October 19, 2020
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Senate Bill 2270

Senate Bill sb2270e2

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    CS for CS for SB 2270                         Second Engrossed



  1                      A bill to be entitled

  2         An act relating to workers' compensation;

  3         amending s. 440.107, F.S.; authorizing the

  4         department to issue an order of conditional

  5         release from a stop-work order if an employer

  6         complies with coverage requirements and a

  7         penalty payment agreement; amending s. 627.311,

  8         F.S.; establishing three tiers of employers

  9         eligible for coverage under the plan; providing

10         for criteria and rates for each tier; deleting

11         references to subplans; providing for

12         assessments to cover deficits in tiers one and

13         two; providing procedures to collect the

14         assessment; exempting the plan from specified

15         premium tax and assessments; requiring the

16         Auditor General to conduct an operational audit

17         of the association; requiring the association

18         to comply with the Florida Single Audit Act, if

19         certain conditions are met; providing

20         appropriations; amending s. 627.0915, F.S.,

21         relating to drug-free workplace discounts;

22         providing for notice by insurers to employers

23         of the availability of premium discounts where

24         certain drug-free workplace programs are used;

25         appropriating moneys from the Workers'

26         Compensation Administration Trust Fund to fund

27         plan deficits; providing transitional

28         provisions to subplan "D" policies; providing

29         legislative intent to create a state workers'

30         compensation mutual fund under certain

31         conditions; establishing the Workers'


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    CS for CS for SB 2270                         Second Engrossed



 1         Compensation Insurance Market Evaluation

 2         Committee; providing for appointment of

 3         members; requiring the committee to monitor and

 4         report; requiring the Office of Insurance

 5         Regulation and workers' compensation insurers

 6         to report certain information; specifying

 7         meeting dates and interim reports for the

 8         committee; providing for reimbursement for

 9         travel and per diem; providing legislative

10         intent as to the type of mutual fund it intends

11         to create; prohibiting insurers from providing

12         coverage to any person who is an affiliated

13         person of a person who is delinquent in the

14         payment of premiums, assessments, penalties, or

15         surcharges owed to the plan; amending s.

16         440.16(7), F.S., which limits workers'

17         compensation benefits to a nonresident alien

18         for the death of the worker; providing

19         effective dates.

20  

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

22  

23         Section 1.  Paragraph (a) of subsection (7) of section

24  440.107, Florida Statutes, is amended to read:

25         440.107  Department powers to enforce employer

26  compliance with coverage requirements.--

27         (7)(a)  Whenever the department determines that an

28  employer who is required to secure the payment to his or her

29  employees of the compensation provided for by this chapter has

30  failed to secure the payment of workers' compensation required

31  by this chapter or to produce the required business records


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    CS for CS for SB 2270                         Second Engrossed



 1  under subsection (5) within 5 business days after receipt of

 2  the written request of the department, such failure shall be

 3  deemed an immediate serious danger to public health, safety,

 4  or welfare sufficient to justify service by the department of

 5  a stop-work order on the employer, requiring the cessation of

 6  all business operations. If the department makes such a

 7  determination, the department shall issue a stop-work order

 8  within 72 hours. The order shall take effect when served upon

 9  the employer or, for a particular employer work site, when

10  served at that work site. In addition to serving a stop-work

11  order at a particular work site which shall be effective

12  immediately, the department shall immediately proceed with

13  service upon the employer which shall be effective upon all

14  employer work sites in the state for which the employer is not

15  in compliance. A stop-work order may be served with regard to

16  an employer's work site by posting a copy of the stop-work

17  order in a conspicuous location at the work site. The order

18  shall remain in effect until the department issues an order

19  releasing the stop-work order upon a finding that the employer

20  has come into compliance with the coverage requirements of

21  this chapter and has paid any penalty assessed under this

22  section. The department may issue an order of conditional

23  release from a stop-work order to an employer upon a finding

24  that the employer has complied with coverage requirements of

25  this chapter and has agreed to remit periodic payments of the

26  penalty pursuant to a payment agreement schedule with the

27  department. If an order of conditional release is issued,

28  failure by the employer to meet any term or condition of such

29  penalty payment agreement shall result in the immediate

30  reinstatement of the stop-work order and the entire unpaid

31  balance of the penalty shall become immediately due. The


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    CS for CS for SB 2270                         Second Engrossed



 1  department may require an employer who is found to have failed

 2  to comply with the coverage requirements of s. 440.38 to file

 3  with the department, as a condition of release from a

 4  stop-work order, periodic reports for a probationary period

 5  that shall not exceed 2 years that demonstrate the employer's

 6  continued compliance with this chapter. The department shall

 7  by rule specify the reports required and the time for filing

 8  under this subsection.

