggrieved by any
2 final action or decision of the association may appeal to the
3 Department of Insurance within 30 days after the action or
4 decision.
5 8. Establish the procedures whereby recommendations of
6 candidates for the board of directors shall be submitted to
7 the Department of Insurance.
8 9. Contain additional provisions necessary or proper
9 for the execution of the powers and duties of the association.
10 (d)(e) The plan of operation may provide that any or
11 all of the powers and duties of the association, except those
12 specified under subparagraphs (c)(d)1. and 2., be delegated to
13 a corporation, association, or other organization which
14 performs or will perform functions similar to those of this
15 association or its equivalent in two or more states. Such a
16 corporation, association, or organization shall be reimbursed
17 as a servicing facility would be reimbursed and shall be paid
18 for its performance of any other functions of the association.
19 A delegation of powers or duties under this subsection shall
20 take effect only with the approval of both the board of
21 directors and the Department of Insurance and may be made only
22 to a corporation, association, or organization which extends
23 protection which is not substantially less favorable and
24 effective than the protection provided by this section.
25 (6) POWERS AND DUTIES OF DEPARTMENT OF INSURANCE LABOR
26 AND EMPLOYMENT SECURITY.--
27 (a) The Department of Insurance shall:
28 (a) Review recommendations of the association
29 concerning whether current or former self-insured employers or
30 members of the association have the financial strength
31 necessary to ensure the timely payment of all current and
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1 estimated future claims. If the association determines an
2 employer does not have the financial strength necessary to
3 ensure the timely payment of all current and future claims and
4 recommends action pursuant to paragraph (3)(b), the department
5 shall take such action as necessary to order the employer to
6 comply with the recommendation, unless the department finds by
7 clear and convincing evidence that the recommendation is
8 erroneous.
9 (b) Contract with the association for services, which
10 may include, but are not limited to:
11 1. Processing applications for self-insurance.
12 2. Collecting and reviewing financial statements and
13 loss reserve information from individual self-insurers.
14 3. Collecting and maintaining files for original
15 security deposit documents and reinsurance policies from
16 individual self-insurers and, if necessary, perfecting
17 security interests in security deposits.
18 4. Processing compliance documentation for individual
19 self-insurers and providing copies of such documentation to
20 the department.
21 5. Collecting all data necessary to calculate annual
22 premium for all individual self-insurers, including individual
23 self-insurers that are public utilities or governmental
24 entities, and providing such calculated annual premium to the
25 division for assessment purposes.
26 6. Inspecting and auditing annually, if necessary, the
27 payroll and other records of each individual self-insurer,
28 including individual self-insurers that are public utilities
29 or governmental entities, in order to determine the wages paid
30 by each individual self-insurer, the premium such individual
31 self-insurer would have to pay if insured, and all payments of
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1 compensation made by such individual self-insurer during each
2 prior period with the results of such audit provided to the
3 division. For purposes of this section, the payroll records of
4 each individual self-insurer shall be open to inspection and
5 audit by the association and the department, or their
6 authorized representatives, during regular business hours.
7 7. Processing applications and making recommendations
8 with respect to the qualification of a business to be approved
9 to provide or continue to provide services to individual
10 self-insurers in the areas of underwriting, claims adjusting,
11 loss control, and safety engineering.
12 8. Providing legal representation to implement the
13 administration and audit of individual self-insurers and
14 making recommendations regarding prosecution of any
15 administrative or legal proceedings necessitated by the
16 regulation of the individual self-insurers by the department.
17 (c) Contract with an attorney or attorneys recommended
18 by the association for representation of the department in any
19 administrative or legal proceedings necessitated by the
20 recommended regulation of the individual self-insurers.
