HB 7241

CS

CHAMBER ACTION

1	The Insurance Committee recommends the following:
2
3	Council/Committee Substitute
4	Remove the entire bill and insert:
5	A bill to be entitled
6	An act relating to the Florida Workers' Compensation Joint
7	Underwriting Association; amending s. 627.311, F.S.;
8	requiring the joint underwriting plan of insurers to
9	operate as the Florida Workers' Compensation Joint
10	Underwriting Association; revising the membership and
11	duties of the board of governors relating to the operation
12	of the joint underwriting plan; providing for continuous
13	review of the plan; authorizing the Office of Insurance
14	Regulation to withdraw approval of the plan under certain
15	circumstances; requiring the periodic review and update of
16	the market-assistance plan; providing requirements and
17	procedures for procurement of goods and services;
18	prohibiting the retention of certain lobbyist services;
19	providing requirements for legal services; authorizing
20	certain employees to provide lobbyist services;
21	authorizing the use of certain subplan surplus funds;
22	extending the deadline to levy deficit assessments;
23	requiring the board to request the transfer of funds from
24	the Workers' Compensation Administration Trust Fund under
25	certain circumstances; requiring that the plan be subject
26	to certain filing and approval rates and rating plan
27	requirements; deleting certain provisions limiting the
28	disapproval of rates by the Office of Insurance
29	Regulation; requiring that excess funds received by the
30	plan be returned to the state; providing applicability of
31	specified statutes regulating ethical standards; requiring
32	certain disclosure statements for plan employees;
33	prescribing limits on certain representation by former
34	plan employees; prohibiting a private individual's ability
35	to benefit from the plan's income; prohibiting employees
36	and board members from accepting gifts or expenditures
37	from persons and entities with certain relationships to
38	the plan; providing applicability; requiring the Office of
39	Insurance Regulation to perform periodic comprehensive
40	market examinations; prescribing disposition of assets of
41	the plan upon dissolution; providing exemption from the
42	corporate income tax; providing for the payment of premium
43	taxes; amending s. 2 of ch. 2004-266, Laws of Florida;
44	allowing the contingency reserve to be used to fund
45	certain deficits; extending the period for maintaining the
46	contingency reserve and projecting current cash needs;
47	requiring the plan to submit a request for an Internal
48	Revenue Service letter determining the plan's eligibility
49	as a tax-exempt organization; providing an effective date.
50
51	Be It Enacted by the Legislature of the State of Florida:
52
53	Section 1.  Subsections (5), (6), and (7) of section
54	627.311, Florida Statutes, are amended to read:
55	627.311  Joint underwriters and joint reinsurers; public
56	records and public meetings exemptions.--
57	(5)(a)  The office shall, after consultation with insurers,
58	approve a joint underwriting plan of insurers which shall be
59	known as the "Florida Workers' Compensation Joint Underwriting
60	Association, Inc.," and which shall operate as a corporation not
61	for profit nonprofit entity. For the purposes of this
62	subsection, the term "insurer" includes group self-insurance
63	funds authorized by s. 624.4621, commercial self-insurance funds
64	authorized by s. 624.462, assessable mutual insurers authorized
65	under s. 628.6011, and insurers licensed to write workers'
66	compensation and employer's liability insurance in this state.
67	The purpose of the plan is to provide workers' compensation and
68	employer's liability insurance to applicants who are required by
69	law to maintain workers' compensation and employer's liability
70	insurance and who are in good faith entitled to but who are
71	unable to procure such insurance through the voluntary market.
72	Except as provided herein, the plan must have actuarially sound
73	rates that ensure that the plan is self-supporting.
74	(b)  The operation of the plan is subject to the
75	supervision of a 9-member board of governors. Each member
76	described in subparagraph 1., subparagraph 2., subparagraph 3.,
77	or subparagraph 5. shall be appointed by the Financial Services
78	Commission and shall serve at the pleasure of the commission.
79	The board of governors shall be comprised of:
80	1.  Three members appointed by the Financial Services
81	Commission. Each member appointed by the commission shall serve
82	at the pleasure of the commission;
83	1.2.  Two representatives of the 20 domestic insurers, as
84	defined in s. 624.06(1), having the largest voluntary direct
85	premiums written in this state for workers' compensation and
86	employer's liability insurance, which shall be elected by those
87	20 domestic insurers;
88	2.3.  Two representatives of the 20 foreign insurers as
89	defined in s. 624.06(2) having the largest voluntary direct
90	premiums written in this state for workers' compensation and
91	employer's liability insurance, which shall be elected by those
92	20 foreign insurers;
93	3.4.  One representative of person appointed by the largest
94	property and casualty insurance agents' association in this
95	state; and
96	4.5.  The consumer advocate appointed under s. 627.0613 or
97	the consumer advocate's designee; and.
98	5.  Three other persons appointed by the commission.
99
100	Each board member shall be appointed to serve a 4-year term and
101	may be appointed to serve consecutive terms. A vacancy on the
102	board shall be filled in the same manner as the original
103	appointment for the unexpired portion of the term. The Financial
104	Services Commission shall designate a member of the board to
105	serve as chair. No board member shall be an insurer which
106	provides services to the plan or which has an affiliate which
107	provides services to the plan or which is serviced by a service
108	company or third-party administrator which provides services to
109	the plan or which has an affiliate which provides services to
110	the plan. The meetings and records minutes, audits, and
111	procedures of the board of governors and the plan are subject to
112	chapters chapter 119 and 286, unless otherwise exempted by law.