 9         Section 2.  Subsection (5) of section 627.311, Florida

10  Statutes, is amended to read:

11         627.311  Joint underwriters and joint reinsurers;

12  public records and public meetings exemptions.--

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

14  insurers, approve a joint underwriting plan of insurers which

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

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

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

18  funds authorized by s. 624.462, assessable mutual insurers

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

20  workers' compensation and employer's liability insurance in

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

22  compensation and employer's liability insurance to applicants

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

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

25  entitled to but who are unable to procure purchase such

26  insurance through the voluntary market. The plan must have

27  actuarially sound rates that are not competitive with approved

28  voluntary market rates so that the plan functions as a

29  residual market mechanism assure that the plan is

30  self-supporting.

31  


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    CS for CS for SB 2270                         Second Engrossed



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

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

 3  governors shall be comprised of:

 4         1.  Three members appointed by the Financial Services

 5  Commission. Each member appointed by the commission shall

 6  serve at the pleasure of the commission;

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

 8  624.06(1), having the largest voluntary direct premiums

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

10  liability insurance, which shall be elected by those 20

11  domestic insurers;

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

13  624.06(2) having the largest voluntary direct premiums written

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

15  liability insurance, which shall be elected by those 20

16  foreign insurers;

17         4.  One person appointed by the largest property and

18  casualty insurance agents' association in this state; and

19         5.  The consumer advocate appointed under s. 627.0613

20  or the consumer advocate's designee.

21  

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

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

24  the same manner as the original appointment for the unexpired

25  portion of the term. The Financial Services Commission shall

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

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

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

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

30  administrator which provides services to the plan or which has

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


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    CS for CS for SB 2270                         Second Engrossed



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

 2  to chapter 119.

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

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

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

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

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

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

 9  shall:

10         1.  Authorize the board to engage in the activities

11  necessary to implement this subsection, including, but not

12  limited to, borrowing money.

13         2.  Develop criteria for eligibility for coverage by

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

15  by at least two insurers which reasonably assures that

16  insureds covered under the plan are unable to acquire coverage

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

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

19  greater than the plan premium if the insurer writing the

20  coverage adheres to the provisions of s. 627.171.

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

22  time of the application for coverage that the application is

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

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

25  self-insurance fund, or assessable mutual insurer through

26  another agent at a lower cost.

27         4.  Establish programs to encourage insurers to provide

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

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

30         a.  Establishing procedures for an insurer to use in

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


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    CS for CS for SB 2270                         Second Engrossed



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

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

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

 4  form developed by the plan.

 5         b.  Developing forms and procedures that provide an

 6  insurer with the information necessary to determine whether

 7  the insurer wants to write particular applicants to the plan

 8  or insureds of the plan.

 9         c.  Developing procedures for notice to the plan and

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

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

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

13  procedures for the selection of an insuring entity by the

14  applicant or insured of the plan.

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

16  the placement of employers. All applications for coverage in

17  the plan received 45 days before the effective date for

18  coverage shall be processed through the market-assistance

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

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

21  must be finalized by January 1, 1994.

22         5.  Provide for policy and claims services to the

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

24  insureds in the voluntary market.

25         6.  Provide for the review of applications for coverage

26  with the plan for reasonableness and accuracy, using any

27  available historic information regarding the insured.

28         7.  Provide for procedures for auditing insureds of the

29  plan which are based on reasonable business judgment and are

30  designed to maximize the likelihood that the plan will collect

31  the appropriate premiums.


