Senate Bill sb7098pb
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Florida Senate - 2006 (PROPOSED COMMITTEE BILL) SPB 7098
FOR CONSIDERATION By the Committee on Banking and Insurance
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1 A bill to be entitled
2 An act relating to the Florida Workers'
3 Compensation Joint Underwriting Association;
4 amending s. 627.311, F.S.; providing
5 requirements for the joint underwriting plan of
6 insurers that operates as the association;
7 increasing the membership of the board of
8 governors that oversees operation of the joint
9 underwriting plan; authorizing the Financial
10 Services Commission to remove a board member
11 for cause; requiring that the market-assistance
12 plan be periodically reviewed and updated;
13 authorizing the use of surplus funds of former
14 plan C; extending the deadline to access
15 contingency reserves; authorizing the board of
16 the association to request a transfer of funds
17 from the Workers' Compensation Administration
18 Trust Fund under certain circumstances;
19 requiring that the Office of Insurance
20 Regulation review filings of the joint
21 underwriting plan of workers' compensation
22 insurers; requiring that the office annually
23 approve rates; deleting certain provisions
24 limiting the disapproval of rates by the
25 office; requiring that excess funds received by
26 the plan be returned to the state; amending s.
27 2 of ch. 2004-266, Laws of Florida; extending
28 the period for maintaining the contingency
29 reserve and the period for projecting current
30 cash needs; providing an effective date.
31
1
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Florida Senate - 2006 (PROPOSED COMMITTEE BILL) SPB 7098
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1 Be It Enacted by the Legislature of the State of Florida:
2
3 Section 1. Subsections (5), (6), and (7) of section
4 627.311, Florida Statutes, are amended to read:
5 627.311 Joint underwriters and joint reinsurers;
6 public records and public meetings exemptions.--
7 (5)(a) The office shall, after consultation with
8 insurers, approve a joint underwriting plan of insurers which
9 shall operate as the Florida Workers' Compensation Joint
10 Underwriting Association, a nonprofit entity. For the purposes
11 of this subsection, the term "insurer" includes group
12 self-insurance funds authorized by s. 624.4621, commercial
13 self-insurance funds authorized by s. 624.462, assessable
14 mutual insurers authorized under s. 628.6011, and insurers
15 licensed to write workers' compensation and employer's
16 liability insurance in this state. The purpose of the plan is
17 to provide workers' compensation and employer's liability
18 insurance to applicants who are required by law to maintain
19 workers' compensation and employer's liability insurance and
20 who are in good faith entitled to but who are unable to
21 procure such insurance through the voluntary market. Except as
22 provided herein, the plan must have actuarially sound rates
23 that ensure that the plan is self-supporting.
24 (b) The operation of the plan is subject to the
25 supervision of an 11-member a 9-member board of governors. The
26 board of governors shall be comprised of:
27 1. Five Three members appointed by the Financial
28 Services Commission. Each member appointed by the commission
29 shall serve at the pleasure of the commission;
30 2. Two representatives of the 20 domestic insurers, as
31 defined in s. 624.06(1), having the largest voluntary direct
2
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1 premiums written in this state for workers' compensation and
2 employer's liability insurance, which shall be elected by
3 those 20 domestic insurers;
4 3. Two representatives of the 20 foreign insurers as
5 defined in s. 624.06(2) having the largest voluntary direct
6 premiums written in this state for workers' compensation and
7 employer's liability insurance, which shall be elected by
8 those 20 foreign insurers;
9 4. One person appointed by the largest property and
10 casualty insurance agents' association in this state; and
11 5. The consumer advocate appointed under s. 627.0613
12 or the consumer advocate's designee.
13
14 Each board member shall be appointed to serve a 4-year term
15 and may be appointed to serve consecutive terms. A vacancy on
16 the board shall be filled in the same manner as the original
17 appointment for the unexpired portion of the term. The
18 Financial Services Commission shall designate a member of the
19 board to serve as chair. The Financial Services Commission may
20 remove any member for cause. No board member shall be an
21 insurer which provides services to the plan or which has an
22 affiliate which provides services to the plan or which is
23 serviced by a service company or third-party administrator
24 which provides services to the plan or which has an affiliate
25 which provides services to the plan. The meeting minutes,
26 audits, and procedures of the board of governors are subject
27 to chapters chapter 119 and 286, unless otherwise provided.
