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  1

  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.

31


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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.

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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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    ENROLLED

    2002 Legislature                 CS/CS/HB 319, First Engrossed



  1         Section 9.  This act shall take effect October 1, 2002.

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