HB 1429

1
A bill to be entitled
2An act relating to the Florida Workers' Compensation Joint
3Underwriting Association, Inc.; amending s. 627.311, F.S.;
4designating the Florida Workers' Compensation Joint
5Underwriting Association, Inc., as a plan of insurers
6operating as a corporation not for profit; revising
7requirements for the plan of operation of the corporation;
8revising the membership of the board of governors of the
9association; requiring that the corporation's market-
10assistance plan be periodically reviewed and updated;
11authorizing the use of surplus funds of former subplans
12for certain deficit purposes; providing for calculation of
13deficit assessments; providing circumstances under which
14policyholders of former subplan C are exempt from certain
15assessments; removing an expiration date for the authority
16to levy certain deficit assessments; increasing the period
17for meeting certain projected cash needs for meeting
18certain deficits; revising criteria for determining the
19amount of transfers from the contingency reserve;
20providing for transfer of specified assets of the plan to
21the Workers' Compensation Administration Trust Fund upon
22dissolution of the plan; creating s. 627.3121, F.S.;
23authorizing the Department of Financial Services to
24request transfer of funds from the Workers' Compensation
25Administration Trust Fund to the workers' compensation
26joint underwriting plan; requiring the department to
27establish a contingency reserve in the trust fund;
28authorizing the department to expend moneys from the
29reserve for certain purposes under certain circumstances;
30providing for transfers from the contingency reserve for
31certain deficit purposes; providing transfer requirements
32and procedures; providing a date on which the contingency
33reserve is abolished; providing for calculation of excess
34state funds, if any, received by the plan from the
35reserve; providing for return of such funds; requiring the
36plan to request a determination of its tax-exempt status;
37providing an effective date.
38
39Be It Enacted by the Legislature of the State of Florida:
40
41     Section 1.  Subsection (5) of section 627.311, Florida
42Statutes, is amended, and subsections (8) and (9) are added to
43that section, to read:
44     627.311  Joint underwriters and joint reinsurers; public
45records and public meetings exemptions.--
46     (5)(a)  The office shall, after consultation with insurers,
47approve a joint underwriting plan of insurers which shall be
48designated as the Florida Workers' Compensation Joint
49Underwriting Association, Inc., and shall operate as a
50corporation not for profit nonprofit entity. For the purposes of
51this subsection, the term "insurer" includes group self-
52insurance funds authorized by s. 624.4621, commercial self-
53insurance funds authorized by s. 624.462, assessable mutual
54insurers authorized under s. 628.6011, and insurers licensed to
55write workers' compensation and employer's liability insurance
56in this state. The purpose of the plan is to provide workers'
57compensation and employer's liability insurance to applicants
58who are required by law to maintain workers' compensation and
59employer's liability insurance and who are in good faith
60entitled to but who are unable to procure such insurance through
61the voluntary market. Except as provided herein, the plan must
62have actuarially sound rates that ensure that the plan is self-
63supporting.
64     (b)  The operation of the plan is subject to the
65supervision of a 9-member board of governors. The board of
66governors shall be comprised of:
67     1.  Three members appointed by the Financial Services
68Commission. Each member appointed by the commission shall serve
69at the pleasure of the commission;
70     2.  Two representatives of the 20 domestic insurers, as
71defined in s. 624.06(1), having the largest voluntary direct
72premiums written in this state for workers' compensation and
73employer's liability insurance, who which shall be appointed by
74the commission from a list of three nominees for each vacancy
75submitted elected by those 20 domestic insurers;
76     3.  Two representatives of the 20 foreign insurers as
77defined in s. 624.06(2) having the largest voluntary direct
78premiums written in this state for workers' compensation and
79employer's liability insurance, who which shall be appointed by
80the commission from a list of three nominees for each vacancy
81submitted elected by those 20 foreign insurers;
82     4.  One representative of person appointed by the largest
83property and casualty insurance agents' association in this
84state, who shall be appointed by the commission from a list of
85three nominees submitted by such association; and
86     5.  The consumer advocate appointed under s. 627.0613 or
87the consumer advocate's designee.
