Senate Bill sb2276
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Florida Senate - 2007 SB 2276
By Senator Bennett
21-1534A-07
1 A bill to be entitled
2 An act relating to the Florida Workers'
3 Compensation Joint Underwriting Association,
4 Inc.; amending s. 627.311, F.S.; creating the
5 Florida Workers' Compensation Joint
6 Underwriting Association; providing that the
7 association shall operate as a not-for-profit
8 corporation; providing for a board of governors
9 appointed by the Financial Services Commission;
10 authorizing the commission to remove any member
11 of the board of governors for cause; requiring
12 the association to review and update its
13 market-assistance plan periodically;
14 authorizing the board to use the surplus
15 attributable to any former subplan to mitigate
16 certain deficits; authorizing the board to
17 calculate and levy deficit assessments;
18 providing criteria for the calculation of
19 deficit assessments; exempting policyholders of
20 former subplan C from assessments attributable
21 to deficits in former subplan C under certain
22 conditions; eliminating a provision stating
23 that assessments may not be levied after July
24 1, 2007; extending from 3 months to 6 months
25 the period of projected cash needs which serves
26 as the basis on which the board may request the
27 transfer of funds from the Workers'
28 Compensation Administration Trust Fund if the
29 board finds that the association will have
30 insufficient cash due to certain deficits;
31 providing for the use of surplus attributable
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1 to former subplans as a means to fund a
2 deficit; providing for dissolution of the
3 association; providing that a joint
4 underwriting plan and the association are
5 exempt from the corporate income tax but may
6 elect to pay premium taxes; creating s.
7 627.3121, F.S.; requiring the Department of
8 Financial Services to establish a contingency
9 reserve within the Workers' Compensation
10 Administration Trust Fund; providing for
11 transfers from the contingency reserve;
12 providing for the dissolution of the
13 contingency reserve; providing for the
14 calculation of any excess state funds received
15 by the plan from the reserve; providing for the
16 return of such funds; requiring the association
17 to submit to the Internal Revenue Service a
18 request for a determination as to the
19 association's status as a tax-exempt entity;
20 providing an effective date.
21
22 Be It Enacted by the Legislature of the State of Florida:
23
24 Section 1. Subsection (5) of section 627.311, Florida
25 Statutes, is amended, and subsections (8) and (9) are added to
26 that section, to read:
27 627.311 Joint underwriters and joint reinsurers;
28 public records and public meetings exemptions.--
29 (5)(a) The office shall, after consultation with
30 insurers, approve a joint underwriting plan of insurers which
31 shall be known as the Florida Workers' Compensation Joint
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1 Underwriting Association, Inc., and shall operate as a
2 not-for-profit corporation nonprofit entity. For the purposes
3 of this subsection, the term "insurer" includes group
4 self-insurance funds authorized by s. 624.4621, commercial
5 self-insurance funds authorized by s. 624.462, assessable
6 mutual insurers authorized under s. 628.6011, and insurers
7 licensed to write workers' compensation and employer's
8 liability insurance in this state. The purpose of the plan is
9 to provide workers' compensation and employer's liability
10 insurance to applicants who are required by law to maintain
11 workers' compensation and employer's liability insurance and
12 who are in good faith entitled to but who are unable to
13 procure such insurance through the voluntary market. Except as
14 provided herein, the plan must have actuarially sound rates
15 that ensure that the plan is self-supporting.
16 (b) The operation of the plan is subject to the
17 supervision of a 9-member board of governors. The board of
18 governors shall be comprised of:
19 1. Three members appointed by the Financial Services
20 Commission. Each member appointed by the commission shall
21 serve at the pleasure of the commission;
22 2. Two representatives of the 20 domestic insurers, as
23 defined in s. 624.06(1), having the largest voluntary direct
24 premiums written in this state for workers' compensation and
25 employer's liability insurance, who which shall be appointed
26 by the Financial Services Commission from a list of three
27 nominees for each vacancy submitted elected by those 20
28 domestic insurers;
29 3. Two representatives of the 20 foreign insurers as
30 defined in s. 624.06(2) having the largest voluntary direct
31 premiums written in this state for workers' compensation and
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1 employer's liability insurance, who which shall be appointed
2 by the Financial Services Commission from a list of three
3 nominees for each vacancy submitted elected by those 20
4 foreign insurers;
5 4. One representative of person appointed by the
6 largest property and casualty insurance agents' association in
7 this state, who shall be appointed by the Financial Services
8 Commission from a list of three nominees submitted by the
9 association; and
10 5. The consumer advocate appointed under s. 627.0613
11 or the consumer advocate's designee.
