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Senate Bill 2270

Senate Bill sb2270c2

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    Florida Senate - 2004                    CS for CS for SB 2270

    By the Committees on Appropriations; and Banking and Insurance





    309-2528-04

  1                      A bill to be entitled

  2         An act relating to workers' compensation;

  3         amending s. 627.311, F.S.; establishing three

  4         tiers of employers eligible for coverage under

  5         the plan; providing for criteria and rates for

  6         each tier; deleting references to subplans;

  7         providing for assessments to cover deficits in

  8         tiers one and two; providing procedures to

  9         collect the assessment; exempting the plan from

10         specified premium tax and assessments;

11         appropriating moneys from the Workers'

12         Compensation Administration Trust Fund to fund

13         plan deficits; providing transitional

14         provisions to subplan "D" policies; providing

15         legislative intent to create a state workers'

16         compensation mutual fund under certain

17         conditions; establishing the Workers'

18         Compensation Insurance Market Evaluation

19         Committee; providing for appointment of

20         members; requiring the committee to monitor and

21         report; requiring the Office of Insurance

22         Regulation and workers' compensation insurers

23         to report certain information; specifying

24         meeting dates and interim reports for the

25         committee; providing for reimbursement for

26         travel and per diem; providing legislative

27         intent as to the type of mutual fund it intends

28         to create; prohibiting insurers from providing

29         coverage to any person who is an affiliated

30         person of a person who is delinquent in the

31         payment of premiums, assessments, penalties, or

                                  1

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 1         surcharges owed to the plan; providing

 2         effective dates.

 3  

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

 5  

 6         Section 1.  Subsection (5) of section 627.311, Florida

 7  Statutes, is amended to read:

 8         627.311  Joint underwriters and joint reinsurers;

 9  public records and public meetings exemptions.--

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

11  insurers, approve a joint underwriting plan of insurers which

12  shall operate as a nonprofit entity. For the purposes of this

13  subsection, the term "insurer" includes group self-insurance

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

15  funds authorized by s. 624.462, assessable mutual insurers

16  authorized under s. 628.6011, and insurers licensed to write

17  workers' compensation and employer's liability insurance in

18  this state. The purpose of the plan is to provide workers'

19  compensation and employer's liability insurance to applicants

20  who are required by law to maintain workers' compensation and

21  employer's liability insurance and who are in good faith

22  entitled to but who are unable to procure purchase such

23  insurance through the voluntary market. The plan must have

24  actuarially sound rates that are not competitive with approved

25  voluntary market rates so that the plan functions as a

26  residual market mechanism assure that the plan is

27  self-supporting.

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

29  supervision of a 9-member board of governors. The board of

30  governors shall be comprised of:

31  

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 1         1.  Three members appointed by the Financial Services

 2  Commission. Each member appointed by the commission shall

 3  serve at the pleasure of the commission;

 4         2.  Two of the 20 domestic insurers, as defined in s.

 5  624.06(1), having the largest voluntary direct premiums

 6  written in this state for workers' compensation and employer's

 7  liability insurance, which shall be elected by those 20

 8  domestic insurers;

 9         3.  Two of the 20 foreign insurers as defined in s.

10  624.06(2) having the largest voluntary direct premiums written

11  in this state for workers' compensation and employer's

12  liability insurance, which shall be elected by those 20

13  foreign insurers;

14         4.  One person appointed by the largest property and

15  casualty insurance agents' association in this state; and

16         5.  The consumer advocate appointed under s. 627.0613

17  or the consumer advocate's designee.

18  

19  Each board member shall serve a 4-year term and may serve

20  consecutive terms. A vacancy on the board shall be filled in

21  the same manner as the original appointment for the unexpired

22  portion of the term. The Financial Services Commission shall

23  designate a member of the board to serve as chair. No board

24  member shall be an insurer which provides services to the plan

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

26  or which is serviced by a service company or third-party

27  administrator which provides services to the plan or which has

28  an affiliate which provides services to the plan. The minutes,

29  audits, and procedures of the board of governors are subject

30  to chapter 119.

31  

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

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

 3  board of governors. The plan of operation may be changed at

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

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

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

 7  shall:

 8         1.  Authorize the board to engage in the activities

 9  necessary to implement this subsection, including, but not

10  limited to, borrowing money.

