1.1                          A bill for an act 
  1.2             relating to workers' compensation; modifying 
  1.3             provisions relating to self-insurance; amending 
  1.4             Minnesota Statutes 1994, section 79A.01, subdivision 
  1.5             4; 79A.02, subdivisions 1 and 2; 79A.04, subdivisions 
  1.6             2 and 9; 79A.09, subdivision 4; and 79A.15. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 1994, section 79A.01, 
  1.9   subdivision 4, is amended to read: 
  1.10     Subd. 4.  [INSOLVENT SELF-INSURER.] "Insolvent 
  1.11  self-insurer" means ~~either~~:  (1) a member private self-insurer 
  1.12  who has failed to pay compensation as a result of a declaration 
  1.13  of bankruptcy or insolvency by a court of competent jurisdiction 
  1.14  and whose security deposit has been called by the commissioner 
  1.15  pursuant to chapter 176~~, or~~; (2) a member self-insurer who has 
  1.16  failed to pay compensation and who has been issued a certificate 
  1.17  of default by the commissioner and whose security deposit has 
  1.18  been called by the commissioner pursuant to chapter 176; or (3) 
  1.19  a member or former member private self-insurer who has failed to 
  1.20  pay an assessment required by section 79A.12, subdivision 2, and 
  1.21  who has been issued a certificate of default by the commissioner 
  1.22  and whose security deposit has been called by the commissioner. 
  1.23     Sec. 2.  Minnesota Statutes 1994, section 79A.02, 
  1.24  subdivision 1, is amended to read: 
  1.25     Subdivision 1.  [MEMBERSHIP.] For the purposes of assisting 
  1.26  the commissioner, there is established a workers' compensation 
  2.1   self-insurers' advisory committee of five members that are 
  2.2   employers authorized to self-insure in Minnesota.  Three of the 
  2.3   members shall be elected by the ~~members of~~ the self-insurers' 
  2.4   security fund board of trustees and two shall be appointed by 
  2.5   the commissioner.  In addition, one alternate member shall be 
  2.6   elected by the self-insurers' security fund board of trustees 
  2.7   and one alternate member shall be appointed by the commissioner. 
  2.8      Sec. 3.  Minnesota Statutes 1994, section 79A.02, 
  2.9   subdivision 2, is amended to read: 
  2.10     Subd. 2.  [ADVICE TO COMMISSIONER.] At the request of the 
  2.11  commissioner, the committee shall meet and shall advise the 
  2.12  commissioner with respect to whether or not an applicant to 
  2.13  become a private self-insurer in the state of Minnesota has met 
  2.14  the statutory requirements to self-insure.  The department of 
  2.15  commerce may furnish the committee with any financial data which 
  2.16  it has, but a member of the advisory committee who may have a 
  2.17  conflict of interest in reviewing the financial data shall not 
  2.18  have access to the data nor participate in the discussions 
  2.19  concerning the applicant.  All members of the advisory committee 
  2.20  shall treat financial data received from the commissioner as 
  2.21  nonpublic data.  The committee shall advise the commissioner if 
  2.22  it has any information that any private self-insurer may become 
  2.23  insolvent.  Disclosure of this data other than for the purposes 
  2.24  of this subdivision is a misdemeanor. 
  2.25     Sec. 4.  Minnesota Statutes 1994, section 79A.04, 
  2.26  subdivision 2, is amended to read: 
  2.27     Subd. 2.  [MINIMUM DEPOSIT.] The minimum deposit is 110 
  2.28  percent of the private self-insurer's estimated future liability.
  2.29  Up to ten percent of that deposit may be used to secure payment 
  2.30  of all administrative and legal costs, and unpaid assessments 
  2.31  required by section 79A.12, subdivision 2, relating to or 
  2.32  arising from the employer's self-insuring.  As used in this 
  2.33  section, "private self-insurer" includes both current and former 
  2.34  members of the self-insurers' security fund; and "private 
  2.35  self-insurers' estimated future liability" means the private 
  2.36  self-insurers' total of estimated future liability as determined 
  3.1   by an Associate or Fellow of the Casualty Actuarial Society 
  3.2   every year for group member private self-insurers and, for a 
  3.3   nongroup member private self-insurer's authority to self-insure, 
  3.4   every year for the first five years.  After the first five 
  3.5   years, the nongroup member's total shall be as determined by an 
  3.6   Associate or Fellow of the Casualty Actuarial Society at least 
  3.7   every two years, and each such actuarial study shall include a 
  3.8   projection of future losses during the ~~two-year~~ period until the 
  3.9   next scheduled actuarial study, less payments anticipated to be 
  3.10  made during that time.  