12
13 Each board member shall be appointed to serve a 4-year term
14 and may serve consecutive terms. A vacancy on the board shall
15 be filled in the same manner as the original appointment for
16 the unexpired portion of the term. The Financial Services
17 Commission shall designate a member of the board to serve as
18 chair. The Financial Services Commission may remove any
19 members for cause. A No board member may not shall be an
20 insurer that which provides services to the plan, that or
21 which has an affiliate that which provides services to the
22 plan, or that which is serviced by a service company or
23 third-party administrator that which provides services to the
24 plan or that which has an affiliate that which provides
25 services to the plan. The minutes, audits, and procedures of
26 the board of governors are subject to chapter 119.
27 (c) The operation of the plan shall be governed by a
28 plan of operation that is prepared at the direction of the
29 board of governors. The plan of operation may be changed at
30 any time by the board of governors or upon request of the
31 office. The plan of operation and all changes thereto are
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1 subject to the approval of the office. The plan of operation
2 shall:
3 1. Authorize the board to engage in the activities
4 necessary to implement this subsection, including, but not
5 limited to, borrowing money.
6 2. Develop criteria for eligibility for coverage by
7 the plan, including, but not limited to, documented rejection
8 by at least two insurers which reasonably assures that
9 insureds covered under the plan are unable to acquire coverage
10 in the voluntary market.
11 3. Require notice from the agent to the insured at the
12 time of the application for coverage that the application is
13 for coverage with the plan and that coverage may be available
14 through an insurer, group self-insurers' fund, commercial
15 self-insurance fund, or assessable mutual insurer through
16 another agent at a lower cost.
17 4. Establish programs to encourage insurers to provide
18 coverage to applicants of the plan in the voluntary market and
19 to insureds of the plan, including, but not limited to:
20 a. Establishing procedures for an insurer to use in
21 notifying the plan of the insurer's desire to provide coverage
22 to applicants to the plan or existing insureds of the plan and
23 in describing the types of risks in which the insurer is
24 interested. The description of the desired risks must be on a
25 form developed by the plan.
26 b. Developing forms and procedures that provide an
27 insurer with the information necessary to determine whether
28 the insurer wants to write particular applicants to the plan
29 or insureds of the plan.
30 c. Developing procedures for notice to the plan and
31 the applicant to the plan or insured of the plan that an
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1 insurer will insure the applicant or the insured of the plan,
2 and notice of the cost of the coverage offered; and developing
3 procedures for the selection of an insuring entity by the
4 applicant or insured of the plan.
5 d. Provide for a market-assistance plan to assist in
6 the placement of employers. All applications for coverage in
7 the plan received 45 days before the effective date for
8 coverage shall be processed through the market-assistance
9 plan. A market-assistance plan specifically designed to serve
10 the needs of small, good policyholders as defined by the board
11 must be reviewed and updated periodically finalized by January
12 1, 1994.
13 5. Provide for policy and claims services to the
14 insureds of the plan of the nature and quality provided for
15 insureds in the voluntary market.
16 6. Provide for the review of applications for coverage
17 with the plan for reasonableness and accuracy, using any
18 available historic information regarding the insured.
19 7. Provide for procedures for auditing insureds of the
20 plan which are based on reasonable business judgment and are
21 designed to maximize the likelihood that the plan will collect
22 the appropriate premiums.
23 8. Authorize the plan to terminate the coverage of and
24 refuse future coverage for any insured that submits a
25 fraudulent application to the plan or provides fraudulent or
26 grossly erroneous records to the plan or to any service
27 provider of the plan in conjunction with the activities of the
28 plan.
29 9. Establish service standards for agents who submit
30 business to the plan.
31
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1 10. Establish criteria and procedures to prohibit any
2 agent who does not adhere to the established service standards
3 from placing business with the plan or receiving, directly or
4 indirectly, any commissions for business placed with the plan.
5 11. Provide for the establishment of reasonable safety
6 programs for all insureds in the plan. All insureds of the
7 plan must participate in the safety program.
8 12. Authorize the plan to terminate the coverage of
9 and refuse future coverage to any insured who fails to pay
10 premiums or surcharges when due; who, at the time of
11 application, is delinquent in payments of workers'
12 compensation or employer's liability insurance premiums or
13 surcharges owed to an insurer, group self-insurers' fund,
14 commercial self-insurance fund, or assessable mutual insurer
15 licensed to write such coverage in this state; or who refuses
16 to substantially comply with any safety programs recommended
17 by the plan.
