Senate Bill sb2118c1

CODING: Words stricken are deletions; words underlined are additions.
    Florida Senate - 2006                           CS for SB 2118

    By the Committee on Banking and Insurance





    597-2216-06

  1                      A bill to be entitled

  2         An act relating to the Florida Workers'

  3         Compensation Joint Underwriting Association,

  4         Inc.; amending s. 627.311, F.S.; providing

  5         requirements for the joint underwriting plan of

  6         insurers which operates as the association;

  7         revising the membership of the board of

  8         governors that oversees operation of the joint

  9         underwriting plan; providing for continuous

10         review of the plan; requiring that the

11         market-assistance plan be periodically reviewed

12         and updated; providing guidelines for

13         procurement of goods and services, including

14         legal services; prohibiting hiring an outside

15         lobbyist; authorizing the use of surplus funds

16         of former plan C; extending the deadline to

17         access contingency reserves; authorizing the

18         board of the association to request a transfer

19         of funds from the Workers' Compensation

20         Administration Trust Fund under certain

21         circumstances; providing that the plan is

22         subject to the same requirements for filing and

23         approval of rating plans as workers'

24         compensation insurers; deleting certain

25         provisions limiting the disapproval of rates by

26         the Office of Insurance Regulation; requiring

27         that excess funds received by the plan be

28         returned to the state; providing applicability

29         of specified statutes regulating ethical

30         standards; requiring annual statements by plan

31         employees that they do not have conflicts of

                                  1

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1         interest; prescribing limits on representing

 2         persons or entities before the plan by former

 3         senior managers or officers of the plan;

 4         prohibiting any part of the plan's income from

 5         inuring to the benefit of a private individual;

 6         prohibiting employees and board members from

 7         accepting expenditures from a person or an

 8         entity; providing applicability; requiring

 9         periodic comprehensive market examinations;

10         prescribing disposition of assets of the plan

11         upon dissolution; amending s. 2 of ch.

12         2004-266, Laws of Florida; extending the period

13         for maintaining the contingency reserve and the

14         period for projecting current cash needs;

15         requiring the plan to submit a request for an

16         Internal Revenue Service letter concerning the

17         plan's eligibility as a tax-exempt

18         organization; providing an effective date.

19  

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

21  

22         Section 1.  Subsections (5), (6), and (7) of section

23  627.311, Florida Statutes, are amended to read:

24         627.311  Joint underwriters and joint reinsurers;

25  public records and public meetings exemptions.--

26         (5)(a)  The office shall, after consultation with

27  insurers, approve a joint underwriting plan of insurers which

28  shall operate as the Florida Workers' Compensation Joint

29  Underwriting Association, Inc., a nonprofit entity. For the

30  purposes of this subsection, the term "insurer" includes group

31  self-insurance funds authorized by s. 624.4621, commercial

                                  2

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  self-insurance funds authorized by s. 624.462, assessable

 2  mutual insurers authorized under s. 628.6011, and insurers

 3  licensed to write workers' compensation and employer's

 4  liability insurance in this state. The purpose of the plan is

 5  to provide workers' compensation and employer's liability

 6  insurance to applicants who are required by law to maintain

 7  workers' compensation and employer's liability insurance and

 8  who are in good faith entitled to but who are unable to

 9  procure such insurance through the voluntary market. Except as

10  provided herein, the plan must have actuarially sound rates

11  that ensure that the plan is self-supporting.

12         (b)  The operation of the plan is subject to the

13  supervision of a 9-member board of governors. Each member

14  described in subparagraph 1., subparagraph 2., subparagraph

15  3., or subparagraph 5. shall be appointed by the Financial

16  Services Commission and shall serve at the pleasure of the

17  commission. The board of governors shall be comprised of:

18         1.  Three members appointed by the Financial Services

19  Commission. Each member appointed by the commission shall

20  serve at the pleasure of the commission;

21         1.2.  Two representatives of the 20 domestic insurers,

22  as defined in s. 624.06(1), having the largest voluntary

23  direct premiums written in this state for workers'

24  compensation and employer's liability insurance, which shall

25  be elected by those 20 domestic insurers;

26         2.3.  Two representatives of the 20 foreign insurers as

27  defined in s. 624.06(2) having the largest voluntary direct

28  premiums written in this state for workers' compensation and

29  employer's liability insurance, which shall be elected by

30  those 20 foreign insurers;

31  

                                  3

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1         3.4.  One representative of person appointed by the

 2  largest property and casualty insurance agents' association in

 3  this state; and

 4         4.5.  The consumer advocate appointed under s. 627.0613

 5  or the consumer advocate's designee; and.

 6         5.  Three other persons appointed by the commission.

 7  

 8  Each board member shall be appointed to serve a 4-year term

 9  and may be appointed to serve consecutive terms. A vacancy on

10  the board shall be filled in the same manner as the original

11  appointment for the unexpired portion of the term. The

12  Financial Services Commission shall designate a member of the

13  board to serve as chair. No board member shall be an insurer

14  which provides services to the plan or which has an affiliate

15  which provides services to the plan or which is serviced by a

16  service company or third-party administrator which provides

17  services to the plan or which has an affiliate which provides

18  services to the plan. The meetings and records minutes,

19  audits, and procedures of the board of governors and plan are

20  subject to chapters chapter 119 and 286, unless otherwise

21  exempted by law.