28 (c) The operation of the plan shall be governed by a
29 plan of operation that is prepared at the direction of the
30 board of governors. The plan of operation may be changed at
31 any time by the board of governors or upon request of the
3
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Florida Senate - 2006 (PROPOSED COMMITTEE BILL) SPB 7098
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1 office. The plan of operation and all changes thereto are
2 subject to the approval of the office. The plan of operation
3 shall:
4 1. Authorize the board to engage in the activities
5 necessary to implement this subsection, including, but not
6 limited to, borrowing money.
7 2. Develop criteria for eligibility for coverage by
8 the plan, including, but not limited to, documented rejection
9 by at least two insurers which reasonably assures that
10 insureds covered under the plan are unable to acquire coverage
11 in the voluntary market.
12 3. Require notice from the agent to the insured at the
13 time of the application for coverage that the application is
14 for coverage with the plan and that coverage may be available
15 through an insurer, group self-insurers' fund, commercial
16 self-insurance fund, or assessable mutual insurer through
17 another agent at a lower cost.
18 4. Establish programs to encourage insurers to provide
19 coverage to applicants of the plan in the voluntary market and
20 to insureds of the plan, including, but not limited to:
21 a. Establishing procedures for an insurer to use in
22 notifying the plan of the insurer's desire to provide coverage
23 to applicants to the plan or existing insureds of the plan and
24 in describing the types of risks in which the insurer is
25 interested. The description of the desired risks must be on a
26 form developed by the plan.
27 b. Developing forms and procedures that provide an
28 insurer with the information necessary to determine whether
29 the insurer wants to write particular applicants to the plan
30 or insureds of the plan.
31
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1 c. Developing procedures for notice to the plan and
2 the applicant to the plan or insured of the plan that an
3 insurer will insure the applicant or the insured of the plan,
4 and notice of the cost of the coverage offered; and developing
5 procedures for the selection of an insuring entity by the
6 applicant or insured of the plan.
7 d. Provide for a market-assistance plan to assist in
8 the placement of employers. All applications for coverage in
9 the plan received 45 days before the effective date for
10 coverage shall be processed through the market-assistance
11 plan. A market-assistance plan specifically designed to serve
12 the needs of small, good policyholders as defined by the board
13 must be reviewed and updated periodically finalized by January
14 1, 1994.
15 5. Provide for policy and claims services to the
16 insureds of the plan of the nature and quality provided for
17 insureds in the voluntary market.
18 6. Provide for the review of applications for coverage
19 with the plan for reasonableness and accuracy, using any
20 available historic information regarding the insured.
21 7. Provide for procedures for auditing insureds of the
22 plan which are based on reasonable business judgment and are
23 designed to maximize the likelihood that the plan will collect
24 the appropriate premiums.
25 8. Authorize the plan to terminate the coverage of and
26 refuse future coverage for any insured that submits a
27 fraudulent application to the plan or provides fraudulent or
28 grossly erroneous records to the plan or to any service
29 provider of the plan in conjunction with the activities of the
30 plan.
31
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1 9. Establish service standards for agents who submit
2 business to the plan.
3 10. Establish criteria and procedures to prohibit any
4 agent who does not adhere to the established service standards
5 from placing business with the plan or receiving, directly or
6 indirectly, any commissions for business placed with the plan.
7 11. Provide for the establishment of reasonable safety
8 programs for all insureds in the plan. All insureds of the
9 plan must participate in the safety program.
10 12. Authorize the plan to terminate the coverage of
11 and refuse future coverage to any insured who fails to pay
12 premiums or surcharges when due; who, at the time of
13 application, is delinquent in payments of workers'
14 compensation or employer's liability insurance premiums or
15 surcharges owed to an insurer, group self-insurers' fund,
16 commercial self-insurance fund, or assessable mutual insurer
17 licensed to write such coverage in this state; or who refuses
18 to substantially comply with any safety programs recommended
19 by the plan.
20 13. Authorize the board of governors to provide the
21 services required by the plan through staff employed by the
22 plan, through reasonably compensated service providers who
23 contract with the plan to provide services as specified by the
24 board of governors, or through a combination of employees and
25 service providers.
26 14. Provide for service standards for service
27 providers, methods of determining adherence to those service
28 standards, incentives and disincentives for service, and
29 procedures for terminating contracts for service providers
30 that fail to adhere to service standards.
31
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1 15. Provide procedures for selecting service providers
2 and standards for qualification as a service provider that
3 reasonably assure that any service provider selected will
4 continue to operate as an ongoing concern and is capable of
5 providing the specified services in the manner required.