88
89Each board member shall serve a 4-year term and may serve
90consecutive terms. A vacancy on the board shall be filled in the
91same manner as the original appointment for the unexpired
92portion of the term. The Financial Services Commission shall
93designate a member of the board to serve as chair. The
94commission may remove any member for cause. No board member
95shall be an insurer which provides services to the plan or which
96has an affiliate which provides services to the plan or which is
97serviced by a service company or third-party administrator which
98provides services to the plan or which has an affiliate which
99provides services to the plan. The minutes, audits, and
100procedures of the board of governors are subject to chapter 119.
101     (c)  The operation of the plan shall be governed by a plan
102of operation that is prepared at the direction of the board of
103governors. The plan of operation may be changed at any time by
104the board of governors or upon request of the office. The plan
105of operation and all changes thereto are subject to the approval
106of the office. The plan of operation shall:
107     1.  Authorize the board to engage in the activities
108necessary to implement this subsection, including, but not
109limited to, borrowing money.
110     2.  Develop criteria for eligibility for coverage by the
111plan, including, but not limited to, documented rejection by at
112least two insurers which reasonably assures that insureds
113covered under the plan are unable to acquire coverage in the
114voluntary market.
115     3.  Require notice from the agent to the insured at the
116time of the application for coverage that the application is for
117coverage with the plan and that coverage may be available
118through an insurer, group self-insurers' fund, commercial self-
119insurance fund, or assessable mutual insurer through another
120agent at a lower cost.
121     4.  Establish programs to encourage insurers to provide
122coverage to applicants of the plan in the voluntary market and
123to insureds of the plan, including, but not limited to:
124     a.  Establishing procedures for an insurer to use in
125notifying the plan of the insurer's desire to provide coverage
126to applicants to the plan or existing insureds of the plan and
127in describing the types of risks in which the insurer is
128interested. The description of the desired risks must be on a
129form developed by the plan.
130     b.  Developing forms and procedures that provide an insurer
131with the information necessary to determine whether the insurer
132wants to write particular applicants to the plan or insureds of
133the plan.
134     c.  Developing procedures for notice to the plan and the
135applicant to the plan or insured of the plan that an insurer
136will insure the applicant or the insured of the plan, and notice
137of the cost of the coverage offered; and developing procedures
138for the selection of an insuring entity by the applicant or
139insured of the plan.
140     5.d.  Provide for a market-assistance plan to assist in the
141placement of employers. All applications for coverage in the
142plan received 45 days before the effective date for coverage
143shall be processed through the market-assistance plan. A market-
144assistance plan specifically designed to serve the needs of
145small, good policyholders as defined by the board must be
146reviewed and updated periodically finalized by January 1, 1994.
147     6.5.  Provide for policy and claims services to the
148insureds of the plan of the nature and quality provided for
149insureds in the voluntary market.
150     7.6.  Provide for the review of applications for coverage
151with the plan for reasonableness and accuracy, using any
152available historic information regarding the insured.
153     8.7.  Provide for procedures for auditing insureds of the
154plan which are based on reasonable business judgment and are
155designed to maximize the likelihood that the plan will collect
156the appropriate premiums.
157     9.8.  Authorize the plan to terminate the coverage of and
158refuse future coverage for any insured that submits a fraudulent
159application to the plan or provides fraudulent or grossly
160erroneous records to the plan or to any service provider of the
161plan in conjunction with the activities of the plan.
162     10.9.  Establish service standards for agents who submit
163business to the plan.
164     11.10.  Establish criteria and procedures to prohibit any
165agent who does not adhere to the established service standards
166from placing business with the plan or receiving, directly or
167indirectly, any commissions for business placed with the plan.
168     12.11.  Provide for the establishment of reasonable safety
169programs for all insureds in the plan. All insureds of the plan
170must participate in the safety program.
171     13.12.  Authorize the plan to terminate the coverage of and
172refuse future coverage to any insured who fails to pay premiums
173or surcharges when due; who, at the time of application, is
174delinquent in payments of workers' compensation or employer's
175liability insurance premiums or surcharges owed to an insurer,
176group self-insurers' fund, commercial self-insurance fund, or
177assessable mutual insurer licensed to write such coverage in
178this state; or who refuses to substantially comply with any
179safety programs recommended by the plan.
180     14.13.  Authorize the board of governors to provide the
181services required by the plan through staff employed by the
182plan, through reasonably compensated service providers who
183contract with the plan to provide services as specified by the
184board of governors, or through a combination of employees and
185service providers.