11         2.  Develop criteria for eligibility for coverage by

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

13  by at least two insurers which reasonably assures that

14  insureds covered under the plan are unable to acquire coverage

15  in the voluntary market. Any insured may voluntarily elect to

16  accept coverage from an insurer for a premium equal to or

17  greater than the plan premium if the insurer writing the

18  coverage adheres to the provisions of s. 627.171.

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

20  time of the application for coverage that the application is

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

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

23  self-insurance fund, or assessable mutual insurer through

24  another agent at a lower cost.

25         4.  Establish programs to encourage insurers to provide

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

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

28         a.  Establishing procedures for an insurer to use in

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

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

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

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

 2  form developed by the plan.

 3         b.  Developing forms and procedures that provide an

 4  insurer with the information necessary to determine whether

 5  the insurer wants to write particular applicants to the plan

 6  or insureds of the plan.

 7         c.  Developing procedures for notice to the plan and

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

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

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

11  procedures for the selection of an insuring entity by the

12  applicant or insured of the plan.

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

14  the placement of employers. All applications for coverage in

15  the plan received 45 days before the effective date for

16  coverage shall be processed through the market-assistance

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

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

19  must be finalized by January 1, 1994.

20         5.  Provide for policy and claims services to the

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

22  insureds in the voluntary market.

23         6.  Provide for the review of applications for coverage

24  with the plan for reasonableness and accuracy, using any

25  available historic information regarding the insured.

26         7.  Provide for procedures for auditing insureds of the

27  plan which are based on reasonable business judgment and are

28  designed to maximize the likelihood that the plan will collect

29  the appropriate premiums.

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

31  refuse future coverage for any insured that submits a

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 1  fraudulent application to the plan or provides fraudulent or

 2  grossly erroneous records to the plan or to any service

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

 4  plan.

 5         9.  Establish service standards for agents who submit

 6  business to the plan.

 7         10.  Establish criteria and procedures to prohibit any

 8  agent who does not adhere to the established service standards

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

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

11         11.  Provide for the establishment of reasonable safety

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

13  plan must participate in the safety program.

14         12.  Authorize the plan to terminate the coverage of

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

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

17  application, is delinquent in payments of workers'

18  compensation or employer's liability insurance premiums or

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

20  commercial self-insurance fund, or assessable mutual insurer

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

22  to substantially comply with any safety programs recommended

23  by the plan.

24         13.  Authorize the board of governors to provide the

25  services required by the plan through staff employed by the

26  plan, through reasonably compensated service providers who

27  contract with the plan to provide services as specified by the

28  board of governors, or through a combination of employees and

29  service providers.

30         14.  Provide for service standards for service

31  providers, methods of determining adherence to those service

                                  6

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 1  standards, incentives and disincentives for service, and

 2  procedures for terminating contracts for service providers

 3  that fail to adhere to service standards.

 4         15.  Provide procedures for selecting service providers

 5  and standards for qualification as a service provider that

 6  reasonably assure that any service provider selected will

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

 8  providing the specified services in the manner required.

 9         16.  Provide for reasonable accounting and

10  data-reporting practices.

11         17.  Provide for annual review of costs associated with

12  the administration and servicing of the policies issued by the

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

14         18.  Authorize the acquisition of such excess insurance

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

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

17  date specified by the office and containing such information

18  as the office reasonably requires.

19         20.  Establish multiple rating plans for various

20  classifications of risk which reflect risk of loss, hazard

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

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

23  preferred-rating plan to accommodate small-premium

24  policyholders with good experience as defined in

25  sub-subparagraph 22.a.

26         21.  Establish agent commission schedules.

27         22.  For employers otherwise eligible for coverage

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

29  criteria and subject to the rate limitations specified in this

30  subparagraph.

31         a.  Tier One.--

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 1         (I)  Criteria, rated employers.--An employer that has

 2  an experience modification rating shall be included in Tier

 3  One if it meets all of the following:

 4         (A)  The experience modification is below 1.00;

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

 6  the applicable experience modification rating period; and

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

 8  subsequent to the applicable experience modification rating

 9  period did not exceed 20 percent of premium.