6 16. Provide for reasonable accounting and
7 data-reporting practices.
8 17. Provide for annual review of costs associated with
9 the administration and servicing of the policies issued by the
10 plan to determine alternatives by which costs can be reduced.
11 18. Authorize the acquisition of such excess insurance
12 or reinsurance as is consistent with the purposes of the plan.
13 19. Provide for an annual report to the office on a
14 date specified by the office and containing such information
15 as the office reasonably requires.
16 20. Establish multiple rating plans for various
17 classifications of risk which reflect risk of loss, hazard
18 grade, actual losses, size of premium, and compliance with
19 loss control. At least one of such plans must be a
20 preferred-rating plan to accommodate small-premium
21 policyholders with good experience as defined in
22 sub-subparagraph 22.a.
23 21. Establish agent commission schedules.
24 22. For employers otherwise eligible for coverage
25 under the plan, establish three tiers of employers meeting the
26 criteria and subject to the rate limitations specified in this
27 subparagraph.
28 a. Tier One.--
29 (I) Criteria; rated employers.--An employer that has
30 an experience modification rating shall be included in Tier
31 One if the employer meets all of the following:
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1 (A) The experience modification is below 1.00.
2 (B) The employer had no lost-time claims subsequent to
3 the applicable experience modification rating period.
4 (C) The total of the employer's medical-only claims
5 subsequent to the applicable experience modification rating
6 period did not exceed 20 percent of premium.
7 (II) Criteria; non-rated employers.--An employer that
8 does not have an experience modification rating shall be
9 included in Tier One if the employer meets all of the
10 following:
11 (A) The employer had no lost-time claims for the
12 3-year period immediately preceding the inception date or
13 renewal date of the employer's coverage under the plan.
14 (B) The total of the employer's medical-only claims
15 for the 3-year period immediately preceding the inception date
16 or renewal date of the employer's coverage under the plan did
17 not exceed 20 percent of premium.
18 (C) The employer has secured workers' compensation
19 coverage for the entire 3-year period immediately preceding
20 the inception date or renewal date of the employer's coverage
21 under the plan.
22 (D) The employer is able to provide the plan with a
23 loss history generated by the employer's prior workers'
24 compensation insurer, except if the employer is not able to
25 produce a loss history due to the insolvency of an insurer,
26 the receiver shall provide to the plan, upon the request of
27 the employer or the employer's agent, a copy of the employer's
28 loss history from the records of the insolvent insurer if the
29 loss history is contained in records of the insurer which are
30 in the possession of the receiver. If the receiver is unable
31 to produce the loss history, the employer may, in lieu of the
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1 loss history, submit an affidavit from the employer and the
2 employer's insurance agent setting forth the loss history.
3 (E) The employer is not a new business.
4 (III) Premiums.--The premiums for Tier One insureds
5 shall be set at a premium level 25 percent above the
6 comparable voluntary market premiums until the plan has
7 sufficient experience as determined by the board to establish
8 an actuarially sound rate for Tier One, at which point the
9 board shall, subject to paragraph (e), adjust the rates, if
10 necessary, to produce actuarially sound rates, provided such
11 rate adjustment shall not take effect prior to January 1,
12 2007.
13 b. Tier Two.--
14 (I) Criteria; rated employers.--An employer that has
15 an experience modification rating shall be included in Tier
16 Two if the employer meets all of the following:
17 (A) The experience modification is equal to or greater
18 than 1.00 but not greater than 1.10.
19 (B) The employer had no lost-time claims subsequent to
20 the applicable experience modification rating period.
21 (C) The total of the employer's medical-only claims
22 subsequent to the applicable experience modification rating
23 period did not exceed 20 percent of premium.
24 (II) Criteria; non-rated employers.--An employer that
25 does not have any experience modification rating shall be
26 included in Tier Two if the employer is a new business. An
27 employer shall be included in Tier Two if the employer has
28 less than 3 years of loss experience in the 3-year period
29 immediately preceding the inception date or renewal date of
30 the employer's coverage under the plan and the employer meets
31 all of the following:
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1 (A) The employer had no lost-time claims for the
2 3-year period immediately preceding the inception date or
3 renewal date of the employer's coverage under the plan.
4 (B) The total of the employer's medical-only claims
5 for the 3-year period immediately preceding the inception date
6 or renewal date of the employer's coverage under the plan did
7 not exceed 20 percent of premium.
