Minnesota Session Laws - 1988, Regular Session

  

                         Laws of Minnesota 1988 

                        CHAPTER 674-S.F.No. 2473 
           An act relating to workers' compensation; regulating 
          self-insurance; establishing a self-insurer guaranty 
          fund; prescribing a penalty; amending Minnesota 
          Statutes 1986, sections 176.181, subdivision 2; 
          176.183, subdivision 3; Minnesota Statutes 1987 
          Supplement, section 176.183, subdivision 2; proposing 
          coding for new law as Minnesota Statutes, chapter 79B; 
          repealing Minnesota Statutes 1987 Supplement, sections 
          60A.101; and 176.183, subdivision 1a. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  [79B.01] [DEFINITIONS.] 
    Subdivision 1.  [SCOPE.] For the purposes of sections 1 to 
17 and 23 the terms defined in this section have the meaning 
given them. 
    Subd. 2.  [COMMISSIONER.] "Commissioner" means the 
commissioner of commerce except where specifically stated 
otherwise. 
    Subd. 3.  [INCURRED LIABILITIES FOR THE PAYMENT OF 
COMPENSATION.] "Incurred liabilities for the payment of 
compensation" means the sum of both of the following: 
    (1) an estimate of future workers' compensation benefits, 
including medical and indemnity; and 
    (2) an amount determined by the commissioner to be 
reasonably adequate to assure the administration of claims, 
including legal costs, but not to exceed ten percent of future 
workers' compensation benefits. 
    Subd. 4.  [INSOLVENT SELF-INSURER.] "Insolvent self-insurer"
means either 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, or 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. 
    Subd. 5.  [MEMBER.] "Member" means a private self-insurer 
which participates in the self-insurers' security fund. 
    Subd. 6.  [PRIVATE SELF-INSURER.] "Private self-insurer" 
means a member private employer which is self-insured or a group 
which is self-insured against liability for workers' 
compensation under chapter 176.  It does not include the state 
of Minnesota or its political subdivisions. 
    Subd. 7.  [SECURITY FUND.] "Security fund" means the 
self-insurers' security fund established pursuant to this 
chapter. 
    Subd. 8.  [TRUSTEES.] "Trustees" means the board of 
trustees of the self-insurers' security fund. 
     Subd. 9.  [CERTIFICATE OF DEFAULT.] "Certificate of 
default" means a notice issued by the commissioner of commerce 
based upon information received from the commissioner of labor 
and industry, that a private self-insurer has failed to pay 
compensation as required by Minnesota Statutes, chapter 176. 
    Sec. 2.  [79B.02] [SELF-INSURERS' ADVISORY COMMITTEE.] 
    Subdivision 1.  [MEMBERSHIP.] For the purposes of assisting 
the commissioner, there is established a workers' compensation 
self-insurers' advisory committee of five members that are 
employers authorized to self-insure in Minnesota.  Three of the 
members shall be elected by the members of the self-insurers' 
security fund and two shall be appointed by the commissioner. 
    Subd. 2.  [ADVICE TO COMMISSIONER.] At the request of the 
commissioner, the committee shall meet and shall advise the 
commissioner with respect to whether or not an applicant to 
become a private self-insurer in the state of Minnesota has met 
the statutory requirements to self-insure.  The committee shall 
advise the commissioner if it has any information that any 
private self-insurer may become insolvent. 
    Sec. 3.  [79B.03] [SELF-INSURANCE APPLICATIONS.] 
     Subdivision 1.  [PROCEDURE.] Each employer desiring to 
self-insure individually shall apply to the commissioner on 
forms available from the commissioner.  The commissioner shall 
grant or deny the application within 60 days after a complete 
application is filed.  The time limit may be extended for 
another 30 days upon 15 days' prior notice to the applicant.  
Any grant of authority to self-insure shall continue in effect 
until revoked by order of the commissioner or until such time as 
the employer becomes insured. 
    Subd. 2.  [CERTIFIED FINANCIAL STATEMENT.] Each application 
for self-insurance shall be accompanied by a certified financial 
statement.  Certified financial statements for a period ending 
more than six months prior to the date of the application must 
be accompanied by an affidavit, signed by a company officer 
under oath, stating that there has been no material lessening of 
the net worth nor other adverse changes in its financial 
condition since the end of the period.  The commissioner may 
require additional financial information necessary to carry out 
the purpose of chapter 79B. 
    Subd. 3.  [NET WORTH.] Each individual self-insurer shall 
have and maintain a net worth at least equal to the greater of 
ten times the retention limit selected with the workers' 
compensation reinsurance association or one-third the amount of 
the self-insurer's current annual modified premium.  The 
requirements of this subdivision shall be modified if the 
self-insurer can demonstrate through a reinsurance program, 
other than coverage provided by the workers' compensation 
reinsurance association, that it can pay expected losses without 
endangering the financial stability of the company. 
    Subd. 4.  [ASSETS, NET WORTH, AND LIQUIDITY.] Each 
individual self-insurer shall have and maintain sufficient 
assets, net worth, and liquidity to promptly and completely meet 
all of its obligations that may arise under chapter 176 or this 
chapter.  In determining whether a self-insurer meets this 
requirement, the commissioner shall consider the self-insurer's 
current ratio; its long-term and short-term debt to equity 
ratios; its net worth; financial characteristics of the 
particular industry in which the self-insurer is involved; any 
recent changes in the management and ownership of the company; 
any excess insurance purchased by the self-insurer from a 
licensed company or an authorized surplus line carrier, other 
than excess insurance from the workers' compensation reinsurance 
association; any other financial data submitted to the 
commissioner by the company; and the company's workers' 
compensation experience for the last four years. 
    Subd. 5.  [GUARANTEE BY AFFILIATES.] Where an employer 
seeking to self-insure fails to meet the financial requirements 
set forth in subdivisions 3 and 4, the commissioner shall grant 
authority to self-insure provided that an affiliated company, 
whose financial statement is filed with the commissioner and 
meets the requirements set forth in subdivisions 3 and 4, 
provides a written guarantee adopted by resolution of its board 
of directors that it will pay all workers' compensation claims 
incurred by its affiliate, and that it will not terminate the 
guarantee under any circumstances without first giving the 
commissioner and its affiliate 30 days' written notice.  If said 
guarantee is withdrawn or if the guarantor ceases being an 
affiliate, the affiliate shall give written notice to the 
commissioner and the self-insured.  The self-insured's authority 
to self-insure shall automatically terminate upon expiration of 
the 30-day notice period. 
    Subd. 6.  [APPLICATIONS FOR GROUP SELF-INSURANCE.] (a) Two 
or more employers may apply to the commissioner for the 
authority to self-insure as a group, using forms available from 
the commissioner.  This initial application shall be accompanied 
by a copy of the bylaws or plan of operation adopted by the 
group.  Such bylaws or plan of operation shall conform to the 
conditions prescribed by law or rule.  The commissioner shall 
approve or disapprove the bylaws within 60 days unless a 
question as to the legality of a specific bylaw or plan 
provision has been referred to the attorney general's office.  