  3.11     All data and information furnished by a private 
  3.12  self-insurer to an Associate or Fellow of the Casualty Actuarial 
  3.13  Society for purposes of determining private self-insurers' 
  3.14  estimated future liability must be certified by an officer of 
  3.15  the private self-insurer to be true and correct with respect to 
  3.16  payroll and paid losses, and must be certified, upon information 
  3.17  and belief, to be true and correct with respect to reserves.  
  3.18  The certification must be made by sworn affidavit.  In addition 
  3.19  to any other remedies provided by law, the certification of 
  3.20  false data or information pursuant to this subdivision may 
  3.21  result in a fine imposed by the commissioner of commerce on the 
  3.22  private self-insurer up to the amount of $5,000, and termination 
  3.23  of the private self-insurers' authority to self-insure.  The 
  3.24  determination of private self-insurers' estimated future 
  3.25  liability by an Associate or Fellow of the Casualty Actuarial 
  3.26  Society shall be conducted in accordance with standards and 
  3.27  principles for establishing loss and loss adjustment expense 
  3.28  reserves by the Actuarial Standards Board, an affiliate of the 
  3.29  American Academy of Actuaries.  The commissioner may reject an 
  3.30  actuarial report that does not meet the standards and principles 
  3.31  of the Actuarial Standards Board, and may further disqualify the 
  3.32  actuary who prepared the report from submitting any future 
  3.33  actuarial reports pursuant to this chapter.  Within 30 days 
  3.34  after the actuary has been served by the commissioner with a 
  3.35  notice of disqualification, an actuary who is aggrieved by the 
  3.36  disqualification may request a hearing to be conducted in 
  4.1   accordance with chapter 14.  Based on a review of the actuarial 
  4.2   report, the commissioner of commerce may require an increase in 
  4.3   the minimum security deposit in an amount the commissioner 
  4.4   considers sufficient. 
  4.5      Estimated future liability is determined by first taking 
  4.6   the total amount of the self-insured's future liability of 
  4.7   workers' compensation claims and then deducting the total amount 
  4.8   which is estimated to be returned to the self-insurer from any 
  4.9   specific excess insurance coverage, aggregate excess insurance 
  4.10  coverage, and any supplementary benefits or second injury 
  4.11  benefits which are estimated to be reimbursed by the special 
  4.12  compensation fund. Supplementary benefits or second injury 
  4.13  benefits will not be reimbursed by the special compensation fund 
  4.14  unless the special compensation fund assessment pursuant to 
  4.15  section 176.129 is paid and the reports required thereunder are 
  4.16  filed with the special compensation fund.  In the case of surety 
  4.17  bonds, bonds shall secure administrative and legal costs in 
  4.18  addition to the liability for payment of compensation reflected 
  4.19  on the face of the bond.  In no event shall the security be less 
  4.20  than the last retention limit selected by the self-insurer with 
  4.21  the workers' compensation reinsurance association.  The posting 
  4.22  or depositing of security pursuant to this section shall release 
  4.23  all previously posted or deposited security from any obligations 
  4.24  under the posting or depositing and any surety bond so released 
  4.25  shall be returned to the surety.  Any other security shall be 
  4.26  returned to the depositor or the person posting the bond. 
  4.27     As a condition for the granting or renewing of a 
  4.28  certificate to self-insure, the commissioner may require a 
  4.29  private self-insurer to furnish any additional security the 
  4.30  commissioner considers sufficient to insure payment of all 
  4.31  claims under chapter 176. 
  4.32     Sec. 5.  Minnesota Statutes 1994, section 79A.04, 
  4.33  subdivision 9, is amended to read: 
  4.34     Subd. 9.  [INSOLVENCY, BANKRUPTCY, OR DEFAULT; UTILIZATION 
  4.35  OF SECURITY DEPOSIT.] The commissioner of labor and industry 
  4.36  shall notify the commissioner and the security fund if the 
  5.1   commissioner of labor and industry has knowledge that any 
  5.2   private self-insurer has failed to pay workers' compensation 
  5.3   benefits as required by chapter 176.  If the commissioner 
  5.4   determines that a court of competent jurisdiction has declared 
  5.5   the private self-insurer to be bankrupt or insolvent, and the 
  5.6   private self-insurer has failed to pay workers' compensation as 
  5.7   required by chapter 176 or, if the commissioner issues a 
  5.8   certificate of default against a private self-insurer for 
  5.9   failure to pay workers' compensation as required by chapter 176, 
  5.10  or failure to pay an assessment to the self-insurers' security 
  5.11  fund when due, then the security deposit shall be utilized to 
  5.12  administer and pay the private self-insurers' workers' 
  5.13  compensation or assessment obligations. 