22         (c)  The operation of the plan shall be governed by a

23  plan of operation that is prepared at the direction of the

24  board of governors and approved by order of the office. The

25  plan is subject to continuous review by the office. The office

26  may, by order, withdraw approval of all or part of a plan if

27  the office determines that conditions have changed since

28  approval was granted and that the purposes of the plan require

29  changes in the plan. The plan of operation may be changed at

30  any time by the board of governors or upon request of the

31  office. The plan of operation and all changes thereto are

                                  4

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  subject to the approval of the office. The plan of operation

 2  shall:

 3         1.  Authorize the board to engage in the activities

 4  necessary to implement this subsection, including, but not

 5  limited to, borrowing money.

 6         2.  Develop criteria for eligibility for coverage by

 7  the plan, including, but not limited to, documented rejection

 8  by at least two insurers which reasonably assures that

 9  insureds covered under the plan are unable to acquire coverage

10  in the voluntary market.

11         3.  Require notice from the agent to the insured at the

12  time of the application for coverage that the application is

13  for coverage with the plan and that coverage may be available

14  through an insurer, group self-insurers' fund, commercial

15  self-insurance fund, or assessable mutual insurer through

16  another agent at a lower cost.

17         4.  Establish programs to encourage insurers to provide

18  coverage to applicants of the plan in the voluntary market and

19  to insureds of the plan, including, but not limited to:

20         a.  Establishing procedures for an insurer to use in

21  notifying the plan of the insurer's desire to provide coverage

22  to applicants to the plan or existing insureds of the plan and

23  in describing the types of risks in which the insurer is

24  interested. The description of the desired risks must be on a

25  form developed by the plan.

26         b.  Developing forms and procedures that provide an

27  insurer with the information necessary to determine whether

28  the insurer wants to write particular applicants to the plan

29  or insureds of the plan.

30         c.  Developing procedures for notice to the plan and

31  the applicant to the plan or insured of the plan that an

                                  5

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  insurer will insure the applicant or the insured of the plan,

 2  and notice of the cost of the coverage offered; and developing

 3  procedures for the selection of an insuring entity by the

 4  applicant or insured of the plan.

 5         d.  Provide for a market-assistance plan to assist in

 6  the placement of employers. All applications for coverage in

 7  the plan received 45 days before the effective date for

 8  coverage shall be processed through the market-assistance

 9  plan. A market-assistance plan specifically designed to serve

10  the needs of small, good policyholders as defined by the board

11  must be reviewed and updated periodically finalized by January

12  1, 1994.

13         5.  Provide for policy and claims services to the

14  insureds of the plan of the nature and quality provided for

15  insureds in the voluntary market.

16         6.  Provide for the review of applications for coverage

17  with the plan for reasonableness and accuracy, using any

18  available historic information regarding the insured.

19         7.  Provide for procedures for auditing insureds of the

20  plan which are based on reasonable business judgment and are

21  designed to maximize the likelihood that the plan will collect

22  the appropriate premiums.

23         8.  Authorize the plan to terminate the coverage of and

24  refuse future coverage for any insured that submits a

25  fraudulent application to the plan or provides fraudulent or

26  grossly erroneous records to the plan or to any service

27  provider of the plan in conjunction with the activities of the

28  plan.

29         9.  Establish service standards for agents who submit

30  business to the plan.

31  

                                  6

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1         10.  Establish criteria and procedures to prohibit any

 2  agent who does not adhere to the established service standards

 3  from placing business with the plan or receiving, directly or

 4  indirectly, any commissions for business placed with the plan.

 5         11.  Provide for the establishment of reasonable safety

 6  programs for all insureds in the plan. All insureds of the

 7  plan must participate in the safety program.

 8         12.  Authorize the plan to terminate the coverage of

 9  and refuse future coverage to any insured who fails to pay

10  premiums or surcharges when due; who, at the time of

11  application, is delinquent in payments of workers'

12  compensation or employer's liability insurance premiums or

13  surcharges owed to an insurer, group self-insurers' fund,

14  commercial self-insurance fund, or assessable mutual insurer

15  licensed to write such coverage in this state; or who refuses

16  to substantially comply with any safety programs recommended

17  by the plan.

18         13.  Authorize the board of governors to provide the

19  goods and services required by the plan through staff employed

20  by the plan, through reasonably compensated service providers

21  who contract with the plan to provide services as specified by

22  the board of governors, or through a combination of employees

23  and service providers.

24         a.  Purchases that equal or exceed $2,500 but are less

25  than or equal to $25,000, shall be made by receipt of written

26  quotes, telephone quotes, or informal bids, whenever

27  practical. The procurement of goods or services valued over

28  $25,000 are subject to competitive solicitation, except in

29  situations in which the goods or services are provided by a

30  sole source or are deemed an emergency purchase, or the

31  services are exempted from competitive solicitation

                                  7

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  requirements under s. 287.057(5)(f). Justification for the

 2  sole-sourcing or emergency procurement must be documented.

 3  Contracts for goods or services valued at or over $100,000 are

 4  subject to board approval.

 5         b.  The board shall determine whether it is more

 6  cost-effective and in the best interests of the plan to use

 7  legal services provided by in-house attorneys employed by the

 8  plan rather than contracting with outside counsel. In making

 9  such determination, the board shall document its findings and

10  shall consider the expertise needed; whether time commitments

11  exceed in-house staff resources; whether local representation

12  is needed; the travel, lodging, and other costs associated

13  with in-house representation; and such other factors that the

14  board determines are relevant.

15         c.  The plan may not retain a lobbyist to represent it

16  before the legislative or executive branch. However, full-time

17  employees of the plan may register as lobbyists and represent

18  that employer before the legislative or executive branch.