21 (d) Direct the association to require from each
22 individual self-insurer, at such time and in accordance with
23 such regulations as the department prescribes, reports
24 relating to wages paid, the amount of premiums such individual
25 self-insurer would have to pay if insured, and all payments of
26 compensation made by such individual self-insurer during each
27 prior period and to determine the amounts paid by each
28 individual self-insurer and the amounts paid by all individual
29 self-insurers during such period. For purposes of this
30 section, the payroll records of each individual self-insurer
31 shall be open to annual inspection and audit by the
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1 association and the department, or their authorized
2 representative, during regular business hours, and if any
3 audit of such records of an individual self-insurer discloses
4 a deficiency in the amount reported to the association or in
5 the amounts paid to the division by an individual self-insurer
6 for its assessment for the Workers' Compensation
7 Administration Trust Fund, the department or the association
8 may assess the cost of such audit against the individual
9 self-insurer.
10 1. Notify the association of the existence of an
11 insolvent employer not later than 3 days after it receives
12 notice of the determination of insolvency.
13 2. Upon request of the board of directors, provide the
14 association with a statement of the annual normal premiums of
15 each member employer.
16 (b) The department may:
17 (e)1. Require that the association notify the member
18 employers and any other interested parties of the
19 determination of insolvency and of their rights under this
20 section. Such notification shall be by mail at the last known
21 address thereof when available; but, if sufficient information
22 for notification by mail is not available, notice by
23 publication in a newspaper of general circulation shall be
24 sufficient.
25 (f)2. Suspend or revoke the authority of any member
26 employer failing to pay an assessment when due or failing to
27 comply with the plan of operation to self-insure in this
28 state. As an alternative, the department may levy a fine on
29 any member employer failing to pay an assessment when due.
30 Such fine shall not exceed 5 percent of the unpaid assessment
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1 per month, except that no fine shall be less than $100 per
2 month.
3 (g)3. Revoke the designation of any servicing facility
4 if the department finds that claims are being handled
5 unsatisfactorily.
6 (7) EFFECT OF PAID CLAIMS.--
7 (a) Any person who recovers from the association under
8 this section shall be deemed to have assigned his or her
9 rights to the association to the extent of such recovery.
10 Every claimant seeking the protection of this section shall
11 cooperate with the association to the same extent as such
12 person would have been required to cooperate with the
13 insolvent member. The association shall have no cause of
14 action against the employee of the insolvent member for any
15 sums the association has paid out, except such causes of
16 action as the insolvent member would have had if such sums had
17 been paid by the insolvent member. In the case of an
18 insolvent member operating on a plan with assessment
19 liability, payments of claims by the association shall not
20 operate to reduce the liability of the insolvent member to the
21 receiver, liquidator, or statutory successor for unpaid
22 assessments.
23 (b) The receiver, liquidator, or statutory successor
24 of an insolvent member shall be bound by settlements of
25 covered claims by the association or a similar organization in
26 another state. The court having jurisdiction shall grant such
27 claims priority against the assets of the insolvent member
28 equal to that to which the claimant would have been entitled
29 in the absence of this section. The expense of the association
30 or similar organization in handling claims shall be accorded
31 the same priority as the expenses of the liquidator.
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1 (c) The association shall file periodically with the
2 receiver or liquidator of the insolvent member statements of
3 the covered claims paid by the association and estimates of
4 anticipated claims on the association, which shall preserve
5 the rights of the association against the assets of the
6 insolvent member.
7 (8) NOTIFICATION PREVENTION OF INSOLVENCIES.--To aid
8 in the detection and prevention of employer insolvencies:
9 (a) Upon determination by majority vote that any
10 member employer may be insolvent or in a financial condition
11 hazardous to the employees thereof or to the public, it shall
12 be the duty of the board of directors to notify the Department
13 of Insurance Labor and Employment Security of any information
14 indicating such condition.
15 (b) The board of directors may, upon majority vote,
16 request that the department determine the condition of any
17 member employer which the board in good faith believes may no
18 longer be qualified to be a member of the association. Within
19 30 days of the receipt of such request or, for good cause
20 shown, within a reasonable time thereafter, the department
21 shall make such determination and shall forthwith advise the
22 board of its findings. Each request for a determination shall
23 be kept on file by the department, but the request shall not
24 be open to public inspection prior to the release of the
25 determination to the public.