10         (II)  Criteria, nonrated employers.--An employer that

11  does not have an experience modification rating shall be

12  included in Tier One if it meets all of the following:

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

14  3-year period immediately preceding the inception date or

15  renewal date of its coverage under the plan;

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

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

18  or renewal date of its coverage under the plan did not exceed

19  20 percent of premium;

20         (C)  It has secured workers' compensation coverage for

21  the entire three-year period immediately preceding the

22  inception date or renewal date of its coverage under the plan;

23         (D)  It is able to provide the plan with a loss history

24  generated by its prior workers' compensation insurer, except

25  that if the employer is not able to produce a loss history due

26  to the insolvency of an insurer, the employer may, in lieu of

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

28  the employer's insurance agent setting forth the loss history;

29  and

30         (E)  It is not a new business.

31  

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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, credible experience as determined by the board to

 5  establish an actuarially sound rate for Tier One, at which

 6  point the board shall, subject to paragraph (e), adjust the

 7  rate, if necessary, to produce actuarially sound rates;

 8  provided the rate adjustment does not take effect until

 9  January 1, 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 it 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; and

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 it is a new business. An employer

24  shall be included in Tier Two if it has less than 3 years of

25  loss experience in the 3-year period immediately preceding the

26  inception date or renewal date of its coverage under the plan

27  and it meets all of the following:

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

29  3-year period immediately preceding the inception date or

30  renewal date of its coverage under the plan;

31  

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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 its coverage under the plan did not exceed

 4  20 percent of premium; and

 5         (C)  It is able to provide the plan with a loss history

 6  generated by the workers' compensation insurer that provided

 7  coverage for the portion or portions of such period during

 8  which the employer had secured workers' compensation coverage.

 9  If the employer is not able to produce a loss history due to

10  the insolvency of an insurer, the employer may, in lieu of the

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

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

13         (IV)  Premiums.--The premiums for Tier Two insureds

14  shall be set at a premium level 50 percent above the

15  comparable voluntary market premiums until the plan has

16  sufficient, credible experience as determined by the board to

17  establish an actuarially sound rate for Tier Two, at which

18  point the board shall, subject to paragraph (e), adjust the

19  rate, if necessary, to produce actuarially sound rates;

20  provided the rate adjustment does not take effect until

21  January 1, 2007.

22         c.  Tier Three.--

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

24  Tier Three if it does not meet the criteria for Tier One or

25  Tier Two.

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

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

28  rates for the Tier Three insureds. Establish four subplans as

29  follows:

30         a.  Subplan "A" must include those insureds whose

31  annual premium does not exceed $2,500 and who have neither

                                  10

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 1  incurred any lost-time claims nor incurred medical-only claims

 2  exceeding 50 percent of their premium for the immediate 2

 3  years.

 4         b.  Subplan "B" must include insureds that are

 5  employers identified by the board of governors as high-risk

 6  employers due solely to the nature of the operations being

 7  performed by those insureds and for whom no market exists in

 8  the voluntary market, and whose experience modifications are

 9  less than 1.00.

10         c.  Subplan "C" must include all insureds within the

11  plan that are not eligible for subplan "A," subplan "B," or

12  subplan "D."

13         d.  Subplan "D" must include any employer, regardless

14  of the length of time for which it has conducted business

15  operations, which has an experience modification factor of

16  1.10 or less and either employs 15 or fewer employees or is an

17  organization that is exempt from federal income tax pursuant

18  to s. 501(c)(3) of the Internal Revenue Code and receives more

19  than 50 percent of its funding from gifts, grants, endowments,

20  or federal or state contracts. The rate plan for subplan "D"

21  shall be the same rate plan as the plan approved under ss.

22  627.091-627.151, and each participant in subplan "D" shall pay

23  the premium determined under such rate plan, plus a surcharge

24  determined by the board to be sufficient to ensure that the

25  plan does not compete with the voluntary market rate for any

26  participant, but not to exceed 25 percent. However, the

27  surcharge shall not exceed 10 percent for an organization that

28  is exempt from federal income tax pursuant to s. 501(c)(3) of

29  the Internal Revenue Code.