19         14.  Provide for service standards for service

20  providers, methods of determining adherence to those service

21  standards, incentives and disincentives for service, and

22  procedures for terminating contracts for service providers

23  that fail to adhere to service standards.

24         15.  Provide procedures for selecting service providers

25  and standards for qualification as a service provider that

26  reasonably assure that any service provider selected will

27  continue to operate as an ongoing concern and is capable of

28  providing the specified services in the manner required.

29         16.  Provide for reasonable accounting and

30  data-reporting practices.

31  

                                  8

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1         17.  Provide for annual review of costs associated with

 2  the administration and servicing of the policies issued by the

 3  plan to determine alternatives by which costs can be reduced.

 4         18.  Authorize the acquisition of such excess insurance

 5  or reinsurance as is consistent with the purposes of the plan.

 6         19.  Provide for an annual report to the office on a

 7  date specified by the office and containing such information

 8  as the office reasonably requires.

 9         20.  Establish multiple rating plans for various

10  classifications of risk which reflect risk of loss, hazard

11  grade, actual losses, size of premium, and compliance with

12  loss control. At least one of such plans must be a

13  preferred-rating plan to accommodate small-premium

14  policyholders with good experience as defined in

15  sub-subparagraph 22.a.

16         21.  Establish agent commission schedules.

17         22.  For employers otherwise eligible for coverage

18  under the plan, establish three tiers of employers meeting the

19  criteria and subject to the rate limitations specified in this

20  subparagraph.

21         a.  Tier One.--

22         (I)  Criteria; rated employers.--An employer that has

23  an experience modification rating shall be included in Tier

24  One if the employer meets all of the following:

25         (A)  The experience modification is below 1.00.

26         (B)  The employer had no lost-time claims subsequent to

27  the applicable experience modification rating period.

28         (C)  The total of the employer's medical-only claims

29  subsequent to the applicable experience modification rating

30  period did not exceed 20 percent of premium.

31  

                                  9

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1         (II)  Criteria; non-rated employers.--An employer that

 2  does not have an experience modification rating shall be

 3  included in Tier One if the employer meets all of the

 4  following:

 5         (A)  The employer had no lost-time claims for the

 6  3-year period immediately preceding the inception date or

 7  renewal date of the employer's coverage under the plan.

 8         (B)  The total of the employer's medical-only claims

 9  for the 3-year period immediately preceding the inception date

10  or renewal date of the employer's coverage under the plan did

11  not exceed 20 percent of premium.

12         (C)  The employer has secured workers' compensation

13  coverage for the entire 3-year period immediately preceding

14  the inception date or renewal date of the employer's coverage

15  under the plan.

16         (D)  The employer is able to provide the plan with a

17  loss history generated by the employer's prior workers'

18  compensation insurer, except if the employer is not able to

19  produce a loss history due to the insolvency of an insurer,

20  the receiver shall provide to the plan, upon the request of

21  the employer or the employer's agent, a copy of the employer's

22  loss history from the records of the insolvent insurer if the

23  loss history is contained in records of the insurer which are

24  in the possession of the receiver. If the receiver is unable

25  to produce the loss history, the employer may, in lieu of the

26  loss history, submit an affidavit from the employer and the

27  employer's insurance agent setting forth the loss history.

28         (E)  The employer is not a new business.

29         (III)  Premiums.--The premiums for Tier One insureds

30  shall be set at a premium level 25 percent above the

31  comparable voluntary market premiums until the plan has

                                  10

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  sufficient experience as determined by the board to establish

 2  an actuarially sound rate for Tier One, at which point the

 3  board shall, subject to paragraph (e), adjust the rates, if

 4  necessary, to produce actuarially sound rates, provided such

 5  rate adjustment shall not take effect prior to January 1,

 6  2007.

 7         b.  Tier Two.--

 8         (I)  Criteria; rated employers.--An employer that has

 9  an experience modification rating shall be included in Tier

10  Two if the employer meets all of the following:

11         (A)  The experience modification is equal to or greater

12  than 1.00 but not greater than 1.10.

13         (B)  The employer had no lost-time claims subsequent to

14  the applicable experience modification rating period.

15         (C)  The total of the employer's medical-only claims

16  subsequent to the applicable experience modification rating

17  period did not exceed 20 percent of premium.

18         (II)  Criteria; non-rated employers.--An employer that

19  does not have any experience modification rating shall be

20  included in Tier Two if the employer is a new business. An

21  employer shall be included in Tier Two if the employer has

22  less than 3 years of loss experience in the 3-year period

23  immediately preceding the inception date or renewal date of

24  the employer's coverage under the plan and the employer meets

25  all of the following:

26         (A)  The employer had no lost-time claims for the

27  3-year period immediately preceding the inception date or

28  renewal date of the employer's coverage under the plan.

29         (B)  The total of the employer's medical-only claims

30  for the 3-year period immediately preceding the inception date

31  

                                  11

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  or renewal date of the employer's coverage under the plan did

 2  not exceed 20 percent of premium.

 3         (C)  The employer is able to provide the plan with a

 4  loss history generated by the workers' compensation insurer

 5  that provided coverage for the portion or portions of such

 6  period during which the employer had secured workers'

 7  compensation coverage, except if the employer is not able to

 8  produce a loss history due to the insolvency of an insurer,

 9  the receiver shall provide to the plan, upon the request of

10  the employer or the employer's agent, a copy of the employer's

11  loss history from the records of the insolvent insurer if the

12  loss history is contained in records of the insurer which are

13  in the possession of the receiver. If the receiver is unable

14  to produce the loss history, the employer may, in lieu of the

15  loss history, submit an affidavit from the employer and the

16  employer's insurance agent setting forth the loss history.