26 (c) It shall also be the duty of the department to
27 report to the board of directors when it has reasonable cause
28 to believe that a member employer may be in such a financial
29 condition as to be no longer qualified to be a member of the
30 association.
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1 (d) The board of directors may, upon majority vote,
2 make reports and recommendations to the department upon any
3 matter which is germane to the solvency, liquidation,
4 rehabilitation, or conservation of any member employer. Such
5 reports and recommendations shall not be considered public
6 documents.
7 (e) The board of directors may, upon majority vote,
8 make recommendations to the department for the detection and
9 prevention of employer insolvencies.
10 (f) The board of directors shall, at the conclusion of
11 any member's insolvency in which the association was obligated
12 to pay covered claims, prepare a report on the history and
13 cause of such insolvency, based on the information available
14 to the association, and shall submit such report to the
15 department.
16 (9) EXAMINATION OF THE ASSOCIATION.--The association
17 shall be subject to examination and regulation by the
18 Department of Insurance Labor and Employment Security. No
19 later than March 30 of each year, the board of directors shall
20 submit an audited a financial statement report for the
21 preceding calendar year in a form approved by the department.
22 (10) IMMUNITY.--There shall be no liability on the
23 part of, and no cause of action of any nature shall arise
24 against, any member employer, the association or its agents or
25 employees, the board of directors, or the Department of
26 Insurance Labor and Employment Security or its representatives
27 for any action taken by them in the performance of their
28 powers and duties under this section.
29 (11) STAY OF PROCEEDINGS; REOPENING OF DEFAULT
30 JUDGMENTS.--All proceedings in which an insolvent employer is
31 a party, or is obligated to defend a party, in any court or
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1 before any quasi-judicial body or administrative board in this
2 state shall be stayed for up to 6 months, or for such
3 additional period from the date the employer becomes an
4 insolvent member, as is deemed necessary by a court of
5 competent jurisdiction to permit proper defense by the
6 association of all pending causes of action as to any covered
7 claims arising from a judgment under any decision, verdict, or
8 finding based on the default of the insolvent member. The
9 association, either on its own behalf or on behalf of the
10 insolvent member, may apply to have such judgment, order,
11 decision, verdict, or finding set aside by the same court or
12 administrator that made such judgment, order, decision,
13 verdict, or finding and shall be permitted to defend against
14 such claim on the merits. If requested by the association,
15 the stay of proceedings may be shortened or waived.
16 (12) LIMITATION ON CERTAIN ACTIONS.--Notwithstanding
17 any other provision of this chapter, a covered claim, as
18 defined herein, with respect to which settlement is not
19 effected and pursuant to which suit is not instituted against
20 the insured of an insolvent member or the association within 1
21 year after the deadline for filing claims with the receiver of
22 the insolvent member, or any extension of the deadline, shall
23 thenceforth be barred as a claim against the association.
24 (13) CORPORATE INCOME TAX CREDIT.--Any sums acquired
25 by a member by refund, dividend, or otherwise from the
26 association shall be payable within 30 days of receipt to the
27 Department of Revenue for deposit with the Treasurer to the
28 credit of the General Revenue Fund. All provisions of chapter
29 220 relating to penalties and interest on delinquent corporate
30 income tax payments apply to payments due under this
31 subsection.
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1 Section 4. Subsections (2), (3), and (4) of section
2 440.386, Florida Statutes, are amended to read:
3 440.386 Individual self-insurers' insolvency;
4 conservation; liquidation.--
5 (2) COMMENCEMENT OF DELINQUENCY PROCEEDING.--The
6 Department of Insurance or the Florida Self-Insurers Guaranty
7 Association, Incorporated, may commence a delinquency any such
8 proceeding by application to the court for an order directing
9 the individual self-insurer to show cause why the department
10 or association should not have the relief sought prayed for.