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    CS for CS for SB 2270                         Second Engrossed



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

 2  refuse future coverage for any insured that submits a

 3  fraudulent application to the plan or provides fraudulent or

 4  grossly erroneous records to the plan or to any service

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

 6  plan.

 7         9.  Establish service standards for agents who submit

 8  business to the plan.

 9         10.  Establish criteria and procedures to prohibit any

10  agent who does not adhere to the established service standards

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

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

13         11.  Provide for the establishment of reasonable safety

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

15  plan must participate in the safety program.

16         12.  Authorize the plan to terminate the coverage of

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

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

19  application, is delinquent in payments of workers'

20  compensation or employer's liability insurance premiums or

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

22  commercial self-insurance fund, or assessable mutual insurer

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

24  to substantially comply with any safety programs recommended

25  by the plan.

26         13.  Authorize the board of governors to provide the

27  services required by the plan through staff employed by the

28  plan, through reasonably compensated service providers who

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

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

31  service providers.


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    CS for CS for SB 2270                         Second Engrossed



 1         14.  Provide for service standards for service

 2  providers, methods of determining adherence to those service

 3  standards, incentives and disincentives for service, and

 4  procedures for terminating contracts for service providers

 5  that fail to adhere to service standards.

 6         15.  Provide procedures for selecting service providers

 7  and standards for qualification as a service provider that

 8  reasonably assure that any service provider selected will

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

10  providing the specified services in the manner required.

11         16.  Provide for reasonable accounting and

12  data-reporting practices.

13         17.  Provide for annual review of costs associated with

14  the administration and servicing of the policies issued by the

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

16         18.  Authorize the acquisition of such excess insurance

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

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

19  date specified by the office and containing such information

20  as the office reasonably requires.

21         20.  Establish multiple rating plans for various

22  classifications of risk which reflect risk of loss, hazard

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

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

25  preferred-rating plan to accommodate small-premium

26  policyholders with good experience as defined in

27  sub-subparagraph 22.a.

28         21.  Establish agent commission schedules.

29         22.  For employers otherwise eligible for coverage

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

31  


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    CS for CS for SB 2270                         Second Engrossed



 1  criteria and subject to the rate limitations specified in this

 2  subparagraph.

 3         a.  Tier One.--

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

 5  an experience modification rating shall be included in Tier

 6  One if it meets all of the following:

 7         (A)  The experience modification is below 1.00;

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

 9  the applicable experience modification rating period; and

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

11  subsequent to the applicable experience modification rating

12  period did not exceed 20 percent of premium.

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

14  does not have an experience modification rating shall be

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

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

17  3-year period immediately preceding the inception date or

18  renewal date of its coverage under the plan;

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

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

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

22  20 percent of premium;

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

24  the entire three-year period immediately preceding the

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

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

27  generated by its prior workers' compensation insurer, except

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

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

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

31  


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    CS for CS for SB 2270                         Second Engrossed



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

 2  and

 3         (E)  It is not a new business.

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

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

 6  comparable voluntary market premiums until the plan has

 7  sufficient, credible experience as determined by the board to

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

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

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

11  provided the rate adjustment does not take effect until

12  January 1, 2007.

13         b.  Tier Two.--

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

15  an experience modification rating shall be included in Tier

16  Two if it meets all of the following:

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

18  than 1.00 but not greater than 1.10;

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

20  the applicable experience modification rating period; and

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

22  subsequent to the applicable experience modification rating

23  period did not exceed 20 percent of premium.

24         (II)  Criteria, non-rated employers.--An employer that

25  does not have any experience modification rating shall be

26  included in Tier Two if it is a new business. An employer

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

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

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

30  and it meets all of the following:

31  


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    CS for CS for SB 2270                         Second Engrossed



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

 2  3-year period immediately preceding the inception date or

 3  renewal date of its coverage under the plan;

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

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

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

 7  20 percent of premium; and

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

 9  generated by the workers' compensation insurer that provided

10  coverage for the portion or portions of such period during

11  which the employer had secured workers' compensation coverage.