The commissioner shall make a determination as to the 
application within 15 days after receipt of the requested 
response from the attorney general's office. 
    (b) After the initial application and the bylaws or plan of 
operation have been approved by the commissioner or at the time 
of the initial application, the group shall submit the names of 
employers that will be members of the group; an indemnity 
agreement providing for joint and several liability for all 
group members for any and all workers' compensation claims 
incurred by any member of the group, as set forth in Minnesota 
Rules, part 2780.9920, signed by an officer of each member; and 
an accounting review performed by a certified public 
accountant.  A certified financial audit may be filed in lieu of 
an accounting review.  
    Subd. 7.  [FINANCIAL STANDARDS.] A group proposing to 
self-insure shall have and maintain: 
    (a) A combined net worth of all of the members of an amount 
at least equal to the greater of ten times the retention 
selected with the workers' compensation reinsurance association 
or one-third of the current annual modified premium of the 
members.  The requirements of this paragraph shall be modified 
if the self-insurer can demonstrate that through excess 
insurance, other than coverage provided by the workers' 
compensation reinsurance association, it can pay expected losses.
    (b) Sufficient assets, net worth, and liquidity to promptly 
and completely meet all obligations of its members under chapter 
176 or this chapter.  In determining whether a group is in sound 
financial condition, consideration shall be given to the 
combined net worth of the member companies; the consolidated 
long-term and short-term debt to equity ratios of the member 
companies; any excess insurance other than reinsurance with the 
workers' compensation reinsurance association, purchased by the 
group from an insurer licensed in Minnesota or from an 
authorized surplus line carrier; other financial data requested 
by the commissioner or submitted by the group; and the combined 
workers' compensation experience of the group for the last four 
years. 
    Subd. 8.  [PROCESSING APPLICATION.] The commissioner shall 
grant or deny the group's application to self-insure within 60 
days after a complete application has been filed, provided that 
the time may be extended for an additional 30 days upon 15 days' 
prior notice to the applicant.  The commissioner shall grant 
approval for self-insurance upon a determination that the 
financial ability of the self-insurer's group is sufficient to 
fulfill all joint and several obligations of the member 
companies that may arise under chapter 176 or this chapter; the 
gross annual premium of the group members is at least $300,000; 
the group has established a fund pursuant to Minnesota Rules, 
parts 2780.4100 to 2780.5000; the group has contracted with a 
licensed workers' compensation service company to administer its 
program; and the required securities or surety bond shall be on 
deposit prior to the effective date of coverage for any member.  
Approval shall be effective until revoked by order of the 
commissioner or until the employer members of the group become 
insured. 
    Subd. 9.  [FILING REPORTS.] (a) Incurred losses, paid and 
unpaid, specifying indemnity and medical losses by 
classification, payroll by classification, and current estimated 
outstanding liability for workers' compensation shall be 
reported to the commissioner by each self-insurer on a calendar 
year basis, in a manner and on forms available from the 
commissioner.  Payroll information must be filed by April 1 of 
the following year, and loss information and total workers' 
compensation liability must be filed by August 1 of the 
following year.  
    (b) Each self-insurer shall, under oath, attest to the 
accuracy of each report submitted pursuant to paragraph (a).  
Upon sufficient cause, the commissioner shall require the 
self-insurer to submit a certified audit of payroll and claim 
records conducted by an independent auditor approved by the 
commissioner, based on generally accepted accounting principles 
and generally accepted auditing standards, and supported by an 
actuarial review and opinion of the future contingent 
liabilities.  The basis for sufficient cause shall include the 
following factors:  where the losses reported appear 
significantly different from similar types of businesses; where 
major changes in the reports exist from year to year, which are 
not solely attributable to economic factors; or where the 
commissioner has reason to believe that the losses and payroll 
in the report do not accurately reflect the losses and payroll 
of that employer.  If any discrepancy is found, the commissioner 
shall require changes in the self-insurer's or workers' 
compensation service company record keeping practices. 
    (c) With the annual loss report due August 1, each 
self-insurer shall report to the commissioner any workers' 
compensation claim from the previous year where the full, 
undiscounted value is estimated to exceed $50,000, in a manner 
and on forms prescribed by the commissioner.  
    (d) Each individual self-insurer shall, within four months 
after the end of its fiscal year, annually file with the 
commissioner its latest 10K report required by the Securities 
and Exchange Commission.  If an individual self-insurer does not 
prepare a 10K report, it shall file an annual certified 
financial statement, together with such other financial 
information as the commissioner may require to substantiate data 
in the financial statement.  
    (e) Each group self-insurer shall, within four months after 
the end of the fiscal year for that group, annually file a 
statement showing the combined net worth of its members based 
upon an accounting review performed by a certified public 
accountant, together with such other financial information the 
commissioner may require to substantiate data in the group's 
summary statement.  
    (f) In addition to the financial statements required by 
paragraphs (d) and (e), interim financial statements or 10Q 
reports required by the Securities and Exchange Commission may 
be required by the commissioner upon an indication that there 
has been deterioration in the self-insurer's financial 
condition, including a worsening of current ratio, lessening of 
net worth, net loss of income, the downgrading of the company's 
bond rating, or any other significant change that may adversely 
affect the self-insurer's ability to pay expected losses.  Any 
self-insurer that files an 8K report with the Securities and 
Exchange Commission shall also file a copy of the report with 
the commissioner within 30 days of the filing with the 
Securities and Exchange Commission. 
    Subd. 10.  [ANNUAL AUDIT.] The accounts and records of the 
group self-insurer's fund shall be audited annually.  Audits 
shall be made by certified public accountants, based on 
generally accepted accounting principles and generally accepted 
auditing standards, and supported by actuarial review and 
opinion of the future contingent liabilities, in order to 
determine the solvency of the self-insurer's fund.  All audits 
required by this subdivision shall be filed with the 
commissioner 90 days after the close of the fiscal year for the 
group self-insurer.  The commissioner may require a special 
audit to be made at other times if the financial stability of 
the fund or the adequacy of its monetary reserves is in question.
    Subd. 11.  [JOINT AND SEVERAL LIABILITY.] All members of a 
private self-insurer group shall be jointly and severally liable 
for the obligations incurred by any member of the same group 
under chapter 176. 
    Subd. 12.  [COMMISSIONER REVIEW.] The commissioner shall 
annually review the documents and reports filed by the private 
self-insurer. 
    Sec. 4.  [79B.04] [PRIVATE SELF-INSURING EMPLOYER; ANNUAL 
RENEWAL OR DEPOSIT OF NEW SECURITY FOR PAYMENT OF COMPENSATION.] 
    Subdivision 1.  [ANNUAL SECURING OF LIABILITY.] Each year 
every private self-insuring employer shall secure incurred 
liabilities for the payment of compensation and the performance 
of the obligations of employers imposed under chapter 176 by 
renewing the prior year's security deposit or by making a new 
deposit of security.  If a new deposit is made, it must be 
posted within 60 days of the filing of the self-insured 
employer's annual report with the commissioner, but in no event 
later than July 1. 
