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CHAPTER 79A. WORKERS' COMPENSATION SELF-INSURANCE

Table of Sections
SectionHeadnote
79A.01DEFINITIONS.
79A.02SELF-INSURERS' ADVISORY COMMITTEE.
79A.03SELF-INSURANCE APPLICATIONS.
79A.04PRIVATE SELF-INSURING EMPLOYER; ANNUAL RENEWAL OR DEPOSIT OF NEW SECURITY FOR PAYMENT OF COMPENSATION.
79A.05REVOCATION OF CERTIFICATE TO SELF-INSURE.
79A.06THIRD-PARTY ADMINISTRATOR.
79A.07PREFERRED SUBROGATION RIGHTS OF SELF-INSURERS' SECURITY FUND OR SURETY.
79A.071CUSTODIAL ACCOUNTS.
79A.08LEGISLATIVE INTENT.
79A.09SECURITY FUND.
79A.10ASSUMPTION OF WORKERS' COMPENSATION OBLIGATIONS OF INSOLVENT SELF-INSURER.
79A.11REIMBURSEMENT FOR OBLIGATIONS PAID AND ASSUMED.
79A.12MAINTENANCE OF ASSETS OR LINE OF CREDIT TO CONTINUE PAYMENT OF COMPENSATION OBLIGATIONS.
79A.13AUDIT; ANNUAL REPORT.
79A.14LETTER OF CREDIT FORM.
79A.15SURETY BOND FORM.
79A.16OPEN MEETING; ADMINISTRATIVE PROCEDURE ACT.
79A.17RULES.
79A.18EXISTING RULES.

COMMERCIAL SELF-INSURANCE GROUPS

79A.19COMMERCIAL SELF-INSURANCE GROUPS; DEFINITIONS.
79A.20ELIGIBILITY REQUIREMENTS FOR COMMERCIAL SELF-INSURANCE GROUPS.
79A.21COMMERCIAL SELF-INSURANCE GROUP APPLICATION.
79A.22COMMERCIAL SELF-INSURANCE GROUP OPERATING REQUIREMENTS.
79A.23COMMERCIAL SELF-INSURANCE GROUP REPORTING REQUIREMENTS.
79A.24COMMERCIAL SELF-INSURANCE GROUP SECURITY DEPOSIT.
79A.25DEFAULT OF A COMMERCIAL SELF-INSURANCE GROUP.
79A.26COMMERCIAL SELF-INSURANCE GROUP SECURITY FUND.
79A.27INDEMNITY AGREEMENT FORM.
79A.28OPEN MEETING; ADMINISTRATIVE PROCEDURE ACT.
79A.29RULES.
79A.30GOVERNING LAW.
79A.31COMMERCIAL SELF-INSURANCE GROUP SECURITY FUND MEMBERSHIP; WITHDRAWAL FROM SELF-INSURERS' SECURITY FUND.
79A.32REPORTING TO LICENSED DATA SERVICE ORGANIZATIONS.
79A.01 DEFINITIONS.
    Subdivision 1. Scope. For the purposes of this chapter, 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: (1) a member private
self-insurer who has failed to pay compensation as a result of a declaration of bankruptcy or
insolvency by a court of competent jurisdiction and whose security deposit has been called by
the commissioner pursuant to chapter 176; (2) a member self-insurer who has failed to pay
compensation and who has been issued a certificate of default by the commissioner and whose
security deposit has been called by the commissioner pursuant to chapter 176; or (3) a member
or former member private self-insurer who has failed to pay an assessment required by section
79A.12, subdivision 2, and who has been issued a certificate of default by the commissioner and
whose security deposit has been called by the commissioner.
    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 chapter 176.
    Subd. 10. Common claims fund. "Common claims fund," with respect to group self-insurers,
means the cash, cash equivalents, or investment accounts maintained by the self-insurance group
to pay its workers' compensation liabilities.
    Subd. 11. Diminutive applicants. "Diminutive applicants" to group self-insurance means
applicants to existing self-insurance groups whose equity and premium are both less than five
percent of the total group's equity and premium.
History: 1988 c 674 s 1; 1993 c 13 art 1 s 20; 1995 c 231 art 2 s 17-19; 1995 c 258 s 59;
1999 c 177 s 72,73
79A.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 and three alternates
shall be elected by the self-insurers' security fund board of trustees and two members and two
alternates shall be appointed by the commissioner. Notwithstanding section 15.059, the advisory
committee does not expire.
    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
Department of Commerce may furnish the committee with any financial data which it has, but a
member of the advisory committee who may have a conflict of interest in reviewing the financial
data shall not have access to the data nor participate in the discussions concerning the applicant.
Financial data received from the commissioner is nonpublic data. The committee shall advise the
commissioner if it has any information that any private self-insurer may become insolvent.
    Subd. 3. Audit of self-insurance application. (a) The self-insurers' security fund may retain
a certified public accountant to perform services for, and report directly to, the commissioner of
commerce. When requested by the Workers' Compensation Self-Insurers' Advisory Committee,
the certified public accountant shall review an application to self-insure, including the applicant's
financial data. The certified public accountant shall provide a report to the commissioner of
commerce indicating whether that applicant has met the requirements of section 79A.03,
subdivisions 2 and 3
. Additionally, the certified public accountant shall provide advice and
counsel to the commissioner about relevant facts regarding that applicant's financial condition.
(b) If the report of the certified public accountant is used by the commissioner as the
basis for the commissioner's determination regarding the applicant's self-insurance status, the
certified public accountant shall be made available to the commissioner for any hearings or other
proceedings arising from that determination.
(c) The commissioner shall provide the advisory committee with the summary report by the
certified public accountant and any financial data in possession of the Department of Commerce
that is otherwise available to the public.
The cost of the review shall be the obligation of the self-insurer's security fund.
    Subd. 4. Recommendations to commissioner regarding revocation. After each fifth
anniversary from the date each individual and group self-insurer becomes certified to self-insure,
the committee shall review all relevant financial data filed with the Department of Commerce
that is otherwise available to the public and make a recommendation to the commissioner about
whether each self-insurer's certificate should be revoked. For group self-insurers who have been
in existence for five years or more and have been granted renewal authority, a level of funding in
the common claims fund must be maintained at not less than the greater of either: (1) one year's
claim losses paid in the most recent year; or (2) one-third of the security deposit posted with the
Department of Commerce according to section 79A.04, subdivision 2. This provision supersedes
any requirements under section 79A.03, subdivision 10, and Minnesota Rules, part 2780.5000.