113	(c)  The operation of the plan shall be governed by a plan
114	of operation that is prepared at the direction of the board of
115	governors and approved by order of the office. The plan is
116	subject to continuous review by the office. The office may, by
117	order, withdraw approval of all or part of a plan if the office
118	determines that conditions have changed since approval was
119	granted and that the purposes of the plan require changes in the
120	plan. The plan of operation may be changed at any time by the
121	board of governors or upon request of the office. The plan of
122	operation and all changes thereto are subject to the approval of
123	the office. The plan of operation shall:
124	1.  Authorize the board to engage in the activities
125	necessary to implement this subsection, including, but not
126	limited to, borrowing money.
127	2.  Develop criteria for eligibility for coverage by the
128	plan, including, but not limited to, documented rejection by at
129	least two insurers which reasonably assures that insureds
130	covered under the plan are unable to acquire coverage in the
131	voluntary market.
132	3.  Require notice from the agent to the insured at the
133	time of the application for coverage that the application is for
134	coverage with the plan and that coverage may be available
135	through an insurer, group self-insurers' fund, commercial self-
136	insurance fund, or assessable mutual insurer through another
137	agent at a lower cost.
138	4.  Establish programs to encourage insurers to provide
139	coverage to applicants of the plan in the voluntary market and
140	to insureds of the plan, including, but not limited to:
141	a.  Establishing procedures for an insurer to use in
142	notifying the plan of the insurer's desire to provide coverage
143	to applicants to the plan or existing insureds of the plan and
144	in describing the types of risks in which the insurer is
145	interested. The description of the desired risks must be on a
146	form developed by the plan.
147	b.  Developing forms and procedures that provide an insurer
148	with the information necessary to determine whether the insurer
149	wants to write particular applicants to the plan or insureds of
150	the plan.
151	c.  Developing procedures for notice to the plan and the
152	applicant to the plan or insured of the plan that an insurer
153	will insure the applicant or the insured of the plan, and notice
154	of the cost of the coverage offered; and developing procedures
155	for the selection of an insuring entity by the applicant or
156	insured of the plan.
157	d.  Provide for a market-assistance plan to assist in the
158	placement of employers. All applications for coverage in the
159	plan received 45 days before the effective date for coverage
160	shall be processed through the market-assistance plan. A market-
161	assistance plan specifically designed to serve the needs of
162	small, good policyholders as defined by the board must be
163	reviewed and updated periodically finalized by January 1, 1994.
164	5.  Provide for policy and claims services to the insureds
165	of the plan of the nature and quality provided for insureds in
166	the voluntary market.
167	6.  Provide for the review of applications for coverage
168	with the plan for reasonableness and accuracy, using any
169	available historic information regarding the insured.
170	7.  Provide for procedures for auditing insureds of the
171	plan which are based on reasonable business judgment and are
172	designed to maximize the likelihood that the plan will collect
173	the appropriate premiums.
174	8.  Authorize the plan to terminate the coverage of and
175	refuse future coverage for any insured that submits a fraudulent
176	application to the plan or provides fraudulent or grossly
177	erroneous records to the plan or to any service provider of the
178	plan in conjunction with the activities of the plan.
179	9.  Establish service standards for agents who submit
180	business to the plan.
181	10.  Establish criteria and procedures to prohibit any
182	agent who does not adhere to the established service standards
183	from placing business with the plan or receiving, directly or
184	indirectly, any commissions for business placed with the plan.
185	11.  Provide for the establishment of reasonable safety
186	programs for all insureds in the plan. All insureds of the plan
187	must participate in the safety program.
188	12.  Authorize the plan to terminate the coverage of and
189	refuse future coverage to any insured who fails to pay premiums
190	or surcharges when due; who, at the time of application, is
191	delinquent in payments of workers' compensation or employer's
192	liability insurance premiums or surcharges owed to an insurer,
193	group self-insurers' fund, commercial self-insurance fund, or
194	assessable mutual insurer licensed to write such coverage in
195	this state; or who refuses to substantially comply with any
196	safety programs recommended by the plan.
197	13.  Authorize the board of governors to provide the goods
198	and services required by the plan through staff employed by the
199	plan, through reasonably compensated service providers who
200	contract with the plan to provide services as specified by the
201	board of governors, or through a combination of employees and
202	service providers.
203	a.  The procurement of goods with a value of less than
204	$2,500 shall be carried out using good purchasing practices,
205	such as the receipt of written quotes or written records of
206	telephone quotes. Purchases that equal or exceed $2,500 but are
207	less than or equal to $25,000 may be made by using good
208	purchasing practices, such as receipt of written quotes, written
209	records of telephone quotes, or informal bids, whenever
210	practical. The procurement of goods or services valued over
211	$25,000 are subject to competitive solicitation, except in
212	situations in which the goods or services are provided by a sole
213	source or are deemed an emergency purchase, or the services are
214	exempted from competitive solicitation requirements under s.
215	287.057(5)(f). Justification for the sole-sourcing or emergency
216	procurement must be documented. Contracts for goods or services
217	valued at or over $100,000 are subject to board approval.
