| 1 | A bill to be entitled |
| 2 | An act relating to the Florida Workers' Compensation Joint |
| 3 | Underwriting Association, Inc.; amending s. 627.311, F.S.; |
| 4 | designating the Florida Workers' Compensation Joint |
| 5 | Underwriting Association, Inc., as a plan of insurers |
| 6 | operating as a corporation not for profit; revising the |
| 7 | membership of the board of governors of the association; |
| 8 | requiring that the corporation's market-assistance plan be |
| 9 | periodically reviewed and updated; revising requirements |
| 10 | for goods and services provided by the plan; postponing an |
| 11 | expiration date for the authority to levy certain deficit |
| 12 | assessments; increasing the period for meeting certain |
| 13 | projected cash needs for meeting certain deficits; |
| 14 | revising rates and rate planning requirements; providing |
| 15 | circumstances under which policyholders of former subplan |
| 16 | C are exempt from certain assessments; providing for |
| 17 | return of certain funds in excess of amounts necessary to |
| 18 | fund deficits in subplan D or any tier; providing for |
| 19 | application of certain provisions of law relating to |
| 20 | ethics, public disclosure, and financial interest |
| 21 | reporting to senior managers and officers of the plan and |
| 22 | members of the board of governors of the association; |
| 23 | providing conflict of interest statement requirements for |
| 24 | plan employees; providing restrictions on certain persons |
| 25 | representing persons or entities before the plan; |
| 26 | prohibiting plan income from inuring to any person; |
| 27 | prohibiting plan employees or board members from accepting |
| 28 | gifts or expenditures; providing penalties; authorizing |
| 29 | the plan to provide insurance coverage to certain |
| 30 | employers or to employ or reemploy former employees under |
| 31 | certain conditions; requiring the Office of Insurance |
| 32 | Regulation to perform a periodic market conduct |
| 33 | examination of the plan for certain purposes; providing |
| 34 | for priority of application of plan assets upon |
| 35 | dissolution; providing a restriction on plan dissolution; |
| 36 | requiring the plan to request a federal determination of |
| 37 | its tax-exempt status; providing an effective date. |
| 38 |
|
| 39 | Be It Enacted by the Legislature of the State of Florida: |
| 40 |
|
| 41 | Section 1. Subsection (5) of section 627.311, Florida |
| 42 | Statutes, is amended, and subsections (8) and (9) are added to |
| 43 | that section, to read: |
| 44 | 627.311 Joint underwriters and joint reinsurers; public |
| 45 | records and public meetings exemptions.-- |
| 46 | (5)(a) The office shall, after consultation with insurers, |
| 47 | approve a joint underwriting plan of insurers which shall |
| 48 | operate as the Florida Workers' Compensation Joint Underwriting |
| 49 | Association, Inc., a nonprofit entity. For the purposes of this |
| 50 | subsection, the term "insurer" includes group self-insurance |
| 51 | funds authorized by s. 624.4621, commercial self-insurance funds |
| 52 | authorized by s. 624.462, assessable mutual insurers authorized |
| 53 | under s. 628.6011, and insurers licensed to write workers' |
| 54 | compensation and employer's liability insurance in this state. |
| 55 | The purpose of the plan is to provide workers' compensation and |
| 56 | employer's liability insurance to applicants who are required by |
| 57 | law to maintain workers' compensation and employer's liability |
| 58 | insurance and who are in good faith entitled to but who are |
| 59 | unable to procure such insurance through the voluntary market. |
| 60 | Except as provided herein, the plan must have actuarially sound |
| 61 | rates that ensure that the plan is self-supporting. |
| 62 | (b) The operation of the plan is subject to the |
| 63 | supervision of a 9-member board of governors. Each member |
| 64 | described in subparagraph 1., subparagraph 2., subparagraph 3., |
| 65 | or subparagraph 5. shall be appointed by the Financial Services |
| 66 | Commission and shall serve at the pleasure of the commission. |
| 67 | The board of governors shall be comprised of: |
| 68 | 1. Three members appointed by the Financial Services |
| 69 | Commission. Each member appointed by the commission shall serve |
| 70 | at the pleasure of the commission; |
| 71 | 1.2. Two representatives of the 20 domestic insurers, as |
| 72 | defined in s. 624.06(1), having the largest voluntary direct |
| 73 | premiums written in this state for workers' compensation and |
| 74 | employer's liability insurance, who which shall be appointed by |
| 75 | the commission from a list of three nominees for each vacancy |
| 76 | submitted elected by those 20 domestic insurers. The commission |
| 77 | may reject all of the nominees recommended for a position and |
| 78 | request that the insurers submit a new list of five different |
| 79 | recommended nominees for the position who have not previously |
| 80 | been recommended by the insurers; |
| 81 | 2.3. Two representatives of the 20 foreign insurers as |
| 82 | defined in s. 624.06(2) having the largest voluntary direct |
| 83 | premiums written in this state for workers' compensation and |
| 84 | employer's liability insurance, who which shall be appointed by |
| 85 | the commission from a list of five nominees for each vacancy |
| 86 | submitted elected by those 20 foreign insurers. The commission |
| 87 | may reject all of the nominees recommended for a position and |
| 88 | request that the insurers submit a new list of five different |
| 89 | recommended nominees for the position who have not previously |
| 90 | been recommended by the insurers; |
| 91 | 3.4. One representative of person appointed by the largest |
| 92 | property and casualty insurance agents' association in this |
| 93 | state, who shall be appointed by the commission from a list of |
| 94 | five nominees submitted by such association. The commission may |
| 95 | reject all of the nominees recommended for a position and |