8 (C) The employer is able to provide the plan with a
9 loss history generated by the workers' compensation insurer
10 that provided coverage for the portion or portions of such
11 period during which the employer had secured workers'
12 compensation coverage, except if the employer is not able to
13 produce a loss history due to the insolvency of an insurer,
14 the receiver shall provide to the plan, upon the request of
15 the employer or the employer's agent, a copy of the employer's
16 loss history from the records of the insolvent insurer if the
17 loss history is contained in records of the insurer which are
18 in the possession of the receiver. If the receiver is unable
19 to produce the loss history, the employer may, in lieu of the
20 loss history, submit an affidavit from the employer and the
21 employer's insurance agent setting forth the loss history.
22 (III) Premiums.--The premiums for Tier Two insureds
23 shall be set at a rate level 50 percent above the comparable
24 voluntary market premiums until the plan has sufficient
25 experience as determined by the board to establish an
26 actuarially sound rate for Tier Two, at which point the board
27 shall, subject to paragraph (e), adjust the rates, if
28 necessary, to produce actuarially sound rates, provided such
29 rate adjustment shall not take effect prior to January 1,
30 2007.
31 c. Tier Three.--
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1 (I) Eligibility.--An employer shall be included in
2 Tier Three if the employer does not meet the criteria for Tier
3 One or Tier Two.
4 (II) Rates.--The board shall establish, subject to
5 paragraph (e), and the plan shall charge, actuarially sound
6 rates for Tier Three insureds.
7 23. For Tier One or Tier Two employers which employ no
8 nonexempt employees or which report payroll which is less than
9 the minimum wage hourly rate for one full-time employee for 1
10 year at 40 hours per week, the plan shall establish
11 actuarially sound premiums, provided, however, that the
12 premiums may not exceed $2,500. These premiums shall be in
13 addition to the fee specified in subparagraph 26. When the
14 plan establishes actuarially sound rates for all employers in
15 Tier One and Tier Two, the premiums for employers referred to
16 in this paragraph are no longer subject to the $2,500 cap.
17 24. Provide for a depopulation program to reduce the
18 number of insureds in the plan. If an employer insured through
19 the plan is offered coverage from a voluntary market carrier:
20 a. During the first 30 days of coverage under the
21 plan;
22 b. Before a policy is issued under the plan;
23 c. By issuance of a policy upon expiration or
24 cancellation of the policy under the plan; or
25 d. By assumption of the plan's obligation with respect
26 to an in-force policy,
27
28 that employer is no longer eligible for coverage through the
29 plan. The premium for risks assumed by the voluntary market
30 carrier must be no greater than the premium the insured would
31 have paid under the plan, and shall be adjusted upon renewal
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1 to reflect changes in the plan rates and the tier for which
2 the insured would qualify as of the time of renewal. The
3 insured may be charged such premiums only for the first 3
4 years of coverage in the voluntary market. A premium under
5 this subparagraph is deemed approved and is not an excess
6 premium for purposes of s. 627.171.
7 25. Require that policies issued and applications must
8 include a notice that the policy could be replaced by a policy
9 issued from a voluntary market carrier and that, if an offer
10 of coverage is obtained from a voluntary market carrier, the
11 policyholder is no longer eligible for coverage through the
12 plan. The notice must also specify that acceptance of coverage
13 under the plan creates a conclusive presumption that the
14 applicant or policyholder is aware of this potential.
15 26. Require that each application for coverage and
16 each renewal premium be accompanied by a nonrefundable fee of
17 $475 to cover costs of administration and fraud prevention.
18 The board may, with the prior approval of the office, increase
19 the amount of the fee pursuant to a rate filing to reflect
20 increased costs of administration and fraud prevention. The
21 fee is not subject to commission and is fully earned upon
22 commencement of coverage.
23 (d)1. The funding of the plan shall include premiums
24 as provided in subparagraph (c)22. and assessments as provided
25 in this paragraph.
26 2.a. If the board determines that a deficit exists in
27 Tier One or Tier Two or that there is any deficit remaining
28 attributable to any of the plan's former subplans and that the
29 deficit cannot be fully funded by using policyholder surplus
30 attributable to former subplan C or, if the surplus in the
31 former subplan C does not fully fund the deficit and the
12
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1 deficit cannot be fully funded by using any remaining funds in
2 the contigency reserve without the use of deficit assessments,
3 the board shall request the office to levy, by order, a
4 deficit assessment against premiums charged to insureds for
5 workers' compensation insurance by insurers as defined in s.