History: 1988 c 674 s 2; 1992 c 510 art 5 s 1,2; 1995 c 231 art 2 s 20-22; 1995 c 258 s
60; 1999 c 177 s 74-76; 2001 c 215 s 36; 2003 c 2 art 1 s 12
79A.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 this chapter.
    Subd. 3. Net worth. Each individual self-insurer's net worth, as presented on its audited
balance sheet filed with the Department of Commerce, shall equal at least ten percent of the
entity's total assets and shall equal at least ten times the retention level selected with the Workers'
Compensation Reinsurance Association.
    Subd. 4. Assets, net worth, and liquidity. (a) 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 self-insurer; 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 self-insurer; and the self-insurer's workers' compensation experience for the
last four years. Notwithstanding any other provision of this chapter, the commissioner may deny
an application for self-insurance authority or terminate existing self-insurance authority if the
applicant or self-insurer does not have sufficient assets, net worth, and liquidity to promptly and
completely meet all of its self-insurance obligations.
(b) An individual self-insurer must have had positive net income as shown on audited
income statements filed with the Department of Commerce during three of the last five years and
cumulatively over the five-year period. If the self-insurer has been in existence less than five years,
it must have had cumulative net income during the period of existence and in the most recent year.
(c) An individual self-insurer must have had cash generated from operations as shown on the
audited statements of cash flows filed with the Department of Commerce during three of the last
five years and cumulatively over the five-year period. If the self-insurer has been in existence
less than five years, it shall have had cumulative cash generated from operations during the
period of existence and in the most recent year.
(d) No entity shall be admitted as an individual self-insurer, or be allowed to continue its
self-insurance authority, if the audit report for the most recent year includes an explanatory
paragraph stating that the auditor has concluded that there is substantial doubt about the entity's
ability to continue as a going concern.
    Subd. 4a. Exceptions. Notwithstanding the requirements of subdivisions 3 and 4, the
commissioner, pursuant to a review of an existing self-insurer's financial data, may continue a
self-insurer's authority to self-insure for one year if, in the commissioner's judgment based on
all factors relevant to the self-insurer's financial status, the self-insurer will be able to meet its
obligations under this chapter for the following year. The relevant factors to be considered must
include, but must not be limited to, the liquidity ratios, leverage ratios, and profitability ratios of
the self-insurer. Where a self-insurer's authority to self-insure is continued under this subdivision,
the self-insurer may be required to post security in the amount equal to two times the amount of
security required under section 79A.04, subdivision 2.
    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.
(c) When a group has obtained its authority to self-insure, additional applicants who wish to
join the group must apply for approval by submitting, at least 45 days before joining the group:
(1) an application; (2) an indemnity agreement providing for joint and several liability as set forth
in Minnesota Rules, part 2780.9920, signed by an officer of the applicant; and (3) a certified
financial audit performed by a certified public accountant. An accounting review performed by a
certified public accountant may be filed in lieu of a certified audit.
New diminutive applicants to the group, as defined in section 79A.01, subdivision 11,
applying for membership in groups in existence longer than one year, who have a combined
equity of all group members in excess of 15 times the last retention limit selected by the group
with the Workers' Compensation Reinsurance Association, and have posted 125 percent of the
group's total estimated future liability, must submit the items in this paragraph at least ten days
before joining the group.
If the cumulative total of premium added to the group by diminutive new members is greater
than 50 percent in a fiscal year of the group, all subsequent new members' applications must be
submitted at least 45 days before joining the group.
In all cases of new membership, evidence that cash premiums equal to not less than 20
percent of the current year's modified premium of each applicant have been paid into a common
claims fund, maintained by the group in a designated depository, must be filed with the department
at least ten days before joining the group.
    Subd. 7. Financial standards. A self-insurer group 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.
(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.
No authority to self-insure will be granted unless, over the term of the policy year, at least 65
percent of total revenues from all sources for the year are available for the payment of its claim
and assessment obligations, and insurance premiums for stop loss coverage. For purposes of this
calculation, claim and assessment obligations include the cost of allocated loss expenses as
well as special compensation fund and self-insurers' security fund assessments but exclude the
cost of unallocated loss expenses.
    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.
(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) An annual status report due August 1 by each self-insurer shall be filed 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 member of the group shall, within six months after the end of each fiscal year for
that group, submit to a certified public accountant designated by the group, the most recent annual
financial statement, reviewed by a certified public accountant in accordance with the Statements
on Standards for Accounting and Review Services, Volume 2, the American Institute of Certified
Public Accountants Professional Standards, or audited in accordance with generally accepted
auditing standards, together with such other financial information the commissioner may require.
In addition, the group shall file with the commissioner, within seven months after the end of each
fiscal year for that group, combining financial statements of the group members, compiled by a
certified public accountant in accordance with the Statements on Standards for Accounting and
Review Services, Volume 2, the American Institute of Certified Public Accountants Professional
Standards. The combining financial statements shall include, but not be limited to, a balance sheet,
income statement, statement of changes in net worth, and statement of cash flow. Each combining
financial statement shall include a column for each individual group member along with a total
column. Each combined statement shall have a statement from the certified public accountant
confirming that each member has submitted the required financial statement as defined in this
section. The certified public accountant shall notify the commissioner if any statement is qualified
or otherwise conditional. The commissioner may require additional financial information from
any group member.
Where a group has 50 or more members, the group shall file, in lieu of the combining
financial statements, a combined financial statement showing only the total column for the entire
group's balance sheet, income statement, statement of changes in net worth, and statement of cash
flow. Additionally, the group shall disclose, for each member, the total assets, net worth, revenue,
and income for the most recent fiscal year. The combining and combined financial statements
may omit all footnote disclosures.
(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 and refunds. (a) 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.
(b) One hundred percent of any surplus money for a fund year in excess of 125 percent of the
amount necessary to fulfill all obligations under chapter 176 for that fund year may be declared
refundable to a member at any time after 18 months following the end of such fund year. There
can be no more than one refund in any 12-month period. When all claims of any one fund year
have been fully paid, as certified by an actuary, all surplus money from that fund year may be
declared refundable.
    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.
    Subd. 13. Annual requirements. The financial requirements set forth in subdivisions 3,
4, 5, and 7 must be met on an annual basis.