218	b.  In determining whether legal services should be
219	provided by staff attorneys or outsourced to private attorneys,
220	the plan shall consider the following factors:
221	(I)  The nature of the attorney services to be provided and
222	the issues involved.
223	(II)  The need for private attorneys rather than staff
224	attorneys, using the criteria provided in sub-subparagraph 13.c.
225	(III)  The criteria by which the plan selected the private
226	attorney or law firm it proposes to employ, using the criteria
227	provided in sub-subparagraph 13.c.
228	(IV)  Competitive fees for similar attorney services.
229	(V)  The plan's analysis estimating the number of hours for
230	attorney services, the costs, the total contract amount, and,
231	when appropriate, a risk or cost-benefit analysis.
232	(VI)  Which partners, associates, paralegals, research
233	associates, or other personnel will be used and how their time
234	will be billed to the plan.
235	(VII)  Any other information that the plan deems
236	appropriate for the proper evaluation of the need for such
237	private attorney services.
238	c.  The plan shall use the following criteria when
239	selecting outside firms for attorney services:
240	(I)  The magnitude or complexity of the case.
241	(II)  The firm's rating and certifications.
242	(III)  The firm's minority status.
243	(IV)  The firm's physical proximity to the case and the
244	plan.
245	(V)  The firm's prior experience with the plan.
246	(VI)  The firm's prior experience with similar cases or
247	issues.
248	(VII)  The firm's billing methodology and proposed rate.
249	(VIII)  The firm's current or past adversarial position or
250	conflict of interest with the plan.
251	(IX)  The firm's willingness to use resources of the plan
252	to minimize costs.
253	d.  The plan may not retain a lobbyist to represent it
254	before the legislative or executive branch. However, full-time
255	employees of the plan may register as lobbyists and represent
256	that employer before the legislative or executive branch.
257	14.  Provide for service standards for service providers,
258	methods of determining adherence to those service standards,
259	incentives and disincentives for service, and procedures for
260	terminating contracts for service providers that fail to adhere
261	to service standards.
262	15.  Provide procedures for selecting service providers and
263	standards for qualification as a service provider that
264	reasonably assure that any service provider selected will
265	continue to operate as an ongoing concern and is capable of
266	providing the specified services in the manner required.
267	16.  Provide for reasonable accounting and data-reporting
268	practices.
269	17.  Provide for annual review of costs associated with the
270	administration and servicing of the policies issued by the plan
271	to determine alternatives by which costs can be reduced.
272	18.  Authorize the acquisition of such excess insurance or
273	reinsurance as is consistent with the purposes of the plan.
274	19.  Provide for an annual report to the office on a date
275	specified by the office and containing such information as the
276	office reasonably requires.
277	20.  Establish multiple rating plans for various
278	classifications of risk which reflect risk of loss, hazard
279	grade, actual losses, size of premium, and compliance with loss
280	control. At least one of such plans must be a preferred-rating
281	plan to accommodate small-premium policyholders with good
282	experience as defined in sub-subparagraph 22.a.
283	21.  Establish agent commission schedules.
284	22.  For employers otherwise eligible for coverage under
285	the plan, establish three tiers of employers meeting the
286	criteria and subject to the rate limitations specified in this
287	subparagraph.
288	a.  Tier One.--
289	(I)  Criteria; rated employers.--An employer that has an
290	experience modification rating shall be included in Tier One if
291	the employer meets all of the following:
292	(A)  The experience modification is below 1.00.
293	(B)  The employer had no lost-time claims subsequent to the
294	applicable experience modification rating period.
295	(C)  The total of the employer's medical-only claims
296	subsequent to the applicable experience modification rating
297	period did not exceed 20 percent of premium.
298	(II)  Criteria; non-rated employers.--An employer that does
299	not have an experience modification rating shall be included in
300	Tier One if the employer meets all of the following:
301	(A)  The employer had no lost-time claims for the 3-year
302	period immediately preceding the inception date or renewal date
303	of the employer's coverage under the plan.
304	(B)  The total of the employer's medical-only claims for
305	the 3-year period immediately preceding the inception date or
306	renewal date of the employer's coverage under the plan did not
307	exceed 20 percent of premium.
308	(C)  The employer has secured workers' compensation
309	coverage for the entire 3-year period immediately preceding the
310	inception date or renewal date of the employer's coverage under
311	the plan.
312	(D)  The employer is able to provide the plan with a loss
313	history generated by the employer's prior workers' compensation
314	insurer, except if the employer is not able to produce a loss
315	history due to the insolvency of an insurer, the receiver shall
316	provide to the plan, upon the request of the employer or the
317	employer's agent, a copy of the employer's loss history from the
318	records of the insolvent insurer if the loss history is
319	contained in records of the insurer which are in the possession
320	of the receiver. If the receiver is unable to produce the loss
321	history, the employer may, in lieu of the loss history, submit
322	an affidavit from the employer and the employer's insurance
323	agent setting forth the loss history.
324	(E)  The employer is not a new business.
325	(III)  Premiums.--The premiums for Tier One insureds shall
326	be set at a premium level 25 percent above the comparable
327	voluntary market premiums until the plan has sufficient
328	experience as determined by the board to establish an
329	actuarially sound rate for Tier One, at which point the board
330	shall, subject to paragraph (e), adjust the rates, if necessary,
331	to produce actuarially sound rates, provided such rate
332	adjustment shall not take effect prior to January 1, 2007.