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

31  nonexempt employees or which report payroll which is less than

                                  11

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

 2  one year at 40 hours per week, the plan shall establish

 3  actuarially sound premiums, provided, however, that the

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

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

 6  plan establishes actuarially sound rates for all employers in

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

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

 9         24.23.  Provide for a depopulation program to reduce

10  the number of insureds in the plan. subplan "D." If an

11  employer insured through the plan subplan "D" is offered

12  coverage from a voluntary market carrier:

13         a.  During the first 30 days of coverage under the plan

14  subplan;

15         b.  Before a policy is issued under the plan subplan;

16         c.  By issuance of a policy upon expiration or

17  cancellation of the policy under the plan subplan; or

18         d.  By assumption of the plan's subplan's obligation

19  with respect to an in-force policy,

20  

21  that employer is no longer eligible for coverage through the

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

23  carrier must be no greater than the same premium the insured

24  would have paid under the plan, and shall be adjusted upon

25  renewal to reflect changes in the plan rates and the tier for

26  which the insured would qualify as of the time of renewal. The

27  insured may be charged such premiums only for the first 2

28  years of coverage in the voluntary market plus, for the first

29  2 years, the surcharge as determined in sub-subparagraph 22.d.

30  A premium under this subparagraph, including surcharge, is

31  

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 1  deemed approved and is not an excess premium for purposes of

 2  s. 627.171.

 3         25.24.  Require that policies issued under subplan "D"

 4  and applications for such policies must include a notice that

 5  the policy issued under subplan "D" could be replaced by a

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

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

 8  the policyholder is no longer eligible for coverage through

 9  the plan. subplan "D." The notice must also specify that

10  acceptance of coverage under the plan subplan "D" creates a

11  conclusive presumption that the applicant or policyholder is

12  aware of this potential.

13         26.  Require that each application for coverage and

14  each renewal premium be accompanied by a nonrefundable fee of

15  $475 to cover costs of administration and fraud prevention.

16  The board may, with the approval of the office, increase the

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

18  increased costs of administration and fraud prevention. The

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

20  commencement of coverage.

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

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

23  in this paragraph.

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

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

26  attributable to the former subplan "D" and that the deficit

27  cannot reasonably be funded without the use of deficit

28  assessments, the board shall request the Office of Insurance

29  Regulation to levy, by order, a deficit assessment against

30  premiums charged to insureds for workers' compensation

31  insurance by insurers as defined in s. 631.904(5). The office

                                  13

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 1  shall issue the order after verifying the amount of the

 2  deficit. The assessment shall be specified as a percentage of

 3  future premium collections, as recommended by the board and

 4  approved by the office. The same percentage shall apply to

 5  premiums on all workers' compensation policies issued or

 6  renewed during the 12-month period beginning on the effective

 7  date of the assessment, as specified in the order.

 8         b.  With respect to each insurer collecting premiums

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

10  the assessment at the same time as it collects the premium

11  payment for each policy and shall remit the assessments

12  collected to the plan as provided in the order issued by the

13  Office of Insurance Regulation. The office shall verify the

14  accurate and timely collection and remittance of deficit

15  assessments and shall report the information to the board.

16  Each insurer collecting assessments shall provide the

17  information with respect to premiums and collections as may be

18  required by the office to enable the office to monitor and

19  audit compliance with this paragraph.

20         c.  Deficit assessments are not considered a part of an

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

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

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

24  The deficit assessment imposed becomes plan funds at the

25  moment of collection and does not constitute income for any

26  purpose, including financial reporting on the insurer's income

27  statement. An insurer is liable for all assessments that it

28  collects and must treat the failure of an insured to pay an

29  assessment as a failure to pay premium.  An insurer is not

30  liable for uncollectible assessments.

31  

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 1         d.  When an insurer is required to return unearned

 2  premium, it shall also return any collected assessments

 3  attributable to the unearned premium.

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

 5  be assessable. All Tier Three assessable policies must be

 6  clearly identified as assessable by containing, in contrasting

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

 8  statements: "This is an assessable policy. If the plan is

 9  unable to pay its obligations, policyholders will be required

10  to contribute on a pro rata earned premium basis the money

11  necessary to meet any assessment levied."