17         (III)  Premiums.--The premiums for Tier Two insureds

18  shall be set at a rate level 50 percent above the comparable

19  voluntary market premiums until the plan has sufficient

20  experience as determined by the board to establish an

21  actuarially sound rate for Tier Two, at which point the board

22  shall, subject to paragraph (e), adjust the rates, if

23  necessary, to produce actuarially sound rates, provided such

24  rate adjustment shall not take effect prior to January 1,

25  2007.

26         c.  Tier Three.--

27         (I)  Eligibility.--An employer shall be included in

28  Tier Three if the employer does not meet the criteria for Tier

29  One or Tier Two.

30  

31  

                                  12

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1         (II)  Rates.--The board shall establish, subject to

 2  paragraph (e), and the plan shall charge, actuarially sound

 3  rates for Tier Three insureds.

 4         23.  For Tier One or Tier Two employers which employ no

 5  nonexempt employees or which report payroll which is less than

 6  the minimum wage hourly rate for one full-time employee for 1

 7  year at 40 hours per week, the plan shall establish

 8  actuarially sound premiums, provided, however, that the

 9  premiums may not exceed $2,500. These premiums shall be in

10  addition to the fee specified in subparagraph 26. When the

11  plan establishes actuarially sound rates for all employers in

12  Tier One and Tier Two, the premiums for employers referred to

13  in this paragraph are no longer subject to the $2,500 cap.

14         24.  Provide for a depopulation program to reduce the

15  number of insureds in the plan. If an employer insured through

16  the plan is offered coverage from a voluntary market carrier:

17         a.  During the first 30 days of coverage under the

18  plan;

19         b.  Before a policy is issued under the plan;

20         c.  By issuance of a policy upon expiration or

21  cancellation of the policy under the plan; or

22         d.  By assumption of the plan's obligation with respect

23  to an in-force policy,

24  

25  that employer is no longer eligible for coverage through the

26  plan. The premium for risks assumed by the voluntary market

27  carrier must be no greater than the premium the insured would

28  have paid under the plan, and shall be adjusted upon renewal

29  to reflect changes in the plan rates and the tier for which

30  the insured would qualify as of the time of renewal. The

31  insured may be charged such premiums only for the first 3

                                  13

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  years of coverage in the voluntary market. A premium under

 2  this subparagraph is deemed approved and is not an excess

 3  premium for purposes of s. 627.171.

 4         25.  Require that policies issued and applications must

 5  include a notice that the policy could be replaced by a policy

 6  issued from a voluntary market carrier and that, if an offer

 7  of coverage is obtained from a voluntary market carrier, the

 8  policyholder is no longer eligible for coverage through the

 9  plan. The notice must also specify that acceptance of coverage

10  under the plan creates a conclusive presumption that the

11  applicant or policyholder is aware of this potential.

12         26.  Require that each application for coverage and

13  each renewal premium be accompanied by a nonrefundable fee of

14  $475 to cover costs of administration and fraud prevention.

15  The board may, with the prior approval of the office, increase

16  the amount of the fee pursuant to a rate filing to reflect

17  increased costs of administration and fraud prevention. The

18  fee is not subject to commission and is fully earned upon

19  commencement of coverage.

20         (d)1.  The funding of the plan shall include premiums

21  as provided in subparagraph (c)22. and assessments as provided

22  in this paragraph.

23         2.a.  If the board determines that a deficit exists in

24  Tier One or Tier Two or that there is any deficit remaining

25  attributable to any of the plan's former subplans and that the

26  deficit cannot be fully funded by using policyholder surplus

27  attributable to former subplan C or, if the surplus in the

28  former subplan C does not fully fund the deficit and the

29  deficit cannot be fully funded by using any remaining funds in

30  the contingency reserve without the use of deficit

31  assessments, the board shall request the office to levy, by

                                  14

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  order, a deficit assessment against premiums charged to

 2  insureds for workers' compensation insurance by insurers as

 3  defined in s. 631.904(5). The office shall issue the order

 4  after verifying the amount of the deficit. The assessment

 5  shall be specified as a percentage of future premium

 6  collections, as recommended by the board and approved by the

 7  office. The same percentage shall apply to premiums on all

 8  workers' compensation policies issued or renewed during the

 9  12-month period beginning on the effective date of the

10  assessment, as specified in the order.

11         b.  With respect to each insurer collecting premiums

12  that are subject to the assessment, the insurer shall collect

13  the assessment at the same time as the insurer collects the

14  premium payment for each policy and shall remit the

15  assessments collected to the plan as provided in the order

16  issued by the office. The office shall verify the accurate and

17  timely collection and remittance of deficit assessments and

18  shall report such information to the board. Each insurer

19  collecting assessments shall provide such information with

20  respect to premiums and collections as may be required by the

21  office to enable the office to monitor and audit compliance

22  with this paragraph.

23         c.  Deficit assessments are not considered part of an

24  insurer's rate, are not premium, and are not subject to the

25  premium tax, to the assessments under ss. 440.49 and 440.51,

26  to the surplus lines tax, to any fees, or to any commissions.

27  The deficit assessment imposed shall become plan funds at the

28  moment of collection and shall not constitute income to the

29  insurer for any purpose, including financial reporting on the

30  insurer's income statement. An insurer is liable for all

31  assessments that the insurer collects and must treat the

                                  15

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  failure of an insured to pay an assessment as a failure to pay

 2  premium. An insurer is not liable for uncollectible

 3  assessments.

 4         d.  When an insurer is required to return unearned

 5  premium, the insurer shall also return any collected

 6  assessments attributable to the unearned premium.