    Subd. 2.  [MINIMUM DEPOSIT.] The minimum deposit is 110 
percent of the private self-insurer's estimated future liability.
Up to ten percent of that deposit may be used to secure payment 
of all administrative and legal costs relating to or arising 
from the employer's self-insuring.  As used in this section, 
"private self-insurers' estimated future liability" means the 
private self-insurers' total of estimated future liability as 
determined by a member of the casualty actuarial society every 
two years for non-group member private self-insurers, and every 
year for group member private self-insurers.  Estimated future 
liability is determined by first taking the total amount of the 
self-insured's future liability of workers' compensation claims 
and then deducting the total amount which is estimated to be 
returned to the self-insurer from any specific excess insurance 
coverage, aggregate excess insurance coverage, and any 
supplementary benefits or second injury benefits which are 
estimated to be reimbursed by the special compensation fund.  
Supplementary benefits or second injury benefits will not be 
reimbursed by the special compensation fund unless the special 
compensation fund assessment pursuant to section 176.129 is paid 
and the reports required thereunder are filed with the special 
compensation fund.  In the case of surety bonds, bonds shall 
secure administrative and legal costs in addition to the 
liability for payment of compensation reflected on the face of 
the bond.  In no event shall the security be less than the last 
retention limit selected by the self-insurer with the workers' 
compensation reinsurance association.  The posting or depositing 
of security pursuant to this section shall release all 
previously posted or deposited security from any obligations 
under the posting or depositing and any surety bond so released 
shall be returned to the surety.  Any other security shall be 
returned to the depositor or the person posting the bond. 
    Subd. 3.  [TYPE OF ACCEPTABLE SECURITY.] The commissioner 
may only accept as security, and the employer shall deposit as 
security, cash, approved government securities, surety bonds, or 
irrevocable letters of credit in any combination.  Interest or 
dividend income or other income generated by the security shall 
be paid to the member or, at the member's direction, applied to 
the member's security requirement.  The current deposit shall 
include within its coverage all amounts covered by terminated 
surety bonds.  As used in this chapter, an irrevocable letter of 
credit shall be accepted only if it is clean, irrevocable, and 
contains an evergreen clause.  
    (a) "Clean" means a letter of credit that is not 
conditioned on the delivery of any other documents or materials. 
    (b) "Irrevocable" means a letter of credit that cannot be 
modified or revoked without the consent of the beneficiary, once 
the beneficiary is established.  
    (c) "Evergreen clause" means one which specifically states 
that expiration of a letter of credit will not take place 
without a 60-day notice by the insurer and one which allows the 
issuer to conduct an annual review of the account party's 
financial condition.  If prior notice of expiration is not given 
by the issuer, the letter of credit is automatically extended 
for one year. 
    A clean irrevocable letter of credit shall be accepted only 
if it is in the form prescribed by statute and is issued by a 
financial institution that is authorized to engage in banking in 
any of the 50 states or under the laws of the United States and 
whose business is substantially confined to banking and 
supervised by the state commissioner of commerce or banking or 
similar official, and which has a long-term debt rating by a 
recognized national rating agency of investment grade or 
better.  If no long-term debt rating is available, the financial 
institution must have the equivalent investment grade financial 
characteristics. 
    Subd. 4.  [DEPOSIT OF SECURITY.] Surety bonds, irrevocable 
letters of credit, and documents showing issuance of any 
irrevocable letter of credit shall be deposited with, and, 
except where specified by statute, in a form approved by the 
commissioner. 
    Subd. 5.  [DEPOSIT WITH STATE TREASURER.] Securities shall 
be deposited on behalf of the commissioner by the self-insured 
employer with the state treasurer or a financial institution 
approved by the commissioner.  Securities shall be accepted by 
the state treasurer for deposit and shall be withdrawn only upon 
written order of the commissioner. 
    Subd. 6.  [CASH DEPOSITS.] Cash shall be deposited in a 
financial institution approved by the commissioner, and in the 
account assigned to the state treasurer.  Cash shall be 
withdrawn only upon written order of the commissioner. 
    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 state treasurer 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 
of a declaration of bankruptcy or 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 self-insurer's security fund for application 
to the self-insured employer's incurred liability. 
    Subd. 8.  [RETURN OF EXCESS AMOUNTS OF SECURITY TO PRIVATE 
SELF-INSURED EMPLOYER.] The commissioner shall return on an 
annual basis to a private self-insured employer all amounts of 
security determined by the commissioner to be in excess of the 
statutory requirements to self-insure, including that necessary 
for administrative costs and legal fees, and the payment of any 
future workers' compensation claims. 
    Subd. 9.  [INSOLVENCY, BANKRUPTCY, 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.  If the commissioner 
determines that a court of competent jurisdiction has declared 
the private self-insurer to be bankrupt or insolvent, and the 
private self-insurer has failed to pay workers' compensation as 
required by chapter 176 or, if the commissioner issues a 
certificate of default against a private self-insurer for 
failure to pay workers' compensation as required by chapter 176, 
then the security deposit shall be utilized to administer and 
pay the private self-insurers' workers' compensation obligations.
    Subd. 10.  [NOTICE; OBLIGATION OF FUND.] In the event of 
bankruptcy, insolvency, or certificate of default, the 
commissioner shall immediately notify by certified mail the 
state treasurer, 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 self-insurers' security fund may administer 
payment of benefits, or it may retain a third-party 
administrator to do so. 
    Subd. 11.  [PRIORITY.] Notwithstanding anything in this 
chapter to the contrary, any cash, securities, irrevocable 
letter of credit, specific excess or aggregate excess insurance 
proceeds, or any other security deposited or posted in 
accordance with this section shall be used first, when due, to 
pay workers' compensation claims.  After that security has been 
exhausted, the payment of workers' compensation claims from 
self-insurers' security fund members' assessments may be made.  
Where the self-insurers' security fund member assessment account 
is used to pay workers' compensation claims on an emergency or 
an interim basis, pending receipt by the self-insurers' security 
fund of security which is due but not yet received, then the 
member assessment account shall be reimbursed for payment from 
the security when it is received, and the priorities stated 
above shall thereafter apply. 
    Subd. 12.  [DUTY TO INFORM.] The commissioner shall be 
provided with any relevant information by the employer, any 
excess insurer, any third party administrator, or any issuer of 
any irrevocable letter of credit, issuer of any surety bond, or 
custodian of any security necessary for the commissioner to 
carry out the commissioner's obligations under this chapter.  
The commissioner shall provide this information to the 
self-insurers' security fund if necessary for the security fund 
to carry out its obligations under this chapter. 
