SF 1039

as introduced - 79th Legislature (1995 - 1996) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to insurance; workers' compensation; 
  1.3             modifying provision relating to self-insurance; 
  1.4             amending Minnesota Statutes 1994, sections 79A.01, by 
  1.5             adding subdivisions; 79A.02, subdivisions 1 and 4; 
  1.6             79A.03, subdivisions 2, 6, 7, 8, 9, and 11; 79A.08; 
  1.7             and 79A.09, subdivision 1. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 1994, section 79A.01, is 
  1.10  amended by adding a subdivision to read: 
  1.11     Subd. 11.  [TRADE ASSOCIATION.] "Trade association" means 
  1.12  an association of businesses with common business interest whose 
  1.13  members are engaged in similar employment activities and have 
  1.14  joined together for the purpose of promoting their common 
  1.15  interest.  For the purposes of this chapter, "trade association" 
  1.16  includes a cooperative organized under chapter 308A. 
  1.17     Sec. 2.  Minnesota Statutes 1994, section 79A.01, is 
  1.18  amended by adding a subdivision to read: 
  1.19     Subd. 12.  [PREFERRED RISK GROUP.] "Preferred risk group" 
  1.20  means a group of members of a trade association that has been in 
  1.21  existence and operating for at least five consecutive years 
  1.22  before application to self-insure for workers' compensation and 
  1.23  whose board membership consists of membership and management of 
  1.24  the trade association. 
  1.25     Sec. 3.  Minnesota Statutes 1994, section 79A.02, 
  1.26  subdivision 1, is amended to read: 
  2.1      Subdivision 1.  [MEMBERSHIP.] For the purposes of assisting 
  2.2   the commissioner, there is established a workers' compensation 
  2.3   self-insurers' advisory committee of five members that are 
  2.4   employers or groups authorized to self-insure in Minnesota.  
  2.5   Three of the members shall be elected by the members of the 
  2.6   self-insurers' security fund and two shall be appointed by the 
  2.7   commissioner.  One of the members shall be a group. 
  2.8      Sec. 4.  Minnesota Statutes 1994, section 79A.02, 
  2.9   subdivision 4, is amended to read: 
  2.10     Subd. 4.  [RECOMMENDATIONS TO COMMISSIONER REGARDING 
  2.11  REVOCATION.] After each fifth anniversary from the date each 
  2.12  individual and, group, or preferred risk group self-insurer 
  2.13  becomes certified to self-insure, the committee shall review all 
  2.14  relevant financial data filed with the department of commerce 
  2.15  that is otherwise available to the public and make a 
  2.16  recommendation to the commissioner about whether each 
  2.17  self-insurer's certificate should be revoked.  
  2.18     Sec. 5.  Minnesota Statutes 1994, section 79A.03, 
  2.19  subdivision 2, is amended to read: 
  2.20     Subd. 2.  [CERTIFIED FINANCIAL STATEMENT.] Each application 
  2.21  for self-insurance shall be accompanied by a certified financial 
  2.22  statement, except in the case of a group application.  Certified 
  2.23  financial statements for a period ending more than six months 
  2.24  prior to the date of the application must be accompanied by an 
  2.25  affidavit, signed by a company officer under oath, stating that 
  2.26  there has been no material lessening of the net worth nor other 
  2.27  adverse changes in its financial condition since the end of the 
  2.28  period.  The commissioner may require additional financial 
  2.29  information necessary to carry out the purpose of this chapter. 
  2.30     Sec. 6.  Minnesota Statutes 1994, section 79A.03, 
  2.31  subdivision 6, is amended to read: 
  2.32     Subd. 6.  [APPLICATIONS FOR GROUP SELF-INSURANCE.] (a) Two 
  2.33  or more employers, or a trade association may apply to the 
  2.34  commissioner for the authority to self-insure as a group or 
  2.35  preferred risk group, using forms available from the 
  2.36  commissioner.  This initial application shall be accompanied by 
  3.1   a copy of the bylaws or plan of operation adopted by the group.  
  3.2   Such bylaws or plan of operation shall conform to the conditions 
  3.3   prescribed by law or rule.  The commissioner shall approve or 
  3.4   disapprove the bylaws within 60 days unless a question as to the 
  3.5   legality of a specific bylaw or plan provision has been referred 
  3.6   to the attorney general's office.  The commissioner shall make a 
  3.7   determination as to the application within 15 days after receipt 
  3.8   of the requested response from the attorney general's office. 