18 13. Authorize the board of governors to provide the
19 services required by the plan through staff employed by the
20 plan, through reasonably compensated service providers who
21 contract with the plan to provide services as specified by the
22 board of governors, or through a combination of employees and
23 service providers.
24 14. Provide for service standards for service
25 providers, methods of determining adherence to those service
26 standards, incentives and disincentives for service, and
27 procedures for terminating contracts for service providers
28 that fail to adhere to service standards.
29 15. Provide procedures for selecting service providers
30 and standards for qualification as a service provider that
31 reasonably assure that any service provider selected will
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1 continue to operate as an ongoing concern and is capable of
2 providing the specified services in the manner required.
3 16. Provide for reasonable accounting and
4 data-reporting practices.
5 17. Provide for annual review of costs associated with
6 the administration and servicing of the policies issued by the
7 plan to determine alternatives by which costs can be reduced.
8 18. Authorize the acquisition of such excess insurance
9 or reinsurance as is consistent with the purposes of the plan.
10 19. Provide for an annual report to the office on a
11 date specified by the office and containing such information
12 as the office reasonably requires.
13 20. Establish multiple rating plans for various
14 classifications of risk which reflect risk of loss, hazard
15 grade, actual losses, size of premium, and compliance with
16 loss control. At least one of such plans must be a
17 preferred-rating plan to accommodate small-premium
18 policyholders with good experience as defined in
19 sub-subparagraph 22.a.
20 21. Establish agent commission schedules.
21 22. For employers otherwise eligible for coverage
22 under the plan, establish three tiers of employers meeting the
23 criteria and subject to the rate limitations specified in this
24 subparagraph.
25 a. Tier One.--
26 (I) Criteria; rated employers.--An employer that has
27 an experience modification rating shall be included in Tier
28 One if the employer meets all of the following:
29 (A) The experience modification is below 1.00.
30 (B) The employer had no lost-time claims subsequent to
31 the applicable experience modification rating period.
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1 (C) The total of the employer's medical-only claims
2 subsequent to the applicable experience modification rating
3 period did not exceed 20 percent of premium.
4 (II) Criteria; non-rated employers.--An employer that
5 does not have an experience modification rating shall be
6 included in Tier One if the employer meets all of the
7 following:
8 (A) The employer had no lost-time claims for the
9 3-year period immediately preceding the inception date or
10 renewal date of the employer's coverage under the plan.
11 (B) The total of the employer's medical-only claims
12 for the 3-year period immediately preceding the inception date
13 or renewal date of the employer's coverage under the plan did
14 not exceed 20 percent of premium.
15 (C) The employer has secured workers' compensation
16 coverage for the entire 3-year period immediately preceding
17 the inception date or renewal date of the employer's coverage
18 under the plan.
19 (D) The employer is able to provide the plan with a
20 loss history generated by the employer's prior workers'
21 compensation insurer, except if the employer is not able to
22 produce a loss history due to the insolvency of an insurer,
23 the receiver shall provide to the plan, upon the request of
24 the employer or the employer's agent, a copy of the employer's
25 loss history from the records of the insolvent insurer if the
26 loss history is contained in records of the insurer which are
27 in the possession of the receiver. If the receiver is unable
28 to produce the loss history, the employer may, in lieu of the
29 loss history, submit an affidavit from the employer and the
30 employer's insurance agent setting forth the loss history.
31 (E) The employer is not a new business.
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1 (III) Premiums.--The premiums for Tier One insureds
2 shall be set at a premium level 25 percent above the
3 comparable voluntary market premiums until the plan has
4 sufficient experience as determined by the board to establish
5 an actuarially sound rate for Tier One, at which point the
6 board shall, subject to paragraph (e), adjust the rates, if
7 necessary, to produce actuarially sound rates, provided such
8 rate adjustment shall not take effect prior to January 1,
9 2007.
10 b. Tier Two.--
11 (I) Criteria; rated employers.--An employer that has
12 an experience modification rating shall be included in Tier
13 Two if the employer meets all of the following:
14 (A) The experience modification is equal to or greater
15 than 1.00 but not greater than 1.10.
16 (B) The employer had no lost-time claims subsequent to
17 the applicable experience modification rating period.
18 (C) The total of the employer's medical-only claims
19 subsequent to the applicable experience modification rating
20 period did not exceed 20 percent of premium.
