Senate Bill sb1894er

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  1                                 

  2         An act relating to the Florida Workers'

  3         Compensation Joint Underwriting Association,

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

  5         requirements for the joint underwriting plan of

  6         insurers which operates as the association;

  7         revising the membership of the board of

  8         governors that oversees operation of the joint

  9         underwriting plan; revising restrictions on who

10         may serve on the board; providing for the

11         continuous review of the plan; requiring that

12         the market-assistance plan be periodically

13         reviewed and updated; providing guidelines for

14         procurement of goods and services, including

15         legal services; authorizing the use of surplus

16         funds of former plan C; requiring that excess

17         funds received by the plan be returned to the

18         state; providing for the applicability of

19         specified statutes regulating ethical

20         standards; requiring annual statements by plan

21         employees certifying that they do not have

22         conflicts of interest; prescribing limits on

23         representing persons or entities before the

24         plan by former senior managers or officers of

25         the plan; prohibiting any part of the plan's

26         income from inuring to the benefit of a private

27         individual; prohibiting employees and board

28         members from accepting expenditures from a

29         person or an entity; providing applicability;

30         requiring periodic comprehensive market

31         examinations; prescribing the disposition of


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 1         assets of the plan upon dissolution; requiring

 2         that the plan submit a request for an Internal

 3         Revenue Service letter concerning the plan's

 4         eligibility as a tax-exempt entity; providing

 5         an effective date.

 6  

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

 8  

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

10  627.311, Florida Statutes, are amended to read:

11         627.311  Joint underwriters and joint reinsurers;

12  public records and public meetings exemptions.--

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

14  insurers, approve a joint underwriting plan of insurers which

15  shall operate as the Florida Workers' Compensation Joint

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

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

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

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

20  mutual insurers authorized under s. 628.6011, and insurers

21  licensed to write workers' compensation and employer's

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

23  to provide workers' compensation and employer's liability

24  insurance to applicants who are required by law to maintain

25  workers' compensation and employer's liability insurance and

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

27  procure such insurance through the voluntary market. Except as

28  provided herein, the plan must have actuarially sound rates

29  that ensure that the plan is self-supporting.

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

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


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

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

 3  Services Commission and shall serve at the pleasure of the

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

 5         1.  Three members appointed by the Financial Services

 6  Commission. Each member appointed by the commission shall

 7  serve at the pleasure of the commission;

 8         1.2.  Two representatives of the 20 domestic insurers,

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

10  direct premiums written in this state for workers'

11  compensation and employer's liability insurance who, which

12  shall be appointed by the commission from a list of five

13  nominees for each vacancy submitted elected by those 20

14  domestic insurers. The commission may reject all of the

15  nominees recommended for a position and request that the

16  insurers submit a new list of five different recommended

17  nominees for the position who have not previously been

18  recommended by the insurers;

19         2.3.  Two representatives of the 20 foreign insurers as

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

21  premiums written in this state for workers' compensation and

22  employer's liability insurance who, which shall be appointed

23  by the commission from a list of five nominees for each

24  vacancy submitted elected by those 20 foreign insurers. The

25  commission may reject all of the nominees recommended for a

26  position and request that the insurers submit a new list of

27  five different recommended nominees for the position who have

28  not previously been recommended by the insurers;

29         3.4.  One representative of person appointed by the

30  largest property and casualty insurance agents' association in

31  this state who shall be appointed by the commission from a


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 1  list of five nominees for each vacancy submitted by the

 2  association. The commission may reject all of the nominees

 3  recommended for a position and request that the association

 4  submit a new list of five different recommended nominees for

 5  the position who have not previously been recommended by the

 6  association; and

 7         4.5.  The consumer advocate appointed under s. 627.0613

 8  or the consumer advocate's designee; and.

 9         5.  Three other persons appointed by the commission.

10  

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

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

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

14  appointment for the unexpired portion of the term. The

15  Financial Services Commission shall designate a member of the

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

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

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

19  service company or third-party administrator which provides

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

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

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

23  subject to chapters chapter 119 and 286, unless otherwise

24  exempted by law.