History: 1988 c 674 s 3; 1992 c 510 art 5 s 3-6; 1995 c 231 art 2 s 23; 1995 c 258 s 61;
1999 c 177 s 77-81; 2001 c 215 s 37; 2005 c 132 s 29
79A.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 its
obligations and the obligations of all self-insuring 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. The deposit may be used to secure payment of all administrative and
legal costs, and unpaid assessments required by section 79A.12, subdivision 2, relating to or
arising from its or other employers' self-insuring. As used in this section, "private self-insurer"
includes both current and former members of the self-insurers' security fund; and "private
self-insurers' estimated future liability" means the private self-insurers' total of estimated future
liability as determined by an Associate or Fellow of the Casualty Actuarial Society every year for
group member private self-insurers and, for a nongroup member private self-insurer's authority to
self-insure, every year for the first five years. After the first five years, the nongroup member's
total shall be as determined by an Associate or Fellow of the Casualty Actuarial Society at least
every two years, and each such actuarial study shall include a projection of future losses during
the period until the next scheduled actuarial study, less payments anticipated to be made during
that time.
All data and information furnished by a private self-insurer to an Associate or Fellow of
the Casualty Actuarial Society for purposes of determining private self-insurers' estimated future
liability must be certified by an officer of the private self-insurer to be true and correct with
respect to payroll and paid losses, and must be certified, upon information and belief, to be
true and correct with respect to reserves. The certification must be made by sworn affidavit. In
addition to any other remedies provided by law, the certification of false data or information
pursuant to this subdivision may result in a fine imposed by the commissioner of commerce on
the private self-insurer up to the amount of $5,000, and termination of the private self-insurers'
authority to self-insure. The determination of private self-insurers' estimated future liability
by an Associate or Fellow of the Casualty Actuarial Society shall be conducted in accordance
with standards and principles for establishing loss and loss adjustment expense reserves by the
Actuarial Standards Board, an affiliate of the American Academy of Actuaries. The commissioner
may reject an actuarial report that does not meet the standards and principles of the Actuarial
Standards Board, and may further disqualify the actuary who prepared the report from submitting
any future actuarial reports pursuant to this chapter. Within 30 days after the actuary has been
served by the commissioner with a notice of disqualification, an actuary who is aggrieved by the
disqualification may request a hearing to be conducted in accordance with chapter 14. Based on
a review of the actuarial report, the commissioner of commerce may require an increase in the
minimum security deposit in an amount the commissioner considers sufficient.
In addition, the Minnesota self-insurers' security fund may, at its sole discretion and cost,
undertake an independent actuarial review or an actuarial study of a private self-insurer's
estimated future liability as defined in this subdivision. The review or study must be conducted
by an associate or fellow of the Casualty Actuarial Society. The actuary has the right to receive
and review data and information of the self-insurer necessary for the actuary to complete its
review or study. A copy of this report must be filed with the commissioner and a copy must be
furnished to the self-insurer.
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. However, in the determination
of estimated future liability, the actuary for the self-insurer shall not take a credit for any
excess insurance or reinsurance which is provided by a captive insurance company which is
wholly owned by the self-insurer. 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, provided that the commissioner may allow
former members to post less than the Workers' Compensation Reinsurance Association retention
level if that amount is adequate to secure payment of the self-insurers' estimated future liability,
as defined in this subdivision, including payment of claims, administrative and legal costs, and
unpaid assessments required by section 79A.12, subdivision 2. 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.
As a condition for the granting or renewing of a certificate to self-insure, the commissioner
may require a private self-insurer to furnish any additional security the commissioner considers
sufficient to insure payment of all claims under chapter 176.
    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 commissioner of finance. Securities shall be deposited on behalf of
the commissioner by the self-insured employer with the commissioner of finance or a financial
institution approved by the commissioner. Securities shall be accepted by the commissioner of
finance 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 commissioner of finance. 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 commissioner of
finance and is released only upon either of the following:
(1) the acceptance by the commissioner of a surety bond or irrevocable letter of credit for the
full amount of the incurred liabilities for the payment of compensation; or
(2) the return of cash or securities by the commissioner.
The private self-insured employer loses all right, title, and interest in and any right to control
all assets or obligations posted or left on deposit as security. In the event that a private self-insurer
is the subject of a voluntary or involuntary petition under the United States Bankruptcy Code,
title 11, or a court of competent jurisdiction has declared the private self-insurer to be bankrupt
or insolvent, or in the event of the issuance of a certificate of default by the commissioner,
the commissioner shall liquidate the deposit as provided in this chapter, and transfer it to the
self-insurer's security fund for application to the self-insured employer's incurred liability
and other current or future obligations of the self-insurers' security fund. In the event that a
private self-insurer is the subject of a voluntary or involuntary petition under the United States
Bankruptcy Code, title 11, or a court of competent jurisdiction has declared the private self-insurer
to be bankrupt or insolvent, or in the event of the issuance of a certificate of default by the
commissioner, all right, title, and interest in and any right to control all assets or obligations which
have been posted or deposited as security must be transferred to the self-insurers' security fund.
    Subd. 8.[Repealed, 1999 c 177 s 88]
    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. The security deposit shall be used to
administer and pay the private self-insurers' workers' compensation or assessment obligations or
any other current or future obligations of the self-insurers' security fund if any of the following
occurs:
(1) the private self-insurer has failed to pay workers' compensation as required by chapter
176 and either:
(a) the commissioner determines that a private self-insurer is the subject of a voluntary or
involuntary petition under the United States Bankruptcy Code, title 11; or
(b) the commissioner determines that a court of competent jurisdiction has declared the
private self-insurer to be bankrupt or insolvent; or
(2) the commissioner issues a certificate of default against a private self-insurer for failure
to pay workers' compensation as required by chapter 176; or
(3) the commissioner issues a certificate of default against a private self-insurer for failure to
pay an assessment to the self-insurer's security fund when due.