21 (II) Criteria; non-rated employers.--An employer that
22 does not have any experience modification rating shall be
23 included in Tier Two if the employer is a new business. An
24 employer shall be included in Tier Two if the employer has
25 less than 3 years of loss experience in the 3-year period
26 immediately preceding the inception date or renewal date of
27 the employer's coverage under the plan and the employer meets
28 all of the following:
29 (A) The employer had no lost-time claims for the
30 3-year period immediately preceding the inception date or
31 renewal date of the employer's coverage under the plan.
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1 (B) The total of the employer's medical-only claims
2 for the 3-year period immediately preceding the inception date
3 or renewal date of the employer's coverage under the plan did
4 not exceed 20 percent of premium.
5 (C) The employer is able to provide the plan with a
6 loss history generated by the workers' compensation insurer
7 that provided coverage for the portion or portions of such
8 period during which the employer had secured workers'
9 compensation coverage, except if the employer is not able to
10 produce a loss history due to the insolvency of an insurer,
11 the receiver shall provide to the plan, upon the request of
12 the employer or the employer's agent, a copy of the employer's
13 loss history from the records of the insolvent insurer if the
14 loss history is contained in records of the insurer which are
15 in the possession of the receiver. If the receiver is unable
16 to produce the loss history, the employer may, in lieu of the
17 loss history, submit an affidavit from the employer and the
18 employer's insurance agent setting forth the loss history.
19 (III) Premiums.--The premiums for Tier Two insureds
20 shall be set at a rate level 50 percent above the comparable
21 voluntary market premiums until the plan has sufficient
22 experience as determined by the board to establish an
23 actuarially sound rate for Tier Two, at which point the board
24 shall, subject to paragraph (e), adjust the rates, if
25 necessary, to produce actuarially sound rates, provided such
26 rate adjustment shall not take effect prior to January 1,
27 2007.
28 c. Tier Three.--
29 (I) Eligibility.--An employer shall be included in
30 Tier Three if the employer does not meet the criteria for Tier
31 One or Tier Two.
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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 approval of the office, increase the
16 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.(I) If the board determines that a deficit exists
24 in Tier One or Tier Two or that there is any deficit remaining
25 attributable to any of the plan's former subplans, the board
26 may use some or all of the surplus attributable to any former
27 subplan for the purpose of mitigating some or all of any such
28 deficit. and that the
29 (II) If the board determines that any deficit cannot
30 be funded without the use of deficit assessments, the board
31 shall request the office to levy, by order, a deficit
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1 assessment against premiums charged to insureds for workers'
2 compensation insurance by insurers as defined in s.
3 631.904(5). The office shall issue the order after verifying
4 the amount of the deficit. The assessment shall be specified
5 as a percentage of future premium collections, as recommended
6 by the board and approved by the office. Any such assessment
7 shall be based upon a reasonable actuarial estimate of the
8 amount of the deficit, taking into account the amount needed
9 to fund medical and indemnity reserves and reserves for
10 incurred claims. The actuarial estimate may not include the
11 amount needed to fund reserves for reported claims. The
12 actuarial estimate must also allow for general administrative
13 expenses, the cost of levying and collecting assessments, a
14 reasonable allowance for estimated uncollectable assessments,
15 and allocated as well as unallocated loss-adjustment expenses.
16 The same percentage shall apply to premiums on all workers'
17 compensation policies issued or renewed during the 12-month
18 period beginning on the effective date of the assessment, as
19 specified in the order.
20 (III) If any surplus attributable to former subplan C
21 is used to mitigate a deficit pursuant to the discretionary
22 authority specified in this sub-sub-subparagraph, any entity
23 that was a policyholder of former subplan C may not be subject
24 to any policyholder assessments attributable to deficits from
25 former subplan C.
26 b. With respect to each insurer collecting premiums
27 that are subject to the assessment, the insurer shall collect
28 the assessment at the same time as the insurer collects the
29 premium payment for each policy and shall remit the
30 assessments collected to the plan as provided in the order
31 issued by the office. The office shall verify the accurate and
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1 timely collection and remittance of deficit assessments and
2 shall report such information to the board. Each insurer
3 collecting assessments shall provide such information with
4 respect to premiums and collections as may be required by the
5 office to enable the office to monitor and audit compliance
6 with this paragraph.
7 c. Deficit assessments are not considered part of an
8 insurer's rate, are not premium, and are not subject to the
9 premium tax, to the assessments under ss. 440.49 and 440.51,
10 to the surplus lines tax, to any fees, or to any commissions.