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

13  insureds to whom the plan has issued assessable policies for

14  the purpose of funding plan deficits. Any assessment shall be

15  based upon a reasonable actuarial estimate of the amount of

16  the deficit, taking into account the amount needed to fund

17  medical and indemnity reserves and reserves for incurred but

18  not reported claims, and allowing for general administrative

19  expenses, the cost of levying and collecting the assessment, a

20  reasonable allowance for estimated uncollectible assessments,

21  and both allocated and unallocated loss adjustment expenses.

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

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

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

25  assessment the ratio of the total deficit to the total

26  premiums earned during the period upon all policies subject to

27  the assessment. In the event one or more Tier Three insureds

28  fail to pay an assessment, the other Tier Three insureds shall

29  be liable on a proportionate basis for additional assessments

30  to fund the deficit. The plan may compromise and settle

31  individual assessment claims without affecting the validity of

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 1  or amounts due on assessments levied against other insureds.

 2  The plan may offer and accept discounted payments for

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

 4  amount of any unpaid assessment against unearned premiums

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

 6  institute legal action when necessary and appropriate to

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

 8  assessment when due.

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

10  assessment or to contest the validity or amount of an

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

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

13  exists for any period and that an assessment is necessary, it

14  shall certify to the office the need for an assessment. No

15  sooner than 30 days after the date of the certification, the

16  board shall notify in writing each insured who is to be

17  assessed that an assessment is being levied against the

18  insured, and informing the insured of the amount of the

19  assessment, the period for which the assessment is being

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

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

22  assessment is due, which may not be sooner than 30 days or

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

24  assessment is mailed to the insured. The plan must be funded

25  through actuarially sound premiums charged to insureds of the

26  plan.

27         2.  The plan may issue assessable policies only to

28  those insureds in subplans "C" and "D." Subject to

29  verification by the department, the board may levy assessments

30  against insureds in subplan "C" or subplan "D," on a pro rata

31  earned premium basis, to fund any deficits that exist in those

                                  16

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 1  subplans. Assessments levied against subplan "C" participants

 2  shall cover only the deficits attributable to subplan "C," and

 3  assessments levied against subplan "D" participants shall

 4  cover only the deficits attributable to subplan "D." In no

 5  event may the plan levy assessments against any person or

 6  entity, except as authorized by this paragraph. Those

 7  assessable policies must be clearly identified as assessable

 8  by containing, in contrasting color and in not less than

 9  10-point type, the following statements: "This is an

10  assessable policy. If the plan is unable to pay its

11  obligations, policyholders will be required to contribute on a

12  pro rata earned premium basis the money necessary to meet any

13  assessment levied."

14         3.  The plan may issue assessable policies with

15  differing terms and conditions to different groups within

16  subplans "C" and "D" when a reasonable basis exists for the

17  differentiation.

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

19  other plans to encourage loss prevention programs.

20         (e)  The plan shall establish and use its rates and

21  rating plans, and the plan may establish and use changes in

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

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

24  1, 1993, and December 1 of each year thereafter, the board

25  shall, except as provided in subparagraph (c)22., establish

26  and use actuarially sound rates for use by the plan to assure

27  that the plan is self-funding while those rates are in effect.

28  Such rates and rating plans must be filed with the office

29  within 30 calendar days after their effective dates, and shall

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

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

                                  17

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

 2  must have prospective effect only. The plan may not be subject

 3  to any order by the office to return to policyholders any

 4  portion of the rates disapproved by the office. The office may

 5  not disapprove any rates or rating plans unless it

 6  demonstrates that such rates and rating plans are excessive,

 7  inadequate, or unfairly discriminatory.

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

 9  obtain an independent actuarial certification of the results

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

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

12  the effective date of the plan, the projected ultimate

13  incurred losses and expenses and dividends for prior years

14  exceed collected premiums, accrued net investment income, and

15  prior assessments for prior years, the certification is

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

17  final.

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

19  90 days, provide the office with a program to eliminate the

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

21  through increased premiums charged to insureds of the plan for

22  subsequent years, through the use of policyholder surplus

23  attributable to any year, through the use of assessments as

24  provided in subparagraph (d)2., and through assessments on

25  insureds in the plan if the plan uses assessable policies as

26  provided in subparagraph (d)3.