    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 commissioner of finance,
the surety, the issuer of an irrevocable letter of credit, and any custodian of the security required
in this chapter. At the time of notification, the commissioner shall also call the security and
transfer and assign it to the self-insurers' security fund. The commissioner shall also immediately
notify by certified mail the self-insurers' security fund, and order the security fund to assume the
insolvent self-insurers' obligations for which it is liable under chapter 176. The security fund
shall commence payment of these obligations within 14 days of receipt of this notification and
order. Payments shall be made to claimants whose entitlement to benefits can be ascertained by
the security fund, with or without proceedings before the Department of Labor and Industry,
the Office of Administrative Hearings, the Workers' Compensation Court of Appeals, or the
Minnesota Supreme Court. Upon the assumption of obligations by the security fund pursuant to
the commissioner's notification and order, the security fund has the right to immediate possession
of any posted or deposited security and the custodian, surety, or issuer of any irrevocable letter
of credit or the commissioner, if in possession of it, shall turn over the security, proceeds of the
surety bond, or letter of credit to the security fund together with the interest that has accrued since
the date of the self-insured employer's insolvency. The security fund has the right to the immediate
possession of all relevant workers' compensation claim files and data of the self-insurer, and the
possessor of the files and data must turn the files and data, or complete copies of them, over to the
security fund within five days of the notification provided under this subdivision. If the possessor
of the files and data fails to timely turn over the files and data to the security fund, it is liable to
the security fund for a penalty of $500 per day for each day after the five-day period has expired.
The security fund is entitled to recover its reasonable attorney fees and costs in any action brought
to obtain possession of the workers' compensation claim files and data of the self-insurer, and for
any action to recover the penalties provided by this subdivision. The self-insurers' security fund
may administer payment of benefits or it may retain a third-party administrator to do so.
    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. No insolvent self-insurer, as defined in section 79A.01, subdivision 4, shall be eligible to
receive another grant of authority to self-insure unless either: (1) the insolvent self-insurer's posted
security was sufficient to pay all direct and indirect administrative and professional expenses of
the security fund related to the insolvent self-insurer, and all losses, including estimated future
liability, allocated loss expense, and unallocated loss expense of the insolvent self-insurer; or (2)
the insolvent self-insurer pays the security fund an amount equal to all such losses and expenses
the security fund has paid or will be required to pay related to this insolvent self-insurer.
History: 1988 c 674 s 4; 1992 c 510 art 5 s 7; 1993 c 210 s 1; 1995 c 231 art 2 s 24,25;
2000 c 483 s 24-27; 2001 c 215 s 38; 2002 c 330 s 31; 2003 c 112 art 2 s 50; 2005 c 132 s
30,31; 2006 c 255 s 69
79A.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.
History: 1988 c 674 s 5
79A.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. (a) 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
Laws 1988, chapter 674, 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 entire period the employer
was self-insured, whether or not reported during that period, the policy will:
(i) discharge the obligation of the employer to maintain a security deposit for the payment of
the claims covered under the policy;
(ii) discharge any obligation which the self-insurers' security fund has or may have for
payment 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; and
(iii) discharge the obligations of the employer to pay any future assessments to the
self-insurers' security fund.
A private employer who has ceased to be a private self-insurer may instead buy an insurance
policy described above, except that it covers only a portion of the period of time during which the
private employer was self-insured; purchase of such a policy discharges any obligation that the
self-insurers' security fund has or may have for payment of all claims for compensation arising
out of injuries occurring during the period for which the policy provides coverage, whether
or not reported during that period.
A policy described in this clause 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: (i) 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 (ii) 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 calendar year immediately preceding the calendar
year in which the employer's right to self-insure is terminated or withdrawn.
(b) With respect to a self-insurer who terminates its self-insurance authority after April
1, 1998, that member shall obtain and file with the commissioner an actuarial opinion of its
outstanding liabilities as determined by an associate or fellow of the Casualty Actuarial Society
within 120 days of the date of its termination. If the actuarial opinion is not timely filed, the
self-insurers' security fund may, at its discretion, engage the services of an actuary for this
purpose. The expense of this actuarial opinion must be assessed against and be the obligation of
the self-insurer. The commissioner may issue a certificate of default against the self-insurer for
failure to pay this assessment to the self-insurers' security fund as provided by section 79A.04,
subdivision 9
. The opinion must separate liability for indemnity benefits from liability from
medical benefits, and must discount each up to four percent per annum to net present value. Within
30 days after notification of approval of the actuarial opinion by the commissioner, the member
shall pay to the security fund an amount equal to 120 percent of that discounted outstanding
indemnity liability, multiplied by the greater of the average annualized assessment rate since
inception of the security fund or the annual rate at the time of the most recent assessment before
termination. If the payment is not made within 30 days of the notification, interest on it at the
rate prescribed by section 549.09 must be paid by the former member to the security fund until
the principal amount is paid in full.
(c) A former member who terminated its self-insurance authority before April 1, 1998, who
has paid assessments to the self-insurers' security fund for seven years, and whose annualized
assessment is $500 or less, may buy out of its outstanding liabilities to the self-insurers' security
fund by an amount calculated as follows: 1.35 multiplied by the indemnity case reserves at the
time of the calculation, multiplied by the then current self-insurers' security fund annualized
assessment rate.
(d) A former member who terminated its self-insurance authority before April 1, 1998, and
who is paying assessments within the first seven years after ceasing to be self-insured under
paragraph (a), clause (3), may elect to buy out its outstanding liabilities to the self-insurers'
security fund by obtaining and filing with the commissioner an actuarial opinion of its outstanding
liabilities as determined by an associate or fellow of the Casualty Actuarial Society. The opinion
must separate liability for indemnity benefits from liability for medical benefits, and must discount
each up to four percent per annum to net present value. Within 30 days after notification of
approval of the actuarial opinion by the commissioner, the member shall pay to the security fund
an amount equal to 120 percent of that discounted outstanding indemnity liability, multiplied by
the greater of the average annualized assessment rate since inception of the security fund or the
annual rate at the time of the most recent assessment.
(e) A former member who has paid the security fund according to paragraphs (b) to (d) and
subsequently receives authority from the commissioner to again self-insure shall be assessed
under section 79A.12, subdivision 2, only on indemnity benefits paid on injuries that occurred
after the former member received authority to self-insure again; provided that the member
furnishes verified data regarding those benefits to the security fund.
(f) 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 5.25, 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.
    Subd. 6. Private employers who are self-insured. Private employers who are currently
self-insurers may also purchase a policy described in subdivision 5, paragraph (a), clause (2), with
the same effect as specified in that clause for the period covered by the policy.