  3.9      (b) After the initial application and the bylaws or plan of 
  3.10  operation have been approved by the commissioner or at the time 
  3.11  of the initial application, the group or preferred risk group 
  3.12  shall submit the names of employers that will be members of the 
  3.13  group; an indemnity agreement providing for joint and several 
  3.14  liability, or in the case of a preferred group, an individual 
  3.15  and proportional liability agreement for all group members for 
  3.16  any and all workers' compensation claims incurred by any member 
  3.17  of the group, as set forth in Minnesota Rules, part 2780.9920, 
  3.18  signed by an officer of each member; and an accounting review 
  3.19  performed by a certified public accountant.  A certified 
  3.20  financial audit may be filed in lieu of an accounting 
  3.21  review.  In the case of preferred risk group members, individual 
  3.22  member financial statements need only be sent to the group. 
  3.23     Sec. 7.  Minnesota Statutes 1994, section 79A.03, 
  3.24  subdivision 7, is amended to read: 
  3.25     Subd. 7.  [FINANCIAL STANDARDS.] A group or preferred group 
  3.26  risk proposing to self-insure shall have and maintain: 
  3.27     (a) A combined net worth of all of the members of an amount 
  3.28  at least equal to the greater of ten times the retention 
  3.29  selected with the workers' compensation reinsurance association 
  3.30  or one-third of the current annual modified premium of the 
  3.31  members.  In the case of preferred risk group members, members 
  3.32  shall have a combined net worth of all of the members of an 
  3.33  amount at least equal to the greater of 20 times the retention 
  3.34  selected with the workers' compensation reinsurance association 
  3.35  or 100 percent of the current annual modified premium of the 
  3.36  members, whichever is greater. 
  4.1      (b) Sufficient assets, net worth, and liquidity to promptly 
  4.2   and completely meet all obligations of its members under chapter 
  4.3   176 or this chapter.  In determining whether a group is in sound 
  4.4   financial condition, consideration shall be given to the 
  4.5   combined net worth of the member companies; the consolidated 
  4.6   long-term and short-term debt to equity ratios of the member 
  4.7   companies; any excess insurance other than reinsurance with the 
  4.8   workers' compensation reinsurance association, purchased by the 
  4.9   group from an insurer licensed in Minnesota or from an 
  4.10  authorized surplus line carrier; other financial data requested 
  4.11  by the commissioner or submitted by the group; and the combined 
  4.12  workers' compensation experience of the group for the last four 
  4.13  years. 
  4.14     Sec. 8.  Minnesota Statutes 1994, section 79A.03, 
  4.15  subdivision 8, is amended to read: 
  4.16     Subd. 8.  [PROCESSING APPLICATION.] The commissioner shall 
  4.17  grant or deny the group's application to self-insure within 60 
  4.18  days after a complete application has been filed, provided that 
  4.19  the time may be extended for an additional 30 days upon 15 days' 
  4.20  prior notice to the applicant.  The commissioner shall grant 
  4.21  approval for self-insurance upon a determination that the 
  4.22  financial ability of the self-insurer's group is sufficient to 
  4.23  fulfill all joint and several or individual and proportional 
  4.24  obligations of the member companies that may arise under chapter 
  4.25  176 or this chapter; the gross annual premium of the group 
  4.26  members is at least $300,000 and $600,000 for preferred risk 
  4.27  group members; the group has established a fund pursuant to 
  4.28  Minnesota Rules, parts 2780.4100 to 2780.5000; the group has 
  4.29  contracted with a licensed workers' compensation service company 
  4.30  to administer its program; and the required securities or surety 
  4.31  bond shall be on deposit prior to the effective date of coverage 
  4.32  for any member.  Approval shall be effective until revoked by 
  4.33  order of the commissioner or until the employer members of the 
  4.34  group become insured. 
  4.35     Sec. 9.  Minnesota Statutes 1994, section 79A.03, 
  4.36  subdivision 9, is amended to read: 
  5.1      Subd. 9.  [FILING REPORTS.] (a) Incurred losses, paid and 
  5.2   unpaid, specifying indemnity and medical losses by 
  5.3   classification, payroll by classification, and current estimated 
  5.4   outstanding liability for workers' compensation shall be 
  5.5   reported to the commissioner by each self-insurer on a calendar 
  5.6   year basis, in a manner and on forms available from the 
  5.7   commissioner.  Payroll information must be filed by April 1 of 
  5.8   the following year, and loss information and total workers' 
  5.9   compensation liability must be filed by August 1 of the 
  5.10  following year.  