186     15.14.  Provide for service standards for service
187providers, methods of determining adherence to those service
188standards, incentives and disincentives for service, and
189procedures for terminating contracts for service providers that
190fail to adhere to service standards.
191     16.15.  Provide procedures for selecting service providers
192and standards for qualification as a service provider that
193reasonably assure that any service provider selected will
194continue to operate as an ongoing concern and is capable of
195providing the specified services in the manner required.
196     17.16.  Provide for reasonable accounting and data-
197reporting practices.
198     18.17.  Provide for annual review of costs associated with
199the administration and servicing of the policies issued by the
200plan to determine alternatives by which costs can be reduced.
201     19.18.  Authorize the acquisition of such excess insurance
202or reinsurance as is consistent with the purposes of the plan.
203     20.19.  Provide for an annual report to the office on a
204date specified by the office and containing such information as
205the office reasonably requires.
206     21.20.  Establish multiple rating plans for various
207classifications of risk which reflect risk of loss, hazard
208grade, actual losses, size of premium, and compliance with loss
209control. At least one of such plans must be a preferred-rating
210plan to accommodate small-premium policyholders with good
211experience as defined in sub-subparagraph 23.22.a.
212     22.21.  Establish agent commission schedules.
213     23.22.  For employers otherwise eligible for coverage under
214the plan, establish three tiers of employers meeting the
215criteria and subject to the rate limitations specified in this
216subparagraph.
217     a.  Tier One.--
218     (I)  Criteria; rated employers.--An employer that has an
219experience modification rating shall be included in Tier One if
220the employer meets all of the following:
221     (A)  The experience modification is below 1.00.
222     (B)  The employer had no lost-time claims subsequent to the
223applicable experience modification rating period.
224     (C)  The total of the employer's medical-only claims
225subsequent to the applicable experience modification rating
226period did not exceed 20 percent of premium.
227     (II)  Criteria; non-rated employers.--An employer that does
228not have an experience modification rating shall be included in
229Tier One if the employer meets all of the following:
230     (A)  The employer had no lost-time claims for the 3-year
231period immediately preceding the inception date or renewal date
232of the employer's coverage under the plan.
233     (B)  The total of the employer's medical-only claims for
234the 3-year period immediately preceding the inception date or
235renewal date of the employer's coverage under the plan did not
236exceed 20 percent of premium.
237     (C)  The employer has secured workers' compensation
238coverage for the entire 3-year period immediately preceding the
239inception date or renewal date of the employer's coverage under
240the plan.
241     (D)  The employer is able to provide the plan with a loss
242history generated by the employer's prior workers' compensation
243insurer, except if the employer is not able to produce a loss
244history due to the insolvency of an insurer, the receiver shall
245provide to the plan, upon the request of the employer or the
246employer's agent, a copy of the employer's loss history from the
247records of the insolvent insurer if the loss history is
248contained in records of the insurer which are in the possession
249of the receiver. If the receiver is unable to produce the loss
250history, the employer may, in lieu of the loss history, submit
251an affidavit from the employer and the employer's insurance
252agent setting forth the loss history.
253     (E)  The employer is not a new business.
254     (III)  Premiums.--The premiums for Tier One insureds shall
255be set at a premium level 25 percent above the comparable
256voluntary market premiums until the plan has sufficient
257experience as determined by the board to establish an
258actuarially sound rate for Tier One, at which point the board
259shall, subject to paragraph (e), adjust the rates, if necessary,
260to produce actuarially sound rates, provided such rate
261adjustment shall not take effect prior to January 1, 2007.
262     b.  Tier Two.--
263     (I)  Criteria; rated employers.--An employer that has an
264experience modification rating shall be included in Tier Two if
265the employer meets all of the following:
266     (A)  The experience modification is equal to or greater
267than 1.00 but not greater than 1.10.
268     (B)  The employer had no lost-time claims subsequent to the
269applicable experience modification rating period.
270     (C)  The total of the employer's medical-only claims
271subsequent to the applicable experience modification rating
272period did not exceed 20 percent of premium.