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

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

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

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

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

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

18  comparable voluntary market premiums until the plan has

19  sufficient, credible experience as determined by the board to

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

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

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

23  provided the rate adjustment does not take effect until

24  January 1, 2007.

25         c.  Tier Three.--

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

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

28  Tier Two.

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

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

31  


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    CS for CS for SB 2270                         Second Engrossed



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

 2  follows:

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

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

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

 6  exceeding 50 percent of their premium for the immediate 2

 7  years.

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

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

10  employers due solely to the nature of the operations being

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

12  the voluntary market, and whose experience modifications are

13  less than 1.00.

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

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

16  subplan "D."

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

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

19  operations, which has an experience modification factor of

20  1.10 or less and either employs 15 or fewer employees or is an

21  organization that is exempt from federal income tax pursuant

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

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

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

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

26  627.091-627.151, and each participant in subplan "D" shall pay

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

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

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

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

31  surcharge shall not exceed 10 percent for an organization that


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    CS for CS for SB 2270                         Second Engrossed



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

 2  the Internal Revenue Code.

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

 4  nonexempt employees or which report payroll which is less than

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

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

 7  actuarially sound premiums, provided, however, that the

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

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

10  plan establishes actuarially sound rates for all employers in

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

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

13         24.23.  Provide for a depopulation program to reduce

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

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

16  coverage from a voluntary market carrier:

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

18  subplan;

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

20         c.  By issuance of a policy upon expiration or

21  cancellation of the policy under the plan subplan; or

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

23  with respect 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 same premium the insured

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

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

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

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


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    CS for CS for SB 2270                         Second Engrossed



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

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

 3  A premium under this subparagraph, including surcharge, is

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

 5  s. 627.171.

 6         25.24.  Require that policies issued under subplan "D"

 7  and applications for such policies must include a notice that

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

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

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

11  the policyholder is no longer eligible for coverage through

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

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

14  conclusive presumption that the applicant or policyholder is

15  aware of this potential.

16         26.  Require that each application for coverage and

17  each renewal premium be accompanied by a nonrefundable fee of

18  $475 to cover costs of administration and fraud prevention.

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

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

21  increased costs of administration and fraud prevention. The

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

23  commencement of coverage.

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

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

26  in this paragraph.

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

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

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

30  cannot reasonably be funded without the use of deficit

31  assessments, the board shall request the Office of Insurance


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    CS for CS for SB 2270                         Second Engrossed



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

 2  premiums charged to insureds for workers' compensation

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

 4  shall issue the order after verifying the amount of the

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

 6  future premium collections, as recommended by the board and

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

 8  premiums on all workers' compensation policies issued or

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

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

11         b.  With respect to each insurer collecting premiums

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

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

14  payment for each policy and shall remit the assessments

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

16  Office of Insurance Regulation. The office shall verify the

17  accurate and timely collection and remittance of deficit

18  assessments and shall report the information to the board.

19  Each insurer collecting assessments shall provide the

20  information with respect to premiums and collections as may be

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

22  audit compliance with this paragraph.

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

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

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

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

27  The deficit assessment imposed becomes plan funds at the

28  moment of collection and does not constitute income for any

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

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

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


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    CS for CS for SB 2270                         Second Engrossed



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

 2  liable for uncollectible assessments.

 3         d.  When an insurer is required to return unearned

 4  premium, it shall also return any collected assessments

 5  attributable to the unearned premium.

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

 7  be assessable. All Tier Three assessable policies must be

 8  clearly identified as assessable by containing, in contrasting

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

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

11  unable to pay its obligations, policyholders will be required

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

13  necessary to meet any assessment levied."

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

15  insureds to whom the plan has issued assessable policies for

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

17  based upon a reasonable actuarial estimate of the amount of

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

19  medical and indemnity reserves and reserves for incurred but

20  not reported claims, and allowing for general administrative

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

22  reasonable allowance for estimated uncollectible assessments,

23  and both allocated and unallocated loss adjustment expenses.

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

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

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

27  assessment the ratio of the total deficit to the total

28  premiums earned during the period upon all policies subject to

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

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

31  be liable on a proportionate basis for additional assessments


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    CS for CS for SB 2270                         Second Engrossed



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

 2  individual assessment claims without affecting the validity of

 3  or amounts due on assessments levied against other insureds.