  5.14     Sec. 6.  Minnesota Statutes 1994, section 79A.09, 
  5.15  subdivision 4, is amended to read: 
  5.16     Subd. 4.  [CONFIDENTIAL INFORMATION.] The security fund may 
  5.17  receive private data concerning the financial condition of 
  5.18  private self-insurers whose liabilities to pay compensation have 
  5.19  become its responsibility ~~and shall adopt bylaws to prevent~~ 
  5.20  ~~dissemination of that information~~.  The data shall become public 
  5.21  data upon its receipt by the security fund.  
  5.22     Sec. 7.  Minnesota Statutes 1994, section 79A.15, is 
  5.23  amended to read: 
  5.24     79A.15 [SURETY BOND FORM.] 
  5.25     The form for the surety bond under this chapter shall be: 
  5.26                         STATE OF MINNESOTA 
  5.27                       DEPARTMENT OF COMMERCE 
  5.28        SURETY BOND OF SELF-INSURER OF WORKERS' COMPENSATION 
  5.29   
  5.30  IN THE MATTER OF THE CERTIFICATE OF      )
  5.31                                           )
  5.32                                           )    SURETY BOND 
  5.33                                           )    NO. .............
  5.34                                           )    PREMIUM: ........
  5.35                                           )
  5.36  Employer, Certificate No: .............. )
  5.37  KNOW ALL PERSONS BY THESE PRESENTS:
  5.38       That ..................................................... 
  5.39                            (Employer)
  5.40  whose address is ..............................................
  6.1   as Principal, and .............................................
  6.2                             (Surety) 
  6.3   a corporation organized under the laws of ..................... 
  6.4   and authorized to transact a general surety business in the 
  6.5   State of Minnesota, as Surety, are held and firmly bound to the 
  6.6   State of Minnesota in the penal sum of 
  6.7   ...........................dollars ($..........) for which 
  6.8   payment we bind ourselves, our heirs, executors, administrators, 
  6.9   successors, and assigns, jointly and severally, firmly by these 
  6.10  presents. 
  6.11     WHEREAS in accordance with Minnesota Statutes, chapter 176, 
  6.12  the principal elected to self-insure, and made application for, 
  6.13  or received from the commissioner of commerce of the state of 
  6.14  Minnesota, a certificate to self-insure, upon furnishing of 
  6.15  proof satisfactory to the commissioner of commerce of ability to 
  6.16  self-insure and to compensate any or all employees of said 
  6.17  principal for injury or disability, and their dependents for 
  6.18  death incurred or sustained by said employees pursuant to the 
  6.19  terms, provisions, and limitations of said statute; 
  6.20     NOW THEREFORE, the conditions of this bond or obligation 
  6.21  are such that if principal shall pay and furnish compensation, 
  6.22  pursuant to the terms, provisions, and limitations of said 
  6.23  statute to its employees for injury or disability, and to the 
  6.24  dependents of its employees, then this bond or obligation shall 
  6.25  be null and void; otherwise to remain in full force and effect.  
  6.26     FURTHERMORE, it is understood and agreed that: 
  6.27     1.  This bond may be amended, by agreement between the 
  6.28  parties hereto and the commissioner of commerce as to the 
  6.29  identity of the principal herein named; and, by agreement of the 
  6.30  parties hereto, as to the premium or rate of premium.  Such 
  6.31  amendment must be by endorsement upon, or rider to, this bond, 
  6.32  executed by the surety and delivered to or filed with the 
  6.33  commissioner. 
  6.34     2.  The surety does, by these presents, undertake and agree 
  6.35  that the obligation of this bond shall cover and extend to all 
  6.36  past, present, existing, and potential liability of said 
  7.1   principal, as a self-insurer, to the extent of the penal sum 
  7.2   herein named without regard to specific injuries, date or dates 
  7.3   of injuries, happenings or events.  