273     (II)  Criteria; non-rated employers.--An employer that does
274not have any experience modification rating shall be included in
275Tier Two if the employer is a new business. An employer shall be
276included in Tier Two if the employer has less than 3 years of
277loss experience in the 3-year period immediately preceding the
278inception date or renewal date of the employer's coverage under
279the plan and the employer meets all of the following:
280     (A)  The employer had no lost-time claims for the 3-year
281period immediately preceding the inception date or renewal date
282of the employer's coverage under the plan.
283     (B)  The total of the employer's medical-only claims for
284the 3-year period immediately preceding the inception date or
285renewal date of the employer's coverage under the plan did not
286exceed 20 percent of premium.
287     (C)  The employer is able to provide the plan with a loss
288history generated by the workers' compensation insurer that
289provided coverage for the portion or portions of such period
290during which the employer had secured workers' compensation
291coverage, except if the employer is not able to produce a loss
292history due to the insolvency of an insurer, the receiver shall
293provide to the plan, upon the request of the employer or the
294employer's agent, a copy of the employer's loss history from the
295records of the insolvent insurer if the loss history is
296contained in records of the insurer which are in the possession
297of the receiver. If the receiver is unable to produce the loss
298history, the employer may, in lieu of the loss history, submit
299an affidavit from the employer and the employer's insurance
300agent setting forth the loss history.
301     (III)  Premiums.--The premiums for Tier Two insureds shall
302be set at a rate level 50 percent above the comparable voluntary
303market premiums until the plan has sufficient experience as
304determined by the board to establish an actuarially sound rate
305for Tier Two, at which point the board shall, subject to
306paragraph (e), adjust the rates, if necessary, to produce
307actuarially sound rates, provided such rate adjustment shall not
308take effect prior to January 1, 2007.
309     c.  Tier Three.--
310     (I)  Eligibility.--An employer shall be included in Tier
311Three if the employer does not meet the criteria for Tier One or
312Tier Two.
313     (II)  Rates.--The board shall establish, subject to
314paragraph (e), and the plan shall charge, actuarially sound
315rates for Tier Three insureds.
316     24.23.  For Tier One or Tier Two employers which employ no
317nonexempt employees or which report payroll which is less than
318the minimum wage hourly rate for one full-time employee for 1
319year at 40 hours per week, the plan shall establish actuarially
320sound premiums, provided, however, that the premiums may not
321exceed $2,500. These premiums shall be in addition to the fee
322specified in subparagraph 27. 26. When the plan establishes
323actuarially sound rates for all employers in Tier One and Tier
324Two, the premiums for employers referred to in this paragraph
325are no longer subject to the $2,500 cap.
326     25.24.  Provide for a depopulation program to reduce the
327number of insureds in the plan. If an employer insured through
328the plan is offered coverage from a voluntary market carrier:
329     a.  During the first 30 days of coverage under the plan;
330     b.  Before a policy is issued under the plan;
331     c.  By issuance of a policy upon expiration or cancellation
332of the policy under the plan; or
333     d.  By assumption of the plan's obligation with respect to
334an in-force policy,
335
336that employer is no longer eligible for coverage through the
337plan. The premium for risks assumed by the voluntary market
338carrier must be no greater than the premium the insured would
339have paid under the plan, and shall be adjusted upon renewal to
340reflect changes in the plan rates and the tier for which the
341insured would qualify as of the time of renewal. The insured may
342be charged such premiums only for the first 3 years of coverage
343in the voluntary market. A premium under this subparagraph is
344deemed approved and is not an excess premium for purposes of s.
345627.171.
346     26.25.  Require that policies issued and applications must
347include a notice that the policy could be replaced by a policy
348issued from a voluntary market carrier and that, if an offer of
349coverage is obtained from a voluntary market carrier, the
350policyholder is no longer eligible for coverage through the
351plan. The notice must also specify that acceptance of coverage
352under the plan creates a conclusive presumption that the
353applicant or policyholder is aware of this potential.
354     27.26.  Require that each application for coverage and each
355renewal premium be accompanied by a nonrefundable fee of $475 to
356cover costs of administration and fraud prevention. The board
357may, with the approval of the office, increase the amount of the
358fee pursuant to a rate filing to reflect increased costs of
359administration and fraud prevention. The fee is not subject to
360commission and is fully earned upon commencement of coverage.
361     (d)1.  The funding of the plan shall include premiums as
362provided in subparagraph (c)23.22. and assessments as provided
363in this paragraph.