| 96 | request that the association submit a new list of five different |
| 97 | recommended nominees for the position who have not previously |
| 98 | been recommended by the association; and |
| 99 | 4.5. The consumer advocate appointed under s. 627.0613 or |
| 100 | the consumer advocate's designee; and |
| 101 | 5. Three other persons appointed by the commission. |
| 102 |
|
| 103 | Each board member shall be appointed to serve a 4-year term and |
| 104 | may be appointed to serve consecutive terms. A vacancy on the |
| 105 | board shall be filled in the same manner as the original |
| 106 | appointment for the unexpired portion of the term. The Financial |
| 107 | Services Commission shall designate a member of the board to |
| 108 | serve as chair. No board member shall be an insurer which |
| 109 | provides services to the plan or which has an affiliate which |
| 110 | provides services to the plan or which is serviced by a service |
| 111 | company or third-party administrator which provides services to |
| 112 | the plan or which has an affiliate which provides services to |
| 113 | the plan. The meetings and records minutes, audits, and |
| 114 | procedures of the board of governors and plan are subject to |
| 115 | chapters chapter 119 and 286, unless otherwise exempted by law. |
| 116 | (c) The operation of the plan shall be governed by a plan |
| 117 | of operation that is prepared at the direction of the board of |
| 118 | governors and approved by order of the office. The plan is |
| 119 | subject to continuous review by the office. The office may, by |
| 120 | order, withdraw approval of all or part of a plan if the office |
| 121 | determines that conditions have changed since approval was |
| 122 | granted and the purposes of the plan require changes to the plan |
| 123 | of operation may be changed at any time by the board of |
| 124 | governors or upon request of the office. The plan of operation |
| 125 | and all changes thereto are subject to the approval of the |
| 126 | office. The plan of operation shall: |
| 127 | 1. Authorize the board to engage in the activities |
| 128 | necessary to implement this subsection, including, but not |
| 129 | limited to, borrowing money. |
| 130 | 2. Develop criteria for eligibility for coverage by the |
| 131 | plan, including, but not limited to, documented rejection by at |
| 132 | least two insurers which reasonably assures that insureds |
| 133 | covered under the plan are unable to acquire coverage in the |
| 134 | voluntary market. |
| 135 | 3. Require notice from the agent to the insured at the |
| 136 | time of the application for coverage that the application is for |
| 137 | coverage with the plan and that coverage may be available |
| 138 | through an insurer, group self-insurers' fund, commercial self- |
| 139 | insurance fund, or assessable mutual insurer through another |
| 140 | agent at a lower cost. |
| 141 | 4. Establish programs to encourage insurers to provide |
| 142 | coverage to applicants of the plan in the voluntary market and |
| 143 | to insureds of the plan, including, but not limited to: |
| 144 | a. Establishing procedures for an insurer to use in |
| 145 | notifying the plan of the insurer's desire to provide coverage |
| 146 | to applicants to the plan or existing insureds of the plan and |
| 147 | in describing the types of risks in which the insurer is |
| 148 | interested. The description of the desired risks must be on a |
| 149 | form developed by the plan. |
| 150 | b. Developing forms and procedures that provide an insurer |
| 151 | with the information necessary to determine whether the insurer |
| 152 | wants to write particular applicants to the plan or insureds of |
| 153 | the plan. |
| 154 | c. Developing procedures for notice to the plan and the |
| 155 | applicant to the plan or insured of the plan that an insurer |
| 156 | will insure the applicant or the insured of the plan, and notice |
| 157 | of the cost of the coverage offered; and developing procedures |
| 158 | for the selection of an insuring entity by the applicant or |
| 159 | insured of the plan. |
| 160 | d. Provide for a market-assistance plan to assist in the |
| 161 | placement of employers. All applications for coverage in the |
| 162 | plan received 45 days before the effective date for coverage |
| 163 | shall be processed through the market-assistance plan. A market- |
| 164 | assistance plan specifically designed to serve the needs of |
| 165 | small, good policyholders as defined by the board must be |
| 166 | reviewed and updated periodically finalized by January 1, 1994. |
| 167 | 5. Provide for policy and claims services to the insureds |
| 168 | of the plan of the nature and quality provided for insureds in |
| 169 | the voluntary market. |
| 170 | 6. Provide for the review of applications for coverage |
| 171 | with the plan for reasonableness and accuracy, using any |
| 172 | available historic information regarding the insured. |
| 173 | 7. Provide for procedures for auditing insureds of the |
| 174 | plan which are based on reasonable business judgment and are |
| 175 | designed to maximize the likelihood that the plan will collect |
| 176 | the appropriate premiums. |
| 177 | 8. Authorize the plan to terminate the coverage of and |
| 178 | refuse future coverage for any insured that submits a fraudulent |
| 179 | application to the plan or provides fraudulent or grossly |
| 180 | erroneous records to the plan or to any service provider of the |
| 181 | plan in conjunction with the activities of the plan. |
| 182 | 9. Establish service standards for agents who submit |
| 183 | business to the plan. |
| 184 | 10. Establish criteria and procedures to prohibit any |
| 185 | agent who does not adhere to the established service standards |
| 186 | from placing business with the plan or receiving, directly or |
| 187 | indirectly, any commissions for business placed with the plan. |
| 188 | 11. Provide for the establishment of reasonable safety |