 4  The plan may offer and accept discounted payments for

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

 6  amount of any unpaid assessment against unearned premiums

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

 8  institute legal action when necessary and appropriate to

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

10  assessment when due.

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

12  assessment or to contest the validity or amount of an

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

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

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

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

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

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

19  assessed that an assessment is being levied against the

20  insured, and informing the insured of the amount of the

21  assessment, the period for which the assessment is being

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

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

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

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

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

27  through actuarially sound premiums charged to insureds of the

28  plan.

29         2.  The plan may issue assessable policies only to

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

31  verification by the department, the board may levy assessments


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    CS for CS for SB 2270                         Second Engrossed



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

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

 3  subplans. Assessments levied against subplan "C" participants

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

 5  assessments levied against subplan "D" participants shall

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

 7  event may the plan levy assessments against any person or

 8  entity, except as authorized by this paragraph. Those

 9  assessable policies must be clearly identified as assessable

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

11  10-point type, the following statements: "This is an

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

13  obligations, policyholders will be required to contribute on a

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

15  assessment levied."

16         3.  The plan may issue assessable policies with

17  differing terms and conditions to different groups within

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

19  differentiation.

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

21  other plans to encourage loss prevention programs.

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

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

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

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

26  1, 1993, and December 1 of each year thereafter, the board

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

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

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

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

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


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    CS for CS for SB 2270                         Second Engrossed



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

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

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

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

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

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

 7  not disapprove any rates or rating plans unless it

 8  demonstrates that such rates and rating plans are excessive,

 9  inadequate, or unfairly discriminatory.

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

11  obtain an independent actuarial certification of the results

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

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

14  the effective date of the plan, the projected ultimate

15  incurred losses and expenses and dividends for prior years

16  exceed collected premiums, accrued net investment income, and

17  prior assessments for prior years, the certification is

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

19  final.

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

21  90 days, provide the office with a program to eliminate the

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

23  through increased premiums charged to insureds of the plan for

24  subsequent years, through the use of policyholder surplus

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

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

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

28  provided in subparagraph (d)3.

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

30  in excess of the amount necessary to fund projected ultimate

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


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    CS for CS for SB 2270                         Second Engrossed



 1  insureds of the plan in conjunction with loss prevention or

 2  dividend programs shall be retained by the plan for future

 3  use.

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

 5  constitute final agency action and are not subject to chapter

 6  120.

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

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

 9  only for payment for losses arising under policies issued by

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

11  1, 1994.

12         (l)  Plan losses are the sole and exclusive

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

14  be funded in accordance with this subsection and must not

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

16  association for such insurers.

17         (m)  Each joint underwriting plan or association

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

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

20  the joint underwriting plan is a political subdivision of the

21  state and is exempt from the corporate income tax.

22         (n)  Each joint underwriting plan or association may

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

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

25  premiums are allocated pay the premium taxes if the member

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

27  association shall notify the member insurers and the

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

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

30  term "premiums received" means the consideration for

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


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    CS for CS for SB 2270                         Second Engrossed



 1  policy assessment or surcharge received by the joint

 2  underwriting association as a result of apportioning losses or

 3  deficits of the association pursuant to this section.

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

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

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

 7  management or policies of the plan, unless:

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

 9  duties as a member; and

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

11  duties constitutes:

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

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

14  unlawful. A judgment or other final adjudication against a

15  member in any criminal proceeding for violation of the

16  criminal law estops that member from contesting the fact that

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

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

19  from establishing that she or he had reasonable cause to

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

21  reasonable cause to believe that her or his conduct was

22  unlawful;

23         b.  A transaction from which the member derived an

24  improper personal benefit, either directly or indirectly; or

25         c.  Recklessness or any act or omission that was

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

27  manner exhibiting wanton and willful disregard of human

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

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

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

31  


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    CS for CS for SB 2270                         Second Engrossed



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

 2  known, to the member; and

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

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

 5  that harm would follow from such act or omission.