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

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

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

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

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

30  the office determines that conditions have changed since

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


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

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

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

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

 5  shall:

 6         1.  Authorize the board to engage in the activities

 7  necessary to implement this subsection, including, but not

 8  limited to, borrowing money.

 9         2.  Develop criteria for eligibility for coverage by

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

11  by at least two insurers which reasonably assures that

12  insureds covered under the plan are unable to acquire coverage

13  in the voluntary market.

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

15  time of the application for coverage that the application is

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

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

18  self-insurance fund, or assessable mutual insurer through

19  another agent at a lower cost.

20         4.  Establish programs to encourage insurers to provide

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

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

23         a.  Establishing procedures for an insurer to use in

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

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

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

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

28  form developed by the plan.

29         b.  Developing forms and procedures that provide an

30  insurer with the information necessary to determine whether

31  


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 1  the insurer wants to write particular applicants to the plan

 2  or insureds of the plan.

 3         c.  Developing procedures for notice to the plan and

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

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

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

 7  procedures for the selection of an insuring entity by the

 8  applicant or insured of the plan.

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

10  the placement of employers. All applications for coverage in

11  the plan received 45 days before the effective date for

12  coverage shall be processed through the market-assistance

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

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

15  must be reviewed and updated periodically finalized by January

16  1, 1994.

17         5.  Provide for policy and claims services to the

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

19  insureds in the voluntary market.

20         6.  Provide for the review of applications for coverage

21  with the plan for reasonableness and accuracy, using any

22  available historic information regarding the insured.

23         7.  Provide for procedures for auditing insureds of the

24  plan which are based on reasonable business judgment and are

25  designed to maximize the likelihood that the plan will collect

26  the appropriate premiums.

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

28  refuse future coverage for any insured that submits a

29  fraudulent application to the plan or provides fraudulent or

30  grossly erroneous records to the plan or to any service

31  


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

 2  plan.

 3         9.  Establish service standards for agents who submit

 4  business to the plan.

 5         10.  Establish criteria and procedures to prohibit any

 6  agent who does not adhere to the established service standards

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

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

 9         11.  Provide for the establishment of reasonable safety

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

11  plan must participate in the safety program.

12         12.  Authorize the plan to terminate the coverage of

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

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

15  application, is delinquent in payments of workers'

16  compensation or employer's liability insurance premiums or

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

18  commercial self-insurance fund, or assessable mutual insurer

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

20  to substantially comply with any safety programs recommended

21  by the plan.

22         13.  Authorize the board of governors to provide the

23  goods and services required by the plan through staff employed

24  by the plan, through reasonably compensated service providers

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

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

27  and service providers.

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

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

30  quotes, telephone quotes, or informal bids, whenever

31  practical. The procurement of goods or services valued over


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 1  $25,000 are subject to competitive solicitation, except in

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

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

 4  services are exempted from competitive-solicitation

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

 6  sole-sourcing or emergency procurement must be documented.

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

 8  subject to board approval.

 9         b.  The board shall determine whether it is more

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

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

12  plan rather than contracting with outside counsel. In making

13  such determination, the board shall document its findings and

14  shall consider the expertise needed; whether time commitments

15  exceed in-house staff resources; whether local representation

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

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

18  board determines are relevant.

19         14.  Provide for service standards for service

20  providers, methods of determining adherence to those service

21  standards, incentives and disincentives for service, and

22  procedures for terminating contracts for service providers

23  that fail to adhere to service standards.

24         15.  Provide procedures for selecting service providers

25  and standards for qualification as a service provider that

26  reasonably assure that any service provider selected will

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

28  providing the specified services in the manner required.

29         16.  Provide for reasonable accounting and

30  data-reporting practices.

31  


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 1         17.  Provide for annual review of costs associated with

 2  the administration and servicing of the policies issued by the

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

 4         18.  Authorize the acquisition of such excess insurance

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

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

 7  date specified by the office and containing such information

 8  as the office reasonably requires.