    Subd. 13.  [DISCHARGE AND RELEASE.] The payment of benefits 
by the self-insurers' security fund from security deposit 
proceeds shall release and discharge any custodian of the 
security deposit, surety, any issuer of a letter of credit, and 
the self-insured employer from liability to fulfill obligations 
to provide those same benefits as compensation, but does not 
release any person or entity from any liability to the security 
fund for full reimbursement.  Any decision or determination made 
or any settlement approved by the commissioner or by an 
administrative law judge under subdivision 15 shall conclusively 
be presumed valid and binding as to all known claims arising out 
of the underlying dispute, unless an appeal is made pursuant to 
chapter 14.  No security shall be exchanged more often than once 
every 90 days. 
    Subd. 14.  [NOTICE TO SECURITY FUND.] The commissioner 
shall advise the self-insurers' security fund promptly after the 
receipt of information indicating that a private self-insurer 
may be unable to meet its compensation obligations.  The 
commissioner shall advise the self-insurers' security fund of 
all determinations and directives and orders made or issued 
pursuant to this section. 
    Subd. 15.  [DISPUTE RESOLUTION; APPEALS.] Disputes 
concerning the posting, renewal, termination, exoneration, or 
return of all or any portion of the security deposit, or any 
liability arising out of the posting or failure to post 
security, or adequacy of the security or reasonableness of 
administrative costs, including legal fees, and arising between 
or among a surety, the issuer of an agreement of assumption and 
guarantee of workers' compensation liabilities, the issuer of a 
letter of credit, any custodian of the security deposit, a 
private self-insurer, or the self-insurers' security fund shall 
be resolved by the commissioner.  An appeal from the 
commissioner's written decision, determination, or order may be 
instituted pursuant to the contested case procedures of chapter 
14.  Payment of claims from the security deposit or by the 
self-insurers' security fund shall not be stayed pending the 
resolution of the disputes unless and until the administrative 
law judge issues a determination staying a payment of claims 
decision or determination of the commissioner or the 
self-insurers' security fund.  
    Subd. 16.  [CERTIFICATE TO SELF-INSURE; REVOCATION.] If, 
following a private self-insurer's bankruptcy, insolvency, 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. 
    Sec. 5.  [79B.05] [REVOCATION OF CERTIFICATE TO 
SELF-INSURE.] 
    A certificate to self-insure may be revoked by the 
commissioner at any time for good cause.  After revocation, the 
self-insurer may request a hearing.  Good cause includes, among 
other things, failure to maintain a security deposit as required 
by this chapter, failure to pay assessments of the 
self-insurers' security fund, or the failure or inability of the 
employer to fulfill obligations under chapter 176 or this 
chapter.  Good cause also includes failure to provide proof of 
renewal of the security 15 days before its expiration. 
    A self-insured employer must comply with section 176.181 
and all applicable rules to operate during the pendency of its 
appeal of a decision under this section.  
    Sec. 6.  [79B.06] [THIRD-PARTY ADMINISTRATOR.] 
    Subdivision 1.  [CERTIFICATE TO SELF-INSURE.] No person, 
firm, or corporation, other than an insurer admitted to transact 
workers' compensation insurance in this state, shall contract to 
administer claims of self-insured employers as a third-party 
administrator unless qualified to do so pursuant to section 
60A.23, subdivision 8. 
    Subd. 2.  [LOCAL OFFICE.] A third-party administrator who 
contracts to administer claims of a self-insured employer shall 
maintain an office in the state of Minnesota and shall be 
subject to regulation under this chapter and chapters 60A and 
72A with respect to the adjustment, administration, and 
management of workers' compensation claims for any self-insured 
employer. 
    Subd. 3.  [ANNUAL ESTIMATE OF LIABILITY.] A third-party 
administrator retained by a self-insured employer to administer 
the employer's workers' compensation claims shall estimate the 
total accrued liability of the employer for the payment of 
compensation for the employer's annual report to the 
commissioner and shall make the estimate both in good faith and 
with the exercise of a reasonable degree of care.  The use of a 
third-party administrator does not discharge or alter the 
employer's responsibilities with respect to the report. 
    Subd. 4.  [FAILURE TO SUBMIT REPORTS OR INFORMATION; 
PENALTY.] Failure to submit reports to the commissioner as 
required by this chapter may result in the assessment of a 
penalty which shall not exceed $3,000 for each month or fraction 
thereof the report is past due.  Failure to submit reports 
required by statute within 60 days from the due date without 
written consent of the commissioner shall result in the 
revocation of the certificate to self-insure.  Penalties shall 
be deposited in the self-insurers security fund.  
    Subd. 5.  [PRIVATE EMPLOYERS WHO HAVE CEASED TO BE 
SELF-INSURED.] Private employers who have ceased to be private 
self-insurers shall discharge their continuing obligations to 
secure the payment of compensation which is accrued during the 
period of self-insurance, for purposes of sections 1 to 21 by 
compliance with all of the following obligations of current 
certificate holders: 
    (1) Filing reports with the commissioner to carry out the 
requirements of this chapter; 
    (2) Depositing and maintaining a security deposit for 
accrued liability for the payment of any compensation which may 
become due, pursuant to chapter 176.  However, if a private 
employer who has ceased to be a private self-insurer purchases 
an insurance policy from an insurer authorized to transact 
workers' compensation insurance in this state which provides 
coverage of all claims for compensation arising out of injuries 
occurring during the period the employer was self-insured, 
whether or not reported during that period, the policy will 
discharge the obligation of the employer to maintain a security 
deposit for the payment of the claims covered under the policy.  
The policy may not be issued by an insurer unless it has 
previously been approved as to form and substance by the 
commissioner; and 
     (3) Paying within 30 days all assessments of which notice 
is sent by the security fund, for a period of seven years from 
the last day its certificate of self-insurance was in effect.  
Thereafter, the private employer who has ceased to be a private 
self-insurer may either:  (a) continue to pay within 30 days all 
assessments of which notice is sent by the security fund until 
it has no incurred liabilities for the payment of compensation 
arising out of injuries during the period of self-insurance; or 
(b) pay the security fund a cash payment equal to four percent 
of the net present value of all remaining incurred liabilities 
for the payment of compensation under sections 176.101 and 
176.111 as certified by a member of the casualty actuarial 
society.  Assessments shall be based on the benefits paid by the 
employer during the last full calendar year of self-insurance on 
claims incurred during that year. 
    In addition to proceedings to establish liabilities and 
penalties otherwise provided, a failure to comply may be the 
subject of a proceeding before the commissioner.  An appeal from 
the commissioner's determination may be taken pursuant to the 
contested case procedures of chapter 14, within 30 days of the 
commissioner's written determination. 
    Any current or past member of the self-insurers' security 
fund is subject to service of process on any claim arising out 
of chapter 176 or this chapter in the manner provided by section 
303.13, subdivision 1, clause (3), or as otherwise provided by 
law.  The issuance of a certificate to self-insure to the 
private self-insured employer shall be deemed to be the 
agreement that any process which is served in accordance with 
this section shall be of the same legal force and effect as if 
served personally within this state. 
    Sec. 7.  [79B.07] [PREFERRED SUBROGATION RIGHTS OF 
SELF-INSURERS' SECURITY FUND OR SURETY.] 