6 631.904(5). The office shall issue the order after verifying
7 the amount of the deficit. The assessment shall be specified
8 as a percentage of future premium collections, as recommended
9 by the board and approved by the office. The same percentage
10 shall apply to premiums on all workers' compensation policies
11 issued or renewed during the 12-month period beginning on the
12 effective date of the assessment, as specified in the order.
13 b. With respect to each insurer collecting premiums
14 that are subject to the assessment, the insurer shall collect
15 the assessment at the same time as the insurer collects the
16 premium payment for each policy and shall remit the
17 assessments collected to the plan as provided in the order
18 issued by the office. The office shall verify the accurate and
19 timely collection and remittance of deficit assessments and
20 shall report such information to the board. Each insurer
21 collecting assessments shall provide such information with
22 respect to premiums and collections as may be required by the
23 office to enable the office to monitor and audit compliance
24 with this paragraph.
25 c. Deficit assessments are not considered part of an
26 insurer's rate, are not premium, and are not subject to the
27 premium tax, to the assessments under ss. 440.49 and 440.51,
28 to the surplus lines tax, to any fees, or to any commissions.
29 The deficit assessment imposed shall become plan funds at the
30 moment of collection and shall not constitute income to the
31 insurer for any purpose, including financial reporting on the
13
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1 insurer's income statement. An insurer is liable for all
2 assessments that the insurer collects and must treat the
3 failure of an insured to pay an assessment as a failure to pay
4 premium. An insurer is not liable for uncollectible
5 assessments.
6 d. When an insurer is required to return unearned
7 premium, the insurer shall also return any collected
8 assessments attributable to the unearned premium.
9 e. Deficit assessments as described in this
10 subparagraph shall not be levied after July 1, 2008 2007.
11 3.a. All policies issued to Tier Three insureds shall
12 be assessable. All Tier Three assessable policies must be
13 clearly identified as assessable by containing, in contrasting
14 color and in not less than 10-point type, the following
15 statement:
16
17 "This is an assessable policy. If the plan is
18 unable to pay its obligations, policyholders
19 will be required to contribute on a pro rata
20 earned premium basis the money necessary to
21 meet any assessment levied."
22
23 b. The board may from time to time assess Tier Three
24 insureds to whom the plan has issued assessable policies for
25 the purpose of funding plan deficits. Any such assessment
26 shall be based upon a reasonable actuarial estimate of the
27 amount of the deficit, taking into account the amount needed
28 to fund medical and indemnity reserves and reserves for
29 incurred but not reported claims, and allowing for general
30 administrative expenses, the cost of levying and collecting
31 the assessment, a reasonable allowance for estimated
14
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1 uncollectible assessments, and allocated and unallocated loss
2 adjustment expenses.
3 c. Each Tier Three insured's share of a deficit shall
4 be computed by applying to the premium earned on the insured's
5 policy or policies during the period to be covered by the
6 assessment the ratio of the total deficit to the total
7 premiums earned during such period upon all policies subject
8 to the assessment. If one or more Tier Three insureds fail to
9 pay an assessment, the other Tier Three insureds shall be
10 liable on a proportionate basis for additional assessments to
11 fund the deficit. The plan may compromise and settle
12 individual assessment claims without affecting the validity of
13 or amounts due on assessments levied against other insureds.
14 The plan may offer and accept discounted payments for
15 assessments which are promptly paid. The plan may offset the
16 amount of any unpaid assessment against unearned premiums
17 which may otherwise be due to an insured. The plan shall
18 institute legal action when necessary and appropriate to
19 collect the assessment from any insured who fails to pay an
20 assessment when due.
21 d. The venue of a proceeding to enforce or collect an
22 assessment or to contest the validity or amount of an
23 assessment shall be in the Circuit Court of Leon County.
24 e. If the board finds that a deficit in Tier Three
25 exists for any period and that an assessment is necessary, the
26 board shall certify to the office the need for an assessment.
27 No sooner than 30 days after the date of such certification,
28 the board shall notify in writing each insured who is to be
29 assessed that an assessment is being levied against the
30 insured, and informing the insured of the amount of the
31 assessment, the period for which the assessment is being
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1 levied, and the date by which payment of the assessment is
2 due. The board shall establish a date by which payment of the
3 assessment is due, which shall be no sooner than 30 days nor
4 later than 120 days after the date on which notice of the
5 assessment is mailed to the insured.