History: 1988 c 674 s 6; 1992 c 510 art 5 s 8; 1995 c 128 art 1 s 3; 1998 c 339 s 2; 1999 c
86 art 1 s 17; 1999 c 177 s 82,83; 2005 c 132 s 32
79A.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.
History: 1988 c 674 s 7
79A.071 CUSTODIAL ACCOUNTS.
    Subdivision 1. Deposit. All securities shall be deposited with the commissioner of finance or
in a custodial account with a depository institution acceptable to the commissioner of finance.
Surety bonds shall be filed with the commissioner. The commissioner and the commissioner of
finance may sell or collect, in the case of default of the employer or fund, the amount that yields
sufficient funds to pay compensation due under the Workers' Compensation Act.
    Subd. 2. Assignment. Securities in physical form deposited with the commissioner of
finance must bear the following assignment, which shall be signed by an officer, partner, or owner:
"Assigned to the state of Minnesota for the benefit of injured employees of the self-insured
employer under the Minnesota Workers' Compensation Act." Any securities held in a custodial
account, whether in physical form, book entry, or other form, need not bear the assignment
language. The instrument or contract creating and governing any custodial account must contain
the following assignment language: "This account is assigned to the commissioner of finance
by the Company to pay compensation and perform the obligations of employers imposed under
Minnesota Statutes, chapter 176. A depositor or other party has no right, title, or interest in the
security deposited in the account until released by the state."
    Subd. 3. Custody. All securities in physical form on deposit with the commissioner of
finance and surety bonds on deposit shall remain in the custody of the commissioner of finance or
the commissioner for a period of time dictated by the applicable statute of limitations provided in
the Workers' Compensation Act. All original instruments and contracts creating and governing
custodial accounts shall remain with the commissioner of finance or the commissioner for
a period of time dictated by the applicable statute of limitations provided in the Workers'
Compensation Act.
    Subd. 4. Release. No securities in physical form on deposit with the commissioner of
finance or custodial accounts assigned to the state shall be released without an order from the
commissioner.
    Subd. 5. Exchanging or replacing. Any securities deposited with the commissioner of
finance or with a custodial account assigned to the commissioner of finance or surety bonds
held by the commissioner may be exchanged or replaced by the depositor with other acceptable
securities or surety bonds of like amount so long as the market value of the securities or amount
of the surety bond equals or exceeds the amount of deposit required. If securities are replaced by a
surety bond, the self-insurer must maintain securities on deposit in an amount sufficient to meet
all outstanding workers' compensation liability arising during the period covered by the deposit
of the replaced securities, subject to the limitations on maximum security deposits established
in Minnesota Rules.
History: 1992 c 510 art 5 s 9; 2003 c 112 art 2 s 50
79A.08 LEGISLATIVE INTENT.
It is the intent of the legislature in enacting sections 79A.08 to 79A.10 to provide for the
continuation of workers' compensation benefits delayed due to the failure of a private self-insured
employer to meet its compensation obligations, whenever the commissioner of commerce issues a
certificate of default or there is a declaration of 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 July
1, 1988. The legislature finds and declares that the establishment of the self-insurers' security fund
is a necessary component of a complete system of workers' compensation, required by chapter
176, to have adequate provisions for the comfort, health, safety, and general welfare of any and all
workers and their dependents to the extent of relieving the consequences of any industrial injury
or death, and full provision for securing the payment of compensation.
History: 1988 c 674 s 8
79A.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 317A.001 to 317A.909.
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 July
1, 1988, 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. The data shall become public data upon its receipt by the security fund.
    Subd. 5. Employees. Security fund employees are not state employees and are not subject to
any state civil service regulations.
History: 1988 c 674 s 9; 1989 c 304 s 131; 1995 c 231 art 2 s 26
79A.10 ASSUMPTION OF WORKERS' COMPENSATION OBLIGATIONS OF
INSOLVENT SELF-INSURER.
    Subdivision 1. Order of commissioner. Upon order of the commissioner pursuant to section
79A.04, 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.
History: 1988 c 674 s 10
79A.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
and retain the security deposit of an insolvent private self-insurer to apply to the private
self-insurer's current or future compensation obligations, including reasonable administrative and
legal costs, paid or assumed by the security fund and to other current or future obligations of 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. 2a. Replacement insurance policy. The insolvent self-insurer may obtain an
insurance policy as described in section 79A.06, subdivision 5, to discharge further workers'
compensation obligations assumed by the self-insurers' security fund on behalf of the insolvent
insurer. At the self-insurers' security fund's option and in its sole discretion, any part of the
insolvent self-insurer's security deposit may be used to fund the acquisition of this policy. After
the security deposit has been used to: (1) fund the acquisition of this policy; (2) pay all direct and
indirect administrative and professional expenses of the fund related to the insolvent self-insurer;
and (3) to the extent not covered by the insurance policy, pay the insolvent self-insurer's losses,
allocated loss expense and unallocated loss expense, any part of the insolvent self-insurer's
security deposit that remains must be promptly returned to the 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.
History: 1988 c 674 s 11; 2000 c 483 s 28,29
79A.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 ten percent of paid indemnity losses, as defined
in section 176.129, made by the self-insured employer during the preceding 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.
History: 1988 c 674 s 12; 1990 c 450 s 2; 2005 c 132 s 33
79A.13 AUDIT; ANNUAL REPORT.
The trustees shall annually contract for an independent certified audit of the financial
activities of the fund. An annual report on the financial status of the fund as of June 30 shall be
submitted to the commissioner and to each member.
The security fund shall be established on July 1, 1988, or 90 days after July 1, 1988,
whichever occurs later. All applications for private self-insurers which are made after July 1,
1988, prior to the establishment of the security fund, shall comply with all requirements of this
chapter. Applications for private self-insurers which are made after January 1, 1988, but prior to
July 1, 1988, shall, prior to the establishment of the security fund, comply with the requirements
of this chapter. The security fund shall be liable for payment of benefits only for members where
there has been a declaration of 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.
History: 1988 c 674 s 13
79A.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 ...............(issuing bank), 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)
History: 1988 c 674 s 14; 1990 c 426 art 1 s 11
79A.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
commissioner of finance, 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, or 30 days under
paragraph 10, 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, 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 and payment of assessments incurred by the surety in
discharging its obligations and payment of the principal's obligations for administration and legal
expenses and payment of assessments under Minnesota Statutes, chapters 79A and 176, shall also
be a charge against the penal sum of the bond.