 7         e.  Deficit assessments as described in this

 8  subparagraph shall not be levied after July 1, 2011 2007.

 9         3.a.  All policies issued to Tier Three insureds shall

10  be assessable. All Tier Three assessable policies must be

11  clearly identified as assessable by containing, in contrasting

12  color and in not less than 10-point type, the following

13  statement:

14  

15         "This is an assessable policy. If the plan is

16         unable to pay its obligations, policyholders

17         will be required to contribute on a pro rata

18         earned premium basis the money necessary to

19         meet any assessment levied."

20  

21         b.  The board may from time to time assess Tier Three

22  insureds to whom the plan has issued assessable policies for

23  the purpose of funding plan deficits. Any such assessment

24  shall be based upon a reasonable actuarial estimate of the

25  amount of the deficit, taking into account the amount needed

26  to fund medical and indemnity reserves and reserves for

27  incurred but not reported claims, and allowing for general

28  administrative expenses, the cost of levying and collecting

29  the assessment, a reasonable allowance for estimated

30  uncollectible assessments, and allocated and unallocated loss

31  adjustment expenses.

                                  16

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1         c.  Each Tier Three insured's share of a deficit shall

 2  be computed by applying to the premium earned on the insured's

 3  policy or policies during the period to be covered by the

 4  assessment the ratio of the total deficit to the total

 5  premiums earned during such period upon all policies subject

 6  to the assessment. If one or more Tier Three insureds fail to

 7  pay an assessment, the other Tier Three insureds shall be

 8  liable on a proportionate basis for additional assessments to

 9  fund the deficit. The plan may compromise and settle

10  individual assessment claims without affecting the validity of

11  or amounts due on assessments levied against other insureds.

12  The plan may offer and accept discounted payments for

13  assessments which are promptly paid. The plan may offset the

14  amount of any unpaid assessment against unearned premiums

15  which may otherwise be due to an insured. The plan shall

16  institute legal action when necessary and appropriate to

17  collect the assessment from any insured who fails to pay an

18  assessment when due.

19         d.  The venue of a proceeding to enforce or collect an

20  assessment or to contest the validity or amount of an

21  assessment shall be in the Circuit Court of Leon County.

22         e.  If the board finds that a deficit in Tier Three

23  exists for any period and that an assessment is necessary, the

24  board shall certify to the office the need for an assessment.

25  No sooner than 30 days after the date of such certification,

26  the board shall notify in writing each insured who is to be

27  assessed that an assessment is being levied against the

28  insured, and informing the insured of the amount of the

29  assessment, the period for which the assessment is being

30  levied, and the date by which payment of the assessment is

31  due. The board shall establish a date by which payment of the

                                  17

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  assessment is due, which shall be no sooner than 30 days nor

 2  later than 120 days after the date on which notice of the

 3  assessment is mailed to the insured.

 4         f.  Whenever the board makes a determination that the

 5  plan does not have a sufficient cash basis to meet 6 3 months

 6  of projected cash needs due to a deficit in Tier Three, the

 7  board may request the department to transfer funds from the

 8  Workers' Compensation Administration Trust Fund to the plan in

 9  an amount sufficient to fund the difference between the amount

10  available and the amount needed to meet a 6-month 3-month

11  projected cash need as determined by the board and verified by

12  the office, subject to the approval of the Legislative Budget

13  Commission. If the Legislative Budget Commission approves a

14  transfer of funds under this sub-subparagraph, the plan shall

15  report to the Legislature the transfer of funds and the

16  Legislature shall review the plan during the next legislative

17  session or the current legislative session, if the transfer

18  occurs during a legislative session. This sub-subparagraph

19  shall not apply until the plan determines and the office

20  verifies that assessments collected by the plan pursuant to

21  sub-subparagraph b. are insufficient to fund the deficit in

22  Tier Three and to meet 6 3 months of projected cash needs.

23         4.  The plan may offer rating, dividend plans, and

24  other plans to encourage loss prevention programs.

25         (e)  For rates and rating plans effective on or after

26  January 1, 2007, the plan shall be subject to the same

27  requirements of this part for the filing and approval of its

28  rates and rating plans as apply to workers' compensation

29  insurers, except as otherwise provided. establish and use its

30  rates and rating plans, and the plan may establish and use

31  changes in rating plans at any time, but no more frequently

                                  18

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  than two times per any rating class for any calendar year. By

 2  December 1, 1993, and December 1 of each year thereafter,

 3  except as provided in subparagraph (c)22., the board shall

 4  establish and use actuarially sound rates for use by the plan

 5  to assure that the plan is self-funding while those rates are

 6  in effect. Such rates and rating plans must be filed with the

 7  office within 30 calendar days after their effective dates,

 8  and shall be considered a "use and file" filing. Any

 9  disapproval by the office must have an effective date that is

10  at least 60 days from the date of disapproval of the rates and

11  rating plan and must have prospective effect only. The plan

12  may not be subject to any order by the office to return to

13  policyholders any portion of the rates disapproved by the

14  office. The office may not disapprove any rates or rating

15  plans unless it demonstrates that such rates and rating plans

16  are excessive, inadequate, or unfairly discriminatory.

17         (f)  No later than June 1 of each year, the plan shall

18  obtain an independent actuarial certification of the results

19  of the operations of the plan for prior years, and shall

20  furnish a copy of the certification to the office. If, after

21  the effective date of the plan, the projected ultimate

22  incurred losses and expenses and dividends for prior years

23  exceed collected premiums, accrued net investment income, and

24  prior assessments for prior years, the certification is

25  subject to review and approval by the office before it becomes

26  final.