    The self-insurers' security fund by making payment of 
compensation under this chapter has the same preference over the 
other debts of the principal or the principal's estate as is 
given by law to the person directly entitled to the compensation.
    Sec. 8.  [79B.08] [LEGISLATIVE INTENT.] 
    It is the intent of the legislature in enacting sections 8 
to 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 bankruptcy or 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 the effective date of this 
section.  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. 9.  [79B.09] [SECURITY FUND.] 
    Subdivision 1.  [CREATION.] The self-insurers' security 
fund is established as a nonprofit corporation pursuant to the 
Minnesota nonprofit corporation act, sections 317.01 to 317.69.  
If any provision of the Minnesota nonprofit corporation act 
conflicts with any provision of this chapter, the provisions of 
this chapter apply.  Each private self-insurer who is 
self-insured on the effective date of this act, or who becomes 
self-insured thereafter, shall participate as a member in the 
security fund.  This participation shall be a condition of 
maintaining its certificate to self-insure. 
    Subd. 2.  [BOARD OF TRUSTEES.] The security fund shall be 
governed by a nine-member board of trustees.  Five of the 
trustees shall be representatives of private self-insurers who 
shall be elected by the members of the security fund, other than 
group self-insurers, each member having one vote.  One of the 
trustees shall be a representative of the private group 
self-insurers who shall be elected by the members of the 
security fund who are group self-insurers, each group having one 
vote.  Three of the trustees, including the group self-insurer 
trustee, initially elected by the members shall serve two-year 
terms, and three shall serve four-year terms.  Thereafter, 
trustees shall be elected to four-year terms, and shall serve 
until their successors are elected and assume office pursuant to 
the bylaws of the security fund.  Three additional trustees 
shall be appointed by the commissioner.  Two of these trustees 
shall serve four-year terms.  One of these trustees shall serve 
a two-year term.  Thereafter, the trustees shall be appointed to 
four-year terms, and shall serve until their successors are 
appointed and assume office pursuant to the bylaws of the 
security fund.  In addition to the nine trustees elected by the 
members or appointed by the commissioner, the commissioner of 
labor and industry or the commissioner's designee shall be an ex 
officio, nonvoting member of the board of trustees.  A member of 
the board of trustees may designate another person to act in the 
member's place as though the member were acting and the 
designee's actions shall be deemed those of the member. 
    Subd. 3.  [BYLAWS.] The security fund shall establish 
bylaws and a plan of operation, subject to the prior approval of 
the commissioner, necessary to the purposes of this chapter and 
to carry out the responsibilities of the security fund.  The 
security fund may carry out its responsibilities directly or by 
contract, and may purchase services and insurance and borrow 
funds as it deems necessary for the protection of the members 
and their employees. 
    Subd. 4.  [CONFIDENTIAL INFORMATION.] The security fund may 
receive private data concerning the financial condition of 
private self-insurers whose liabilities to pay compensation have 
become its responsibility and shall adopt bylaws to prevent 
dissemination of that information.  
     Subd. 5.  [EMPLOYEES.] Security fund employees are not 
state employees and are not subject to any state civil service 
regulations.  
    Sec. 10.  [79B.10] [ASSUMPTION OF WORKERS' COMPENSATION 
OBLIGATIONS OF INSOLVENT SELF-INSURER.] 
    Subdivision 1.  [ORDER OF COMMISSIONER.] Upon order of the 
commissioner pursuant to section 4, subdivision 10, the security 
fund shall assume the workers' compensation obligations of an 
insolvent private self-insurer. 
    Subd. 2.  [ACT OR OMISSIONS; PENALTIES.] Notwithstanding 
subdivision 1, the security fund shall not be liable for the 
payment of any penalties assessed for any act or omission on the 
part of any person other than the security fund or its appointed 
administrator, including, but not limited to, the penalties 
provided in chapter 176 unless the security fund or its 
appointed administrator would be subject to penalties under 
chapter 176 as the result of the actions of the security fund or 
its administrator. 
    Subd. 3.  [PARTY IN INTEREST.] The security fund shall be a 
party in interest in all proceedings involving compensation 
claims against an insolvent self-insurer whose compensation 
obligations have been paid or assumed by the security fund.  The 
security fund shall have the same rights and defenses as the 
insolvent private self-insurer, including, but not limited to, 
all of the following: 
     (1) to appear, defend, and appeal claims; 
     (2) to receive notice of, investigate, adjust, compromise, 
settle, and pay claims; and 
     (3) to investigate, handle, and deny claims. 
    Subd. 4.  [PAYMENTS TO SECURITY FUND.] Notwithstanding 
anything in this chapter or chapter 176 to the contrary, in the 
event that the self-insurers' security fund assumes the 
obligations of any bankrupt or insolvent private self-insurer 
pursuant to this section, then the proceeds of any surety bond, 
workers' compensation reinsurance association, specific excess 
insurance or aggregate excess insurance policy, and any special 
compensation fund payment or second injury fund or supplementary 
benefit reimbursements shall be paid to the self-insurers' 
security fund instead of the bankrupt or insolvent private 
self-insurer or its successor in interest.  No special 
compensation fund reimbursements shall be made to the security 
fund unless the special compensation fund assessments pursuant 
to section 176.129 are paid and the reports required thereunder 
are made to the special compensation fund. 
    Sec. 11.  [79B.11] [REIMBURSEMENT FOR OBLIGATIONS PAID AND 
ASSUMED.] 
    Subdivision 1.  [INSOLVENT INSURER.] The security fund 
shall have the right and obligation to obtain reimbursement from 
an insolvent private self-insurer up to the amount of the 
private self-insurer's workers' compensation obligations paid 
and assumed by the security fund, including reasonable 
administrative and legal costs.  This right includes, but is not 
limited to, a right to claim for wages and other necessities of 
life advanced to claimants as subrogee of the claimants in any 
action to collect against the private self-insurer as debtor. 
    Subd. 2.  [SECURITY DEPOSITS.] The security fund shall have 
the right and obligation to obtain from the security deposit of 
an insolvent private self-insurer the amount of the private 
self-insurer's compensation obligations, including reasonable 
administrative and legal costs, paid or assumed by the security 
fund.  Reimbursement of administrative costs, including legal 
costs, shall be subject to approval by a majority of the 
security fund's voting trustees.  The security fund shall be a 
party in interest in any action to obtain the security deposit 
for the payment of compensation obligations of an insolvent 
self-insurer. 
    Subd. 3.  [LEGAL ACTIONS.] The security fund shall have the 
right to bring an action against any person or entity to recover 
compensation paid and liability assumed by the security fund, 
including, but not limited to, any excess insurance carrier of 
the insolvent private self-insurer, and any person or entity 
whose negligence or breach of any obligation contributed to any 
underestimation of the private self-insurer's total accrued 
liability as reported to the commissioner. 
    Subd. 4.  [PARTY IN INTEREST.] The security fund may be a 
party in interest in any action brought by any other person 
seeking damages resulting from the failure of an insolvent 
private self-insurer to pay workers' compensation required 
pursuant to this subdivision.  