333	b.  Tier Two.--
334	(I)  Criteria; rated employers.--An employer that has an
335	experience modification rating shall be included in Tier Two if
336	the employer meets all of the following:
337	(A)  The experience modification is equal to or greater
338	than 1.00 but not greater than 1.10.
339	(B)  The employer had no lost-time claims subsequent to the
340	applicable experience modification rating period.
341	(C)  The total of the employer's medical-only claims
342	subsequent to the applicable experience modification rating
343	period did not exceed 20 percent of premium.
344	(II)  Criteria; non-rated employers.--An employer that does
345	not have any experience modification rating shall be included in
346	Tier Two if the employer is a new business. An employer shall be
347	included in Tier Two if the employer has less than 3 years of
348	loss experience in the 3-year period immediately preceding the
349	inception date or renewal date of the employer's coverage under
350	the plan and the employer meets all of the following:
351	(A)  The employer had no lost-time claims for the 3-year
352	period immediately preceding the inception date or renewal date
353	of the employer's coverage under the plan.
354	(B)  The total of the employer's medical-only claims for
355	the 3-year period immediately preceding the inception date or
356	renewal date of the employer's coverage under the plan did not
357	exceed 20 percent of premium.
358	(C)  The employer is able to provide the plan with a loss
359	history generated by the workers' compensation insurer that
360	provided coverage for the portion or portions of such period
361	during which the employer had secured workers' compensation
362	coverage, except if the employer is not able to produce a loss
363	history due to the insolvency of an insurer, the receiver shall
364	provide to the plan, upon the request of the employer or the
365	employer's agent, a copy of the employer's loss history from the
366	records of the insolvent insurer if the loss history is
367	contained in records of the insurer which are in the possession
368	of the receiver. If the receiver is unable to produce the loss
369	history, the employer may, in lieu of the loss history, submit
370	an affidavit from the employer and the employer's insurance
371	agent setting forth the loss history.
372	(III)  Premiums.--The premiums for Tier Two insureds shall
373	be set at a rate level 50 percent above the comparable voluntary
374	market premiums until the plan has sufficient experience as
375	determined by the board to establish an actuarially sound rate
376	for Tier Two, at which point the board shall, subject to
377	paragraph (e), adjust the rates, if necessary, to produce
378	actuarially sound rates, provided such rate adjustment shall not
379	take effect prior to January 1, 2007.
380	c.  Tier Three.--
381	(I)  Eligibility.--An employer shall be included in Tier
382	Three if the employer does not meet the criteria for Tier One or
383	Tier Two.
384	(II)  Rates.--The board shall establish, subject to
385	paragraph (e), and the plan shall charge, actuarially sound
386	rates for Tier Three insureds.
387	23.  For Tier One or Tier Two employers which employ no
388	nonexempt employees or which report payroll which is less than
389	the minimum wage hourly rate for one full-time employee for 1
390	year at 40 hours per week, the plan shall establish actuarially
391	sound premiums, provided, however, that the premiums may not
392	exceed $2,500. These premiums shall be in addition to the fee
393	specified in subparagraph 26. When the plan establishes
394	actuarially sound rates for all employers in Tier One and Tier
395	Two, the premiums for employers referred to in this paragraph
396	are no longer subject to the $2,500 cap.
397	24.  Provide for a depopulation program to reduce the
398	number of insureds in the plan. If an employer insured through
399	the plan is offered coverage from a voluntary market carrier:
400	a.  During the first 30 days of coverage under the plan;
401	b.  Before a policy is issued under the plan;
402	c.  By issuance of a policy upon expiration or cancellation
403	of the policy under the plan; or
404	d.  By assumption of the plan's obligation with respect to
405	an in-force policy, that employer is no longer eligible for
406	coverage through the plan. The premium for risks assumed by the
407	voluntary market carrier must be no greater than the premium the
408	insured would have paid under the plan, and shall be adjusted
409	upon renewal to reflect changes in the plan rates and the tier
410	for which the insured would qualify as of the time of renewal.
411	The insured may be charged such premiums only for the first 3
412	years of coverage in the voluntary market. A premium under this
413	subparagraph is deemed approved and is not an excess premium for
414	purposes of s. 627.171.
415	25.  Require that policies issued and applications must
416	include a notice that the policy could be replaced by a policy
417	issued from a voluntary market carrier and that, if an offer of
418	coverage is obtained from a voluntary market carrier, the
419	policyholder is no longer eligible for coverage through the
420	plan. The notice must also specify that acceptance of coverage
421	under the plan creates a conclusive presumption that the
422	applicant or policyholder is aware of this potential.
423	26.  Require that each application for coverage and each
424	renewal premium be accompanied by a nonrefundable fee of $475 to
425	cover costs of administration and fraud prevention. The board
426	may, with the prior approval of the office, increase the amount
427	of the fee pursuant to a rate filing to reflect increased costs
428	of administration and fraud prevention. The fee is not subject
429	to commission and is fully earned upon commencement of coverage.
430	(d)1.  The funding of the plan shall include premiums as
431	provided in subparagraph (c)22. and assessments as provided in
432	this paragraph.