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

28  90 days, provide the office with a program to eliminate the

29  deficit within a reasonable time. The deficit may be funded

30  through increased premiums charged to insureds of the plan for

31  subsequent years, through the use of policyholder surplus

                                  19

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  attributable to any year, including policyholder surplus in

 2  former subplan C as authorized in subparagraph (d)2., through

 3  the use of assessments as provided in subparagraph (d)2., and

 4  through assessments on assessable policies as provided in

 5  subparagraph (d)3. Any entity that was a policyholder of

 6  former subplan C shall not be subject to any assessments that

 7  are attributable to deficits in former subplan C.

 8         (h)  Any premium or assessments collected by the plan

 9  in excess of the amount necessary to fund projected ultimate

10  incurred losses and expenses of the plan and not paid to

11  insureds of the plan in conjunction with loss prevention or

12  dividend programs shall be retained by the plan for future

13  use. Any state funds received by the plan in excess of the

14  amount necessary to fund deficits in subplan D or any tier

15  shall be returned to the state.

16         (i)  The decisions of the board of governors do not

17  constitute final agency action and are not subject to chapter

18  120.

19         (j)  Policies for insureds shall be issued by the plan.

20         (k)  The plan created under this subsection is liable

21  only for payment for losses arising under policies issued by

22  the plan with dates of accidents occurring on or after January

23  1, 1994.

24         (l)  Plan losses are the sole and exclusive

25  responsibility of the plan, and payment for such losses must

26  be funded in accordance with this subsection and must not

27  come, directly or indirectly, from insurers or any guaranty

28  association for such insurers.

29         (m)  Senior managers and officers, as defined in the

30  plan of operation, and members of the board of governors shall

31  be subject to part III of chapter 112, including, but not

                                  20

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  limited to, the code of ethics and public disclosure and

 2  reporting of financial interests, pursuant to s. 112.3145.

 3  Senior managers, officers, and board members are also required

 4  to file such disclosures with the Office of Insurance

 5  Regulation. The executive director of the plan or his or her

 6  designee shall notify each newly appointed and existing

 7  appointed member of the board of governors, senior manager and

 8  officer of their duty to comply with the reporting

 9  requirements of part III of chapter 112. At least quarterly,

10  the executive director of the plan or his or her designee

11  shall submit to the Commission on Ethics a list of names of

12  the senior managers, officers, members of the board of

13  governors that are subject to the public disclosure

14  requirements under s. 112.3145. Each joint underwriting plan

15  or association created under this section is not a state

16  agency, board, or commission. However, for the purposes of s.

17  199.183(1) only, the joint underwriting plan is a political

18  subdivision of the state and is exempt from the corporate

19  income tax.

20         (n)  On or before July 1 of each year, employees of the

21  plan are required to sign and submit a statement to the plan

22  attesting that they do not have a conflict of interest, as

23  defined in part III of chapter 112. As a condition of

24  employment, all prospective employees are required to sign and

25  submit a conflict-of-interest statement to the plan. Each

26  joint underwriting plan or association may elect to pay

27  premium taxes on the premiums received on its behalf or may

28  elect to have the member insurers to whom the premiums are

29  allocated pay the premium taxes if the member insurer had

30  written the policy. The joint underwriting plan or association

31  shall notify the member insurers and the Department of Revenue

                                  21

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  by January 15 of each year of its election for the same year.

 2  As used in this paragraph, the term "premiums received" means

 3  the consideration for insurance, by whatever name called, but

 4  does not include any policy assessment or surcharge received

 5  by the joint underwriting association as a result of

 6  apportioning losses or deficits of the association pursuant to

 7  this section.

 8         (o)  Any senior manager or officer of the plan who is

 9  employed by the plan as of January 1, 2007, regardless of the

10  date of hire, and who subsequently retires or terminates

11  employment is prohibited from representing another person or

12  entity before the plan for 2 years after retirement or

13  termination of employment from the plan.

14         (p)  No part of the income of the plan may inure to the

15  benefit of any private person.

16         (q)  Notwithstanding ss. 112.3148 and 112.3149 or other

17  provision of law, an employee or board member may not

18  knowingly accept, directly or indirectly, any expenditure or

19  gift from a person or entity, or an employee or representative

20  of such person or entity, which has a contractual relationship

21  with the plan or who is under consideration for a contract. An

22  employee or board member that fails to comply with this

23  paragraph is subject to penalties provided under ss. 112.317

24  and 112.3173.

25         (r)  Nothing contained in this section shall be

26  construed as barring the plan from providing insurance

27  coverage to any employer with whom a former employee of the

28  plan is affiliated or employing or reemploying any former

29  employee of the plan in a part-time, full-time, temporary, or

30  permanent capacity, so long as such employment does not

31  violate any provision of part III of chapter 112.