 9         20.  Establish multiple rating plans for various

10  classifications of risk which reflect risk of loss, hazard

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

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

13  preferred-rating plan to accommodate small-premium

14  policyholders with good experience as defined in

15  sub-subparagraph 22.a.

16         21.  Establish agent commission schedules.

17         22.  For employers otherwise eligible for coverage

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

19  criteria and subject to the rate limitations specified in this

20  subparagraph.

21         a.  Tier One.--

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

23  an experience modification rating shall be included in Tier

24  One if the employer meets all of the following:

25         (A)  The experience modification is below 1.00.

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

27  the applicable experience modification rating period.

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

29  subsequent to the applicable experience modification rating

30  period did not exceed 20 percent of premium.

31  


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

 2  does not have an experience modification rating shall be

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

 4  following:

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

 6  3-year period immediately preceding the inception date or

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

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

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

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

11  not exceed 20 percent of premium.

12         (C)  The employer has secured workers' compensation

13  coverage for the entire 3-year period immediately preceding

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

15  under the plan.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

31  comparable voluntary market premiums until the plan has


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 1  sufficient experience as determined by the board to establish

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

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

 4  necessary, to produce actuarially sound rates, provided such

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

 6  2007.

 7         b.  Tier Two.--

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

 9  an experience modification rating shall be included in Tier

10  Two if the employer meets all of the following:

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

12  than 1.00 but not greater than 1.10.

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

14  the applicable experience modification rating period.

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

16  subsequent to the applicable experience modification rating

17  period did not exceed 20 percent of premium.

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

19  does not have any experience modification rating shall be

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

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

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

23  immediately preceding the inception date or renewal date of

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

25  all of the following:

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

27  3-year period immediately preceding the inception date or

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

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

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

31  


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

 2  not exceed 20 percent of premium.

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

 4  loss history generated by the workers' compensation insurer

 5  that provided coverage for the portion or portions of such

 6  period during which the employer had secured workers'

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

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

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

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

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

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

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

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

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

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

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

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

19  voluntary market premiums until the plan has sufficient

20  experience as determined by the board to establish an

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

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

23  necessary, to produce actuarially sound rates, provided such

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

25  2007.

26         c.  Tier Three.--

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

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

29  One or Tier Two.

30  

31  


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

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

 3  rates for Tier Three insureds.

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

 5  nonexempt employees or which report payroll which is less than

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

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

 8  actuarially sound premiums, provided, however, that the

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

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

11  plan establishes actuarially sound rates for all employers in

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

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

14         24.  Provide for a depopulation program to reduce the

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

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

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

18  plan;

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

20         c.  By issuance of a policy upon expiration or

21  cancellation of the policy under the plan; or

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

23  to an in-force policy,

24  

25  that employer is no longer eligible for coverage through the

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

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

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

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

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

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


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

 2  this subparagraph is deemed approved and is not an excess

 3  premium for purposes of s. 627.171.

 4         25.  Require that policies issued and applications must

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

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

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

 8  policyholder is no longer eligible for coverage through the

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

10  under the plan creates a conclusive presumption that the

11  applicant or policyholder is aware of this potential.

12         26.  Require that each application for coverage and

13  each renewal premium be accompanied by a nonrefundable fee of

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

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

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

17  increased costs of administration and fraud prevention. The

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

19  commencement of coverage.

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

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

22  in this paragraph.

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

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

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

26  deficit cannot be fully funded by using policyholder surplus

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

28  former subplan C does not fully fund the deficit without the

29  use of deficit assessments, the board shall request the office

30  to levy, by order, a deficit assessment against premiums

31  charged to insureds for workers' compensation insurance by


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 1  insurers as defined in s. 631.904(5). The office shall issue

 2  the order after verifying the amount of the deficit. The

 3  assessment shall be specified as a percentage of future

 4  premium collections, as recommended by the board and approved

 5  by the office. The same percentage shall apply to premiums on

 6  all workers' compensation policies issued or renewed during

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

 8  assessment, as specified in the order.