364     2.a.(I)  If the board determines that a deficit exists in
365Tier One or Tier Two or that there is any deficit remaining
366attributable to any of the plan's former subplans, the board in
367its discretion may use some or all of the surplus attributable
368to any former subplan for the purpose of mitigating some or all
369of any such deficit.
370     (II)  If the board determines that any and that the deficit
371cannot be funded without the use of deficit assessments, the
372board shall request the office to levy, by order, a deficit
373assessment against premiums charged to insureds for workers'
374compensation insurance by insurers as defined in s. 631.904(5).
375The office shall issue the order after verifying the amount of
376the deficit. The assessment shall be specified as a percentage
377of future premium collections, as recommended by the board and
378approved by the office. Any such assessment shall be based upon
379a reasonable actuarial estimate of the deficit, taking into
380account the amount needed to fund medical and indemnity reserves
381and reserves for incurred but not reported claims and allowing
382for general administrative costs, the cost of levying and
383collecting the assessment, a reasonable allowance for estimated
384uncollectible assessments, and allocated and unallocated loss
385adjustment expenses. The same percentage shall apply to premiums
386on all workers' compensation policies issued or renewed during
387the 12-month period beginning on the effective date of the
388assessment, as specified in the order.
389     (III)  If any surplus attributable to former subplan C is
390used to mitigate a deficit pursuant to the discretionary
391authority specified in this sub-subparagraph, any entity that
392was a policyholder of former subplan C shall not be subject to
393policyholder assessments attributable to deficits in former
394subplan C.
395     b.  With respect to each insurer collecting premiums that
396are subject to the assessment, the insurer shall collect the
397assessment at the same time as the insurer collects the premium
398payment for each policy and shall remit the assessments
399collected to the plan as provided in the order issued by the
400office. The office shall verify the accurate and timely
401collection and remittance of deficit assessments and shall
402report such information to the board. Each insurer collecting
403assessments shall provide such information with respect to
404premiums and collections as may be required by the office to
405enable the office to monitor and audit compliance with this
406paragraph.
407     c.  Deficit assessments are not considered part of an
408insurer's rate, are not premium, and are not subject to the
409premium tax, to the assessments under ss. 440.49 and 440.51, to
410the surplus lines tax, to any fees, or to any commissions. The
411deficit assessment imposed shall become plan funds at the moment
412of collection and shall not constitute income to the insurer for
413any purpose, including financial reporting on the insurer's
414income statement. An insurer is liable for all assessments that
415the insurer collects and must treat the failure of an insured to
416pay an assessment as a failure to pay premium. An insurer is not
417liable for uncollectible assessments.
418     d.  When an insurer is required to return unearned premium,
419the insurer shall also return any collected assessments
420attributable to the unearned premium.
421     e.  Deficit assessments as described in this subparagraph
422shall not be levied after July 1, 2007.
423     3.a.  All policies issued to Tier Three insureds shall be
424assessable. All Tier Three assessable policies must be clearly
425identified as assessable by containing, in contrasting color and
426in not less than 10-point type, the following statement:
427
428"This is an assessable policy. If the plan is unable to pay its
429obligations, policyholders will be required to contribute on a
430pro rata earned premium basis the money necessary to meet any
431assessment levied."
432
433     b.  The board may from time to time assess Tier Three
434insureds to whom the plan has issued assessable policies for the
435purpose of funding plan deficits. Any such assessment shall be
436based upon a reasonable actuarial estimate of the amount of the
437deficit, taking into account the amount needed to fund medical
438and indemnity reserves and reserves for incurred but not
439reported claims, and allowing for general administrative
440expenses, the cost of levying and collecting the assessment, a
441reasonable allowance for estimated uncollectible assessments,
442and allocated and unallocated loss adjustment expenses.
443     c.  Each Tier Three insured's share of a deficit shall be
444computed by applying to the premium earned on the insured's
445policy or policies during the period to be covered by the
446assessment the ratio of the total deficit to the total premiums
447earned during such period upon all policies subject to the
448assessment. If one or more Tier Three insureds fail to pay an
449assessment, the other Tier Three insureds shall be liable on a
450proportionate basis for additional assessments to fund the
451deficit. The plan may compromise and settle individual
452assessment claims without affecting the validity of or amounts
453due on assessments levied against other insureds. The plan may
454offer and accept discounted payments for assessments which are
455promptly paid. The plan may offset the amount of any unpaid
456assessment against unearned premiums which may otherwise be due
457to an insured. The plan shall institute legal action when
458necessary and appropriate to collect the assessment from any
459insured who fails to pay an assessment when due.