| 189 | programs for all insureds in the plan. All insureds of the plan |
| 190 | must participate in the safety program. |
| 191 | 12. Authorize the plan to terminate the coverage of and |
| 192 | refuse future coverage to any insured who fails to pay premiums |
| 193 | or surcharges when due; who, at the time of application, is |
| 194 | delinquent in payments of workers' compensation or employer's |
| 195 | liability insurance premiums or surcharges owed to an insurer, |
| 196 | group self-insurers' fund, commercial self-insurance fund, or |
| 197 | assessable mutual insurer licensed to write such coverage in |
| 198 | this state; or who refuses to substantially comply with any |
| 199 | safety programs recommended by the plan. |
| 200 | 13. Authorize the board of governors to provide the goods |
| 201 | and services required by the plan through staff employed by the |
| 202 | plan, through reasonably compensated service providers who |
| 203 | contract with the plan to provide services as specified by the |
| 204 | board of governors, or through a combination of employees and |
| 205 | service providers. |
| 206 | a. Purchases that equal or exceed $2,500, but are less |
| 207 | than or equal to $25,000, shall be made by receipt of written |
| 208 | quotes, telephone quotes, or informal bids, whenever practical. |
| 209 | The procurement of goods or services valued over $25,000 are |
| 210 | subject to competitive solicitation, except in situations in |
| 211 | which the goods or services are provided by a sole source or are |
| 212 | deemed an emergency purchase or the services are exempted from |
| 213 | competitive-solicitation requirements under s. 287.057(5)(f). |
| 214 | Justification for the sole-sourcing or emergency procurement |
| 215 | must be documented. Contracts for goods or services valued at or |
| 216 | over $100,000 are subject to board approval. |
| 217 | b. The board shall determine whether it is more cost- |
| 218 | effective and in the best interests of the plan to use legal |
| 219 | services provided by in-house attorneys employed by the plan |
| 220 | rather than contracting with outside counsel. In making such |
| 221 | determination, the board shall document its findings and shall |
| 222 | consider the expertise needed; whether time commitments exceed |
| 223 | in-house staff resources; whether local representation is |
| 224 | needed; the travel, lodging, and other costs associated with in- |
| 225 | house representation; and such other factors that the board |
| 226 | determines are relevant. |
| 227 | 14. Provide for service standards for service providers, |
| 228 | methods of determining adherence to those service standards, |
| 229 | incentives and disincentives for service, and procedures for |
| 230 | terminating contracts for service providers that fail to adhere |
| 231 | to service standards. |
| 232 | 15. Provide procedures for selecting service providers and |
| 233 | standards for qualification as a service provider that |
| 234 | reasonably assure that any service provider selected will |
| 235 | continue to operate as an ongoing concern and is capable of |
| 236 | providing the specified services in the manner required. |
| 237 | 16. Provide for reasonable accounting and data-reporting |
| 238 | practices. |
| 239 | 17. Provide for annual review of costs associated with the |
| 240 | administration and servicing of the policies issued by the plan |
| 241 | to determine alternatives by which costs can be reduced. |
| 242 | 18. Authorize the acquisition of such excess insurance or |
| 243 | reinsurance as is consistent with the purposes of the plan. |
| 244 | 19. Provide for an annual report to the office on a date |
| 245 | specified by the office and containing such information as the |
| 246 | office reasonably requires. |
| 247 | 20. Establish multiple rating plans for various |
| 248 | classifications of risk which reflect risk of loss, hazard |
| 249 | grade, actual losses, size of premium, and compliance with loss |
| 250 | control. At least one of such plans must be a preferred-rating |
| 251 | plan to accommodate small-premium policyholders with good |
| 252 | experience as defined in sub-subparagraph 22.a. |
| 253 | 21. Establish agent commission schedules. |
| 254 | 22. For employers otherwise eligible for coverage under |
| 255 | the plan, establish three tiers of employers meeting the |
| 256 | criteria and subject to the rate limitations specified in this |
| 257 | subparagraph. |
| 258 | a. Tier One.-- |
| 259 | (I) Criteria; rated employers.--An employer that has an |
| 260 | experience modification rating shall be included in Tier One if |
| 261 | the employer meets all of the following: |
| 262 | (A) The experience modification is below 1.00. |
| 263 | (B) The employer had no lost-time claims subsequent to the |
| 264 | applicable experience modification rating period. |
| 265 | (C) The total of the employer's medical-only claims |
| 266 | subsequent to the applicable experience modification rating |
| 267 | period did not exceed 20 percent of premium. |
| 268 | (II) Criteria; non-rated employers.--An employer that does |
| 269 | not have an experience modification rating shall be included in |
| 270 | Tier One if the employer meets all of the following: |
| 271 | (A) The employer had no lost-time claims for the 3-year |
| 272 | period immediately preceding the inception date or renewal date |
| 273 | of the employer's coverage under the plan. |
| 274 | (B) The total of the employer's medical-only claims for |
| 275 | the 3-year period immediately preceding the inception date or |
| 276 | renewal date of the employer's coverage under the plan did not |
| 277 | exceed 20 percent of premium. |
| 278 | (C) The employer has secured workers' compensation |
| 279 | coverage for the entire 3-year period immediately preceding the |
| 280 | inception date or renewal date of the employer's coverage under |
| 281 | the plan. |
| 282 | (D) The employer is able to provide the plan with a loss |
