SF 3193

as introduced - 93rd Legislature (2023 - 2024) Posted on 05/02/2023 07:47pm

A bill for an act
relating to commerce; modifying workers' compensation self-insurance provisions;
amending Minnesota Statutes 2022, sections 79A.01, subdivision 4; 79A.04,
subdivisions 7, 9, 10, 16, by adding a subdivision; 79A.08; 79A.13; 79A.24,
subdivision 4; 79A.25, subdivisions 1, 2, 3, by adding a subdivision.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2022, section 79A.01, subdivision 4, is amended to read:

Subd. 4.

Insolvent self-insurer.

"Insolvent self-insurer" means: (1) a member private
self-insurer who has failed to pay compensation as a result of a declaration of bankruptcy
or insolvency by a court of competent jurisdiction and whose security deposit has been
called by the commissioner pursuant to chapter 176; (2) a member self-insurer who has
failed to pay compensation and who has been issued a certificate of default by the
commissioner and whose security deposit has been called by the commissioner pursuant to
chapter 176; deleted text begin or deleted text end (3) a member or former member private self-insurer who has failed to pay
an assessment required by section 79A.12, subdivision 2, and who has been issued a
certificate of default by the commissioner and whose security deposit has been called by
the commissioner deleted text begin . deleted text end new text begin ; or (4) a member private self-insurer whose security deposit has been
called by the commissioner pursuant to chapter 176 and in accordance with section 79A.04,
subdivision 9a, paragraph (b).
new text end

Sec. 2.

Minnesota Statutes 2022, section 79A.04, subdivision 7, is amended to read:

Subd. 7.

Perfection of security.

Upon the commissioner sending a request to renew,
request to post, or request to increase a security deposit, a perfected security interest is
created in the private self-insured's assets in favor of the commissioner to the extent of any
then unsecured portion of the self-insured's incurred liabilities. That perfected security
interest is transferred to any cash or securities thereafter posted by the private self-insured
with the commissioner of management and budget and is released only upon either of the
following:

(1) the acceptance by the commissioner of a surety bond or irrevocable letter of credit
for the full amount of the incurred liabilities for the payment of compensation; or

(2) the return of cash or securities by the commissioner.

The private self-insured employer loses all right, title, and interest in and any right to
control all assets or obligations posted or left on deposit as security. In the event that deleted text begin a
private self-insurer is the subject of a voluntary or involuntary petition under the United
States Bankruptcy Code, title 11, or deleted text end a court of competent jurisdiction has declared the private
self-insurer to be deleted text begin bankrupt or deleted text end insolvent, or in the event of the issuance of a certificate of
default by the commissioner, the commissioner shall liquidate the deposit as provided in
this chapter, and transfer it to the self-insurer's security fund for application to the self-insured
employer's incurred liability and other current or future obligations of the self-insurers'
security fund. In the event that deleted text begin a private self-insurer is the subject of a voluntary or
involuntary petition under the United States Bankruptcy Code, title 11, or deleted text end a court of
competent jurisdiction has declared the private self-insurer to be deleted text begin bankrupt or deleted text end insolvent, or
in the event of the issuance of a certificate of default by the commissioner, all right, title,
and interest in and any right to control all assets or obligations which have been posted or
deposited as security must be transferred to the self-insurers' security fund.

Sec. 3.

Minnesota Statutes 2022, section 79A.04, subdivision 9, is amended to read:

Subd. 9.

Insolvency deleted text begin , bankruptcy, deleted text end or default; utilization of security deposit.