 9         b.  With respect to each insurer collecting premiums

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

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

12  premium payment for each policy and shall remit the

13  assessments collected to the plan as provided in the order

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

15  timely collection and remittance of deficit assessments and

16  shall report such information to the board. Each insurer

17  collecting assessments shall provide such information with

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

19  office to enable the office to monitor and audit compliance

20  with this paragraph.

21         c.  Deficit assessments are not considered part of an

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

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

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

25  The deficit assessment imposed shall become plan funds at the

26  moment of collection and shall not constitute income to the

27  insurer for any purpose, including financial reporting on the

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

29  assessments that the insurer collects and must treat the

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

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 1  premium. An insurer is not liable for uncollectible

 2  assessments.

 3         d.  When an insurer is required to return unearned

 4  premium, the insurer shall also return any collected

 5  assessments attributable to the unearned premium.

 6         e.  Deficit assessments as described in this

 7  subparagraph shall not be levied after July 1, 2012 2007.

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

 9  be assessable. All Tier Three assessable policies must be

10  clearly identified as assessable by containing, in contrasting

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

12  statement:

13  

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

15         unable to pay its obligations, policyholders

16         will be required to contribute on a pro rata

17         earned premium basis the money necessary to

18         meet any assessment levied."

19  

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

21  insureds to whom the plan has issued assessable policies for

22  the purpose of funding plan deficits. Any such assessment

23  shall be based upon a reasonable actuarial estimate of the

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

25  to fund medical and indemnity reserves and reserves for

26  incurred but not reported claims, and allowing for general

27  administrative expenses, the cost of levying and collecting

28  the assessment, a reasonable allowance for estimated

29  uncollectible assessments, and allocated and unallocated loss

30  adjustment expenses.

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

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

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

 4  assessment the ratio of the total deficit to the total

 5  premiums earned during such period upon all policies subject

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

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

 8  liable on a proportionate basis for additional assessments to

 9  fund the deficit. The plan may compromise and settle

10  individual assessment claims without affecting the validity of

11  or amounts due on assessments levied against other insureds.

12  The plan may offer and accept discounted payments for

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

14  amount of any unpaid assessment against unearned premiums

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

16  institute legal action when necessary and appropriate to

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

18  assessment when due.

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

20  assessment or to contest the validity or amount of an

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

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

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

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

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

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

27  assessed that an assessment is being levied against the

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

29  assessment, the period for which the assessment is being

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

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


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

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

 3  assessment is mailed to the insured.

 4         f.  Whenever the board makes a determination that the

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

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

 7  board may request the department to transfer funds from the

 8  Workers' Compensation Administration Trust Fund to the plan in

 9  an amount sufficient to fund the difference between the amount

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

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

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

13  Commission. If the Legislative Budget Commission approves a

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

15  report to the Legislature the transfer of funds and the

16  Legislature shall review the plan during the next legislative

17  session or the current legislative session, if the transfer

18  occurs during a legislative session. This sub-subparagraph

19  shall not apply until the plan determines and the office

20  verifies that assessments collected by the plan pursuant to

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

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

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

24  other plans to encourage loss prevention programs.

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

26  January 1, 2008, the plan shall establish and use its rates

27  and rating plans, and the plan may establish and use changes

28  in rating plans at any time, but no more frequently than two

29  times per any rating class for any calendar year. By December

30  1, 1993, and December 1 of each year thereafter, except as

31  provided in subparagraph (c)22., the board shall establish and


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 1  use actuarially sound rates for use by the plan to assure that

 2  the plan is self-funding while those rates are in effect. Such

 3  rates and rating plans must be filed with the office within 30

 4  calendar days after their effective dates, and shall be

 5  considered a "use and file" filing. Any disapproval by the

 6  office must have an effective date that is at least 60 days

 7  from the date of disapproval of the rates and rating plan and

 8  must have prospective effect only. The plan shall may not be

 9  subject to any order by the office to return to policyholders

10  any portion of the rates disapproved by the office. The office

11  may not disapprove any rates or rating plans unless it

12  demonstrates that such rates and rating plans are excessive,

13  inadequate, or unfairly discriminatory.