| 283 | history generated by the employer's prior workers' compensation |
| 284 | insurer, except if the employer is not able to produce a loss |
| 285 | history due to the insolvency of an insurer, the receiver shall |
| 286 | provide to the plan, upon the request of the employer or the |
| 287 | employer's agent, a copy of the employer's loss history from the |
| 288 | records of the insolvent insurer if the loss history is |
| 289 | contained in records of the insurer which are in the possession |
| 290 | of the receiver. If the receiver is unable to produce the loss |
| 291 | history, the employer may, in lieu of the loss history, submit |
| 292 | an affidavit from the employer and the employer's insurance |
| 293 | agent setting forth the loss history. |
| 294 | (E) The employer is not a new business. |
| 295 | (III) Premiums.--The premiums for Tier One insureds shall |
| 296 | be set at a premium level 25 percent above the comparable |
| 297 | voluntary market premiums until the plan has sufficient |
| 298 | experience as determined by the board to establish an |
| 299 | actuarially sound rate for Tier One, at which point the board |
| 300 | shall, subject to paragraph (e), adjust the rates, if necessary, |
| 301 | to produce actuarially sound rates, provided such rate |
| 302 | adjustment shall not take effect prior to January 1, 2007. |
| 303 | b. Tier Two.-- |
| 304 | (I) Criteria; rated employers.--An employer that has an |
| 305 | experience modification rating shall be included in Tier Two if |
| 306 | the employer meets all of the following: |
| 307 | (A) The experience modification is equal to or greater |
| 308 | than 1.00 but not greater than 1.10. |
| 309 | (B) The employer had no lost-time claims subsequent to the |
| 310 | applicable experience modification rating period. |
| 311 | (C) The total of the employer's medical-only claims |
| 312 | subsequent to the applicable experience modification rating |
| 313 | period did not exceed 20 percent of premium. |
| 314 | (II) Criteria; non-rated employers.--An employer that does |
| 315 | not have any experience modification rating shall be included in |
| 316 | Tier Two if the employer is a new business. An employer shall be |
| 317 | included in Tier Two if the employer has less than 3 years of |
| 318 | loss experience in the 3-year period immediately preceding the |
| 319 | inception date or renewal date of the employer's coverage under |
| 320 | the plan and the employer meets all of the following: |
| 321 | (A) The employer had no lost-time claims for the 3-year |
| 322 | period immediately preceding the inception date or renewal date |
| 323 | of the employer's coverage under the plan. |
| 324 | (B) The total of the employer's medical-only claims for |
| 325 | the 3-year period immediately preceding the inception date or |
| 326 | renewal date of the employer's coverage under the plan did not |
| 327 | exceed 20 percent of premium. |
| 328 | (C) The employer is able to provide the plan with a loss |
| 329 | history generated by the workers' compensation insurer that |
| 330 | provided coverage for the portion or portions of such period |
| 331 | during which the employer had secured workers' compensation |
| 332 | coverage, except if the employer is not able to produce a loss |
| 333 | history due to the insolvency of an insurer, the receiver shall |
| 334 | provide to the plan, upon the request of the employer or the |
| 335 | employer's agent, a copy of the employer's loss history from the |
| 336 | records of the insolvent insurer if the loss history is |
| 337 | contained in records of the insurer which are in the possession |
| 338 | of the receiver. If the receiver is unable to produce the loss |
| 339 | history, the employer may, in lieu of the loss history, submit |
| 340 | an affidavit from the employer and the employer's insurance |
| 341 | agent setting forth the loss history. |
| 342 | (III) Premiums.--The premiums for Tier Two insureds shall |
| 343 | be set at a rate level 50 percent above the comparable voluntary |
| 344 | market premiums until the plan has sufficient experience as |
| 345 | determined by the board to establish an actuarially sound rate |
| 346 | for Tier Two, at which point the board shall, subject to |
| 347 | paragraph (e), adjust the rates, if necessary, to produce |
| 348 | actuarially sound rates, provided such rate adjustment shall not |
| 349 | take effect prior to January 1, 2007. |
| 350 | c. Tier Three.-- |
| 351 | (I) Eligibility.--An employer shall be included in Tier |
| 352 | Three if the employer does not meet the criteria for Tier One or |
| 353 | Tier Two. |
| 354 | (II) Rates.--The board shall establish, subject to |
| 355 | paragraph (e), and the plan shall charge, actuarially sound |
| 356 | rates for Tier Three insureds. |
| 357 | 23. For Tier One or Tier Two employers which employ no |
| 358 | nonexempt employees or which report payroll which is less than |
| 359 | the minimum wage hourly rate for one full-time employee for 1 |
| 360 | year at 40 hours per week, the plan shall establish actuarially |
| 361 | sound premiums, provided, however, that the premiums may not |
| 362 | exceed $2,500. These premiums shall be in addition to the fee |
| 363 | specified in subparagraph 26. When the plan establishes |
| 364 | actuarially sound rates for all employers in Tier One and Tier |
| 365 | Two, the premiums for employers referred to in this paragraph |
| 366 | are no longer subject to the $2,500 cap. |
| 367 | 24. Provide for a depopulation program to reduce the |
| 368 | number of insureds in the plan. If an employer insured through |
| 369 | the plan is offered coverage from a voluntary market carrier: |
| 370 | a. During the first 30 days of coverage under the plan; |
| 371 | b. Before a policy is issued under the plan; |
| 372 | c. By issuance of a policy upon expiration or cancellation |
| 373 | of the policy under the plan; or |
| 374 | d. By assumption of the plan's obligation with respect to |
| 375 | an in-force policy, |
| 376 |
|