The
commissioner of labor and industry shall notify the commissioner and the security fund if
the commissioner of labor and industry has knowledge that any private self-insurer has
failed to pay workers' compensation benefits as required by chapter 176. The security deposit
shall be used to administer and pay the private self-insurers' workers' compensation or
assessment obligations or any other current or future obligations of the self-insurers' security
fund if any of the following occurs:

(1) the private self-insurer has failed to pay workers' compensation as required by chapter
176 and deleted text begin either:
deleted text end

deleted text begin (i) the commissioner determines that a private self-insurer is the subject of a voluntary
or involuntary petition under the United States Bankruptcy Code, title 11; or
deleted text end

deleted text begin (ii) deleted text end the commissioner determines that a court of competent jurisdiction has declared the
private self-insurer to be deleted text begin bankrupt or deleted text end insolvent; deleted text begin or
deleted text end

(2) the commissioner issues a certificate of default against a private self-insurer for
failure to pay workers' compensation as required by chapter 176; or

(3) the commissioner issues a certificate of default against a private self-insurer for
failure to pay an assessment to the self-insurer's security fund when due.

Sec. 4.

Minnesota Statutes 2022, section 79A.04, is amended by adding a subdivision to
read:

new text begin Subd. 9a. new text end

new text begin Bankruptcy; utilization of security deposit. new text end

new text begin (a) A private self-insurer must
notify the commissioner prior to, or immediately upon, the filing of a voluntary or involuntary
petition under the United States Bankruptcy Code, title 11, and when a court of competent
jurisdiction has declared the private self-insurer to be bankrupt.
new text end

new text begin (b) If a private self-insurer is (1) the subject of a voluntary or involuntary petition under
the United States Bankruptcy Code, title 11, or (2) a court of competent jurisdiction has
declared the private self-insurer to be bankrupt and the private self-insurer has failed to pay
workers' compensation as required by chapter 176, the commissioner must call the security
and proceed in accordance with this section.
new text end

new text begin (c) If, upon notice that a private self-insurer is the subject of a voluntary or involuntary
petition under the United States Bankruptcy Code, title 11, or a court of competent
jurisdiction has declared the private self-insurer to be bankrupt but the private self-insurer
has not failed to timely pay workers' compensation benefits as required by chapter 176, the
commissioner may call the security and proceed in accordance with this section if the
commissioner determines that the private self-insurer's payment of workers' compensation
benefits would be delayed in any way as a result of the bankruptcy petition or declaration
or that the private self-insurer would otherwise be unable to fulfill its obligations under
chapter 79A or 176.
new text end

new text begin (d) In making the determination provided for in paragraph (c) to call a private
self-insurer's security and proceed in accordance with this section, the commissioner must
consult with the commissioner of labor and industry to determine if the commissioner of
labor and industry has knowledge that the private self-insurer has failed to pay workers'
compensation benefits as required by chapter 176. The commissioner shall also consider
the following:
new text end

new text begin (1) the self-insurer's most recent actuarial statement, including but not limited to estimated
future liability and posted security;
new text end

new text begin (2) the self-insurer's claims history and claims projections;
new text end

new text begin (3) the circumstances surrounding the self-insurer's petition to file bankruptcy; and
new text end

new text begin (4) any other circumstances the commissioner deems relevant.
new text end

new text begin (d) In making the determination under paragraph (c), the commissioner must also meet
and confer with the private self-insurer and the security fund. The initial meet and confer
must occur within 30 days of the filing of the petition for chapter 11 bankruptcy. Failure to
participate in the meet and confer process by the self-insurer may result in a default
determination to immediately transfer the posted security and claims obligations to the
security fund. During the meet and confer, the commissioner may ask the self-insurer to
provide additional information. Additionally, the security fund may inspect the private
self-insurer's most recent actuarial study on file with the commissioner as well as its current
security deposit amount required by the commissioner. Data disclosed during the meet and
confer must remain confidential. Nothing in this section shall limit the fund's authority to
seek information directly from its members.
new text end

Sec. 5.

Minnesota Statutes 2022, section 79A.04, subdivision 10, is amended to read:

Subd. 10.

Notice; obligation of fund.