    Sec. 12.  [79B.12] [MAINTENANCE OF ASSETS OR LINE OF CREDIT 
TO CONTINUE PAYMENT OF COMPENSATION OBLIGATIONS.] 
    Subdivision 1.  [ASSETS MAINTAINED.] The security fund 
shall maintain cash, readily marketable securities, or other 
assets, or a line of credit, approved by the commissioner, 
sufficient to immediately continue the payment of the 
compensation obligations of an insolvent private self-insurer 
pending receipt of the security deposit, surety bond proceeds, 
irrevocable letter of credit, or, if necessary, assessment of 
the members.  The commissioner may establish the minimum amount 
to be maintained by, or immediately available to, the security 
fund for this purpose. 
    Subd. 2.  [ASSESSMENT.] The security fund may assess each 
of its members a pro rata share of the funding necessary to 
carry out its obligation and the purposes of this chapter.  
Total annual assessments in any calendar year shall not exceed 
four percent of the workers' compensation benefits paid under 
sections 176.101 and 176.111 during the previous calendar year.  
The annual assessment calculation shall not include 
supplementary benefits paid which will be reimbursed by the 
special compensation fund.  Funds obtained by assessments 
pursuant to this subdivision may only be used for the purposes 
of this chapter.  The trustees shall certify to the commissioner 
the collection and receipt of all money from assessments, noting 
any delinquencies.  The trustees shall take any action deemed 
appropriate to collect any delinquent assessments. 
    Sec. 13.  [79B.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 the effective date of this act, whichever occurs 
later.  All applications for private self-insurers which are 
made after the effective date of this act, 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 
the effective date of this act 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 
bankruptcy or 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. 14.  [79B.14] [LETTER OF CREDIT FORM.] 
    The form for the letter of credit under this chapter shall 
be:  
Effective Date 
State of Minnesota (Beneficiary) 
(Address) 
Dear Sirs: 
By order of ....................(Self-Insurer) we are instructed 
to open a clean irrevocable Letter of Credit in your favor for 
United States $............(Amount). 
We undertake that drawings under this Letter of Credit will be 
honored upon presentation of your draft drawn on 
..........(Self-Insurer), at ..........(Address) prior to 
expiration date.  
The Letter of Credit expires on .........., but will 
automatically extend for an additional one year if you have not 
received by registered mail notification of intention not to 
renew 60 days prior to the original expiration date and each 
subsequent expiration date. 
    Except as expressly stated herein, this undertaking is not 
subject to any condition or qualification.  The obligation of 
............(issuing bank) under this letter of credit shall be 
the individual obligation of ............(issuing bank), in no 
way contingent upon reimbursement with respect thereto. 
Very truly yours, 
......................(Signature) 
    Sec. 15.  [79B.15] [SURETY BOND FORM.] 
    The form for the surety bond under this chapter shall be: 
STATE OF MINNESOTA 
DEPARTMENT OF COMMERCE 
SURETY BOND OF SELF-INSURER OF WORKERS' COMPENSATION 
 
IN THE MATTER OF THE CERTIFICATE OF      )
                                         )
                                         )    SURETY BOND 
                                         )    NO. .............
                                         )    PREMIUM: ........
                                           )
                                         )
Employer, Certificate No: .............. )
KNOW ALL PERSONS BY THESE PRESENTS:
     That ..................................................... 
                          (Employer)
whose address is ..............................................
as Principal, and .............................................
                          (Surety) 
a corporation organized under the laws of ..................... 
and authorized to transact a general surety business in the 
State of Minnesota, as Surety, are held and firmly bound to the 
State of Minnesota in the penal sum of 
...........................dollars ($..........) for which 
payment we bind ourselves, our heirs, executors, administrators, 
successors, and assigns, jointly and severally, firmly by these 
presents. 
    WHEREAS in accordance with Minnesota Statutes, chapter 176, 
the principal elected to self-insure, and made application for, 
or received from the commissioner of commerce of the state of 
Minnesota, a certificate to self-insure, upon furnishing of 
proof satisfactory to the commissioner of commerce of ability to 
self-insure and to compensate any or all employees of said 
principal for injury or disability, and their dependents for 
death incurred or sustained by said employees pursuant to the 
terms, provisions, and limitations of said statute; 
    NOW THEREFORE, the conditions of this bond or obligation 
are such that if principal shall pay and furnish compensation, 
pursuant to the terms, provisions, and limitations of said 
statute to its employees for injury or disability, and to the 
dependents of its employees, then this bond or obligation shall 
be null and void; otherwise to remain in full force and effect.  
    FURTHERMORE, it is understood and agreed that: 
    1.  This bond may be amended, by agreement between the 
parties hereto and the commissioner of commerce as to the 
identity of the principal herein named; and, by agreement of the 
parties hereto, as to the premium or rate of premium.  Such 
amendment must be by endorsement upon, or rider to, this bond, 
executed by the surety and delivered to or filed with the 
commissioner. 
    2.  The surety does, by these presents, undertake and agree 
that the obligation of this bond shall cover and extend to all 
past, present, existing, and potential liability of said 
principal, as a self-insurer, to the extent of the penal sum 
herein named without regard to specific injuries, date or dates 
of injuries, happenings or events.  
    3.  The penal sum of this bond may be increased or 
decreased, by agreement between the parties hereto and the 
commissioner of commerce, without impairing the obligation 
incurred under this bond for the overall coverage of the said 
principal, for all past, present, existing, and potential 
liability, as a self-insurer, without regard to specific 
injuries, date or dates of injuries, happenings or events, to 
the extent, in the aggregate, of the penal sum as increased or 
decreased.  Such amendment must be by endorsement. 
     4.  The aggregate liability of the surety hereunder on all 
claims whatsoever shall not exceed the penal sum of this bond in 
any event. 
    5.  This bond shall be continuous in form and shall remain 
in full force and effect unless terminated as follows: 
    (a) The obligation of this bond shall terminate upon 
written notice of cancellation from the surety, given by 
registered or certified mail to the commissioner of commerce, 
state of Minnesota, save and except as to all past, present, 
existing, and potential liability of the principal incurred, 
including obligations resulting from claims which are incurred 
but not yet reported, as a self-insurer prior to effective date 
of termination.  This termination is effective 60 days after 
receipt of notice of cancellation by the commissioner of 
commerce, state of Minnesota. 
    (b) This bond shall also terminate upon the revocation of 
the certificate to self-insure, save and except as to all past, 
present, existing, and potential liability of the principal 
incurred, including obligations resulting from claims which are 
incurred but not yet reported, as a self-insurer prior to 
effective date of termination.  The principal and the surety, 
herein named, shall be immediately notified in writing by said 
commissioner, in the event of such revocation. 