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

15  obtain an independent actuarial certification of the results

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

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

18  the effective date of the plan, the projected ultimate

19  incurred losses and expenses and dividends for prior years

20  exceed collected premiums, accrued net investment income, and

21  prior assessments for prior years, the certification is

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

23  final.

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

25  90 days, provide the office with a program to eliminate the

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

27  through increased premiums charged to insureds of the plan for

28  subsequent years, through the use of policyholder surplus

29  attributable to any year, including policyholder surplus in

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

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


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 1  through assessments on assessable policies as provided in

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

 3  former subplan C is not subject to any assessments that are

 4  attributable to deficits in former subplan C.

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

 6  in excess of the amount necessary to fund projected ultimate

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

 8  insureds of the plan in conjunction with loss prevention or

 9  dividend programs shall be retained by the plan for future

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

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

12  shall be returned to the state.

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

14  constitute final agency action and are not subject to chapter

15  120.

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

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

18  only for payment for losses arising under policies issued by

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

20  1, 1994.

21         (l)  Plan losses are the sole and exclusive

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

23  be funded in accordance with this subsection and must not

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

25  association for such insurers.

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

27  plan of operation, and members of the board of governors are

28  subject to the provisions of ss. 112.313, 112.3135, 112.3143,

29  112.3145, 112.316, and 112.317. Senior managers, officers, and

30  board members are also required to file such disclosures with

31  the Commission on Ethics and the Office of Insurance


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

 2  designee shall notify each newly appointed and existing

 3  appointed member of the board of governors, senior manager,

 4  and officer of their duty to comply with the reporting

 5  requirements of s. 112.345. At least quarterly, the executive

 6  director of the plan or his or her designee shall submit to

 7  the Commission on Ethics a list of names of the senior

 8  managers, officers, and members of the board of governors who

 9  are subject to the public disclosure requirements under s.

10  112.3145. Notwithstanding s. 112.313, an employee, officer,

11  owner, or director of an insurance agency, insurance company,

12  or other insurance entity may be a member of the board of

13  governors unless such employee, officer, owner, or director of

14  an insurance agency, insurance company, other insurance

15  entity, or an affiliate provides policy issuance, policy

16  administration, underwriting, claims handling, or payroll

17  audit services. Notwithstanding s. 112.3143, such board member

18  may not participate in or vote on a matter if the insurance

19  agency, insurance company, or other insurance entity would

20  obtain a special or unique benefit that would not apply to

21  other similarly situated insurance entities. Each joint

22  underwriting plan or association created under this section is

23  not a state agency, board, or commission. However, for the

24  purposes of s. 199.183(1) only, the joint underwriting plan is

25  a political subdivision of the state and is exempt from the

26  corporate income tax.

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

28  plan shall sign and submit a statement to the plan attesting

29  that they do not have a conflict of interest as defined in

30  part III of chapter 112. As a condition of employment, all

31  prospective employees shall sign and submit a


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 1  conflict-of-interest statement to the plan. Each joint

 2  underwriting plan or association may elect to pay premium

 3  taxes on the premiums received on its behalf or may elect to

 4  have the member insurers to whom the premiums are allocated

 5  pay the premium taxes if the member insurer had written the

 6  policy. The joint underwriting plan or association shall

 7  notify the member insurers and the Department of Revenue by

 8  January 15 of each year of its election for the same year. As

 9  used in this paragraph, the term "premiums received" means the

10  consideration for insurance, by whatever name called, but does

11  not include any policy assessment or surcharge received by the

12  joint underwriting association as a result of apportioning

13  losses or deficits of the association pursuant to this

14  section.