| 377 | that employer is no longer eligible for coverage through the |
| 378 | plan. The premium for risks assumed by the voluntary market |
| 379 | carrier must be no greater than the premium the insured would |
| 380 | have paid under the plan, and shall be adjusted upon renewal to |
| 381 | reflect changes in the plan rates and the tier for which the |
| 382 | insured would qualify as of the time of renewal. The insured may |
| 383 | be charged such premiums only for the first 3 years of coverage |
| 384 | in the voluntary market. A premium under this subparagraph is |
| 385 | deemed approved and is not an excess premium for purposes of s. |
| 386 | 627.171. |
| 387 | 25. Require that policies issued and applications must |
| 388 | include a notice that the policy could be replaced by a policy |
| 389 | issued from a voluntary market carrier and that, if an offer of |
| 390 | coverage is obtained from a voluntary market carrier, the |
| 391 | policyholder is no longer eligible for coverage through the |
| 392 | plan. The notice must also specify that acceptance of coverage |
| 393 | under the plan creates a conclusive presumption that the |
| 394 | applicant or policyholder is aware of this potential. |
| 395 | 26. Require that each application for coverage and each |
| 396 | renewal premium be accompanied by a nonrefundable fee of $475 to |
| 397 | cover costs of administration and fraud prevention. The board |
| 398 | may, with the prior approval of the office, increase the amount |
| 399 | of the fee pursuant to a rate filing to reflect increased costs |
| 400 | of administration and fraud prevention. The fee is not subject |
| 401 | to commission and is fully earned upon commencement of coverage. |
| 402 | (d)1. The funding of the plan shall include premiums as |
| 403 | provided in subparagraph (c)22. and assessments as provided in |
| 404 | this paragraph. |
| 405 | 2.a. If the board determines that a deficit exists in Tier |
| 406 | One or Tier Two or that there is any deficit remaining |
| 407 | attributable to any of the plan's former subplans and that the |
| 408 | deficit cannot be fully funded by using policyholder surplus |
| 409 | attributable to former subplan C or, if the surplus in the |
| 410 | former subplan C does not fully fund the without the use of |
| 411 | deficit assessments, the board shall request the office to levy, |
| 412 | by order, a deficit assessment against premiums charged to |
| 413 | insureds for workers' compensation insurance by insurers as |
| 414 | defined in s. 631.904(5). The office shall issue the order after |
| 415 | verifying the amount of the deficit. The assessment shall be |
| 416 | specified as a percentage of future premium collections, as |
| 417 | recommended by the board and approved by the office. The same |
| 418 | percentage shall apply to premiums on all workers' compensation |
| 419 | policies issued or renewed during the 12-month period beginning |
| 420 | on the effective date of the assessment, as specified in the |
| 421 | order. |
| 422 | b. With respect to each insurer collecting premiums that |
| 423 | are subject to the assessment, the insurer shall collect the |
| 424 | assessment at the same time as the insurer collects the premium |
| 425 | payment for each policy and shall remit the assessments |
| 426 | collected to the plan as provided in the order issued by the |
| 427 | office. The office shall verify the accurate and timely |
| 428 | collection and remittance of deficit assessments and shall |
| 429 | report such information to the board. Each insurer collecting |
| 430 | assessments shall provide such information with respect to |
| 431 | premiums and collections as may be required by the office to |
| 432 | enable the office to monitor and audit compliance with this |
| 433 | paragraph. |
| 434 | c. Deficit assessments are not considered part of an |
| 435 | insurer's rate, are not premium, and are not subject to the |
| 436 | premium tax, to the assessments under ss. 440.49 and 440.51, to |
| 437 | the surplus lines tax, to any fees, or to any commissions. The |
| 438 | deficit assessment imposed shall become plan funds at the moment |
| 439 | of collection and shall not constitute income to the insurer for |
| 440 | any purpose, including financial reporting on the insurer's |
| 441 | income statement. An insurer is liable for all assessments that |
| 442 | the insurer collects and must treat the failure of an insured to |
| 443 | pay an assessment as a failure to pay premium. An insurer is not |
| 444 | liable for uncollectible assessments. |
| 445 | d. When an insurer is required to return unearned premium, |
| 446 | the insurer shall also return any collected assessments |
| 447 | attributable to the unearned premium. |
| 448 | e. Deficit assessments as described in this subparagraph |
| 449 | shall not be levied after July 1, 2012 2007. |
| 450 | 3.a. All policies issued to Tier Three insureds shall be |
| 451 | assessable. All Tier Three assessable policies must be clearly |
| 452 | identified as assessable by containing, in contrasting color and |
| 453 | in not less than 10-point type, the following statement: |
| 454 |
|
| 455 | "This is an assessable policy. If the plan is unable to pay its |
| 456 | obligations, policyholders will be required to contribute on a |
| 457 | pro rata earned premium basis the money necessary to meet any |
| 458 | assessment levied." |
| 459 |
|
| 460 | b. The board may from time to time assess Tier Three |
| 461 | insureds to whom the plan has issued assessable policies for the |
| 462 | purpose of funding plan deficits. Any such assessment shall be |
| 463 | based upon a reasonable actuarial estimate of the amount of the |
| 464 | deficit, taking into account the amount needed to fund medical |
| 465 | and indemnity reserves and reserves for incurred but not |
| 466 | reported claims, and allowing for general administrative |
| 467 | expenses, the cost of levying and collecting the assessment, a |
| 468 | reasonable allowance for estimated uncollectible assessments, |