11 The deficit assessment imposed shall become plan funds at the
12 moment of collection and shall not constitute income to the
13 insurer for any purpose, including financial reporting on the
14 insurer's income statement. An insurer is liable for all
15 assessments that the insurer collects and must treat the
16 failure of an insured to pay an assessment as a failure to pay
17 premium. An insurer is not liable for uncollectible
18 assessments.
19 d. When an insurer is required to return unearned
20 premium, the insurer shall also return any collected
21 assessments attributable to the unearned premium.
22 e. Deficit assessments as described in this
23 subparagraph shall not be levied after July 1, 2007.
24 3.a. All policies issued to Tier Three insureds shall
25 be assessable. All Tier Three assessable policies must be
26 clearly identified as assessable by containing, in contrasting
27 color and in not less than 10-point type, the following
28 statement:
29
30 "This is an assessable policy. If the plan is
31 unable to pay its obligations, policyholders
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1 will be required to contribute on a pro rata
2 earned premium basis the money necessary to
3 meet any assessment levied."
4
5 b. The board may from time to time assess Tier Three
6 insureds to whom the plan has issued assessable policies for
7 the purpose of funding plan deficits. Any such assessment
8 shall be based upon a reasonable actuarial estimate of the
9 amount of the deficit, taking into account the amount needed
10 to fund medical and indemnity reserves and reserves for
11 incurred but not reported claims, and allowing for general
12 administrative expenses, the cost of levying and collecting
13 the assessment, a reasonable allowance for estimated
14 uncollectible assessments, and allocated and unallocated loss
15 adjustment expenses.
16 c. Each Tier Three insured's share of a deficit shall
17 be computed by applying to the premium earned on the insured's
18 policy or policies during the period to be covered by the
19 assessment the ratio of the total deficit to the total
20 premiums earned during such period upon all policies subject
21 to the assessment. If one or more Tier Three insureds fail to
22 pay an assessment, the other Tier Three insureds shall be
23 liable on a proportionate basis for additional assessments to
24 fund the deficit. The plan may compromise and settle
25 individual assessment claims without affecting the validity of
26 or amounts due on assessments levied against other insureds.
27 The plan may offer and accept discounted payments for
28 assessments which are promptly paid. The plan may offset the
29 amount of any unpaid assessment against unearned premiums
30 which may otherwise be due to an insured. The plan shall
31 institute legal action when necessary and appropriate to
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1 collect the assessment from any insured who fails to pay an
2 assessment when due.
3 d. The venue of a proceeding to enforce or collect an
4 assessment or to contest the validity or amount of an
5 assessment shall be in the Circuit Court of Leon County.
6 e. If the board finds that a deficit in Tier Three
7 exists for any period and that an assessment is necessary, the
8 board shall certify to the office the need for an assessment.
9 No sooner than 30 days after the date of such certification,
10 the board shall notify in writing each insured who is to be
11 assessed that an assessment is being levied against the
12 insured, and informing the insured of the amount of the
13 assessment, the period for which the assessment is being
14 levied, and the date by which payment of the assessment is
15 due. The board shall establish a date by which payment of the
16 assessment is due, which shall be no sooner than 30 days nor
17 later than 120 days after the date on which notice of the
18 assessment is mailed to the insured.
19 f. Whenever the board makes a determination that the
20 plan does not have a sufficient cash basis to meet 6 months 3
21 months of projected cash needs due to a deficit in Tier Three,
22 the board may request the department to transfer funds from
23 the Workers' Compensation Administration Trust Fund to the
24 plan in an amount sufficient to fund the difference between
25 the amount available and the amount needed to meet a 6-month
26 3-month projected cash need as determined by the board and
27 verified by the office, subject to the approval of the
28 Legislative Budget Commission. If the Legislative Budget
29 Commission approves a transfer of funds under this
30 sub-subparagraph, the plan shall report to the Legislature the
31 transfer of funds and the Legislature shall review the plan
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1 during the next legislative session or the current legislative
2 session, if the transfer occurs during a legislative session.
3 This sub-subparagraph shall not apply until the plan
4 determines and the office verifies that assessments collected
5 by the plan pursuant to sub-subparagraph b. are insufficient
6 to fund the deficit in Tier Three and to meet 6 months 3
7 months of projected cash needs.
8 4. The plan may offer rating, dividend plans, and
9 other plans to encourage loss prevention programs.