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

16  employed by the plan as of January 1, 2008, regardless of the

17  date of hire, and who subsequently retires or terminates

18  employment may not represent another person or entity before

19  the plan for 2 years after retirement or termination of

20  employment from the plan.

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

22  benefit of any private person.

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

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

25  knowingly accept, directly or indirectly, any expenditure or

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

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

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

29  employee or board member who fails to comply with paragraph

30  (m) or this paragraph is subject to penalties provided under

31  s. 112.317.


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 1         (r)  This section does not prohibit the plan from

 2  providing insurance coverage to any employer with whom a

 3  former employee of the plan is affiliated or employing or

 4  reemploying any former employee of the plan in a part-time,

 5  full-time, temporary, or permanent capacity, so long as such

 6  employment does not violate any provision of part III of

 7  chapter 112.

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

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

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

11  management or policies of the plan, unless:

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

13  duties as a member; and

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

15  duties constitutes:

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

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

18  unlawful. A judgment or other final adjudication against a

19  member in any criminal proceeding for violation of the

20  criminal law estops that member from contesting the fact that

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

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

23  from establishing that she or he had reasonable cause to

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

25  reasonable cause to believe that her or his conduct was

26  unlawful;

27         b.  A transaction from which the member derived an

28  improper personal benefit, either directly or indirectly; or

29         c.  Recklessness or any act or omission that was

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

31  manner exhibiting wanton and willful disregard of human


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

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

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

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

 5  known, to the member; and

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

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

 8  that harm would follow from such act or omission.

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

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

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

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

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

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

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

16  person" of another person means:

17         1.  The spouse of such other natural person;

18         2.  Any person who directly or indirectly owns or

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

20  of the outstanding voting securities of such other person;

21         3.  Any person who directly or indirectly owns 5

22  percent or more of the outstanding voting securities that are

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

24  power to vote, by such other person;

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

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

27  control with such other person;

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

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

30  performing duties similar to persons in those positions, of

31  such other persons; or


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

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

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

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

 5  440.49 and 440.51.

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

 7  comprehensive market conduct examination of the plan

 8  periodically to determine compliance with its plan of

 9  operation and internal operating policies and procedures.

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

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

12  of the plan, including the establishment of reasonable

13  reserves for any contingent liabilities or obligations, and

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

15  state and shall be deposited in the Workers' Compensation

16  Administration Trust Fund. However, dissolution may not take

17  effect as long as the plan has financial obligations

18  outstanding unless adequate provision has been made for the

19  payment of financial obligations pursuant to the documents

20  authorizing the financial obligations.

21         (6)  Each joint underwriting plan or association

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

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

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

25  political subdivision of the state and is exempt from the

26  corporate income tax.

27         (7)  Each joint underwriting plan or association may

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

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

30  premiums are allocated pay the premium taxes if the member

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


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 1  association shall notify the member insurers and the

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

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

 4  term "premiums received" means the consideration for

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

 6  policy assessment or surcharge received by the joint

 7  underwriting association as a result of apportioning losses or

 8  deficits of the association pursuant to this section.

 9         (8)(6)  As used in this section and ss. 215.555 and

10  627.351, the term "collateral protection insurance" means

11  commercial property insurance of which a creditor is the

12  primary beneficiary and policyholder and which protects or

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

14  transaction secured by real or personal property. Initiation

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

16  maintain insurance coverage as required by the mortgage or

17  other lending document. Collateral protection insurance is not

18  residential coverage.

19         (9)(7)(a)  The Florida Automobile Joint Underwriting

20  Association created under this section shall be deemed to have

21  appointed its general manager as its agent to receive service

22  of all legal process issued against the association in any

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

24  shall be valid and binding upon the insurer.

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

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

27  appointment shall be the sole method of service of process

28  upon the association.

29         Section 2.  No later than January 1, 2008, the Florida

30  Workers' Compensation Joint Underwriting Association, Inc.,

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


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

 2  tax-exempt entity.

 3         Section 3.  This act shall take effect July 1, 2007.

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