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 (self-insurer's security fund) (commercial
self-insurance group security fund) and the commissioner of commerce, state of Minnesota,
within five business days of receipt of written notification from the commissioner of commerce,
state of Minnesota, pursuant to paragraph 7, to exercise its option to administer claims pursuant
to paragraph 8, then the (self-insurer's security fund) (commercial self-insurance security fund)
will assume the payments of the workers' compensation obligations of the principal pursuant
to Minnesota Statutes, chapter 176. Administrative, legal, actuarial, and other direct costs
attributed to the principal shall also be a charge against the penal sum of the bond. The surety
shall pay, within 30 days of the receipt of the notification by the commissioner of commerce,
state of Minnesota, pursuant to paragraph 7, to the (self-insurer's security fund) (commercial
self-insurance group security fund) as an initial deposit an amount equal to 50 percent of the
penal sum of the bond, and shall thereafter, upon notification from the (self-insurer's security
fund) (commercial self-insurance group security fund) that the balance of the initial deposit,
including interest earned as provided below with respect to the segregated account, had fallen to
ten percent of the penal sum of the bond, remit to the (self-insurer's security fund) (commercial
self-insurance group security fund) an amount equal to an additional ten percent of the penal
sum of the bond. All such payments will be a charge against the penal sum of the bond. The
initial deposit and all subsequent deposits shall be deposited by the (self-insurer's security fund)
(commercial self-insurance group security fund) into a segregated, interest-bearing account.
These deposits, together with any interest earned thereon, shall be used to satisfy all obligations of
the surety hereunder. Upon determination that there are no remaining reserves for any known
claims covered under the bond, the balance of the account, including any interest earned thereon,
shall be paid to the surety.
Said repayment of the funds to the surety will not discharge the bond, which shall remain
in full force and effect 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 the effective date of termination 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-insurer's security fund) (commercial self-insurance
group security fund) shall be resolved by the commissioner of commerce pursuant to Minnesota
Statutes, chapters 79A and 176.
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.
History: 1988 c 674 s 15; 1995 c 231 art 2 s 27; 2001 c 215 s 39; 2003 c 112 art 2 s 50
79A.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).
History: 1988 c 674 s 16
79A.17 RULES.
The commissioner may adopt, amend, and repeal rules reasonably necessary to carry out
the purposes of sections 79A.01 to 79A.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.
History: 1988 c 674 s 17
79A.18 EXISTING RULES.
If there is any inconsistency among any rule or statute and Laws 1988, chapter 674, Laws
1988, chapter 674, shall govern.
History: 1988 c 674 s 21

COMMERCIAL SELF-INSURANCE GROUPS

79A.19 COMMERCIAL SELF-INSURANCE GROUPS; DEFINITIONS.
    Subdivision 1. Scope. For the purposes of sections 79A.19 to 79A.32, the terms defined in
this section have the meanings given them. If there is any inconsistency between this section and
section 79A.01, the provisions of this section shall govern.
    Subd. 2. Accountant. "Accountant" means a certified public accountant who is not an
employee of any member of the commercial self-insurance group and is not affiliated with any
individual or organization providing services other than accounting services to the group.
    Subd. 3. Actuary. "Actuary" means an individual who has attained the status of associate
or fellow of the Casualty Actuarial Society who is not an employee of any member of the
commercial self-insurance group and is not affiliated with any individual or organization
providing services other than actuarial services to the group.
    Subd. 4. Common claims fund. "Common claims fund" means the cash, cash equivalents,
or investment accounts maintained by the commercial self-insurance group to pay its workers'
compensation liabilities.
    Subd. 5. Member. "Member" means an employer that participates in a commercial
self-insurance group.
    Subd. 6. Commercial self-insurance group. "Commercial self-insurance group" means a
group of employers that are self-insured for workers' compensation under chapter 176 and elects
to operate under sections 79A.19 to 79A.32 rather than sections 79A.01 to 79A.18.
    Subd. 7. Commercial self-insurance group security fund. "Commercial self-insurance
group security fund" means the commercial self-insurance group security fund established
pursuant to this chapter.
    Subd. 8. Trustees. "Trustees" means the board of trustees of the commercial self-insurance
group security fund.
History: 1995 c 231 art 2 s 28
79A.20 ELIGIBILITY REQUIREMENTS FOR COMMERCIAL SELF-INSURANCE
GROUPS.
    Subdivision 1. Group eligibility. A commercial self-insurance group consists of two or more
employers in similar industries. The commercial self-insurance group shall not incorporate or
form a business trust pursuant to chapter 318.
    Subd. 2. Membership eligibility. A commercial self-insurance group may only admit
employers who meet the eligibility requirements established by the group including financial
criteria, underwriting guidelines, risk profile, and any other requirements stated in the commercial
self-insurance group's bylaws or plan of operation.
History: 1995 c 231 art 2 s 29
79A.21 COMMERCIAL SELF-INSURANCE GROUP APPLICATION.
    Subdivision 1. Procedure. (a) Groups proposing to become licensed as commercial
self-insurance groups must complete and submit an application on a form or forms prescribed
by the commissioner.
(b) 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.
    Subd. 2. Required documents. All first-year applications must be accompanied by the
following:
(a) A detailed business plan including the risk profile of the proposed membership,
underwriting guidelines, marketing plan, minimum financial criteria for each member, and
financial projections for the first year of operation.
(b) A plan describing the method in which premiums are to be charged to the employer
members. The plan shall be accompanied by copies of the member's workers' compensation
insurance policies in force at the time of application. In developing the premium for the
group, the commercial self-insurance group shall base its premium on the Minnesota Workers'
Compensation Insurers Association's manual of rules, loss costs, and classifications approved
for use in Minnesota by the commissioner. Each member applicant shall, on a form approved by
the commissioner, complete estimated payrolls for the first 12-month period that the applicant
will be self-insured. Premium volume discounts per the plan will be permitted if they can be
shown to be consistent with actuarial standards.
(c) A schedule indicating actual or anticipated operational expenses of the commercial
self-insurance group. No authority to self-insure will be granted unless, over the term of the
policy year, at least 65 percent of total revenues from all sources for the year are available for
the payment of its claim and assessment obligations. For purposes of this calculation, claim and
assessment obligations include the cost of allocated loss expenses as well as special compensation
fund and commercial self-insurance group security fund assessments but exclude the cost of
unallocated loss expenses.