In the event of deleted text begin bankruptcy, deleted text end insolvency deleted text begin , deleted text end or
certificate of default, the commissioner shall immediately notify by certified mail the
commissioner of management and budget, the surety, the issuer of an irrevocable letter of
credit, and any custodian of the security required in this chapter. At the time of notification,
the commissioner shall also call the security and transfer and assign it to the self-insurers'
security fund. The commissioner shall also immediately notify by certified mail the
self-insurers' security fund, and order the security fund to assume the insolvent self-insurers'
obligations for which it is liable under chapter 176. The security fund shall commence
payment of these obligations within 14 days of receipt of this notification and order. Payments
shall be made to claimants whose entitlement to benefits can be ascertained by the security
fund, with or without proceedings before the Department of Labor and Industry, the Office
of Administrative Hearings, the Workers' Compensation Court of Appeals, or the Minnesota
Supreme Court. Upon the assumption of obligations by the security fund pursuant to the
commissioner's notification and order, the security fund has the right to immediate possession
of any posted or deposited security and the custodian, surety, or issuer of any irrevocable
letter of credit or the commissioner, if in possession of it, shall turn over the security,
proceeds of the surety bond, or letter of credit to the security fund together with the interest
that has accrued since the date of the self-insured employer's insolvency. The security fund
has the right to the immediate possession of all relevant workers' compensation claim files
and data of the self-insurer, and the possessor of the files and data must turn the files and
data, or complete copies of them, over to the security fund within five days of the notification
provided under this subdivision. If the possessor of the files and data fails to timely turn
over the files and data to the security fund, it is liable to the security fund for a penalty of
$500 per day for each day after the five-day period has expired. The security fund is entitled
to recover its reasonable attorney fees and costs in any action brought to obtain possession
of the workers' compensation claim files and data of the self-insurer, and for any action to
recover the penalties provided by this subdivision. The self-insurers' security fund may
administer payment of benefits or it may retain a third-party administrator to do so.

Sec. 6.

Minnesota Statutes 2022, section 79A.04, subdivision 16, is amended to read:

Subd. 16.

Certificate to self-insure; revocation.

If, following a private self-insurer's
deleted text begin bankruptcy, deleted text end insolvency deleted text begin , deleted text end or certificate of default, the commissioner calls its security and
proceeds in accordance with this section, the commissioner shall revoke the certificate to
self-insure of the private self-insurer as soon as practicable but no later than 30 days after
its security has been called. No insolvent self-insurer, as defined in section 79A.01,
subdivision 4, shall be eligible to receive another grant of authority to self-insure unless
either: (1) the insolvent self-insurer's posted security was sufficient to pay all direct and
indirect administrative and professional expenses of the security fund related to the insolvent
self-insurer, and all losses, including estimated future liability, allocated loss expense, and
unallocated loss expense of the insolvent self-insurer; or (2) the insolvent self-insurer pays
the security fund an amount equal to all such losses and expenses the security fund has paid
or will be required to pay related to this insolvent self-insurer.

Sec. 7.

Minnesota Statutes 2022, section 79A.08, is amended to read:

79A.08 LEGISLATIVE INTENT.

It is the intent of the legislature in enacting sections 79A.08 to 79A.10 to provide for
the continuation of workers' compensation benefits delayed due to the failure of a private
self-insured employer to meet its compensation obligations, whenever the commissioner
of commerce issues a certificate of default or there is a declaration of deleted text begin bankruptcy or deleted text end
insolvency by a court of competent jurisdiction. With respect to the continued liability of
a surety for claims that arise under a bond after termination of that bond and to a surety's
liability for the cost of administration of claims, it is the intent of the legislature to provide
that that liability ceases upon lawful termination of that bond. This applies to all surety
bonds which are purchased by the self-insured employer after July 1, 1988. The legislature
finds and declares that the establishment of the self-insurers' security fund is a necessary
component of a complete system of workers' compensation, required by chapter 176, to
have adequate provisions for the comfort, health, safety, and general welfare of any and all
workers and their dependents to the extent of relieving the consequences of any industrial
injury or death, and full provision for securing the payment of compensation.

Sec. 8.

Minnesota Statutes 2022, section 79A.13, is amended to read:

79A.13 AUDIT; ANNUAL REPORT.

The trustees shall annually contract for an independent certified audit of the financial
activities of the fund. An annual report on the financial status of the fund as of June 30 shall
be submitted to the commissioner and to each member.