460     d.  The venue of a proceeding to enforce or collect an
461assessment or to contest the validity or amount of an assessment
462shall be in the Circuit Court of Leon County.
463     e.  If the board finds that a deficit in Tier Three exists
464for any period and that an assessment is necessary, the board
465shall certify to the office the need for an assessment. No
466sooner than 30 days after the date of such certification, the
467board shall notify in writing each insured who is to be assessed
468that an assessment is being levied against the insured, and
469informing the insured of the amount of the assessment, the
470period for which the assessment is being levied, and the date by
471which payment of the assessment is due. The board shall
472establish a date by which payment of the assessment is due,
473which shall be no sooner than 30 days nor later than 120 days
474after the date on which notice of the assessment is mailed to
475the insured.
476     f.  Whenever the board makes a determination that the plan
477does not have a sufficient cash basis to meet 6 3 months of
478projected cash needs due to a deficit in Tier Three, the board
479may request the department to transfer funds from the Workers'
480Compensation Administration Trust Fund to the plan in an amount
481sufficient to fund the difference between the amount available
482and the amount needed to meet a 6-month 3-month projected cash
483need as determined by the board and verified by the office,
484subject to the approval of the Legislative Budget Commission. If
485the Legislative Budget Commission approves a transfer of funds
486under this sub-subparagraph, the plan shall report to the
487Legislature the transfer of funds and the Legislature shall
488review the plan during the next legislative session or the
489current legislative session, if the transfer occurs during a
490legislative session. This sub-subparagraph shall not apply until
491the plan determines and the office verifies that assessments
492collected by the plan pursuant to sub-subparagraph b. are
493insufficient to fund the deficit in Tier Three and to meet 6 3
494months of projected cash needs.
495     4.  The plan may offer rating, dividend plans, and other
496plans to encourage loss prevention programs.
497     (e)  The plan shall establish and use its rates and rating
498plans, and the plan may establish and use changes in rating
499plans at any time, but no more frequently than two times per any
500rating class for any calendar year. By December 1, 1993, and
501December 1 of each year thereafter, except as provided in
502subparagraph (c)23.22., the board shall establish and use
503actuarially sound rates for use by the plan to assure that the
504plan is self-funding while those rates are in effect. Such rates
505and rating plans must be filed with the office within 30
506calendar days after their effective dates, and shall be
507considered a "use and file" filing. Any disapproval by the
508office must have an effective date that is at least 60 days from
509the date of disapproval of the rates and rating plan and must
510have prospective effect only. The plan may not be subject to any
511order by the office to return to policyholders any portion of
512the rates disapproved by the office. The office may not
513disapprove any rates or rating plans unless it demonstrates that
514such rates and rating plans are excessive, inadequate, or
515unfairly discriminatory.
516     (f)  No later than June 1 of each year, the plan shall
517obtain an independent actuarial certification of the results of
518the operations of the plan for prior years, and shall furnish a
519copy of the certification to the office. If, after the effective
520date of the plan, the projected ultimate incurred losses and
521expenses and dividends for prior years exceed collected
522premiums, accrued net investment income, and prior assessments
523for prior years, the certification is subject to review and
524approval by the office before it becomes final.
525     (g)  Whenever a deficit exists, the plan shall, within 90
526days, provide the office with a program to eliminate the deficit
527within a reasonable time. The deficit may be funded through
528increased premiums charged to insureds of the plan for
529subsequent years;, through the use of policyholder surplus
530attributable to any year, including the use of surplus
531attributable to any former subplan as provided in sub-
532subparagraph (d)2.a.; through the use of assessments as provided
533in subparagraph (d)2.;, and through assessments on assessable
534policies as provided in subparagraph (d)3.
535     (h)  Any premium or assessments collected by the plan in
536excess of the amount necessary to fund projected ultimate
537incurred losses and expenses of the plan and not paid to
538insureds of the plan in conjunction with loss prevention or
539dividend programs shall be retained by the plan for future use.