10 (e) The plan shall establish and use its rates and
11 rating plans, and the plan may establish and use changes in
12 rating plans at any time, but no more frequently than two
13 times per any rating class for any calendar year. By December
14 1, 1993, and December 1 of each year thereafter, except as
15 provided in subparagraph (c)22., the board shall establish and
16 use actuarially sound rates for use by the plan to assure that
17 the plan is self-funding while those rates are in effect. Such
18 rates and rating plans must be filed with the office within 30
19 calendar days after their effective dates, and shall be
20 considered a "use and file" filing. Any disapproval by the
21 office must have an effective date that is at least 60 days
22 from the date of disapproval of the rates and rating plan and
23 must have prospective effect only. The plan may not be subject
24 to any order by the office to return to policyholders any
25 portion of the rates disapproved by the office. The office may
26 not disapprove any rates or rating plans unless it
27 demonstrates that such rates and rating plans are excessive,
28 inadequate, or unfairly discriminatory.
29 (f) No later than June 1 of each year, the plan shall
30 obtain an independent actuarial certification of the results
31 of the operations of the plan for prior years, and shall
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1 furnish a copy of the certification to the office. If, after
2 the effective date of the plan, the projected ultimate
3 incurred losses and expenses and dividends for prior years
4 exceed collected premiums, accrued net investment income, and
5 prior assessments for prior years, the certification is
6 subject to review and approval by the office before it becomes
7 final.
8 (g) Whenever a deficit exists, the plan shall, within
9 90 days, provide the office with a program to eliminate the
10 deficit within a reasonable time. The deficit may be funded
11 through increased premiums charged to insureds of the plan for
12 subsequent years;, through the use of policyholder surplus
13 attributable to any year, including the use of surplus
14 attributable to any former subplan as provided in
15 sub-subparagraph (d)2.a.; through the use of assessments as
16 provided in subparagraph (d)2.;, and through assessments on
17 assessable policies as provided in subparagraph (d)3.
18 (h) Any premium or assessments collected by the plan
19 in excess of the amount necessary to fund projected ultimate
20 incurred losses and expenses of the plan and not paid to
21 insureds of the plan in conjunction with loss prevention or
22 dividend programs shall be retained by the plan for future
23 use.
24 (i) The decisions of the board of governors do not
25 constitute final agency action and are not subject to chapter
26 120.
27 (j) Policies for insureds shall be issued by the plan.
28 (k) The plan created under this subsection is liable
29 only for payment for losses arising under policies issued by
30 the plan with dates of accidents occurring on or after January
31 1, 1994.
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1 (l) Plan losses are the sole and exclusive
2 responsibility of the plan, and payment for such losses must
3 be funded in accordance with this subsection and must not
4 come, directly or indirectly, from insurers or any guaranty
5 association for such insurers.
6 (m) Each joint underwriting plan or association
7 created under this section is not a state agency, board, or
8 commission. However, for the purposes of s. 199.183(1) only,
9 the joint underwriting plan is a political subdivision of the
10 state and is exempt from the corporate income tax.
11 (n) Each joint underwriting plan or association may
12 elect to pay premium taxes on the premiums received on its
13 behalf or may elect to have the member insurers to whom the
14 premiums are allocated pay the premium taxes if the member
15 insurer had written the policy. The joint underwriting plan or
16 association shall notify the member insurers and the
17 Department of Revenue by January 15 of each year of its
18 election for the same year. As used in this paragraph, the
19 term "premiums received" means the consideration for
20 insurance, by whatever name called, but does not include any
21 policy assessment or surcharge received by the joint
22 underwriting association as a result of apportioning losses or
23 deficits of the association pursuant to this section.
24 (m)(o) Neither the plan nor any member of the board of
25 governors is liable for monetary damages to any person for any
26 statement, vote, decision, or failure to act, regarding the
27 management or policies of the plan, unless:
28 1. The member breached or failed to perform her or his
29 duties as a member; and
30 2. The member's breach of, or failure to perform,
31 duties constitutes:
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1 a. A violation of the criminal law, unless the member
2 had reasonable cause to believe her or his conduct was not
3 unlawful. A judgment or other final adjudication against a
4 member in any criminal proceeding for violation of the
5 criminal law estops that member from contesting the fact that
6 her or his breach, or failure to perform, constitutes a
7 violation of the criminal law; but does not estop the member
8 from establishing that she or he had reasonable cause to
9 believe that her or his conduct was lawful or had no
10 reasonable cause to believe that her or his conduct was
11 unlawful;
12 b. A transaction from which the member derived an
13 improper personal benefit, either directly or indirectly; or
14 c. Recklessness or any act or omission that was
15 committed in bad faith or with malicious purpose or in a
16 manner exhibiting wanton and willful disregard of human
17 rights, safety, or property. For purposes of this
18 sub-subparagraph, the term "recklessness" means the acting, or
19 omission to act, in conscious disregard of a risk:
20 (I) Known, or so obvious that it should have been
21 known, to the member; and
22 (II) Known to the member, or so obvious that it should
23 have been known, to be so great as to make it highly probable
24 that harm would follow from such act or omission.