The security fund shall be established on July 1, 1988, or 90 days after July 1, 1988,
whichever occurs later. All applications for private self-insurers which are made after July
1, 1988, prior to the establishment of the security fund, shall comply with all requirements
of this chapter. Applications for private self-insurers which are made after January 1, 1988,
but prior to July 1, 1988, shall, prior to the establishment of the security fund, comply with
the requirements of this chapter. The security fund shall be liable for payment of benefits
only for members where there has been a declaration of deleted text begin bankruptcy or deleted text end insolvency by a court
of competent jurisdiction after the date on which the security fund is established, or where
the commissioner has issued a certificate of default which has occurred after the date on
which the security fund is established.

Sec. 9.

Minnesota Statutes 2022, section 79A.24, subdivision 4, is amended to read:

Subd. 4.

Custodial accounts.

(a) All surety bonds, irrevocable letters of credit, and
documents showing issuance of any irrevocable letter of credit shall be deposited in
accordance with the provisions of section 79A.071.

(b) Upon the commissioner sending a request to renew, request to post, or request to
increase a security deposit, a perfected security interest is created in the commercial
self-insurance group's and member's assets in favor of the commissioner to the extent of
any then unsecured portion of the commercial self-insurance group's incurred liabilities.
The perfected security interest is transferred to any cash or securities thereafter posted by
the commercial self-insurance group with the commissioner of management and budget
and is released only upon either of the following:

(1) the acceptance by the commissioner of a surety bond or irrevocable letter of credit
for the full amount of the incurred liabilities for the payment of compensation; or

(2) the return of cash or securities by the commissioner. The commercial self-insurance
group loses all right, title, and interest in and any right to control all assets or obligations
posted or left on deposit as security. In the event of a declaration of deleted text begin bankruptcy or deleted text end insolvency
by a court of competent jurisdiction, or in the event of the issuance of a certificate of default
by the commissioner, the commissioner shall liquidate the deposit as provided in this chapter,
and transfer it to the commercial self-insurance group security fund for application to the
commercial self-insurance group's incurred liability.

(c) No securities in physical form on deposit with the commissioner of management and
budget or the commissioner or custodial accounts assigned to the state shall be released or
exchanged without an order from the commissioner. No security can be exchanged more
than once every 90 days.

(d) Any securities deposited with the commissioner of management and budget or with
a custodial account assigned to the commissioner of management and budget or letters of
credit or surety bonds held by the commissioner may be exchanged or replaced by the
depositor with any other acceptable securities or letters of credit or surety bond of like
amount so long as the market value of the securities or amount of the surety bonds or letter
of credit equals or exceeds the amount of the deposit required. If securities are replaced by
surety bond, the commercial self-insurance group must maintain securities on deposit in an
amount sufficient to meet all outstanding workers' compensation liability arising during the
period covered by the deposit of the replaced securities.

Sec. 10.

Minnesota Statutes 2022, section 79A.25, subdivision 1, is amended to read:

Subdivision 1.

Notice of insolvency deleted text begin , bankruptcy, deleted text end or default.

The commissioner of
labor and industry shall notify the commissioner and the commercial self-insurance group
security fund if the commissioner of labor and industry has knowledge that any commercial
self-insurance group has failed to pay workers' compensation benefits as required by chapter
176. If the commissioner determines that a court of competent jurisdiction has declared the
commercial self-insurance group to be deleted text begin bankrupt or deleted text end insolvent and the commercial
self-insurance group has failed to pay workers' compensation as required by chapter 176 or
if the commissioner issues a certificate of default against a commercial self-insurance group
for failure to pay workers' compensation as required by chapter 176, then the security deposit
posted by the commercial self-insurance group shall be utilized to administer and pay the
commercial self-insurance group's workers' compensation obligation.

Sec. 11.

Minnesota Statutes 2022, section 79A.25, subdivision 2, is amended to read:

Subd. 2.

new text begin Mandatory new text end revocation of certificate to self-insure.