540     (i)  The decisions of the board of governors do not
541constitute final agency action and are not subject to chapter
542120.
543     (j)  Policies for insureds shall be issued by the plan.
544     (k)  The plan created under this subsection is liable only
545for payment for losses arising under policies issued by the plan
546with dates of accidents occurring on or after January 1, 1994.
547     (l)  Plan losses are the sole and exclusive responsibility
548of the plan, and payment for such losses must be funded in
549accordance with this subsection and must not come, directly or
550indirectly, from insurers or any guaranty association for such
551insurers.
552     (m)  Each joint underwriting plan or association created
553under this section is not a state agency, board, or commission.
554However, for the purposes of s. 199.183(1) only, the joint
555underwriting plan is a political subdivision of the state and is
556exempt from the corporate income tax.
557     (n)  Each joint underwriting plan or association may elect
558to pay premium taxes on the premiums received on its behalf or
559may elect to have the member insurers to whom the premiums are
560allocated pay the premium taxes if the member insurer had
561written the policy. The joint underwriting plan or association
562shall notify the member insurers and the Department of Revenue
563by January 15 of each year of its election for the same year. As
564used in this paragraph, the term "premiums received" means the
565consideration for insurance, by whatever name called, but does
566not include any policy assessment or surcharge received by the
567joint underwriting association as a result of apportioning
568losses or deficits of the association pursuant to this section.
569     (m)(o)  Neither the plan nor any member of the board of
570governors is liable for monetary damages to any person for any
571statement, vote, decision, or failure to act, regarding the
572management or policies of the plan, unless:
573     1.  The member breached or failed to perform her or his
574duties as a member; and
575     2.  The member's breach of, or failure to perform, duties
576constitutes:
577     a.  A violation of the criminal law, unless the member had
578reasonable cause to believe her or his conduct was not unlawful.
579A judgment or other final adjudication against a member in any
580criminal proceeding for violation of the criminal law estops
581that member from contesting the fact that her or his breach, or
582failure to perform, constitutes a violation of the criminal law;
583but does not estop the member from establishing that she or he
584had reasonable cause to believe that her or his conduct was
585lawful or had no reasonable cause to believe that her or his
586conduct was unlawful;
587     b.  A transaction from which the member derived an improper
588personal benefit, either directly or indirectly; or
589     c.  Recklessness or any act or omission that was committed
590in bad faith or with malicious purpose or in a manner exhibiting
591wanton and willful disregard of human rights, safety, or
592property. For purposes of this sub-subparagraph, the term
593"recklessness" means the acting, or omission to act, in
594conscious disregard of a risk:
595     (I)  Known, or so obvious that it should have been known,
596to the member; and
597     (II)  Known to the member, or so obvious that it should
598have been known, to be so great as to make it highly probable
599that harm would follow from such act or omission.
600     (n)(p)  No insurer shall provide workers' compensation and
601employer's liability insurance to any person who is delinquent
602in the payment of premiums, assessments, penalties, or
603surcharges owed to the plan or to any person who is an
604affiliated person of a person who is delinquent in the payment
605of premiums, assessments, penalties, or surcharges owed to the
606plan. For purposes of this paragraph, the term "affiliated
607person" of another person means:
608     1.  The spouse of such other natural person;
609     2.  Any person who directly or indirectly owns or controls,
610or holds with the power to vote, 5 percent or more of the
611outstanding voting securities of such other person;
612     3.  Any person who directly or indirectly owns 5 percent or
613more of the outstanding voting securities that are directly or
614indirectly owned or controlled, or held with the power to vote,
615by such other person;
616     4.  Any person or group of persons who directly or
617indirectly control, are controlled by, or are under common
618control with such other person;
619     5.  Any officer, director, trustee, partner, owner,
620manager, joint venturer, or employee, or other person performing
621duties similar to persons in those positions, of such other
622persons; or
623     6.  Any person who has an officer, director, trustee,
624partner, or joint venturer in common with such other person.
625     (o)(q)  Effective July 1, 2004, the plan is exempt from the
626premium tax under s. 624.509 and any assessments under ss.
627440.49 and 440.51.