  5.11     (b) Each self-insurer shall, under oath, attest to the 
  5.12  accuracy of each report submitted pursuant to paragraph (a).  
  5.13  Upon sufficient cause, the commissioner shall require the 
  5.14  self-insurer to submit a certified audit of payroll and claim 
  5.15  records conducted by an independent auditor approved by the 
  5.16  commissioner, based on generally accepted accounting principles 
  5.17  and generally accepted auditing standards, and supported by an 
  5.18  actuarial review and opinion of the future contingent 
  5.19  liabilities.  The basis for sufficient cause shall include the 
  5.20  following factors:  where the losses reported appear 
  5.21  significantly different from similar types of businesses; where 
  5.22  major changes in the reports exist from year to year, which are 
  5.23  not solely attributable to economic factors; or where the 
  5.24  commissioner has reason to believe that the losses and payroll 
  5.25  in the report do not accurately reflect the losses and payroll 
  5.26  of that employer.  If any discrepancy is found, the commissioner 
  5.27  shall require changes in the self-insurer's or workers' 
  5.28  compensation service company record keeping practices. 
  5.29     (c) With the annual loss report due August 1, each 
  5.30  self-insurer shall report to the commissioner any workers' 
  5.31  compensation claim from the previous year where the full, 
  5.32  undiscounted value is estimated to exceed $50,000, in a manner 
  5.33  and on forms prescribed by the commissioner.  
  5.34     (d) Each individual self-insurer shall, within four months 
  5.35  after the end of its fiscal year, annually file with the 
  5.36  commissioner its latest 10K report required by the Securities 
  6.1   and Exchange Commission.  If an individual self-insurer does not 
  6.2   prepare a 10K report, it shall file an annual certified 
  6.3   financial statement, together with such other financial 
  6.4   information as the commissioner may require to substantiate data 
  6.5   in the financial statement.  
  6.6      (e) Each member of the group shall, within four months 
  6.7   after the end of each fiscal year for that group, file the most 
  6.8   recent annual financial statement, reviewed by a certified 
  6.9   public accountant in accordance with the Statements on Standards 
  6.10  for Accounting and Review Services, Volume 2, the American 
  6.11  Institute of Certified Public Accountants Professional 
  6.12  Standards, or audited in accordance with generally accepted 
  6.13  auditing standards, together with such other financial 
  6.14  information the commissioner may require.  In addition, the 
  6.15  group shall file, within four months after the end of each 
  6.16  fiscal year for that group, combining financial statements of 
  6.17  the group members, compiled by a certified public accountant in 
  6.18  accordance with the Statements on Standards for Accounting and 
  6.19  Review Services, Volume 2, the American Institute of Certified 
  6.20  Public Accountants Professional Standards.  Payroll and loss 
  6.21  information must also be provided to the Workers' Compensation 
  6.22  Insurers Association.  The combining financial statements shall 
  6.23  include, but not be limited to, a balance sheet, income 
  6.24  statement, statement of changes in net worth, and statement of 
  6.25  cash flow.  Each combining financial statement shall include a 
  6.26  column for each individual group member along with a total 
  6.27  column.  
  6.28     Where a group has 50 or more members, the group shall file, 
  6.29  in lieu of the combining financial statements, a combined 
  6.30  financial statement showing only the total column for the entire 
  6.31  group's balance sheet, income statement, statement of changes in 
  6.32  net worth, and statement of cash flow.  Additionally, the group 
  6.33  shall disclose, for each member, the total assets, net worth, 
  6.34  revenue, and income for the most recent fiscal year.  The 
  6.35  combining and combined financial statements may omit all 
  6.36  footnote disclosures.  
  7.1      Where members belong to a preferred risk group, the 
  7.2   preferred group shall file, in lieu of the combining financial 
  7.3   statements, a compiled combined financial statement prepared by 
  7.4   a certified public accountant showing only the total column for 
  7.5   the entire group's balance sheet, income statement, statement of 
  7.6   changes in net worth, statement of cash flow, and a list of all 
  7.7   members comprising the combined statement.  Additionally, 
  7.8   individual members constituting at least 80 percent of the 
  7.9   premium shall submit to the preferred risk group reviewed or 
  7.10  audited financial statements, and the remaining members may 
  7.11  submit compilation level statements.  The combined financial 
  7.12  statement shall attest that financial statements of members 
  7.13  representing 80 percent of the group's premium has been reviewed 
  7.14  or audited.  The preferred risk group shall also provide any 
  7.15  footnote disclosures of individual members to the department of 
  7.16  commerce which indicate contingent liabilities that could 
  7.17  potentially exceed 20 percent of the combined net worth of all 
  7.18  members of the group. 