25 (n)(p) No insurer shall provide workers' compensation
26 and employer's liability insurance to any person who is
27 delinquent in the payment of premiums, assessments, penalties,
28 or surcharges owed to the plan or to any person who is an
29 affiliated person of a person who is delinquent in the payment
30 of premiums, assessments, penalties, or surcharges owed to the
31
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1 plan. For purposes of this paragraph, the term "affiliated
2 person" of another person means:
3 1. The spouse of such other natural person;
4 2. Any person who directly or indirectly owns or
5 controls, or holds with the power to vote, 5 percent or more
6 of the outstanding voting securities of such other person;
7 3. Any person who directly or indirectly owns 5
8 percent or more of the outstanding voting securities that are
9 directly or indirectly owned or controlled, or held with the
10 power to vote, by such other person;
11 4. Any person or group of persons who directly or
12 indirectly control, are controlled by, or are under common
13 control with such other person;
14 5. Any officer, director, trustee, partner, owner,
15 manager, joint venturer, or employee, or other person
16 performing duties similar to persons in those positions, of
17 such other persons; or
18 6. Any person who has an officer, director, trustee,
19 partner, or joint venturer in common with such other person.
20 (o)(q) Effective July 1, 2004, the plan is exempt from
21 the premium tax under s. 624.509 and any assessments under ss.
22 440.49 and 440.51.
23 (p) Upon dissolution of a plan, the assets of the plan
24 shall be applied first to pay all debts, liabilities, and
25 obligations of the plan, including the establishment of
26 reasonable reserves for any contingent liabilities or
27 obligations. All remaining assets of the plan shall become
28 property of the state and shall be deposited into the Workers'
29 Compensation Administration Trust Fund. However, dissolution
30 may not take effect as long as the plan has financial
31 obligations outstanding unless adequate provisions have been
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1 made in the documents authorizing those financial obligations
2 for the payment thereof.
3 (6) As used in this section and ss. 215.555 and
4 627.351, the term "collateral protection insurance" means
5 commercial property insurance of which a creditor is the
6 primary beneficiary and policyholder and which protects or
7 covers an interest of the creditor arising out of a credit
8 transaction secured by real or personal property. Initiation
9 of such coverage is triggered by the mortgagor's failure to
10 maintain insurance coverage as required by the mortgage or
11 other lending document. Collateral protection insurance is not
12 residential coverage.
13 (7)(a) The Florida Automobile Joint Underwriting
14 Association created under this section shall be deemed to have
15 appointed its general manager as its agent to receive service
16 of all legal process issued against the association in any
17 civil action or proceeding in this state. Process so served
18 shall be valid and binding upon the insurer.
19 (b) Service of process upon the association's general
20 manager as the association's agent pursuant to such an
21 appointment shall be the sole method of service of process
22 upon the association.
23 (8) Each joint underwriting plan or association
24 created under this section is not a state agency, board, or
25 commission. However, for the purpose of s. 199.183(1) only,
26 the joint underwriting plan is a political subdivision of the
27 state and is exempt from corporate income tax.
28 (9) Each joint underwriting plan or association may
29 elect to pay premium taxes on the premiums received on its
30 behalf or to have the member insurers to whom the premiums are
31 allocated pay the premium taxes if the member insurer wrote
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1 the policy. The joint underwriting plan or association shall
2 notify the member insurers and the Department of Revenue by
3 January 15 of each year of its election for that year. As used
4 in this paragraph, the term "premiums received" means any
5 consideration received in exchange for insurance, but does not
6 include any policy assessments or surcharges received by the
7 joint underwriting association as a result of apportioning
8 losses or deficits of the association pursuant to this
9 section.
10 Section 2. Section 627.3121, Florida Statutes, is
11 created to read:
12 627.3121 Contingency reserve.--Notwithstanding the
13 provisions of ss. 440.50 and 440.51 and subject to the
14 following procedures, the Department of Financial Services may
15 request the transfer of funds from the Workers' Compensation
16 Administration Trust Fund within the department to the
17 workers' compensation joint underwriting plan provided in s.