(a) The commissioner
shall revoke the commercial self-insurance group's certificate to self-insure once notified
of the commercial self-insurance group's deleted text begin bankruptcy, deleted text end insolvency deleted text begin , deleted text end or upon issuance of a
certificate of default. The revocation shall be completed as soon as practicable, but no later
than 30 days after the commercial self-insurance group's security has been called.

(b) The commissioner shall also revoke a commercial self-insurance group's authority
to self-insure on the following grounds:

(1) failure to comply with any lawful order of the commissioner;

(2) failure to comply with any provision of chapter 176;

(3) a deterioration of the commercial self-insurance group's financial condition affecting
its ability to pay obligations in chapter 176;

(4) committing an unfair or deceptive act or practice as defined in section 72A.20; or

(5) failure to abide by the plan of operation of the Workers' Compensation Reinsurance
Association.

Sec. 12.

Minnesota Statutes 2022, section 79A.25, is amended by adding a subdivision to
read:

new text begin Subd. 2a. new text end

new text begin Discretionary revocation of certificate to self-insure. new text end

new text begin (a) A commercial
self-insurance group must notify the commissioner, prior to or immediately upon a court
of competent jurisdiction declaring it to be insolvent. If a commercial self-insurance group
has been declared insolvent by a court of competent jurisdiction and the commercial
self-insurance group has failed to pay workers' compensation as required by chapter 176,
the commissioner must call the security and proceed in accordance with this section.
new text end

new text begin (b) If a commercial self-insurance group has notified the commissioner that a court of
competent jurisdiction has declared it bankrupt but the commercial self-insurance group
has not failed to pay workers' compensation benefits as required by chapter 176, the
commissioner may call the security and proceed in accordance with this section if the
commissioner determines that the commercial self-insurance group's payment of workers'
compensation benefits would be delayed in any way as a result of the bankruptcy petition
or declaration or that the commercial self-insurance group would otherwise be unable to
fulfill its obligations under chapter 79A or 176.
new text end

new text begin (c) In making the determination provided for in paragraph (b) to call a commercial
self-insurance group's security and proceed in accordance with this section, the commissioner
must consult with the commissioner of labor and industry to determine if the commissioner
of labor and industry has knowledge that the commercial self-insurance group has failed to
pay workers' compensation benefits as required by chapter 176. The commissioner shall
also consider the following:
new text end

new text begin (1) the commercial self-insurance group's most recent actuarial statement, including but
not limited to estimated future liability and posted security;
new text end

new text begin (2) the commercial self-insurance group's claims history and claims projections;
new text end

new text begin (3) the circumstances surrounding the commercial self-insurance group's petition to file
bankruptcy; and
new text end

new text begin (4) any other circumstances the commissioner deems relevant.
new text end

new text begin (d) The commissioner must also meet and confer with the commercial self-insurance
group and the group security fund. The initial meet and confer must occur within 30 days
of the filing of the petition for chapter 11 bankruptcy. Failure to participate in the meet and
confer process by the commercial self-insurance group may result in a default determination
to immediately transfer the posted security and claims obligations to the fund. During the
meet and confer, the commissioner may ask the commercial self-insurance group to provide
additional information and the commercial self-insurance group security fund may inspect
the commercial self-insurance group's most recent actuarial study on file with the
commissioner as well as its current security deposit amount required by the commissioner.
Data disclosed during the meet and confer must remain confidential. Nothing in this section
shall limit the fund's authority to seek information directly from its members.
new text end

Sec. 13.

Minnesota Statutes 2022, section 79A.25, subdivision 3, is amended to read:

Subd. 3.

Notice by commissioner.

In the event of deleted text begin bankruptcy, deleted text end insolvency deleted text begin , deleted text end or certificate
of default, the commissioner shall immediately notify by certified mail the commissioner
of management and budget, the surety, the issuer of an irrevocable letter of credit, and any
custodian of the security. At the time of notification, the commissioner shall also call the
security and transfer and assign it to the commercial self-insurance group security fund.
The commissioner shall also notify by certified mail the commercial self-insurance group's
security fund and order the commercial security fund to assume the insolvent commercial
self-insurance group's obligations for which it is liable under chapter 176.