11 The Florida Self-Insurers Guaranty Association, Incorporated,
12 may petition the department to commence such proceedings, and
13 upon receipt of such petition, the department shall commence
14 such proceeding. On the return of such order to show cause,
15 and after a full hearing, the court shall either deny the
16 application or grant the application, together with such other
17 relief as the nature of the case and the interests of the
18 claimants, creditors, stockholders, members, subscribers, or
19 public may require. The department and the Florida
20 Self-Insurers Guaranty association, Incorporated, shall give
21 be given reasonable written notice to each other by the
22 department of all hearings which pertain to an adjudication of
23 insolvency of a member individual self-insurer.
24 (3) GROUNDS FOR LIQUIDATION.--The Department of
25 Insurance or the association may apply to the court for an
26 order appointing a receiver and directing the receiver to
27 liquidate the business of a domestic individual self-insurer
28 if such individual self-insurer is insolvent. Florida
29 Self-Insurers Guaranty Association, Incorporated, may petition
30 the department to apply to the court for such order. Upon
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1 receipt of such petition, the department shall apply to the
2 court for such order.
3 (4) GROUNDS FOR CONSERVATION; FOREIGN INDIVIDUAL
4 SELF-INSURERS.--
5 (a) The Department of Insurance or the association may
6 apply to the court for an order appointing a receiver or
7 ancillary receiver, and directing the receiver to conserve the
8 assets within this state, of a foreign individual self-insurer
9 if such individual self-insurer is insolvent. Florida
10 Self-Insurers Guaranty Association, Incorporated, may petition
11 the department to apply for such order, and, upon receipt of
12 such petition, the department shall apply to the court for
13 such order.
14 (b) An order to conserve the assets of an individual
15 self-insurer shall require the receiver forthwith to take
16 possession of the property of the receiver within the state
17 and to conserve it, subject to the further direction of the
18 court.
19 Section 5. Subsection (6) of section 440.51, Florida
20 Statutes, is amended to read:
21 440.51 Expenses of administration.--
22 (6)(a) The division may require from each carrier, at
23 such time and in accordance with such regulations as the
24 division may prescribe, reports in respect to all gross earned
25 premiums and of all payments of compensation made by such
26 carrier during each prior period, and may determine the
27 amounts paid by each carrier and the amounts paid by all
28 carriers during such period.
29 (b) The Department of Insurance may require from each
30 self-insurer, at such time and in accordance with such
31 regulations as the Department of Insurance prescribes, reports
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1 in respect to wages paid, the amount of premiums such
2 self-insurer would have to pay if insured, and all payments of
3 compensation made by such self-insurer during each prior
4 period, and may determine the amounts paid by each
5 self-insurer and the amounts paid by all self-insurers during
6 such period. For the purposes of this section, the payroll
7 records of each self-insurer shall be open to annual
8 inspection and audit by the Department of Insurance or its
9 authorized representative, during regular business hours; and
10 if any audit of such records of a self-insurer discloses a
11 deficiency in the amounts reported to the Department of
12 Insurance or in the amounts paid to the Department of
13 Insurance by a self-insurer pursuant to this section, the
14 Department of Insurance may assess the cost of such audit
15 against the self-insurer.
16 Section 6. All powers, duties, functions, rules,
17 records, and property of the Division of Workers' Compensation
18 of the Department of Labor and Employment Security related to
19 the regulation of individual, self-insured employers under
20 chapter 440, Florida Statutes, are transferred to the
21 Department of Insurance.
22 Section 7. The sum of $183,750 is appropriated from
23 the Workers' Compensation Administration Trust Fund of the
24 Department of Labor and Employment Security to the Department
25 of Insurance for the purpose of contracting with the Florida
26 Self-Insurers Guaranty Association, Incorporated, to carry out
27 the provisions of this act during the 2002-2003 fiscal year.
28 Section 8. Six full-time equivalent positions within
29 the Division of Workers' Compensation of the Department of
30 Labor and Employment Security responsible for the regulation
31 and oversight of self-insured employers are eliminated.
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1 Section 9. This act shall take effect October 1, 2002.
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