18 627.311(5).
19 (1) The department shall establish a contingency
20 reserve within the Workers' Compensation Administration Trust
21 Fund from which the department may expend funds, as provided
22 in s. 627.311(5), in an amount not to exceed $15 million, to
23 be released only upon the approval of a budget amendment
24 presented to the Legislative Budget Commission. For actuarial
25 deficits projected for policyholders, based on actuarial best
26 estimates, covered in subplan "D" prior to July 1, 2004, and
27 upon verification by the Office of Insurance Regulation, the
28 plan may request and the department may submit a budget
29 amendment in an amount not to exceed $15 million for the
30 purpose of funding deficits in subplan D.
31
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1 (2) After the contingency reserve is established and
2 whenever the board determines that subplan D does not have a
3 sufficient cash basis to meet 6 months of projected cash needs
4 due to any deficit in subplan D, the board may request that
5 the department transfer funds from the contingency reserve
6 fund within the Workers' Compensation Administration Trust
7 Fund to the plan in an amount sufficient to fund the
8 difference between the amount available and the amount needed
9 to meet subplan D's projected cash needs for the subsequent
10 6-month period. The board and the office must first certify to
11 the department that there is insufficient cash within subplan
12 D to meet the projected cash needs in subplan D for the
13 subsequent 6 months. The amount requested for transfer to
14 subplan D may not exceed the difference between the amount
15 available in subplan D and the amount needed to meet subplan
16 D's projected cash needs for the subsequent 6-month period, as
17 jointly certified by the board and the Office of Insurance
18 Regulation to the department, attributable to the former
19 subplan "D" policyholders. The department may submit a budget
20 amendment to request release of funds from the Workers'
21 Compensation Administration Trust Fund, subject to the
22 approval of the Legislative Budget Commission. The board shall
23 provide, for the commission's review, information regarding
24 the reasonableness of the plan's administration, including,
25 but not limited to, the plan of operations and costs, claims
26 costs, claims administration costs, overhead costs, claims
27 reserves, and the latest report submitted on administration
28 cost-reduction alternatives as required in s. 627.311(5)(c)17.
29 (3) The contingency reserve created under this section
30 shall be dissolved on July 1, 2012. No later than December 31,
31 2012, the plan must provide a report to the Legislative Budget
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1 Commission stating the amount of any state funds received by
2 the plan in excess of the amount needed to fund the deficit in
3 subplan D. If any excess funds exist, the plan must return all
4 excess funds to the Workers' Compensation Administration Trust
5 Fund.
6 Section 3. At its earliest reasonable opportunity, the
7 plan must submit a request to the Internal Revenue Service for
8 a letter ruling or determination of the plan's status as a
9 tax-exempt entity.
10 Section 4. This act shall take effect July 1, 2007.
11
12 *****************************************
13 SENATE SUMMARY
14 Creates the Florida Workers' Compensation Joint
Underwriting Association. Provides that the association
15 shall operate as a not-for-profit corporation. Provides
for a board of governors. Provides for appointment of
16 members of the board of governors. Authorizes the
Financial Services Commission to remove any member of the
17 board of governors for cause. Requires the association to
review and update its market-assistance plan
18 periodically. Authorizes the board to use the surplus
attributable to any former subplan to mitigate certain
19 deficits. Authorizes the board to calculate and levy
deficit assessments. Provides criteria for the
20 calculation of deficit assessments. Exempts certain
policyholders from certain assessments under specific
21 conditions. Extends from 3 months to 6 months the period
of projected cash needs which serves as the basis on
22 which the board may request the transfer of funds from
the Workers' Compensation Administration Trust Fund if
23 the board finds that the association will have
insufficient cash due to certain deficits. Provides for
24 the use of surplus attributable to former subplans as a
means to fund a deficit. Provides for dissolution of the
25 association. Requires the Department of Financial
Services to establish a contingency reserve within the
26 Workers' Compensation Administration Trust Fund. Provides
procedures for the release and transfer of funds from the
27 contingency reserve. Provides for dissolution of the
contingency reserve. Requires the association to
28 calculate and report any state funds received in excess
of the amount needed to fund certain deficits. Requires
29 the association to return any excess funds to the
Workers' Compensation Administration Trust Fund. Requires
30 the association to submit to the Internal Revenue Service
a request for a determination as to the association's
31 status as a tax-exempt entity.
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