6 f. Whenever the board makes a determination that the
7 plan does not have a sufficient cash basis to meet 6 3 months
8 of projected cash needs due to a deficit in Tier Three, the
9 board may request the department to transfer funds from the
10 Workers' Compensation Administration Trust Fund to the plan in
11 an amount sufficient to fund the difference between the amount
12 available and the amount needed to meet a 6-month 3-month
13 projected cash need as determined by the board and verified by
14 the office, subject to the approval of the Legislative Budget
15 Commission. If the Legislative Budget Commission approves a
16 transfer of funds under this sub-subparagraph, the plan shall
17 report to the Legislature the transfer of funds and the
18 Legislature shall review the plan during the next legislative
19 session or the current legislative session, if the transfer
20 occurs during a legislative session. This sub-subparagraph
21 shall not apply until the plan determines and the office
22 verifies that assessments collected by the plan pursuant to
23 sub-subparagraph b. are insufficient to fund the deficit in
24 Tier Three and to meet 6 3 months of projected cash needs.
25 4. The plan may offer rating, dividend plans, and
26 other plans to encourage loss prevention programs.
27 (e) The plan shall file with the office each manual of
28 classifications, rules, and rates; each rating plan; and each
29 modification pursuant to the requirements of this part which
30 applies to workers' compensation insurers. The office shall
31 review and approve or disapprove the filing pursuant to such
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1 requirements and the requirements of this section establish
2 and use its rates and rating plans, and the plan may establish
3 and use changes in rating plans at any time, but no more
4 frequently than two times per any rating class for any
5 calendar year. By January 1 December 1, 1993, and December 1
6 of each year thereafter, except as provided in subparagraph
7 (c)22., the board shall establish and use actuarially sound
8 rates approved by the office for use by the plan to assure
9 that the plan is self-funding while those rates are in effect.
10 Such rates and rating plans must be filed with the office
11 within 30 calendar days after their effective dates, and shall
12 be considered a "use and file" filing. Any disapproval by the
13 office must have an effective date that is at least 60 days
14 from the date of disapproval of the rates and rating plan and
15 must have prospective effect only. The plan may not be subject
16 to any order by the office to return to policyholders any
17 portion of the rates disapproved by the office. The office may
18 not disapprove any rates or rating plans unless it
19 demonstrates that such rates and rating plans are excessive,
20 inadequate, or unfairly discriminatory.
21 (f) No later than June 1 of each year, the plan shall
22 obtain an independent actuarial certification of the results
23 of the operations of the plan for prior years, and shall
24 furnish a copy of the certification to the office. If, after
25 the effective date of the plan, the projected ultimate
26 incurred losses and expenses and dividends for prior years
27 exceed collected premiums, accrued net investment income, and
28 prior assessments for prior years, the certification is
29 subject to review and approval by the office before it becomes
30 final.
31
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1 (g) Whenever a deficit exists, the plan shall, within
2 90 days, provide the office with a program to eliminate the
3 deficit within a reasonable time. The deficit may be funded
4 through increased premiums charged to insureds of the plan for
5 subsequent years, through the use of policyholder surplus
6 attributable to any year, including policyholder surplus in
7 former subplan C as authorized in subparagraph (d)2., through
8 the use of assessments as provided in subparagraph (d)2., and
9 through assessments on assessable policies as provided in
10 subparagraph (d)3. Policyholders in former subplan C shall not
11 be subject to any assessments attributable to deficits in
12 subplan D and Tiers One, Two, and Three.
13 (h) Any premium or assessments collected by the plan
14 in excess of the amount necessary to fund projected ultimate
15 incurred losses and expenses of the plan and not paid to
16 insureds of the plan in conjunction with loss prevention or
17 dividend programs shall be retained by the plan for future
18 use. Any state funds received by the plan in excess of the
19 amount necessary to fund deficits in subplan D or any tier
20 shall be returned to the state.
21 (i) The decisions of the board of governors do not
22 constitute final agency action and are not subject to chapter
23 120.
24 (j) Policies for insureds shall be issued by the plan.
25 (k) The plan created under this subsection is liable
26 only for payment for losses arising under policies issued by
27 the plan with dates of accidents occurring on or after January
28 1, 1994.
29 (l) Plan losses are the sole and exclusive
30 responsibility of the plan, and payment for such losses must
31 be funded in accordance with this subsection and must not
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1 come, directly or indirectly, from insurers or any guaranty
2 association for such insurers.