| 469 | and allocated and unallocated loss adjustment expenses. |
| 470 | c. Each Tier Three insured's share of a deficit shall be |
| 471 | computed by applying to the premium earned on the insured's |
| 472 | policy or policies during the period to be covered by the |
| 473 | assessment the ratio of the total deficit to the total premiums |
| 474 | earned during such period upon all policies subject to the |
| 475 | assessment. If one or more Tier Three insureds fail to pay an |
| 476 | assessment, the other Tier Three insureds shall be liable on a |
| 477 | proportionate basis for additional assessments to fund the |
| 478 | deficit. The plan may compromise and settle individual |
| 479 | assessment claims without affecting the validity of or amounts |
| 480 | due on assessments levied against other insureds. The plan may |
| 481 | offer and accept discounted payments for assessments which are |
| 482 | promptly paid. The plan may offset the amount of any unpaid |
| 483 | assessment against unearned premiums which may otherwise be due |
| 484 | to an insured. The plan shall institute legal action when |
| 485 | necessary and appropriate to collect the assessment from any |
| 486 | insured who fails to pay an assessment when due. |
| 487 | d. The venue of a proceeding to enforce or collect an |
| 488 | assessment or to contest the validity or amount of an assessment |
| 489 | shall be in the Circuit Court of Leon County. |
| 490 | e. If the board finds that a deficit in Tier Three exists |
| 491 | for any period and that an assessment is necessary, the board |
| 492 | shall certify to the office the need for an assessment. No |
| 493 | sooner than 30 days after the date of such certification, the |
| 494 | board shall notify in writing each insured who is to be assessed |
| 495 | that an assessment is being levied against the insured, and |
| 496 | informing the insured of the amount of the assessment, the |
| 497 | period for which the assessment is being levied, and the date by |
| 498 | which payment of the assessment is due. The board shall |
| 499 | establish a date by which payment of the assessment is due, |
| 500 | which shall be no sooner than 30 days nor later than 120 days |
| 501 | after the date on which notice of the assessment is mailed to |
| 502 | the insured. |
| 503 | f. Whenever the board makes a determination that the plan |
| 504 | does not have a sufficient cash basis to meet 6 3 months of |
| 505 | projected cash needs due to a deficit in Tier Three, the board |
| 506 | may request the department to transfer funds from the Workers' |
| 507 | Compensation Administration Trust Fund to the plan in an amount |
| 508 | sufficient to fund the difference between the amount available |
| 509 | and the amount needed to meet a 6-month 3-month projected cash |
| 510 | need as determined by the board and verified by the office, |
| 511 | subject to the approval of the Legislative Budget Commission. If |
| 512 | the Legislative Budget Commission approves a transfer of funds |
| 513 | under this sub-subparagraph, the plan shall report to the |
| 514 | Legislature the transfer of funds and the Legislature shall |
| 515 | review the plan during the next legislative session or the |
| 516 | current legislative session, if the transfer occurs during a |
| 517 | legislative session. This sub-subparagraph shall not apply until |
| 518 | the plan determines and the office verifies that assessments |
| 519 | collected by the plan pursuant to sub-subparagraph b. are |
| 520 | insufficient to fund the deficit in Tier Three and to meet 6 3 |
| 521 | months of projected cash needs. |
| 522 | 4. The plan may offer rating, dividend plans, and other |
| 523 | plans to encourage loss prevention programs. |
| 524 | (e) For rates and rating plans effective on or after |
| 525 | January 1, 2008, the plan shall establish and use its rates and |
| 526 | rating plans, and the plan may establish and use changes in |
| 527 | rating plans at any time, but no more frequently than two times |
| 528 | per any rating class for any calendar year. By December 1, 1993, |
| 529 | and December 1 of each year thereafter, except as provided in |
| 530 | subparagraph (c)22., the board shall establish and use |
| 531 | actuarially sound rates for use by the plan to assure that the |
| 532 | plan is self-funding while those rates are in effect. Such rates |
| 533 | and rating plans must be filed with the office within 30 |
| 534 | calendar days after their effective dates, and shall be |
| 535 | considered a "use and file" filing. Any disapproval by the |
| 536 | office must have an effective date that is at least 60 days from |
| 537 | the date of disapproval of the rates and rating plan and must |
| 538 | have prospective effect only. The plan shall may not be subject |
| 539 | to any order by the office to return to policyholders any |
| 540 | portion of the rates disapproved by the office. The office may |
| 541 | not disapprove any rates or rating plans unless it demonstrates |
| 542 | that such rates and rating plans are excessive, inadequate, or |
| 543 | unfairly discriminatory. |
| 544 | (f) No later than June 1 of each year, the plan shall |
| 545 | obtain an independent actuarial certification of the results of |
| 546 | the operations of the plan for prior years, and shall furnish a |
| 547 | copy of the certification to the office. If, after the effective |
| 548 | date of the plan, the projected ultimate incurred losses and |
| 549 | expenses and dividends for prior years exceed collected |
| 550 | premiums, accrued net investment income, and prior assessments |
| 551 | for prior years, the certification is subject to review and |
| 552 | approval by the office before it becomes final. |
| 553 | (g) Whenever a deficit exists, the plan shall, within 90 |
| 554 | days, provide the office with a program to eliminate the deficit |
| 555 | within a reasonable time. The deficit may be funded through |
| 556 | increased premiums charged to insureds of the plan for |