  7.4      3.  The penal sum of this bond may be increased or 
  7.5   decreased, by agreement between the parties hereto and the 
  7.6   commissioner of commerce, without impairing the obligation 
  7.7   incurred under this bond for the overall coverage of the said 
  7.8   principal, for all past, present, existing, and potential 
  7.9   liability, as a self-insurer, without regard to specific 
  7.10  injuries, date or dates of injuries, happenings or events, to 
  7.11  the extent, in the aggregate, of the penal sum as increased or 
  7.12  decreased.  Such amendment must be by endorsement. 
  7.13     4.  The aggregate liability of the surety hereunder on all 
  7.14  claims whatsoever shall not exceed the penal sum of this bond in 
  7.15  any event. 
  7.16     5.  This bond shall be continuous in form and shall remain 
  7.17  in full force and effect unless terminated as follows: 
  7.18     (a) The obligation of this bond shall terminate upon 
  7.19  written notice of cancellation from the surety, given by 
  7.20  registered or certified mail to the commissioner of commerce, 
  7.21  state of Minnesota, save and except as to all past, present, 
  7.22  existing, and potential liability of the principal incurred, 
  7.23  including obligations resulting from claims which are incurred 
  7.24  but not yet reported, as a self-insurer prior to effective date 
  7.25  of termination.  This termination is effective 60 days after 
  7.26  receipt of notice of cancellation by the commissioner of 
  7.27  commerce, state of Minnesota. 
  7.28     (b) This bond shall also terminate upon the revocation of 
  7.29  the certificate to self-insure, save and except as to all past, 
  7.30  present, existing, and potential liability of the principal 
  7.31  incurred, including obligations resulting from claims which are 
  7.32  incurred but not yet reported, as a self-insurer prior to 
  7.33  effective date of termination.  The principal and the surety, 
  7.34  herein named, shall be immediately notified in writing by said 
  7.35  commissioner, in the event of such revocation. 
  7.36     6.  Where the principal posts with the commissioner of 
  8.1   commerce, state of Minnesota, or the state treasurer, state of 
  8.2   Minnesota, a replacement security deposit, in the form of a 
  8.3   surety bond, irrevocable letter of credit, cash, securities, or 
  8.4   any combination thereof, in the full amount as may be required 
  8.5   by the commissioner of commerce, state of Minnesota, to secure 
  8.6   all incurred liabilities for the payment of compensation of said 
  8.7   principal under Minnesota Statutes, chapter 176, the surety is 
  8.8   released from obligations under the surety bond upon the date of 
  8.9   acceptance by the commissioner of commerce, state of Minnesota, 
  8.10  of said replacement security deposit. 
  8.11     7.  If the said principal shall suspend payment of workers' 
  8.12  compensation benefits or shall become insolvent or a receiver 
  8.13  shall be appointed for its business, or the commissioner of 
  8.14  commerce, state of Minnesota, issues a certificate of default, 
  8.15  the undersigned surety will become liable for the workers' 
  8.16  compensation obligations of the principal on the date benefits 
  8.17  are suspended.  The surety shall begin payments within 14 days 
  8.18  under paragraph 8, or 30 days under paragraph 10, after receipt 
  8.19  of written notification by certified mail from the commissioner 
  8.20  of commerce, state of Minnesota, to begin payments under the 
  8.21  terms of this bond. 
  8.22     8.  If the surety exercises its option to administer 
  8.23  claims, it shall pay benefits due to the principal's injured 
  8.24  workers within 14 days of the receipt of the notification by the 
  8.25  commissioner of commerce, state of Minnesota, pursuant to 
  8.26  paragraph 7, without a formal award of a compensation judge, the 
  8.27  commissioner of labor and industry, any intermediate appellate 
  8.28  court, or the Minnesota supreme court and such payment will be a 
  8.29  charge against the penal sum of the bond.  Administrative and 
  8.30  legal costs and payment of assessments incurred by the surety in 
  8.31  discharging its obligations and payment of the principal's 
  8.32  obligations for administration and legal expenses and payment of 
  8.33  assessments under Minnesota Statutes, chapter 176, and sections 
  8.34  79A.01 to 79A.17 and Laws 1988, chapter 674, section 23, shall 
  8.35  also be a charge against the penal sum of the bond; however, the 
  8.36  total amount of this surety bond set aside for the payment of 
  9.1   said administrative and legal expenses and payment of 
  9.2   assessments shall be limited to a maximum ten percent of the 
  9.3   total penal sum of the bond unless otherwise authorized by the 
  9.4   security fund. 