                                  22

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1         (s)(o)  Neither the plan nor any member of the board of

 2  governors is liable for monetary damages to any person for any

 3  statement, vote, decision, or failure to act, regarding the

 4  management or policies of the plan, unless:

 5         1.  The member breached or failed to perform her or his

 6  duties as a member; and

 7         2.  The member's breach of, or failure to perform,

 8  duties constitutes:

 9         a.  A violation of the criminal law, unless the member

10  had reasonable cause to believe her or his conduct was not

11  unlawful. A judgment or other final adjudication against a

12  member in any criminal proceeding for violation of the

13  criminal law estops that member from contesting the fact that

14  her or his breach, or failure to perform, constitutes a

15  violation of the criminal law; but does not estop the member

16  from establishing that she or he had reasonable cause to

17  believe that her or his conduct was lawful or had no

18  reasonable cause to believe that her or his conduct was

19  unlawful;

20         b.  A transaction from which the member derived an

21  improper personal benefit, either directly or indirectly; or

22         c.  Recklessness or any act or omission that was

23  committed in bad faith or with malicious purpose or in a

24  manner exhibiting wanton and willful disregard of human

25  rights, safety, or property. For purposes of this

26  sub-subparagraph, the term "recklessness" means the acting, or

27  omission to act, in conscious disregard of a risk:

28         (I)  Known, or so obvious that it should have been

29  known, to the member; and

30  

31  

                                  23

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1         (II)  Known to the member, or so obvious that it should

 2  have been known, to be so great as to make it highly probable

 3  that harm would follow from such act or omission.

 4         (t)(p)  No insurer shall provide workers' compensation

 5  and employer's liability insurance to any person who is

 6  delinquent in the payment of premiums, assessments, penalties,

 7  or surcharges owed to the plan or to any person who is an

 8  affiliated person of a person who is delinquent in the payment

 9  of premiums, assessments, penalties, or surcharges owed to the

10  plan. For purposes of this paragraph, the term "affiliated

11  person" of another person means:

12         1.  The spouse of such other natural person;

13         2.  Any person who directly or indirectly owns or

14  controls, or holds with the power to vote, 5 percent or more

15  of the outstanding voting securities of such other person;

16         3.  Any person who directly or indirectly owns 5

17  percent or more of the outstanding voting securities that are

18  directly or indirectly owned or controlled, or held with the

19  power to vote, by such other person;

20         4.  Any person or group of persons who directly or

21  indirectly control, are controlled by, or are under common

22  control with such other person;

23         5.  Any officer, director, trustee, partner, owner,

24  manager, joint venturer, or employee, or other person

25  performing duties similar to persons in those positions, of

26  such other persons; or

27         6.  Any person who has an officer, director, trustee,

28  partner, or joint venturer in common with such other person.

29         (u)(q)  Effective July 1, 2004, the plan is exempt from

30  the premium tax under s. 624.509 and any assessments under ss.

31  440.49 and 440.51.

                                  24

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1         (v)  The Office of Insurance Regulation shall perform a

 2  comprehensive market conduct examination of the plan

 3  periodically to determine compliance with its plan of

 4  operation and internal operating policies and procedures.

 5         (w)  Upon dissolution, the assets of the plan shall be

 6  applied first to pay all debts, liabilities, and obligations

 7  of the plan, including the establishment of reasonable

 8  reserves for any contingent liabilities or obligations, and

 9  all remaining assets of the plan shall become property of the

10  state and shall be deposited in the Workers' Compensation

11  Administration Trust Fund. However, dissolution shall not take

12  effect as long as the plan has financial obligations

13  outstanding unless adequate provision has been made for the

14  payment of financial obligations pursuant to the documents

15  authorizing the financial obligations.

16         (6)  Each joint underwriting plan or association

17  created under this section is not a state agency, board, or

18  commission. However, for the purposes of s. 199.183(1) only,

19  the joint underwriting plan created under subsection (5) is a

20  political subdivision of the state and is exempt from the

21  corporate income tax.

22         (7)  Each joint underwriting plan or association may

23  elect to pay premium taxes on the premiums received on its

24  behalf or may elect to have the member insurers to whom the

25  premiums are allocated pay the premium taxes if the member

26  insurer had written the policy. The joint underwriting plan or

27  association shall notify the member insurers and the

28  Department of Revenue by January 15 of each year of its

29  election for the same year. As used in this paragraph, the

30  term "premiums received" means the consideration for

31  insurance, by whatever name called, but does not include any

                                  25

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  policy assessment or surcharge received by the joint

 2  underwriting association as a result of apportioning losses or

 3  deficits of the association pursuant to this section.

 4         (8)(6)  As used in this section and ss. 215.555 and

 5  627.351, the term "collateral protection insurance" means

 6  commercial property insurance of which a creditor is the

 7  primary beneficiary and policyholder and which protects or

 8  covers an interest of the creditor arising out of a credit

 9  transaction secured by real or personal property. Initiation

10  of such coverage is triggered by the mortgagor's failure to

11  maintain insurance coverage as required by the mortgage or

12  other lending document. Collateral protection insurance is not

13  residential coverage.

14         (9)(7)(a)  The Florida Automobile Joint Underwriting

15  Association created under this section shall be deemed to have

16  appointed its general manager as its agent to receive service

17  of all legal process issued against the association in any

18  civil action or proceeding in this state. Process so served

19  shall be valid and binding upon the insurer.

20         (b)  Service of process upon the association's general

21  manager as the association's agent pursuant to such an

22  appointment shall be the sole method of service of process

23  upon the association.

24         Section 2.  Section 2 of chapter 2004-266, Laws of

25  Florida, appearing as a footnote to section 627.311, Florida

26  Statutes, is amended to read:

27         Notwithstanding the provisions of ss. 440.50 and

28  440.51, Florida Statutes, subject to the following procedures

29  and approval, the Department of Financial Services may request

30  transfer funds from the Workers' Compensation Administration

31  Trust Fund within the Department of Financial Services to the

                                  26

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  workers' compensation joint underwriting plan provided in s.

 2  627.311(5), Florida Statutes.