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

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

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

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

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

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

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

13  person" of another person means:

14         1.  The spouse of such other natural person;

15         2.  Any person who directly or indirectly owns or

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

17  of the outstanding voting securities of such other person;

18         3.  Any person who directly or indirectly owns 5

19  percent or more of the outstanding voting securities that are

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

21  power to vote, by such other person;

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

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

24  control with such other person;

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

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

27  performing duties similar to persons in those positions, of

28  such other person; or

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

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

31  


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    CS for CS for SB 2270                         Second Engrossed



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

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

 3  440.49 and 440.51.

 4         Section 3.  The Auditor General shall perform an

 5  operational audit, as defined in section 11.45(1), Florida

 6  Statutes, of the Workers' Compensation Joint Underwriting

 7  Association created under section 627.311(5), Florida

 8  Statutes. The scope of the audit shall also include:

 9         (1)  An analysis of the adequacy and appropriateness of

10  the rates and reserves of the association. The Auditor General

11  shall engage an independent consulting actuary who is an

12  enrolled actuary to evaluate the rates and the reserves of the

13  association.

14         (2)  An evaluation of costs associated with the

15  administration and servicing of the policies issued by the

16  association to determine alternatives by which costs can be

17  reduced.

18  

19  The Auditor General shall submit a report to the Governor, the

20  President of the Senate, and the Speaker of the House of

21  Representatives no later than October 1, 2004.

22         Section 4.  The Workers' Compensation Joint

23  Underwriting Association is subject to the Florida Single

24  Audit Act, as provided in section 215.97, Florida Statutes, if

25  the association expends a total amount of state financial

26  assistance equal to or in excess of $300,000 in any fiscal

27  year. Such audit reports shall be submitted to the President

28  of the Senate, the Speaker of the House of Representatives,

29  and the Governor pursuant to section 215.97, Florida Statutes.

30         Section 5.  The sum of $50,000 in nonrecurring funds is

31  appropriated from the Workers' Compensation Administration


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    CS for CS for SB 2270                         Second Engrossed



 1  Trust Fund to the Office of the Auditor General for the

 2  purpose of engaging an actuary to evaluate the rates and

 3  reserves of the Florida Workers' Compensation Joint

 4  Underwriting Association as required by section 3.

 5         Section 6.  Section 627.0915, Florida Statutes, is

 6  amended to read:

 7         627.0915  Rate filings; workers' compensation,

 8  drug-free workplace, and safe employers.--

 9         (1)  The office shall approve rating plans for workers'

10  compensation and employer's liability insurance that give

11  specific identifiable consideration in the setting of rates to

12  employers that either implement a drug-free workplace program

13  pursuant to s. 440.102 and rules adopted thereunder by the

14  commission or implement a safety program pursuant to

15  provisions of the rating plan or implement both a drug-free

16  workplace program and a safety program. The plans must be

17  actuarially sound and must state the savings anticipated to

18  result from such drug-testing and safety programs.

19         (2)  An insurer offering a rate plan approved under

20  this section shall notify the employer at the time of a

21  written offer of insurance and at the time of each renewal of

22  the policy of the availability of the premium discount where a

23  drug-free workplace plan is used by the employer pursuant to

24  s. 440.102 and related rules. The commission shall adopt rules

25  to implement this section.

26         Section 7.  Notwithstanding the provisions of sections

27  440.50 and 440.51, Florida Statutes, for the 2004-2005 fiscal

28  year:

29         (1)  The sum of $10 million is appropriated from the

30  Workers' Compensation Administration Trust Fund in the

31  Department of Financial Services for transfer to the workers'


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    CS for CS for SB 2270                         Second Engrossed



 1  compensation joint underwriting plan provided in section

 2  627.311(5), Florida Statutes, as a capital contribution to

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

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

 5  2004.

 6         (2)  The workers' compensation joint underwriting plan

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

 8  the Department of Financial Services to transfer an amount not

 9  to exceed $25 million from the Workers' Compensation

10  Administration Trust Fund to the plan subject to the approval

11  of the Legislative Budget Commission under sections 216.181

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

13  underwriting plan board of governors and the Office of

14  Insurance Regulation must first certify to the Department of

15  Financial Services that a deficit exists in the workers'

16  compensation joint underwriting plan. The amount requested for

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

18  certified by the board of governors and the Office of

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

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

21  which cannot be funded without the use of deficit assessments

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

23         Section 8.  Transitional provisions.--Effective upon

24  this act becoming a law:

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

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

27  Florida Workers' Compensation Joint Underwriting Association

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

29  deficit.