628     (p)  Upon dissolution of a plan, the assets of the plan
629shall be applied first to pay all debts, liabilities, and
630obligations of the plan, including the establishment of
631reasonable reserves for any contingent liabilities or
632obligations, and all remaining assets of the plan shall become
633property of the state and shall be deposited in the Workers'
634Compensation Administration Trust Fund. However, dissolution of
635a plan shall not take effect as long as the plan has financial
636obligations outstanding unless adequate provision has been made
637for the payment of financial obligations pursuant to the
638documents authorizing the financial obligations.
639     (8)  Each joint underwriting plan or association created
640under this section is not a state agency, board, or commission.
641However, solely for the purposes of s. 199.183(1), the joint
642underwriting plan is a political subdivision of the state and is
643exempt from the corporate income tax.
644     (9)  Each joint underwriting plan or association may elect
645to pay taxes on the premiums received on its behalf or may elect
646to have the member insurers to whom the premiums are allocated
647pay the premium taxes if the member insurer had written the
648policy. The joint underwriting plan or association shall notify
649the member insurers and the Department of Revenue by January 15
650of each year of its election for the same year. As used in this
651subsection, the term "premiums received" means the consideration
652for insurance, by whatever name called, but does not include any
653policy assessment or surcharge received by the joint
654underwriting association as a result of apportioning losses or
655deficits of the association pursuant to this section.
656     Section 2.  Section 627.3121, Florida Statutes, is created
657to read:
658     627.3121  Contingency reserve.--Notwithstanding the
659provisions of ss. 440.50 and 440.51, and subject to the
660following procedures and approval, the Department of Financial
661Services may request transfer funds from the Workers'
662Compensation Administration Trust Fund within the Department of
663Financial Services to the workers' compensation joint
664underwriting plan provided in s. 627.311(5).
665     (1)  The department shall establish a contingency reserve
666within the Workers' Compensation Administration Trust Fund, from
667which the department may expend funds as provided in this
668section, in an amount not to exceed $15 million to be released
669only upon the approval of a budget amendment presented to the
670Legislative Budget Commission. For actuarial deficits projected
671for policyholders, based on actuarial best estimates, covered in
672subplan D prior to July 1, 2004, and upon verification by the
673Office of Insurance Regulation, the plan may request and the
674department may submit a budget amendment in an amount not to
675exceed $15 million for the purpose of funding deficits in
676subplan D.
677     (2)  After the contingency reserve is established, when the
678board determines subplan D does not have a sufficient cash basis
679to meet 6 months of projected cash needs due to any deficit in
680subplan D, the board may request the Department of Financial
681Services to transfer funds from the contingency reserve fund
682within the Workers' Compensation Administration Trust Fund to
683the plan in an amount sufficient to fund the difference between
684the amount available and the amount needed to meet subplan D's
685projected cash need for the subsequent 6-month period. The board
686and the office shall first certify to the department that there
687is not sufficient cash within subplan D to meet the projected
688cash needs in subplan D within the subsequent 6 months. The
689amount requested for transfer to subplan D may not exceed the
690difference between the amount available within subplan D and the
691amount needed to meet subplan D's projected cash need for the
692subsequent 6-month period, as jointly certified by the board and
693the office to the department, attributable to the former subplan
694D policyholders. The department may submit a budget amendment to
695request release of funds from the Workers' Compensation
696Administration Trust Fund, subject to the approval of the
697Legislative Budget Commission. The board shall provide, for
698review by the Legislative Budget Commission, information on the
699reasonableness of the plan's administration, including, but not
700limited to, the plan of operations and costs, claims costs,
701claims administration costs, overhead costs, claims reserves,
702and the latest report submitted on administration cost reduction
703alternatives as required in s. 627.311(5)(c)17.
704     (3)  The contingency reserve created under this section is
705abolished July 1, 2012. No later than December 31, 2012, the
706plan shall provide a report to the Legislative Budget Commission
707stating the amount of state funds, if any, received by the plan
708in excess of the amount needed to fund the deficit in subplan D
709and shall return such amount to the Workers' Compensation
710Administration Trust Fund.
711     Section 3.  At its earliest reasonable opportunity, the
712Florida Workers' Compensation Joint Underwriting Association,
713Inc., shall submit a request to the Internal Revenue Service for
714a letter ruling or determination on the plan's status as a tax-
715exempt entity.
716     Section 4.  This act shall take effect July 1, 2007.


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