    6.  Where the principal posts with the commissioner of 
commerce, state of Minnesota, or the state treasurer, state of 
Minnesota, a replacement security deposit, in the form of a 
surety bond, irrevocable letter of credit, cash, securities, or 
any combination thereof, in the full amount as may be required 
by the commissioner of commerce, state of Minnesota, to secure 
all incurred liabilities for the payment of compensation of said 
principal under Minnesota Statutes, chapter 176, the surety is 
released from obligations under the surety bond upon the date of 
acceptance by the commissioner of commerce, state of Minnesota, 
of said replacement security deposit. 
    7.  If the said principal shall suspend payment of workers' 
compensation benefits or shall become insolvent or a receiver 
shall be appointed for its business, or the commissioner of 
commerce, state of Minnesota, issues a certificate of default, 
the undersigned surety will become liable for the workers' 
compensation obligations of the principal on the date benefits 
are suspended.  The surety shall begin payments within 14 days 
under paragraph 8 herein, or 30 days under paragraph 10 herein, 
after receipt of written notification by certified mail from the 
commissioner of commerce, state of Minnesota, to begin payments 
under the terms of this bond. 
     8.  If the surety exercises its option to administer 
claims, it shall pay benefits due to the principal's injured 
workers within 14 days of the receipt of the notification by the 
commissioner of commerce, state of Minnesota, pursuant to 
paragraph 7 herein, without a formal award of a compensation 
judge, the commissioner of labor and industry, any intermediate 
appellate court, or the Minnesota supreme court and such payment 
will be a charge against the penal sum of the bond.  
Administrative and legal costs incurred by the surety in 
discharging its obligations and payment of the principal's 
obligations for administration and legal expenses under 
Minnesota Statutes, chapter 176, and sections 1 to 17 and 23, 
shall also be a charge against the penal sum of the bond; 
however, the total amount of this surety bond set aside for the 
payment of said administrative and legal expenses shall be 
limited to a maximum ten percent of the total penal sum of the 
bond unless otherwise authorized by the security fund. 
    9.  If any part or provision of this bond shall be declared 
unenforceable or held to be invalid by a court of proper 
jurisdiction, such determination shall not affect the validity 
or enforceability of the other provisions or parts of this bond. 
     10.  If the surety does not give notice to the security 
fund and the commissioner of commerce, state of Minnesota, 
within two business days of receipt of written notification from 
the commissioner of commerce, state of Minnesota, pursuant to 
paragraph 7 herein, to exercise its option to administer claims 
pursuant to paragraph 8 herein, then the self-insurer's security 
fund will assume the payments of the workers' compensation 
obligations of the principal pursuant to Minnesota Statutes, 
chapter 176.  The surety shall pay, within thirty (30) days of 
the receipt of the notification by the commissioner of commerce, 
state of Minnesota, pursuant to paragraph 7 herein, to the 
self-insurer's security fund as an initial deposit an amount 
equal to ten percent of the penal sum of the bond, and shall 
thereafter, upon notification from the security fund that the 
balance of the initial deposit had fallen to one percent of the 
penal sum of the bond, remit to the security fund an amount 
equal to the payments made by the security fund in the three 
calendar months immediately preceding said notification.  All 
such payments will be a charge against the penal sum of the bond.
    11.  Disputes concerning the posting, renewal, termination, 
exoneration, or return of all or any portion of the principal's 
security deposit or any liability arising out of the posting or 
failure to post security, or the adequacy of the security or the 
reasonableness of administrative costs, including legal costs, 
arising between or among a surety, the issuer of an agreement of 
assumption and guarantee of workers' compensation liabilities, 
the issuer of a letter of credit, any custodian of the security 
deposit, the principal, or the self-insurers' security fund 
shall be resolved by the commissioner of commerce pursuant to 
Minnesota Statutes, chapter 176 and sections 1 to 17 and 23.  
     12.  Written notification to the surety required by this 
bond shall be sent to: 
                                 .........................
                                 Name of Surety 
                                  .........................
                                 To the attention of Person or
                                   Position
                                 ......................... 
                                 Address 
                                 ......................... 
                                 City, State, Zip 
     Written notification to the principal required by this bond 
shall be sent to: 
                                 ........................
                                 Name of Principal
                                 ........................
                                 To the attention of Person or
                                   Position
                                 ........................
                                 Address
                                 ........................
                                 City, State, Zip
    13.  This bond is executed by the surety to comply with 
Minnesota Statutes, chapter 176, and said bond shall be subject 
to all terms and provisions thereof. 
                                 ........................
                                 Name of Surety
                                 ........................
                                 Address
                                 ........................
                                 City, State, Zip
    THIS bond is executed under an unrevoked appointment or 
power of attorney.  
    I certify (or declare) under penalty of perjury under the 
laws of the state of Minnesota that the foregoing is true and 
correct.  
..............                   ............................. 
Date                             Signature of Attorney-In-Fact 
                                 ............................. 
                                 Printed or Typed Name of  
                                 Attorney-In-Fact 
    A copy of the transcript or record of the unrevoked 
appointment, power of attorney, bylaws, or other instrument, 
duly certified by the proper authority and attested by the seal 
of the insurer entitling or authorizing the person who executed 
the bond to do so for and in behalf of the insurer, must be 
filed in the office of the commissioner of commerce or must be 
included with this bond for such filing. 
    Sec. 16.  [79B.16] [OPEN MEETING; ADMINISTRATIVE PROCEDURE 
ACT.] 
    The security fund and its board of trustees shall not be 
subject to (1) the open meeting law, (2) the open appointments 
law, (3) the data privacy law, and (4) except where specifically 
set forth, the administrative procedure act. 
     The self-insurers' advisory committee shall not be subject 
to clauses (2) and (4). 
    Sec. 17.  [79B.17] [RULES.] 
    The commissioner may adopt, amend, and repeal rules 
reasonably necessary to carry out the purposes of sections 1 to 
17.  This authorization includes, but is not limited to, the 
adoption of rules to do all of the following: 
    (1) except as otherwise specifically provided by statute, 
specifying what constitutes ability to self-insure and to pay 
any compensation which may become due under chapter 176; 
    (2) specifying what constitutes a failure or inability to 
fulfill an insolvent self-insurer's obligations under this 
chapter; 
    (3) interpreting and defining the terms used in this 
chapter; 
    (4) establishing procedures and standards for hearing and 
determinations, and providing for those determinations to be 
appealed; 
    (5) except where otherwise specifically provided by 
statute, specifying the standards, forms, and content of 
agreements, forms, and reports between parties who have 
obligations pursuant to this chapter; 
    (6) providing for the combinations and relative liabilities 
of security deposits, assumptions, and guarantees used pursuant 
to this chapter; and 
    (7) disclosing otherwise private data concerning 
self-insurers to courts or the self-insurers' security fund and 
specifying appropriate safeguards for that information. 
     The self-insurers' advisory committee may make 
recommendations to the commissioner under this section as it 
deems appropriate. 