  7.19     (f) In addition to the financial statements required by 
  7.20  paragraphs (d) and (e), interim financial statements or 10Q 
  7.21  reports required by the Securities and Exchange Commission may 
  7.22  be required by the commissioner upon an indication that there 
  7.23  has been deterioration in the self-insurer's financial 
  7.24  condition, including a worsening of current ratio, lessening of 
  7.25  net worth, net loss of income, the downgrading of the company's 
  7.26  bond rating, or any other significant change that may adversely 
  7.27  affect the self-insurer's ability to pay expected losses.  Any 
  7.28  self-insurer that files an 8K report with the Securities and 
  7.29  Exchange Commission shall also file a copy of the report with 
  7.30  the commissioner within 30 days of the filing with the 
  7.31  Securities and Exchange Commission. 
  7.32     Sec. 10.  Minnesota Statutes 1994, section 79A.03, 
  7.33  subdivision 11, is amended to read: 
  7.34     Subd. 11.  [JOINT AND SEVERAL LIABILITY.] All members of a 
  7.35  private self-insurer group shall be jointly and severally liable 
  7.36  for the obligations incurred by any member of the same group 
  8.1   under chapter 176., except that preferred risk group members 
  8.2   shall be individually and proportionally liable.  The 
  8.3   proportional liability of each preferred risk member shall be 
  8.4   based on the member's percentage of the group's total 
  8.5   obligations.  If a member of the group becomes insolvent, the 
  8.6   remaining member liability must be adjusted upward, based on the 
  8.7   member's proportion of the total group obligation, to satisfy 
  8.8   the obligation. 
  8.9      Sec. 11.  Minnesota Statutes 1994, section 79A.08, is 
  8.10  amended to read: 
  8.11     79A.08 [LEGISLATIVE INTENT.] 
  8.12     It is the intent of the legislature in enacting sections 
  8.13  79A.08 to 79A.10 to provide for the continuation of workers' 
  8.14  compensation benefits delayed due to the failure of a an 
  8.15  individual or group private self-insured employer to meet its 
  8.16  compensation obligations, whenever the commissioner of commerce 
  8.17  issues a certificate of default or there is a declaration of 
  8.18  bankruptcy or insolvency by a court of competent jurisdiction.  
  8.19  With respect to the continued liability of a surety for claims 
  8.20  that arise under a bond after termination of that bond and to a 
  8.21  surety's liability for the cost of administration of claims, it 
  8.22  is the intent of the legislature to provide that that liability 
  8.23  ceases upon lawful termination of that bond.  This applies to 
  8.24  all surety bonds which are purchased by the self-insured 
  8.25  employer after July 1, 1988.  The legislature finds and declares 
  8.26  that the establishment of the self-insurers' security fund is a 
  8.27  necessary component of a complete system of workers' 
  8.28  compensation, required by chapter 176, to have adequate 
  8.29  provisions for the comfort, health, safety, and general welfare 
  8.30  of any and all workers and their dependents to the extent of 
  8.31  relieving the consequences of any industrial injury or death, 
  8.32  and full provision for securing the payment of compensation. 
  8.33     Sec. 12.  Minnesota Statutes 1994, section 79A.09, 
  8.34  subdivision 1, is amended to read: 
  8.35     Subdivision 1.  [CREATION.] The self-insurers' security 
  8.36  fund is established as a nonprofit corporation pursuant to the 
  9.1   Minnesota nonprofit corporation act, sections 317A.001 to 
  9.2   317A.909.  If any provision of the Minnesota nonprofit 
  9.3   corporation act conflicts with any provision of this chapter, 
  9.4   the provisions of this chapter apply.  Each private self-insurer 
  9.5   or group, except a preferred risk group, who is self-insured on 
  9.6   July 1, 1988, or who becomes self-insured thereafter, shall 
  9.7   participate as a member in the security fund.  This 
  9.8   participation shall be a condition of maintaining its 
  9.9   certificate to self-insure.