433	2.a.  If the board determines that a deficit exists in Tier
434	One or Tier Two or that there is any deficit remaining
435	attributable to any of the plan's former subplans and that the
436	deficit cannot be fully funded by using policyholder surplus
437	attributable to former subplan C or, if the surplus in the
438	former subplan C does not fully fund the deficit and the deficit
439	cannot be fully funded by using any remaining funds in the
440	contingency reserve without the use of deficit assessments, the
441	board shall request the office to levy, by order, a deficit
442	assessment against premiums charged to insureds for workers'
443	compensation insurance by insurers as defined in s. 631.904(5).
444	The office shall issue the order after verifying the amount of
445	the deficit. The assessment shall be specified as a percentage
446	of future premium collections, as recommended by the board and
447	approved by the office. The same percentage shall apply to
448	premiums on all workers' compensation policies issued or renewed
449	during the 12-month period beginning on the effective date of
450	the assessment, as specified in the order.
451	b.  With respect to each insurer collecting premiums that
452	are subject to the assessment, the insurer shall collect the
453	assessment at the same time as the insurer collects the premium
454	payment for each policy and shall remit the assessments
455	collected to the plan as provided in the order issued by the
456	office. The office shall verify the accurate and timely
457	collection and remittance of deficit assessments and shall
458	report such information to the board. Each insurer collecting
459	assessments shall provide such information with respect to
460	premiums and collections as may be required by the office to
461	enable the office to monitor and audit compliance with this
462	paragraph.
463	c.  Deficit assessments are not considered part of an
464	insurer's rate, are not premium, and are not subject to the
465	premium tax, to the assessments under ss. 440.49 and 440.51, to
466	the surplus lines tax, to any fees, or to any commissions. The
467	deficit assessment imposed shall become plan funds at the moment
468	of collection and shall not constitute income to the insurer for
469	any purpose, including financial reporting on the insurer's
470	income statement. An insurer is liable for all assessments that
471	the insurer collects and must treat the failure of an insured to
472	pay an assessment as a failure to pay premium. An insurer is not
473	liable for uncollectible assessments.
474	d.  When an insurer is required to return unearned premium,
475	the insurer shall also return any collected assessments
476	attributable to the unearned premium.
477	e.  Deficit assessments as described in this subparagraph
478	shall not be levied after July 1, 2011 2007.
479	3.a.  All policies issued to Tier Three insureds shall be
480	assessable. All Tier Three assessable policies must be clearly
481	identified as assessable by containing, in contrasting color and
482	in not less than 10-point type, the following statement:
483	"This is an assessable policy. If the plan is unable to pay its
484	obligations, policyholders will be required to contribute on a
485	pro rata earned premium basis the money necessary to meet any
486	assessment levied."
487	b.  The board may from time to time assess Tier Three
488	insureds to whom the plan has issued assessable policies for the
489	purpose of funding plan deficits. Any such assessment shall be
490	based upon a reasonable actuarial estimate of the amount of the
491	deficit, taking into account the amount needed to fund medical
492	and indemnity reserves and reserves for incurred but not
493	reported claims, and allowing for general administrative
494	expenses, the cost of levying and collecting the assessment, a
495	reasonable allowance for estimated uncollectible assessments,
496	and allocated and unallocated loss adjustment expenses.
497	c.  Each Tier Three insured's share of a deficit shall be
498	computed by applying to the premium earned on the insured's
499	policy or policies during the period to be covered by the
500	assessment the ratio of the total deficit to the total premiums
501	earned during such period upon all policies subject to the
502	assessment. If one or more Tier Three insureds fail to pay an
503	assessment, the other Tier Three insureds shall be liable on a
504	proportionate basis for additional assessments to fund the
505	deficit. The plan may compromise and settle individual
506	assessment claims without affecting the validity of or amounts
507	due on assessments levied against other insureds. The plan may
508	offer and accept discounted payments for assessments which are
509	promptly paid. The plan may offset the amount of any unpaid
510	assessment against unearned premiums which may otherwise be due
511	to an insured. The plan shall institute legal action when
512	necessary and appropriate to collect the assessment from any
513	insured who fails to pay an assessment when due.
514	d.  The venue of a proceeding to enforce or collect an
515	assessment or to contest the validity or amount of an assessment
516	shall be in the Circuit Court of Leon County.
517	e.  If the board finds that a deficit in Tier Three exists
518	for any period and that an assessment is necessary, the board
519	shall certify to the office the need for an assessment. No
520	sooner than 30 days after the date of such certification, the
521	board shall notify in writing each insured who is to be assessed
522	that an assessment is being levied against the insured, and
523	informing the insured of the amount of the assessment, the
524	period for which the assessment is being levied, and the date by
525	which payment of the assessment is due. The board shall
526	establish a date by which payment of the assessment is due,
527	which shall be no sooner than 30 days nor later than 120 days
528	after the date on which notice of the assessment is mailed to
529	the insured.