 3         (1)  The department shall establish a contingency

 4  reserve within the Workers' Compensation Administration Trust

 5  Fund, from which the department is authorized to expend funds

 6  as provided in the subsection, in an amount not to exceed $15

 7  million to be released only upon the approval of a budget

 8  amendment presented to the Legislative Budget Commission. For

 9  actuarial deficits projected for policyholders, based on

10  actuarial best estimates, covered in subplan "D" prior to July

11  1, 2004, or Tier One or Tier Two, and upon verification by the

12  Office of Insurance Regulation, the plan is authorized to

13  request and the department is authorized to submit a budget

14  amendment in an amount not to exceed $15 million for the

15  purpose of funding deficits in the subplan or the tier subplan

16  "D".

17         (2)  After the contingency reserve is established,

18  whenever the board determines the subplan or the tier subplan

19  "D" does not have a sufficient cash basis to meet a 6-month

20  period 3 months of projected cash needs due to any deficit in

21  the subplan or the tier remaining after accessing any

22  policyholder surplus attributable to former subplan C, subplan

23  "D," the board is authorized to request the department to

24  transfer funds from the contingency reserve fund within the

25  Workers' Compensation Administration Trust Fund to the plan in

26  an amount sufficient to fund the difference between the amount

27  available and the amount needed to meet the subplan's or the

28  tier's subplan "D"'s projected cash need for the subsequent

29  6-month 3-month period. The board and the office must first

30  certify to the Department of Financial Services that there is

31  not sufficient cash within the subplan or the tier subplan "D"

                                  27

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1  to meet the projected cash needs in the subplan or the tier

 2  subplan "D" within the subsequent 6-month period 3 months. The

 3  amount requested for transfer to the subplan or the tier

 4  subplan "D" may not exceed the difference between the amount

 5  available within the subplan or the tier subplan "D" and the

 6  amount needed to meet the subplan's or the tier's subplan

 7  "D"'s projected cash need for the subsequent 6-month 3-month

 8  period, as jointly certified by the board and the Office of

 9  Insurance Regulation to the Department of Financial Services,

10  attributable to the former subplan or the tier subplan "D"

11  policyholders. The Department of Financial Services may submit

12  a budget amendment to request release of funds from the

13  Workers' Compensation Administration Trust Fund, subject to

14  the approval of the Legislative Budget Commission. The board

15  will provide, for review of the Legislative Budget Commission,

16  information on the reasonableness of the plan's

17  administration, including, but not limited to, the plan of

18  operations and costs, claims costs, claims administration

19  costs, overhead costs, claims reserves, and the latest report

20  submitted on administration cost reduction alternatives as

21  required in s. 627.311(5)(c)17., Florida Statutes.

22         (3)  This section expires July 1, 2011 2007.

23         Section 3.  No later than January 1, 2007, the plan

24  shall submit a request to the Internal Revenue Service for a

25  letter ruling or determination on the plan's eligibility as a

26  section 501(c)(3) tax-exempt organization.

27         Section 4.  Except as otherwise expressly provided in

28  this act, this act shall take effect July 1, 2006.

29  

30  

31  

                                  28

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
 2                         Senate Bill 2118

 3                                 

 4  1.   Requires the Financial Services Commission to select and
         appoint all nine board members of the Workers'
 5       Compensation Joint Underwriting Association, including
         five representatives of the insurance industry and the
 6       consumer advocate.  Currently the FSC appoints 3 of the 9
         members and the insurance industry appoints 5 members.
 7  
    2.   Requires senior managers, officers, and board members be
 8       subject to part III of ch. 112, F.S., including but not
         limited to, standards of conduct, public disclosure and
 9       reporting of financial interests to the Commission on
         Ethics on an annual basis.
10  
    3.   Prohibits any senior manager or officer, employed on
11       January 1, 2007, regardless of the original date of hire,
         and who retires from the JUA from representing another
12       person before the JUA for a two-year period.

13  4.   Prohibits employees and board members of the plan from
         accepting any gift or expenditure of any value from any
14       person or entity who has a contractual relationship with
         the plan or who is under consideration for a contract.
15  
    5.   Requires competitive selection of goods and services
16       valued at over $25,000, with exceptions.  Any purchase
         that exceeds $100,000 requires approval by the board of
17       governors.

18  6.   Provides guidelines for determining whether staff
         attorneys or outside attorneys should be used.
19  
    7.   Prohibits the JUA from retaining an outside lobbyist and
20       authorizes the JUA to employ a full-time employee of the
         plan to register as a lobbyist for the plan.
21  
    8.   Requires the use of surplus funds in subplan C to fund
22       deficits in Tiers one or two or subplan D, prior to using
         any state funds or levying any assessments on
23       policyholders.

24  9.   Extends the deadline for levying assessments to fund
         deficits in any tier or former subplan from July 1, 2007,
25       to July 1, 2011.

26  10.  Requires the JUA to obtain prior approval of rates prior
         to their use, effective for rates and rating plans
27       effective on or after January 1, 2007.

28  11.  Requires all assets of the JUA to be first used to pay
         all debts and obligations of the plan and any remaining
29       assets to become property of the state upon dissolution
         of the JUA to assist the JUA in achieving its tax-exempt
30       status.

31  12.  Requires the JUA to seek a letter ruling or determination
         from the IRS as to the JUA's eligibility as a 501(c)(3)
                                  29

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2006                           CS for SB 2118
    597-2216-06




 1       tax-exempt organization.

 2  

 3  

 4  

 5  

 6  

 7  

 8  

 9  

10  

11  

12  

13  

14  

15  

16  

17  

18  

19  

20  

21  

22  

23  

24  

25  

26  

27  

28  

29  

30  

31  

                                  30

CODING: Words stricken are deletions; words underlined are additions.