  9.5      9.  If any part or provision of this bond shall be declared 
  9.6   unenforceable or held to be invalid by a court of proper 
  9.7   jurisdiction, such determination shall not affect the validity 
  9.8   or enforceability of the other provisions or parts of this bond. 
  9.9      10.  If the surety does not give notice to the security 
  9.10  fund and the commissioner of commerce, state of Minnesota, 
  9.11  within two business days of receipt of written notification from 
  9.12  the commissioner of commerce, state of Minnesota, pursuant to 
  9.13  paragraph 7, to exercise its option to administer claims 
  9.14  pursuant to paragraph 8, then the self-insurer's security fund 
  9.15  will assume the payments of the workers' compensation 
  9.16  obligations of the principal pursuant to Minnesota Statutes, 
  9.17  chapter 176.  The surety shall pay, within 30 days of the 
  9.18  receipt of the notification by the commissioner of commerce, 
  9.19  state of Minnesota, pursuant to paragraph 7, to the 
  9.20  self-insurer's security fund as an initial deposit an amount 
  9.21  equal to ten percent of the penal sum of the bond, and shall 
  9.22  thereafter, upon notification from the security fund that the 
  9.23  balance of the initial deposit had fallen to one percent of the 
  9.24  penal sum of the bond, remit to the security fund an amount 
  9.25  equal to the payments made by the security fund in the three 
  9.26  calendar months immediately preceding said notification.  All 
  9.27  such payments will be a charge against the penal sum of the bond.
  9.28     11.  Disputes concerning the posting, renewal, termination, 
  9.29  exoneration, or return of all or any portion of the principal's 
  9.30  security deposit or any liability arising out of the posting or 
  9.31  failure to post security, or the adequacy of the security or the 
  9.32  reasonableness of administrative costs, including legal costs, 
  9.33  arising between or among a surety, the issuer of an agreement of 
  9.34  assumption and guarantee of workers' compensation liabilities, 
  9.35  the issuer of a letter of credit, any custodian of the security 
  9.36  deposit, the principal, or the self-insurers' security fund 
 10.1   shall be resolved by the commissioner of commerce pursuant to 
 10.2   Minnesota Statutes, chapter 176 and sections 79A.01 to 79A.17 
 10.3   and Laws 1988, chapter 674, section 23.  
 10.4      12.  Written notification to the surety required by this 
 10.5   bond shall be sent to: 
 10.6                                    .........................
 10.7                                    Name of Surety 
 10.8                                    .........................
 10.9                                    To the attention of Person or
 10.10                                     Position
 10.11                                   ......................... 
 10.12                                   Address 
 10.13                                   ......................... 
 10.14                                   City, State, Zip 
 10.15     Written notification to the principal required by this bond 
 10.16  shall be sent to: 
 10.17                                   ........................
 10.18                                   Name of Principal
 10.19                                   ........................
 10.20                                   To the attention of Person or
 10.21                                     Position
 10.22                                   ........................
 10.23                                   Address
 10.24                                   ........................
 10.25                                   City, State, Zip
 10.26     13.  This bond is executed by the surety to comply with 
 10.27  Minnesota Statutes, chapter 176, and said bond shall be subject 
 10.28  to all terms and provisions thereof. 
 10.29                                   ........................
 10.30                                   Name of Surety
 10.31                                   ........................
 10.32                                   Address
 10.33                                   ........................
 10.34                                   City, State, Zip
 10.35     THIS bond is executed under an unrevoked appointment or 
 10.36  power of attorney.  
 10.37     I certify (or declare) under penalty of perjury under the 
 10.38  laws of the state of Minnesota that the foregoing is true and 
 10.39  correct.  
 10.40     
 10.41  ..............                   .............................
 10.42  Date                             Signature of Attorney-In-Fact 
 11.1                                    .............................
 11.2                                    Printed or Typed Name of  
 11.3                                    Attorney-In-Fact 
 11.4      A copy of the transcript or record of the unrevoked 
 11.5   appointment, power of attorney, bylaws, or other instrument, 
 11.6   duly certified by the proper authority and attested by the seal 
 11.7   of the insurer entitling or authorizing the person who executed 
 11.8   the bond to do so for and in behalf of the insurer, must be 
 11.9   filed in the office of the commissioner of commerce or must be 
 11.10  included with this bond for such filing.