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

28  in excess of the amount necessary to fund projected ultimate

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

30  insureds of the plan in conjunction with loss prevention or

31  

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 1  dividend programs shall be retained by the plan for future

 2  use.

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

 4  constitute final agency action and are not subject to chapter

 5  120.

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

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

 8  only for payment for losses arising under policies issued by

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

10  1, 1994.

11         (l)  Plan losses are the sole and exclusive

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

13  be funded in accordance with this subsection and must not

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

15  association for such insurers.

16         (m)  Each joint underwriting plan or association

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

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

19  the joint underwriting plan is a political subdivision of the

20  state and is exempt from the corporate income tax.

21         (n)  Each joint underwriting plan or association may

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

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

24  premiums are allocated pay the premium taxes if the member

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

26  association shall notify the member insurers and the

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

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

29  term "premiums received" means the consideration for

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

31  policy assessment or surcharge received by the joint

                                  19

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 1  underwriting association as a result of apportioning losses or

 2  deficits of the association pursuant to this section.

 3         (o)  Neither the plan nor any member of the board of

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

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

 6  management or policies of the plan, unless:

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

 8  duties as a member; and

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

10  duties constitutes:

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

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

13  unlawful. A judgment or other final adjudication against a

14  member in any criminal proceeding for violation of the

15  criminal law estops that member from contesting the fact that

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

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

18  from establishing that she or he had reasonable cause to

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

20  reasonable cause to believe that her or his conduct was

21  unlawful;

22         b.  A transaction from which the member derived an

23  improper personal benefit, either directly or indirectly; or

24         c.  Recklessness or any act or omission that was

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

26  manner exhibiting wanton and willful disregard of human

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

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

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

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

31  known, to the member; and

                                  20

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

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

 3  that harm would follow from such act or omission.

 4         (p)  No insurer shall provide workers' compensation and

 5  employer's liability insurance to any person who is delinquent

 6  in the payment of premiums, assessments, penalties, or

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

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

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

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

11  person" of another person means:

12         1.  The spouse of such other natural person;

13         2.  Any person who directly or indirectly owns or

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

15  of the outstanding voting securities of such other person;

16         3.  Any person who directly or indirectly owns 5

17  percent or more of the outstanding voting securities that are

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

19  power to vote, by such other person;

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

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

22  control with such other person;

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

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

25  performing duties similar to persons in those positions, of

26  such other person; or

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

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

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

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

31  440.49 and 440.51.

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 1         Section 2.  Notwithstanding the provisions of sections

 2  440.50 and 440.51, Florida Statutes, for the 2004-2005 fiscal

 3  year:

 4         (1)  The sum of $25 million is appropriated from the

 5  Workers' Compensation Administration Trust Fund in the

 6  Department of Financial Services for transfer to the workers'

 7  compensation joint underwriting plan provided in section

 8  627.311(5), Florida Statutes, as a capital contribution to

 9  fund any deficit in the plan. The Chief Financial Officer

10  shall transfer the funds to the plan no later than July 31,

11  2004.

12         (2)  The workers' compensation joint underwriting plan

13  set forth in section 627.311(5), Florida Statutes, may request

14  the Department of Financial Services to transfer an amount not

15  to exceed $10 million from the Workers' Compensation

16  Administration Trust Fund to the plan subject to the approval

17  of the Legislative Budget Commission under sections 216.181

18  and 216.292, Florida Statutes. The workers' compensation joint

19  underwriting plan board of governors and the Office of

20  Insurance Regulation must first certify to the Department of

21  Financial Services that a deficit exists in the workers'

22  compensation joint underwriting plan. The amount requested for

23  transfer to the plan may not exceed the deficit amount jointly

24  certified by the board of governors and the Office of

25  Insurance Regulation to exist in Tier One or Tier Two or for

26  any deficit remaining attributable to the former subplan "D"

27  which cannot be funded without the use of deficit assessments

28  as authorized by section 627.351(5)(d), Florida Statutes.

29         Section 3.  Transitional provisions.--Effective upon

30  this act becoming a law:

31  

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 1         (1)  Notwithstanding section 627.311(5), Florida

 2  Statutes, to the contrary, no policy in subplan "D" of the

 3  Florida Workers' Compensation Joint Underwriting Association

 4  is subject to an assessment for the purpose of funding a

 5  deficit.