    Sec. 18.  Minnesota Statutes 1986, section 176.181, 
subdivision 2, is amended to read:  
    Subd. 2.  [COMPULSORY INSURANCE; SELF-INSURERS.] (1) Every 
employer, except the state and its municipal subdivisions, 
liable under this chapter to pay compensation shall insure 
payment of compensation with some insurance carrier authorized 
to insure workers' compensation liability in this state, or 
obtain a written order from the commissioner of commerce 
exempting the employer from insuring liability for compensation 
and permitting self-insurance of the liability.  The terms, 
conditions and requirements governing self-insurance shall be 
established by the commissioner pursuant to chapter 14.  The 
commissioner of commerce shall also adopt, pursuant to clause 
(2)(c), rules permitting two or more employers, whether or not 
they are in the same industry, to enter into agreements to pool 
their liabilities under this chapter for the purpose of 
qualifying as group self-insurers.  With the approval of the 
commissioner of commerce, any employer may exclude medical, 
chiropractic and hospital benefits as required by this chapter.  
An employer conducting distinct operations at different 
locations may either insure or self-insure the other portion of 
operations as a distinct and separate risk.  An employer 
desiring to be exempted from insuring liability for compensation 
shall make application to the commissioner of commerce, showing 
financial ability to pay the compensation, whereupon by written 
order the commissioner of commerce, on deeming it proper, may 
make an exemption.  The commissioner of commerce may require 
further statements of financial ability of the employer to pay 
compensation.  An employer may establish financial ability to 
pay compensation by:  (1) providing financial statements of the 
employer to the commissioner of commerce; or (2) filing a surety 
bond or bank letter of credit with the commissioner of commerce 
in an amount equal to the anticipated annual compensation costs 
of the employer, but in no event less than $100,000.  Upon ten 
days written notice the commissioner of commerce may revoke the 
order granting an exemption, in which event the employer shall 
immediately insure the liability.  As a condition for the 
granting of an exemption the commissioner of commerce may 
require the employer to furnish security the commissioner of 
commerce considers sufficient to insure payment of all claims 
under this chapter.  If the required security is in the form of 
currency or negotiable bonds, the commissioner of commerce shall 
deposit it with the state treasurer.  In the event of any 
default upon the part of a self-insurer to abide by any final 
order or decision of the commissioner of labor and industry 
directing and awarding payment of compensation and benefits to 
any employee or the dependents of any deceased employee, then 
upon at least ten days notice to the self-insurer, the 
commissioner of commerce may by written order to the state 
treasurer require the treasurer to sell the pledged and assigned 
securities or a part thereof necessary to pay the full amount of 
any such claim or award with interest thereon.  This authority 
to sell may be exercised from time to time to satisfy any order 
or award of the commissioner of labor and industry or any 
judgment obtained thereon.  When securities are sold the money 
obtained shall be deposited in the state treasury to the credit 
of the commissioner of commerce and awards made against any such 
self-insurer by the commissioner of commerce shall be paid to 
the persons entitled thereto by the state treasurer upon 
warrants prepared by the commissioner of commerce and approved 
by the commissioner of finance out of the proceeds of the sale 
of securities.  Where the security is in the form of a surety 
bond or personal guaranty the commissioner of commerce, at any 
time, upon at least ten days notice and opportunity to be heard, 
may require the surety to pay the amount of the award, the 
payments to be enforced in like manner as the award may be 
enforced. 
    (2)(a) No association, corporation, partnership, sole 
proprietorship, trust or other business entity shall provide 
services in the design, establishment or administration of a 
group self-insurance plan under rules adopted pursuant to this 
subdivision unless it is licensed to do so by the commissioner 
of commerce.  An applicant for a license shall state in writing 
the type of activities it seeks authorization to engage in and 
the type of services it seeks authorization to provide.  The 
license shall be granted only when the commissioner of commerce 
is satisfied that the entity possesses the necessary 
organization, background, expertise, and financial integrity to 
supply the services sought to be offered.  The commissioner of 
commerce may issue a license subject to restrictions or 
limitations, including restrictions or limitations on the type 
of services which may be supplied or the activities which may be 
engaged in.  The license is for a two-year period. 
    (b) To assure that group self-insurance plans are 
financially solvent, administered in a fair and capable fashion, 
and able to process claims and pay benefits in a prompt, fair 
and equitable manner, entities licensed to engage in such 
business are subject to supervision and examination by the 
commissioner of commerce. 
    (c) To carry out the purposes of this subdivision, the 
commissioner of commerce may promulgate administrative rules, 
including emergency rules, pursuant to sections 14.01 to 14.70.  
These rules may: 
    (i) establish reporting requirements for administrators of 
group self-insurance plans; 
    (ii) establish standards and guidelines to assure the 
adequacy of the financing and administration of group 
self-insurance plans; 
    (iii) establish bonding requirements or other provisions 
assuring the financial integrity of entities administering group 
self-insurance plans; 
    (iv) establish standards, including but not limited to 
minimum terms of membership in self-insurance plans, as 
necessary to provide stability for those plans; 
    (v) establish standards or guidelines governing the 
formation, operation, administration and dissolution of 
self-insurance plans; and 
    (vi) establish other reasonable requirements to further the 
purposes of this subdivision. 
    Sec. 19.  Minnesota Statutes 1987 Supplement, section 
176.183, subdivision 2, is amended to read:  
    Subd. 2.  The commissioner of labor and industry, in 
accordance with the terms of the order awarding compensation, 
shall pay compensation to the employee or the employee's 
dependent from the special compensation fund.  The commissioner 
of labor and industry shall certify to the commissioner of 
finance and to the legislature annually the total amount of 
compensation paid from the special compensation fund under 
subdivisions subdivision 1 and 1a.  The commissioner of finance 
shall upon proper certification reimburse the special 
compensation fund from the general fund appropriation provided 
for this purpose.  The amount reimbursed shall be limited to the 
certified amount paid under this section or the appropriation 
made for this purpose, whichever is the lesser amount.  
Compensation paid under this section which is not reimbursed by 
the general fund shall remain a liability of the special 
compensation fund and shall be financed by the percentage 
assessed under section 176.129. 
    Sec. 20.  Minnesota Statutes 1986, section 176.183, 
subdivision 3, is amended to read:  
    Subd. 3.  (a) Notwithstanding subdivision 2, the 
commissioner may direct payment from the special compensation 
fund for compensation payable pursuant to subdivisions 
subdivision 1 and 1a, including benefits payable under sections 
176.102 and 176.135, prior to issuance of an order of a 
compensation judge or the workers' compensation court of appeals 
directing payment or awarding compensation.  
    (b) The commissioner may suspend or terminate an order 
under clause (a) for good cause as determined by the 
commissioner. 
    Sec. 21.  [79B.18] [EXISTING RULES.] 
    If there is any inconsistency among any rule or statute and 
this act, this act shall govern. 
     Sec. 22.  [REPEALER.] 
    Minnesota Statutes 1987 Supplement, sections 60A.101; and 
176.183, subdivision 1a, are repealed. 
    Sec. 23.  [EFFECTIVE DATE.] 
    This act is effective July 1, 1988. 
    Approved April 26, 1988