| 557 | subsequent years;, through the use of policyholder surplus |
| 558 | attributable to any year, including the use of surplus |
| 559 | attributable to former subplan C as authorized in subparagraph |
| 560 | (d)2.; through the use of assessments as provided in |
| 561 | subparagraph (d)2.;, and through assessments on assessable |
| 562 | policies as provided in subparagraph (d)3. Any entity that was a |
| 563 | policyholder of former subplan C is not subject to any |
| 564 | assessments that are attributable to deficits in former subplan |
| 565 | C. |
| 566 | (h) Any premium or assessments collected by the plan in |
| 567 | excess of the amount necessary to fund projected ultimate |
| 568 | incurred losses and expenses of the plan and not paid to |
| 569 | insureds of the plan in conjunction with loss prevention or |
| 570 | dividend programs shall be retained by the plan for future use. |
| 571 | Any state funds received by the plan in excess of the amount |
| 572 | necessary to fund deficits in subplan D or any tier shall be |
| 573 | returned to the state. |
| 574 | (i) The decisions of the board of governors do not |
| 575 | constitute final agency action and are not subject to chapter |
| 576 | 120. |
| 577 | (j) Policies for insureds shall be issued by the plan. |
| 578 | (k) The plan created under this subsection is liable only |
| 579 | for payment for losses arising under policies issued by the plan |
| 580 | with dates of accidents occurring on or after January 1, 1994. |
| 581 | (l) Plan losses are the sole and exclusive responsibility |
| 582 | of the plan, and payment for such losses must be funded in |
| 583 | accordance with this subsection and must not come, directly or |
| 584 | indirectly, from insurers or any guaranty association for such |
| 585 | insurers. |
| 586 | (m) Senior managers and officers, as defined in the plan |
| 587 | of operation, and members of the board of governors are subject |
| 588 | to part III of chapter 112, including, but not limited to, the |
| 589 | code of ethics and public disclosure and reporting of financial |
| 590 | interests pursuant to s. 112.3145. Senior managers, officers, |
| 591 | and board members are also required to file such disclosures |
| 592 | with the Office of Insurance Regulation. The executive director |
| 593 | of the plan or his or her designee shall notify each newly |
| 594 | appointed and existing appointed member of the board of |
| 595 | governors, senior manager, and officer of their duty to comply |
| 596 | with the reporting requirements of part III of chapter 112. At |
| 597 | least quarterly, the executive director of the plan or his or |
| 598 | her designee shall submit to the Commission on Ethics a list of |
| 599 | names of the senior managers, officers, and members of the board |
| 600 | of governors who are subject to the public disclosure |
| 601 | requirements under s. 112.3145. Each joint underwriting plan or |
| 602 | association created under this section is not a state agency, |
| 603 | board, or commission. However, for the purposes of s. 199.183(1) |
| 604 | only, the joint underwriting plan is a political subdivision of |
| 605 | the state and is exempt from the corporate income tax. |
| 606 | (n) On or before July 1 of each year, employees of the |
| 607 | plan shall sign and submit a statement to the plan attesting |
| 608 | that they do not have a conflict of interest as defined in part |
| 609 | III of chapter 112. As a condition of employment, all |
| 610 | prospective employees shall sign and submit a conflict-of- |
| 611 | interest statement to the plan. Each joint underwriting plan or |
| 612 | association may elect to pay premium taxes on the premiums |
| 613 | received on its behalf or may elect to have the member insurers |
| 614 | to whom the premiums are allocated pay the premium taxes if the |
| 615 | member insurer had written the policy. The joint underwriting |
| 616 | plan or association shall notify the member insurers and the |
| 617 | Department of Revenue by January 15 of each year of its election |
| 618 | for the same year. As used in this paragraph, the term "premiums |
| 619 | received" means the consideration for insurance, by whatever |
| 620 | name called, but does not include any policy assessment or |
| 621 | surcharge received by the joint underwriting association as a |
| 622 | result of apportioning losses or deficits of the association |
| 623 | pursuant to this section. |
| 624 | (o) Any senior manager or officer of the plan who is |
| 625 | employed by the plan as of January 1, 2008, regardless of the |
| 626 | date of hire, and who subsequently retires or terminates |
| 627 | employment may not represent another person or entity before the |
| 628 | plan for 2 years after retirement or termination of employment |
| 629 | from the plan. |
| 630 | (p) No part of the income of the plan may inure to the |
| 631 | benefit of any private person. |
| 632 | (q) Notwithstanding ss. 112.3148 and 112.3149 or other |
| 633 | provision of law, an employee or board member may not knowingly |
| 634 | accept, directly or indirectly, any expenditure or gift from a |
| 635 | person or entity, or an employee or representative of such |
| 636 | person or entity, which has a contractual relationship with the |
| 637 | plan or is under consideration for a contract. An employee or |
| 638 | board member who fails to comply with this paragraph is subject |
| 639 | to penalties provided under s. 112.317. |
| 640 | (r) This section does not prohibit the plan from providing |
| 641 | insurance coverage to any employer with whom a former employee |
| 642 | of the plan is affiliated or employing or reemploying any former |
| 643 | employee of the plan in a part-time, full-time, temporary, or |
| 644 | permanent capacity so long as such employment does not violate |
| 645 | any provision of part III of chapter 112. |
| 646 | (s)(o) Neither the plan nor any member of the board of |
| 647 | governors is liable for monetary damages to any person for any |