 6         (2)  Any policy issued by the Florida Workers'

 7  Compensation Joint Underwriting Association with an effective

 8  date between the date on which this act becomes a law and June

 9  30, 2004, shall be rerated and placed in the appropriate tier

10  provided in section 627.311(5), Florida Statues, as amended

11  effective July 1, 2004, and shall be subject to the premiums

12  and charges provided for in that section as amended.

13         Section 4.  Effective upon this act becoming a law:

14         (1)  The Legislature intends to create a state workers'

15  compensation mutual fund if workers' compensation coverage is

16  not generally available and affordable to small employers in

17  Florida by October 1, 2005. In order to make this

18  determination, there is established the Workers' Compensation

19  Insurance Market Evaluation Committee which shall consist of

20  one member appointed by the Governor, who shall serve as

21  chair; two members appointed by the President of the Senate;

22  and two members appointed by the Speaker of the House of

23  Representatives. The committee shall monitor and report on the

24  number of insurers actively writing workers' compensation

25  insurance in this state for small employers, the number of

26  policies issued, premium volume written, types of underwriting

27  restrictions utilized, and the extent to which actual premiums

28  charged vary from standard rates, such as the use of excess

29  rates pursuant to section 627.171, Florida Statutes, and rate

30  deviations pursuant to section 627.211, Florida Statutes. The

31  Office of Insurance Regulation shall provide such related

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 1  information to the committee as is requested, and workers'

 2  compensation insurers shall report such information to the

 3  office in the manner and format specified by the office.

 4         (2)  The committee shall meet once each month,

 5  beginning in August 2004, and shall provide interim reports to

 6  the appointing officers on October 1, 2004, December 1, 2004,

 7  and March 1, 2005, and at such additional times as the

 8  President of the Senate and the Speaker of the House of

 9  Representatives jointly require. Members of the committee

10  shall be entitled to reimbursement for travel and per diem

11  pursuant to section 112.061, Florida Statutes.

12         (3)  If the Legislature determines that workers'

13  compensation coverage is not generally available and

14  affordable to small employers in Florida, the Legislature

15  intends to create a state mutual fund as a nonprofit entity

16  for the benefit of its small employer policyholders. The state

17  mutual fund would compete with private carriers and would be

18  charged with the public mission of customer service, quality

19  loss prevention, timely claims management, active fighting of

20  fraud, and compassionate care for injured workers, at the

21  lowest cost consistent with actuarial sound rates. The fund

22  should primarily rely on an in-house staff of professional

23  employees, rather than contracting with servicing carriers. It

24  is further intended that the state appropriate adequate

25  initial capitalization for the fund and that the fund be

26  subject to the same financial and other requirements as apply

27  to an authorized insurer.

28         Section 5.  Except as otherwise expressly provided in

29  this act, and except for this section, which shall take effect

30  upon becoming a law, this act shall take effect July 1, 2004.

31  

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 1          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
 2                          CS for SB 2270

 3                                 

 4  The committee substitute:

 5  (1) Restructures the current workers' compensation joint
    underwriting plan (JUA), s. 627.311(5), F.S., by eliminating
 6  the current subplans and creating Tiers One, Two and Three.

 7  (2) Provides employers in Tiers One and Two who have no
    employees or a payroll that is less than the minimum wage for
 8  one full-time non-exempt employee access to purchase minimum
    premium policies not to exceed $2,500, plus a $475 annual
 9  administrative fee.

10  (3) Provides a one time appropriation of $25 million from the
    Workers' Compensation Administration Trust Fund to the
11  Department of Financial Services for transfer to the JUA to
    fund the deficit incurred for subplan D policies.
12  
    (4) Provides authority to the JUA to request transfer from the
13  Department of Financial Services an amount not to exceed $10
    million from the Workers' Compensation Administration Trust
14  Fund to fund deficits anticipated to occur in Fiscal Year
    2004-2005.  The transfer amount is subject to approval by the
15  Legislative Budget Commission and may not exceed the deficit
    amount jointly certified by the JUA board of governors and the
16  Office of Insurance Regulation.

17  

18  

19  

20  

21  

22  

23  

24  

25  

26  

27  

28  

29  

30  

31  

                                  25

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