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

31  Compensation Joint Underwriting Association with an effective


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    CS for CS for SB 2270                         Second Engrossed



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

 2  30, 2004, shall be rerated and placed in the appropriate tier

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

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

 5  and charges provided for in that section as amended.

 6         Section 9.  Effective upon this act becoming a law:

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

 8  compensation mutual fund if workers' compensation coverage is

 9  not generally available and affordable to small employers and

10  organizations that are exempt from federal income tax under s.

11  501(c)(3) of the Internal Revenue Code in Florida by October

12  1, 2005. In order to make this determination, there is

13  established the Workers' Compensation Insurance Market

14  Evaluation Committee which shall consist of one member

15  appointed by the Governor, who shall serve as chair; two

16  members appointed by the President of the Senate; and two

17  members appointed by the Speaker of the House of

18  Representatives. The committee shall monitor and report on the

19  number of insurers actively writing workers' compensation

20  insurance in this state for small employers and organizations

21  that are exempt from federal income tax under s. 501(c)(3) of

22  the Internal Revenue Code, the number of policies issued,

23  premium volume written, types of underwriting restrictions

24  utilized, and the extent to which actual premiums charged vary

25  from standard rates, such as the use of excess rates pursuant

26  to section 627.171, Florida Statutes, and rate deviations

27  pursuant to section 627.211, Florida Statutes. The Office of

28  Insurance Regulation shall provide such related information to

29  the committee as is requested, and workers' compensation

30  insurers shall report such information to the office in the

31  manner and format specified by the office.


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    CS for CS for SB 2270                         Second Engrossed



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

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

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

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

 5  President of the Senate and the Speaker of the House of

 6  Representatives jointly require. Members of the committee

 7  shall be entitled to reimbursement for travel and per diem

 8  pursuant to section 112.061, Florida Statutes.

 9         (3)  If the Legislature determines that workers'

10  compensation coverage is not generally available and

11  affordable to small employers and organizations that are

12  exempt from federal income tax under s. 501(c)(3) of the

13  Internal Revenue Code in Florida, the Legislature intends to

14  create a state mutual fund as a nonprofit entity for the

15  benefit of its policyholders that are a small employer or an

16  organization that is exempt from the federal income tax under

17  s. 501(c)(3) of the Internal Revenue Code. The state mutual

18  fund would compete with private carriers and would be charged

19  with the public mission of customer service, quality loss

20  prevention, timely claims management, active fighting of

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

22  lowest cost consistent with actuarial sound rates. The fund

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

24  employees, rather than contracting with servicing carriers. It

25  is further intended that the state appropriate adequate

26  initial capitalization for the fund and that the fund be

27  subject to the same financial and other requirements as apply

28  to an authorized insurer.

29         Section 10.  Subsection (7) of section 440.16, Florida

30  Statutes, is amended to read:

31         440.16  Compensation for death.--


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    CS for CS for SB 2270                         Second Engrossed



 1         (7)  Compensation under this chapter to aliens not

 2  residents (or about to become nonresidents) of the United

 3  States or Canada shall be the same in amount as provided for

 4  residents, except that dependents in any foreign country shall

 5  be limited to surviving spouse and child or children, or if

 6  there be no surviving spouse or child or children, to

 7  surviving father or mother whom the employee has supported,

 8  either wholly or in part, for the period of 1 year prior to

 9  the date of the injury, and except that the judge of

10  compensation claims may, at the option of the judge of

11  compensation claims, or upon the application of the insurance

12  carrier, commute all future installments of compensation to be

13  paid to such aliens by paying or causing to be paid to them

14  one-half of the commuted amount of such future installments of

15  compensation as determined by the judge of compensation

16  claims, and provided further that compensation to dependents

17  referred to in this subsection shall in no case exceed

18  $75,000.

19         Section 11.  Except as otherwise expressly provided in

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

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

22  

23  

24  

25  

26  

27  

28  

29  

30  

31  


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