| 648 | statement, vote, decision, or failure to act, regarding the |
| 649 | management or policies of the plan, unless: |
| 650 | 1. The member breached or failed to perform her or his |
| 651 | duties as a member; and |
| 652 | 2. The member's breach of, or failure to perform, duties |
| 653 | constitutes: |
| 654 | a. A violation of the criminal law, unless the member had |
| 655 | reasonable cause to believe her or his conduct was not unlawful. |
| 656 | A judgment or other final adjudication against a member in any |
| 657 | criminal proceeding for violation of the criminal law estops |
| 658 | that member from contesting the fact that her or his breach, or |
| 659 | failure to perform, constitutes a violation of the criminal law; |
| 660 | but does not estop the member from establishing that she or he |
| 661 | had reasonable cause to believe that her or his conduct was |
| 662 | lawful or had no reasonable cause to believe that her or his |
| 663 | conduct was unlawful; |
| 664 | b. A transaction from which the member derived an improper |
| 665 | personal benefit, either directly or indirectly; or |
| 666 | c. Recklessness or any act or omission that was committed |
| 667 | in bad faith or with malicious purpose or in a manner exhibiting |
| 668 | wanton and willful disregard of human rights, safety, or |
| 669 | property. For purposes of this sub-subparagraph, the term |
| 670 | "recklessness" means the acting, or omission to act, in |
| 671 | conscious disregard of a risk: |
| 672 | (I) Known, or so obvious that it should have been known, |
| 673 | to the member; and |
| 674 | (II) Known to the member, or so obvious that it should |
| 675 | have been known, to be so great as to make it highly probable |
| 676 | that harm would follow from such act or omission. |
| 677 | (t)(p) No insurer shall provide workers' compensation and |
| 678 | employer's liability insurance to any person who is delinquent |
| 679 | in the payment of premiums, assessments, penalties, or |
| 680 | surcharges owed to the plan or to any person who is an |
| 681 | affiliated person of a person who is delinquent in the payment |
| 682 | of premiums, assessments, penalties, or surcharges owed to the |
| 683 | plan. For purposes of this paragraph, the term "affiliated |
| 684 | person" of another person means: |
| 685 | 1. The spouse of such other natural person; |
| 686 | 2. Any person who directly or indirectly owns or controls, |
| 687 | or holds with the power to vote, 5 percent or more of the |
| 688 | outstanding voting securities of such other person; |
| 689 | 3. Any person who directly or indirectly owns 5 percent or |
| 690 | more of the outstanding voting securities that are directly or |
| 691 | indirectly owned or controlled, or held with the power to vote, |
| 692 | by such other person; |
| 693 | 4. Any person or group of persons who directly or |
| 694 | indirectly control, are controlled by, or are under common |
| 695 | control with such other person; |
| 696 | 5. Any officer, director, trustee, partner, owner, |
| 697 | manager, joint venturer, or employee, or other person performing |
| 698 | duties similar to persons in those positions, of such other |
| 699 | persons; or |
| 700 | 6. Any person who has an officer, director, trustee, |
| 701 | partner, or joint venturer in common with such other person. |
| 702 | (u)(q) Effective July 1, 2004, the plan is exempt from the |
| 703 | premium tax under s. 624.509 and any assessments under ss. |
| 704 | 440.49 and 440.51. |
| 705 | (v) The office shall perform a comprehensive market |
| 706 | conduct examination of the plan periodically to determine |
| 707 | compliance with its plan of operation and internal operating |
| 708 | policies and procedures. |
| 709 | (w) Upon dissolution of the plan, the assets of the plan |
| 710 | shall be applied first to pay all debts, liabilities, and |
| 711 | obligations of the plan, including the establishment of |
| 712 | reasonable reserves for any contingent liabilities or |
| 713 | obligations, and all remaining assets of the plan shall become |
| 714 | property of the state and shall be deposited into the Workers' |
| 715 | Compensation Administration Trust Fund. However, dissolution of |
| 716 | the plan shall not take effect as long as the plan has financial |
| 717 | obligations outstanding unless adequate provision has been made |
| 718 | for the payment of financial obligations pursuant to the |
| 719 | documents authorizing the financial obligations. |
| 720 | (8) Each joint underwriting plan or association created |
| 721 | under this section is not a state agency, board, or commission. |
| 722 | However, solely for the purposes of s. 199.183(1), the joint |
| 723 | underwriting plan is a political subdivision of the state and is |
| 724 | exempt from the corporate income tax. |
| 725 | (9) Each joint underwriting plan or association may elect |
| 726 | to pay premium taxes on the premiums received on its behalf or |
| 727 | may elect to have the member insurers to whom the premiums are |
| 728 | allocated pay the premium taxes if the member insurer had |
| 729 | written the policy. The joint underwriting plan or association |
| 730 | shall notify the member insurers and the Department of Revenue |
| 731 | by January 15 of each year of its election for the same year. As |
| 732 | used in this subsection, the term "premiums received" means the |
| 733 | consideration for insurance, by whatever name called, but does |
| 734 | not include any policy assessment or surcharge received by the |
| 735 | joint underwriting association as a result of apportioning |
| 736 | losses or deficits of the association pursuant to this section. |
| 737 | Section 2. No later than January 1, 2008, the Florida |
| 738 | Workers' Compensation Joint Underwriting Association, Inc., |
| 739 | shall submit a request to the Internal Revenue Service for a |
| 740 | letter ruling or determination on the plan's eligibility as a |
| 741 | tax-exempt entity. |
| 742 | Section 3. This act shall take effect July 1, 2007. |