530	f.  Whenever the board makes a determination that the plan
531	does not have a sufficient cash basis to meet 6 3 months of
532	projected cash needs due to a deficit in Tier Three, the board
533	may request the department to transfer funds from the Workers'
534	Compensation Administration Trust Fund to the plan in an amount
535	sufficient to fund the difference between the amount available
536	and the amount needed to meet a 6-month 3-month projected cash
537	need as determined by the board and verified by the office,
538	subject to the approval of the Legislative Budget Commission. If
539	the Legislative Budget Commission approves a transfer of funds
540	under this sub-subparagraph, the plan shall report to the
541	Legislature the transfer of funds and the Legislature shall
542	review the plan during the next legislative session or the
543	current legislative session, if the transfer occurs during a
544	legislative session. This sub-subparagraph shall not apply until
545	the plan determines and the office verifies that assessments
546	collected by the plan pursuant to sub-subparagraph b. are
547	insufficient to fund the deficit in Tier Three and to meet 6 3
548	months of projected cash needs.
549	4.  The plan may offer rating, dividend plans, and other
550	plans to encourage loss prevention programs.
551	(e)  For rates and rating plans effective on or after
552	January 1, 2007, the plan shall be subject to the same
553	requirements of this part for the filing and approval of its
554	rates and rating plans as apply to workers' compensation
555	insurers, except as otherwise provided establish and use its
556	rates and rating plans, and the plan may establish and use
557	changes in rating plans at any time, but no more frequently than
558	two times per any rating class for any calendar year. By
559	December 1, 1993, and December 1 of each year thereafter, except
560	as provided in subparagraph (c)22., the board shall establish
561	and use actuarially sound rates for use by the plan to assure
562	that the plan is self-funding while those rates are in effect.
563	Such rates and rating plans must be filed with the office within
564	30 calendar days after their effective dates, and shall be
565	considered a "use and file" filing. Any disapproval by the
566	office must have an effective date that is at least 60 days from
567	the date of disapproval of the rates and rating plan and must
568	have prospective effect only. The plan may not be subject to any
569	order by the office to return to policyholders any portion of
570	the rates disapproved by the office. The office may not
571	disapprove any rates or rating plans unless it demonstrates that
572	such rates and rating plans are excessive, inadequate, or
573	unfairly discriminatory.
574	(f)  No later than June 1 of each year, the plan shall
575	obtain an independent actuarial certification of the results of
576	the operations of the plan for prior years, and shall furnish a
577	copy of the certification to the office. If, after the effective
578	date of the plan, the projected ultimate incurred losses and
579	expenses and dividends for prior years exceed collected
580	premiums, accrued net investment income, and prior assessments
581	for prior years, the certification is subject to review and
582	approval by the office before it becomes final.
583	(g)  Whenever a deficit exists, the plan shall, within 90
584	days, provide the office with a program to eliminate the deficit
585	within a reasonable time. The deficit may be funded through
586	increased premiums charged to insureds of the plan for
587	subsequent years, through the use of policyholder surplus
588	attributable to any year, including policyholder surplus in
589	former subplan C as authorized in subparagraph (d)2., through
590	the use of assessments as provided in subparagraph (d)2., and
591	through assessments on assessable policies as provided in
592	subparagraph (d)3. Policyholders in former subplan C shall not
593	be subject to any assessments.
594	(h)  Any premium or assessments collected by the plan in
595	excess of the amount necessary to fund projected ultimate
596	incurred losses and expenses of the plan and not paid to
597	insureds of the plan in conjunction with loss prevention or
598	dividend programs shall be retained by the plan for future use.
599	Any state funds received by the plan in excess of the amount
600	necessary to fund deficits in subplan D or any tier shall be
601	returned to the state.
602	(i)  The decisions of the board of governors do not
603	constitute final agency action and are not subject to chapter
604	120.
605	(j)  Policies for insureds shall be issued by the plan.
606	(k)  The plan created under this subsection is liable only
607	for payment for losses arising under policies issued by the plan
608	with dates of accidents occurring on or after January 1, 1994.
609	(l)  Plan losses are the sole and exclusive responsibility
610	of the plan, and payment for such losses must be funded in
611	accordance with this subsection and must not come, directly or
612	indirectly, from insurers or any guaranty association for such
613	insurers.
614	(m)  Senior managers and officers, as defined in the plan
615	of operation, and members of the board of governors shall be
616	subject to part III of chapter 112, including, but not limited
617	to, the code of ethics and public disclosure and reporting of
618	financial interests under s. 112.3145. Senior managers,
619	officers, and board members are also required to file such
620	disclosures with the Office of Insurance Regulation. The
621	executive director of the plan or his or her designee shall
622	notify newly appointed and existing appointed members of the
623	board of governors, senior managers, and officers of their duty
624	to comply with the reporting requirements of part III of chapter
625	112. At least quarterly, the executive director of the plan or
626	his or her designee shall submit to the Commission on Ethics a
627	list of names of the senior managers, officers, and members of
628	the board of governors that are subject to the public disclosure
629	requirements under s. 112.3145 Each joint underwriting plan or
630	association created under this section is not a state agency,
631	board, or commission. However, for the purposes of s. 199.183(1)
632	only, the joint underwriting plan is a political subdivision of
633	the state and is exempt from the corporate income tax.