3 (m) Each joint underwriting plan or association
4 created under this section is not a state agency, board, or
5 commission. However, for the purposes of s. 199.183(1) only,
6 the joint underwriting plan is a political subdivision of the
7 state and is exempt from the corporate income tax.
8 (n) Each joint underwriting plan or association may
9 elect to pay premium taxes on the premiums received on its
10 behalf or may elect to have the member insurers to whom the
11 premiums are allocated pay the premium taxes if the member
12 insurer had written the policy. The joint underwriting plan or
13 association shall notify the member insurers and the
14 Department of Revenue by January 15 of each year of its
15 election for the same year. As used in this paragraph, the
16 term "premiums received" means the consideration for
17 insurance, by whatever name called, but does not include any
18 policy assessment or surcharge received by the joint
19 underwriting association as a result of apportioning losses or
20 deficits of the association pursuant to this section.
21 (m)(o) Neither the plan nor any member of the board of
22 governors is liable for monetary damages to any person for any
23 statement, vote, decision, or failure to act, regarding the
24 management or policies of the plan, unless:
25 1. The member breached or failed to perform her or his
26 duties as a member; and
27 2. The member's breach of, or failure to perform,
28 duties constitutes:
29 a. A violation of the criminal law, unless the member
30 had reasonable cause to believe her or his conduct was not
31 unlawful. A judgment or other final adjudication against a
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1 member in any criminal proceeding for violation of the
2 criminal law estops that member from contesting the fact that
3 her or his breach, or failure to perform, constitutes a
4 violation of the criminal law; but does not estop the member
5 from establishing that she or he had reasonable cause to
6 believe that her or his conduct was lawful or had no
7 reasonable cause to believe that her or his conduct was
8 unlawful;
9 b. A transaction from which the member derived an
10 improper personal benefit, either directly or indirectly; or
11 c. Recklessness or any act or omission that was
12 committed in bad faith or with malicious purpose or in a
13 manner exhibiting wanton and willful disregard of human
14 rights, safety, or property. For purposes of this
15 sub-subparagraph, the term "recklessness" means the acting, or
16 omission to act, in conscious disregard of a risk:
17 (I) Known, or so obvious that it should have been
18 known, to the member; and
19 (II) Known to the member, or so obvious that it should
20 have been known, to be so great as to make it highly probable
21 that harm would follow from such act or omission.
22 (n)(p) No insurer shall provide workers' compensation
23 and employer's liability insurance to any person who is
24 delinquent in the payment of premiums, assessments, penalties,
25 or surcharges owed to the plan or to any person who is an
26 affiliated person of a person who is delinquent in the payment
27 of premiums, assessments, penalties, or surcharges owed to the
28 plan. For purposes of this paragraph, the term "affiliated
29 person" of another person means:
30 1. The spouse of such other natural person;
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1 2. Any person who directly or indirectly owns or
2 controls, or holds with the power to vote, 5 percent or more
3 of the outstanding voting securities of such other person;
4 3. Any person who directly or indirectly owns 5
5 percent or more of the outstanding voting securities that are
6 directly or indirectly owned or controlled, or held with the
7 power to vote, by such other person;
8 4. Any person or group of persons who directly or
9 indirectly control, are controlled by, or are under common
10 control with such other person;
11 5. Any officer, director, trustee, partner, owner,
12 manager, joint venturer, or employee, or other person
13 performing duties similar to persons in those positions, of
14 such other persons; or
15 6. Any person who has an officer, director, trustee,
16 partner, or joint venturer in common with such other person.
17 (o)(q) Effective July 1, 2004, the plan is exempt from
18 the premium tax under s. 624.509 and any assessments under ss.
19 440.49 and 440.51.
20 (6) Each joint underwriting plan or association
21 created under this section is not a state agency, board, or
22 commission. However, for the purposes of s. 199.183(1) only,
23 the joint underwriting plan created under subsection (5) is a
24 political subdivision of the state and is exempt from the
25 corporate income tax.
26 (7) Each joint underwriting plan or association may
27 elect to pay premium taxes on the premiums received on its
28 behalf or may elect to have the member insurers to whom the
29 premiums are allocated pay the premium taxes if the member
30 insurer had written the policy. The joint underwriting plan or
31 association shall notify the member insurers and the
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1 Department of Revenue by January 15 of each year of its
2 election for the same year. As used in this paragraph, the
3 term "premiums received" means the consideration for
4 insurance, by whatever name called, but does not include any
5 policy assessment or surcharge received by the joint
6 underwriting association as a result of apportioning losses or
7 deficits of the association pursuant to this section.