(d) An indemnity agreement from each member who will participate in the commercial
self-insurance group, signed by an officer of each member, providing for joint and several liability
for all claims and expenses of all of the members of the commercial self-insurance group arising
in any fund year in which the member was a participant on a form approved by the commissioner.
The indemnity agreement shall provide for assessments according to the group's bylaws on an
individual and proportionate basis.
(e) A copy of the commercial self-insurance group bylaws.
(f) Evidence of the security deposit required under section 79A.24, accompanied by the
actuarial certification study for the minimum security deposit as required under section 79A.24.
(g) Each initial member of the commercial self-insurance group shall submit to the
commercial self-insurance group accountant its most recent annual financial statement. 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. Individual group members constituting at least 50 percent of the group's
annual premium shall submit reviewed or audited financial statements. The remaining members
must submit compilation level statements. Statements for a period ending more than 12 months
prior to the date of application cannot be accepted.
(h) A compiled combined financial statement of all group members prepared by the
commercial self-insurance group's accountant and a list of members included in such statements.
An "Agreed Upon Procedures" report, as determined by the commissioner, indicating combined
net worth, total assets, cash flow, and net income of the group members may be filed in lieu of
the compiled combined financial statement.
(i) A copy of each member's accountant's report letter from the reports used in compiling
the combined financial statements.
(j) A list of all members and the percentage of premium each represents to the total group's
annual premium for the policy year.
    Subd. 3. Approval. The commissioner shall approve an application for self-insurance upon
a determination that all of the following conditions are met:
(1) a completed application and all required documents have been submitted to the
commissioner;
(2) the financial ability of the commercial self-insurance group is sufficient to fulfill all
obligations that may arise under this chapter or chapter 176;
(3) the annual premium of the commercial self-insurance group to be charged to initial
members is at least $400,000;
(4) the commercial self-insurance group has contracted with a service company to administer
its program; and
(5) the required securities or surety bond shall be on deposit prior to the effective date of
coverage for the commercial self-insurance group.
History: 1995 c 231 art 2 s 30; 1999 c 168 s 1,2; 1999 c 177 s 84
79A.22 COMMERCIAL SELF-INSURANCE GROUP OPERATING REQUIREMENTS.
    Subdivision 1. Board of directors. (a) A commercial self-insurance group shall elect a board
of directors who shall have complete authority over and control of the assets of the commercial
self-insurance group. The board of directors will also be responsible for all of the operations of
the commercial self-insurance group.
(b) The majority of the board of directors shall be owners, officers, directors, partners, or
employees of members of the commercial self-insurance group. No third-party administrator or
vendor of risk management services shall serve as a director of the commercial self-insurance
group.
(c) The directors shall approve applications for membership in the commercial self-insurance
group.
    Subd. 2. Financial standards. Commercial self-insurance groups shall have and maintain:
(1) combined net worth of all of the members in an amount at least equal to ten times the
group's selected retention level of the Workers' Compensation Reinsurance Association. For
purposes of this clause, the amount of any retained surplus by the group is considered part of
the combined net worth of all the members;
(2) sufficient assets and liquidity in the group's common claims fund to promptly and
completely meet all obligations of its members under this chapter and chapter 176.
    Subd. 3. New membership. The commercial self-insurance group shall file with the
commissioner the name of any new employer that has been accepted in the group prior to the
initiation date of membership along with the member's signed indemnity agreement and evidence
the member has deposited sufficient premiums with the group as required by the commercial
self-insurance group's bylaws or plan of operation. The security deposit of the group shall be
increased quarterly to an amount equal to 50 percent of the new members' premiums for that
quarter. If the total increase of new members' premiums for the first quarter is less than five
percent of the total annual premium of the group, no quarterly increase is necessary until the
cumulative quarterly increases for that calendar year exceed five percent of the total premium of
the group. The commissioner may, at the commissioner's option, review the financial statement of
any applicant whose premium equals 25 percent or more of the group's total premium.
    Subd. 4. Commercial self-insurance group common claims fund. (a) Each commercial
self-insurance group shall establish a common claims fund.
(b) Each commercial self-insurance group shall, not less than ten days prior to the proposed
effective date of the group, collect cash premiums from each member equal to not less than
20 percent of the member's annual workers' compensation premium to be paid into a common
claims fund, maintained by the group in a designated depository. The remaining balance of the
member's premium shall be paid to the group in a reasonable manner over the remainder of the
year. Payments in subsequent years shall be made according to the business plan.
(c) Each commercial self-insurance group shall initiate proceedings against a member when
that member becomes more than 15 days delinquent in any payment of premium to the fund.
(d) There shall be no commingling of any assets of the common claims fund with the assets
of any individual member or with any other account of the service company or fiscal agent
unrelated to the payment of workers' compensation liabilities incurred by the group.
    Subd. 5. Joint and several liability. Each member of a commercial self-insurance group
shall be jointly and severally liable for the obligations incurred by any member of the same group
under chapter 176 for any fund year in which the member was a participant of the commercial
self-insurance group.
    Subd. 6. Annual audit. The accounts and records of the common claims fund shall be
audited in the manner required under section 79A.03, subdivision 10.
    Subd. 7. Investments. (a) Any securities purchased by the common claims fund shall be
in such denominations and with dates of maturity to ensure securities may be redeemable at
sufficient time and in sufficient amounts to meet the fund's current and long-term liabilities.
(b) Cash assets of the self-insurers' fund may be invested as provided in section 60A.11 for a
casualty insurance company, provided that investment in real estate of or indebtedness from a
member company or affiliates is prohibited. In addition, investment in the following is allowed:
(1) savings accounts or certificates of deposit in a duly chartered commercial bank located
within the state of Minnesota and insured through the Federal Deposit Insurance Corporation;
(2) share accounts or savings certificates in a duly chartered savings association or savings
bank located within the state of Minnesota and insured through the Federal Deposit Insurance
Corporation;
(3) direct obligations of the United States Treasury, such as notes, bonds, or bills;
(4) a bond or security issued by the state of Minnesota and backed by the full faith and
credit of the state;
(5) a credit union where the employees of the self-insurer are members if the credit union is
located in Minnesota and insured through the National Credit Union Administration; or
(6) real estate, common stock, preferred stock, or corporate bonds listed on the New York,
American Stock Exchange or NASDAQ Stock Market, so long as these investments are not issued
by any member company or affiliate and the total in all other allowable categories make up at
least 75 percent of the total required in the common claims fund.