634	(n)  On or before July 1 of each year, employees of the
635	plan are required to sign and submit a statement to the plan
636	attesting that they do not have a conflict of interest, as
637	defined in part III of chapter 112. As a condition of
638	employment, all prospective employees are required to sign and
639	submit a conflict-of-interest statement to the plan Each joint
640	underwriting plan or association may elect to pay premium taxes
641	on the premiums received on its behalf or may elect to have the
642	member insurers to whom the premiums are allocated pay the
643	premium taxes if the member insurer had written the policy. The
644	joint underwriting plan or association shall notify the member
645	insurers and the Department of Revenue by January 15 of each
646	year of its election for the same year. As used in this
647	paragraph, the term "premiums received" means the consideration
648	for insurance, by whatever name called, but does not include any
649	policy assessment or surcharge received by the joint
650	underwriting association as a result of apportioning losses or
651	deficits of the association pursuant to this section.
652	(o)  Any senior manager or officer of the plan who is
653	employed by the plan as of January 1, 2007, regardless of the
654	date of hire, and who subsequently retires or terminates
655	employment is prohibited from representing another person or
656	entity before the plan for 2 years after retirement or
657	termination of employment from the plan.
658	(p)  No part of the income of the plan may inure to the
659	benefit of any private person.
660	(q)  Notwithstanding ss. 112.3148 and 112.3149 or other
661	provisions of law, an employee or board member may not knowingly
662	accept, directly or indirectly, any expenditure or gift from a
663	person or entity, or an employee or representative of such
664	person or entity, that has a contractual relationship with the
665	plan or who is under consideration for a contract. An employee
666	or board member that fails to comply with this paragraph is
667	subject to penalties provided under ss. 112.317 and 112.3173.
668	(r)  Nothing contained in this section shall be construed
669	as barring the plan from providing insurance coverage to any
670	employer with whom a former employee of the plan is affiliated
671	or employing or reemploying any former employee of the plan in a
672	part-time, full-time, temporary, or permanent capacity, so long
673	as such employment does not violate any provision of part III of
674	chapter 112.
675	(s)(o)  Neither the plan nor any member of the board of
676	governors is liable for monetary damages to any person for any
677	statement, vote, decision, or failure to act, regarding the
678	management or policies of the plan, unless:
679	1.  The member breached or failed to perform her or his
680	duties as a member; and
681	2.  The member's breach of, or failure to perform, duties
682	constitutes:
683	a.  A violation of the criminal law, unless the member had
684	reasonable cause to believe her or his conduct was not unlawful.
685	A judgment or other final adjudication against a member in any
686	criminal proceeding for violation of the criminal law estops
687	that member from contesting the fact that her or his breach, or
688	failure to perform, constitutes a violation of the criminal law;
689	but does not estop the member from establishing that she or he
690	had reasonable cause to believe that her or his conduct was
691	lawful or had no reasonable cause to believe that her or his
692	conduct was unlawful;
693	b.  A transaction from which the member derived an improper
694	personal benefit, either directly or indirectly; or
695	c.  Recklessness or any act or omission that was committed
696	in bad faith or with malicious purpose or in a manner exhibiting
697	wanton and willful disregard of human rights, safety, or
698	property. For purposes of this sub-subparagraph, the term
699	"recklessness" means the acting, or omission to act, in
700	conscious disregard of a risk:
701	(I)  Known, or so obvious that it should have been known,
702	to the member; and
703	(II)  Known to the member, or so obvious that it should
704	have been known, to be so great as to make it highly probable
705	that harm would follow from such act or omission.
706	(t)(p)  No insurer shall provide workers' compensation and
707	employer's liability insurance to any person who is delinquent
708	in the payment of premiums, assessments, penalties, or
709	surcharges owed to the plan or to any person who is an
710	affiliated person of a person who is delinquent in the payment
711	of premiums, assessments, penalties, or surcharges owed to the
712	plan. For purposes of this paragraph, the term "affiliated
713	person" of another person means:
714	1.  The spouse of such other natural person;
715	2.  Any person who directly or indirectly owns or controls,
716	or holds with the power to vote, 5 percent or more of the
717	outstanding voting securities of such other person;
718	3.  Any person who directly or indirectly owns 5 percent or
719	more of the outstanding voting securities that are directly or
720	indirectly owned or controlled, or held with the power to vote,
721	by such other person;
722	4.  Any person or group of persons who directly or
723	indirectly control, are controlled by, or are under common
724	control with such other person;
725	5.  Any officer, director, trustee, partner, owner,
726	manager, joint venturer, or employee, or other person performing
727	duties similar to persons in those positions, of such other
728	persons; or
729	6.  Any person who has an officer, director, trustee,
730	partner, or joint venturer in common with such other person.
731	(u)(q)  Effective July 1, 2004, the plan is exempt from the
732	premium tax under s. 624.509 and any assessments under ss.
733	440.49 and 440.51.
734	(v)  The Office of Insurance Regulation shall periodically
735	perform a comprehensive market conduct examination of the plan
736	to determine compliance with its plan of operation and internal
737	operating policies and procedures.
738	(w)  Upon dissolution of a plan, the assets of the plan
739	shall be applied first to pay all debts, liabilities, and
740	obligations of the plan, including the establishment of
741	reasonable reserves for any contingent liabilities or
742	obligations, and all remaining assets of the plan shall become
743	property of the state and shall be deposited in the Workers'
744	Compensation Administration Trust Fund. However, dissolution
745	shall not take effect as long as the plan has financial
746	obligations outstanding unless adequate provision has been made
747	for the payment of financial obligations pursuant to the
748	documents authorizing the financial obligations.
749	(6)  Each joint underwriting plan or association created
750	under this section is not a state agency, board, or commission.