8 (8)(6) As used in this section and ss. 215.555 and
9 627.351, the term "collateral protection insurance" means
10 commercial property insurance of which a creditor is the
11 primary beneficiary and policyholder and which protects or
12 covers an interest of the creditor arising out of a credit
13 transaction secured by real or personal property. Initiation
14 of such coverage is triggered by the mortgagor's failure to
15 maintain insurance coverage as required by the mortgage or
16 other lending document. Collateral protection insurance is not
17 residential coverage.
18 (9)(7)(a) The Florida Automobile Joint Underwriting
19 Association created under this section shall be deemed to have
20 appointed its general manager as its agent to receive service
21 of all legal process issued against the association in any
22 civil action or proceeding in this state. Process so served
23 shall be valid and binding upon the insurer.
24 (b) Service of process upon the association's general
25 manager as the association's agent pursuant to such an
26 appointment shall be the sole method of service of process
27 upon the association.
28 Section 2. Section 2 of chapter 2004-266, Laws of
29 Florida, appearing as a footnote to section 627.311, Florida
30 Statutes, is amended to read:
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1 Notwithstanding the provisions of ss. 440.50 and
2 440.51, Florida Statutes, subject to the following procedures
3 and approval, the Department of Financial Services may request
4 transfer funds from the Workers' Compensation Administration
5 Trust Fund within the Department of Financial Services to the
6 workers' compensation joint underwriting plan provided in s.
7 627.311(5), Florida Statutes.
8 (1) The department shall establish a contingency
9 reserve within the Workers' Compensation Administration Trust
10 Fund, from which the department is authorized to expend funds
11 as provided in the subsection, in an amount not to exceed $15
12 million to be released only upon the approval of a budget
13 amendment presented to the Legislative Budget Commission. For
14 actuarial deficits projected for policyholders, based on
15 actuarial best estimates, covered in subplan "D" prior to July
16 1, 2004, and upon verification by the Office of Insurance
17 Regulation, the plan is authorized to request and the
18 department is authorized to submit a budget amendment in an
19 amount not to exceed $15 million for the purpose of funding
20 deficits in subplan "D".
21 (2) After the contingency reserve is established,
22 whenever the board determines subplan "D" does not have a
23 sufficient cash basis to meet a 6-month period 3 months of
24 projected cash needs due to any deficit in subplan "D,"
25 remaining after accessing any policyholder surplus
26 attributable to former subplan C, the board is authorized to
27 request the department to transfer funds from the contingency
28 reserve fund within the Workers' Compensation Administration
29 Trust Fund to the plan in an amount sufficient to fund the
30 difference between the amount available and the amount needed
31 to meet subplan "D"'s projected cash need for the subsequent
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1 6-month 3-month period. The board and the office must first
2 certify to the Department of Financial Services that there is
3 not sufficient cash within subplan "D" to meet the projected
4 cash needs in subplan "D" within the subsequent 6-month period
5 3 months. The amount requested for transfer to subplan "D" may
6 not exceed the difference between the amount available within
7 subplan "D" and the amount needed to meet subplan "D"'s
8 projected cash need for the subsequent 6-month 3-month period,
9 as jointly certified by the board and the Office of Insurance
10 Regulation to the Department of Financial Services,
11 attributable to the former subplan "D" policyholders. The
12 Department of Financial Services may submit a budget amendment
13 to request release of funds from the Workers' Compensation
14 Administration Trust Fund, subject to the approval of the
15 Legislative Budget Commission. The board will provide, for
16 review of the Legislative Budget Commission, information on
17 the reasonableness of the plan's administration, including,
18 but not limited to, the plan of operations and costs, claims
19 costs, claims administration costs, overhead costs, claims
20 reserves, and the latest report submitted on administration
21 cost reduction alternatives as required in s.
22 627.311(5)(c)17., Florida Statutes.
23 (3) This section expires July 1, 2011 2007.
24 Section 3. This act shall take effect July 1, 2006.
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2 SENATE SUMMARY
3 Revises provisions governing the Florida Workers'
Compensation Joint Underwriting Association. Increases
4 the membership of the board of governors. Authorizes the
use of surplus funds of former plan C to fund certain
5 deficits. Requires that the Office of Insurance
Regulation approve rates. Requires that excess funds be
6 returned to the state. Extends operation of the
contingency reserve until July 1, 2011. (See bill for
7 details.)
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