751	However, for the purposes of s. 199.183(1) only, the joint
752	underwriting plan created under subsection (5) is a political
753	subdivision of the state and is exempt from the corporate income
754	tax.
755	(7)  Each joint underwriting plan or association may elect
756	to pay premium taxes on the premiums received on its behalf or
757	may elect to have the member insurers to whom the premiums are
758	allocated pay the premium taxes if the member insurer had
759	written the policy. The joint underwriting plan or association
760	shall notify the member insurers and the Department of Revenue
761	by January 15 of each year of its election for the same year. As
762	used in this paragraph, the term "premiums received" means the
763	consideration for insurance, by whatever name called, but does
764	not include any policy assessment or surcharge received by the
765	joint underwriting association as a result of apportioning
766	losses or deficits of the association under this section.
767	(8)(6)  As used in this section and ss. 215.555 and
768	627.351, the term "collateral protection insurance" means
769	commercial property insurance of which a creditor is the primary
770	beneficiary and policyholder and which protects or covers an
771	interest of the creditor arising out of a credit transaction
772	secured by real or personal property. Initiation of such
773	coverage is triggered by the mortgagor's failure to maintain
774	insurance coverage as required by the mortgage or other lending
775	document. Collateral protection insurance is not residential
776	coverage.
777	(9)(7)(a)  The Florida Automobile Joint Underwriting
778	Association created under this section shall be deemed to have
779	appointed its general manager as its agent to receive service of
780	all legal process issued against the association in any civil
781	action or proceeding in this state. Process so served shall be
782	valid and binding upon the insurer.
783	(b)  Service of process upon the association's general
784	manager as the association's agent pursuant to such an
785	appointment shall be the sole method of service of process upon
786	the association.
787	Section 2.  Section 2 of chapter 2004-266, Laws of Florida,
788	is amended to read:
789	Section 2.  Notwithstanding the provisions of ss. 440.50
790	and 440.51, Florida Statutes, subject to the following
791	procedures and approval, the Department of Financial Services
792	may request transfer funds from the Workers' Compensation
793	Administration Trust Fund within the Department of Financial
794	Services to the workers' compensation joint underwriting plan
795	provided in s. 627.311(5), Florida Statutes.
796	(1)  The department shall establish a contingency reserve
797	within the Workers' Compensation Administration Trust Fund, from
798	which the department is authorized to expend funds as provided
799	in the subsection, in an amount not to exceed $15 million to be
800	released only upon the approval of a budget amendment presented
801	to the Legislative Budget Commission. For actuarial deficits
802	projected for policyholders, based on actuarial best estimates,
803	covered in subplan D "D" prior to July 1, 2004, or Tier One or
804	Tier Two and upon verification by the Office of Insurance
805	Regulation, the plan is authorized to request and the department
806	is authorized to submit a budget amendment in an amount not to
807	exceed $15 million for the purpose of funding deficits in the
808	subplan or the tier subplan "D".
809	(2)  After the contingency reserve is established, whenever
810	the board determines the subplan or the tier subplan "D" does
811	not have a sufficient cash basis to meet a 6-month period 3
812	months of projected cash needs due to any deficit in the subplan
813	or the tier subplan "D," remaining after accessing any
814	policyholder surplus attributable to former subplan C, the board
815	is authorized to request the department to transfer funds from
816	the contingency reserve fund within the Workers' Compensation
817	Administration Trust Fund to the plan in an amount sufficient to
818	fund the difference between the amount available and the amount
819	needed to meet the subplan's or the tier's subplan "D"'s
820	projected cash need for the subsequent 6-month 3-month period.
821	The board and the office must first certify to the Department of
822	Financial Services that there is not sufficient cash within the
823	subplan or the tier subplan "D" to meet the projected cash needs
824	in the subplan or the tier subplan "D" within the subsequent 6-
825	month period 3 months. The amount requested for transfer to the
826	subplan or tier subplan "D" may not exceed the difference
827	between the amount available within the subplan or the tier
828	subplan "D" and the amount needed to meet the subplan's or the
829	tier's subplan "D"'s projected cash need for the subsequent 6-
830	month 3-month period, as jointly certified by the board and the
831	Office of Insurance Regulation to the Department of Financial
832	Services, attributable to the former subplan or tier subplan "D"
833	policyholders. The Department of Financial Services may submit a
834	budget amendment to request release of funds from the Workers'
835	Compensation Administration Trust Fund, subject to the approval
836	of the Legislative Budget Commission. The board will provide,
837	for review of the Legislative Budget Commission, information on
838	the reasonableness of the plan's administration, including, but
839	not limited to, the plan of operations and costs, claims costs,
840	claims administration costs, overhead costs, claims reserves,
841	and the latest report submitted on administration cost reduction
842	alternatives as required in s. 627.311(5)(c)17., Florida
843	Statutes.
844	(3)  This section expires July 1, 2011 2007.
845	Section 3.  No later than January 1, 2007, the workers'
846	compensation joint underwriting plan provided for in s.
847	627.311(5), Florida Statutes, shall submit a request to the
848	Internal Revenue Service for a letter ruling or determination on
849	the plan's eligibility as a tax-exempt organization under s.
850	501(c)(3) of the Internal Revenue Code.
851	Section 4.  This act shall take effect July 1, 2006.

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