    Subd. 8. Administration. (a) The commercial self-insurance group shall be required to
secure administrative services through a service company which maintains an office in the state of
Minnesota. Services provided by the service company or its subcontractor should at a minimum
include claim handling, safety and loss control, and submission of all required regulatory reports.
(b) The service company must demonstrate it has the capability to provide, through its
employees or by contract, services which are necessary to administer the self-insurance group and
it must employ or have under contract a claims adjuster with at least three years of Minnesota
specific workers' compensation claim handling experience.
(c) The service company retained by a commercial self-insurance group to administer
workers' compensation claims shall estimate the total accrued liability of the group for the payment
of compensation for the commercial self-insurance group'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.
    Subd. 9. Marketing and communications. A commercial self-insurance group's
applications, coverage documents, quotations, and all marketing materials must prominently
display information indicating that the commercial self-insurance group is a self-insured program,
that members are jointly and severally liable for the obligations of the commercial self-insurance
group, and that members will be assessed on an individual and proportionate basis for any deficits
created by the commercial self-insurance group.
    Subd. 10. Reinsurance. (a) A commercial self-insurance group shall be required to purchase
specific excess coverage with the Workers' Compensation Reinsurance Association at the lower
retention level for its first three years of operation. After that time it may select the higher or super
retention level with prior notice given to and approval of the commissioner.
(b) The commissioner may require a commercial self-insurance group to purchase aggregate
excess coverage. Any reinsurance or excess coverage purchased other than that of the Workers'
Compensation Reinsurance Association must be secured with an insurance company or reinsurer
licensed to underwrite such coverage in Minnesota and maintains at least an "A" rating with
the A.M. Best rating organization.
    Subd. 11. Disbursement of fund surplus. (a) Except as otherwise provided in paragraphs
(b) and (c), 100 percent of any surplus money for a fund year in excess of 125 percent of the
amount necessary to fulfill all obligations under the Workers' Compensation Act, chapter 176, for
that fund year may be declared refundable to eligible members at any time.
(b) Except as otherwise provided in paragraph (c), for groups that have been in existence for
five years or more, 100 percent of any surplus money for a fund year in excess of 110 percent of
the amount necessary to fulfill all obligations under the Workers' Compensation Act, chapter 176,
for that fund year may be declared refundable to eligible members at any time.
(c) Excess surplus distributions under paragraphs (a) and (b) may not be greater than the
combined surplus of the group at the time of the distribution.
(d) When all the claims of any one fund year have been fully paid, as certified by an actuary,
all surplus money from that fund year may be declared refundable.
(e) The commercial self-insurance group shall give ten days' prior notice to the commissioner
of any refund. The notice must be accompanied by a statement from the commercial self-insurer
group's certified public accountant certifying that the proposed refund is in compliance with
this subdivision.
    Subd. 12. Satisfaction of fund deficit. In the event of a deficit in any fund year, such deficit
shall be paid up immediately, either from surplus from a fund year other than the current fund
year, or by assessment of the membership. The commissioner shall be notified within ten days of
any transfer of surplus funds. The commissioner, upon finding that a deficit in a fund year has
not been satisfied by a transfer of surplus from another fund year, shall order an assessment to
be levied on a proportionate basis against the members of the commercial self-insurance group
during that fund year sufficient to make up any deficit.
    Subd. 13. Common claims fund; five-year exception. For commercial group self-insurers
who have been in existence for five years or more, a level of funding in the common claims fund
must be maintained at not less than the greater of either:
(1) one year's claim losses paid in the most recent year; or
(2) one-third of the security deposit posted with the Department of Commerce according to
section 79A.24, subdivision 2.
This provision supersedes any requirements under subdivisions 11 and 12 and Minnesota
Rules, part 2780.5000.
    Subd. 14. All states coverage. Policies issued by commercial self-insurance groups pursuant
to this chapter may also provide workers' compensation coverage required under the laws of states
other than Minnesota, commonly known as "all states coverage." The coverage must be provided
to members of the group which are temporarily performing work in another state.
History: 1995 c 231 art 2 s 31; 1998 c 339 s 3,4; 1999 c 168 s 3; 2000 c 483 s 30-32;
2005 c 132 s 34,35
79A.23 COMMERCIAL SELF-INSURANCE GROUP REPORTING REQUIREMENTS.
    Subdivision 1. Required reports to commissioner. Each commercial self-insurance group
shall submit the following documents to the commissioner.
(a) An annual report shall be submitted by April 1 showing the incurred losses, paid and
unpaid, specifying indemnity and medical losses by classification, payroll by classification, and
current estimated outstanding liability for workers' compensation on a calendar year basis, in a
manner and on forms available from the commissioner. In addition each group will submit a
quarterly interim loss report showing incurred losses for all its membership.
(b) Each commercial self-insurance group shall submit within 45 days of the end of each
quarter:
(1) a schedule showing all the members who participate in the group, their date of inception,
and date of withdrawal, if applicable;
(2) a separate section identifying which members were added or withdrawn during that
quarter; and
(3) an internal financial statement and copies of the fiscal agent's statements supporting the
balances in the common claims fund.
(c) The commercial self-insurance group shall submit an annual certified financial audit
report of the commercial self-insurance group fund by April 1 of the following year. The report
must be accompanied by an expense schedule showing the commercial self-insurance group's
operational costs for the same year including service company charges, accounting and actuarial
fees, fund administration charges, reinsurance premiums, commissions, and any other costs
associated with the administration of the group program.
(d) An officer of the commercial self-insurance group shall, under oath, attest to the
accuracy of each report submitted under paragraphs (a), (b), and (c). Upon sufficient cause, the
commissioner shall require the commercial self-insurance group 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:
(1) where the losses reported appear significantly different from similar types of groups;
(2) where major changes in the reports exist from year to year, which are not solely
attributable to economic factors; or
(3) where the commissioner has reason to believe that the losses and payroll in the report do
not accurately reflect the losses and payroll of the commercial self-insurance group.
If any discrepancy is found, the commissioner shall require changes in the commercial
self-insurance group's business plan or service company record-keeping practices.
(e) Each commercial self-insurance group shall submit by September 15 a copy of the
group's annual federal and state income tax returns or provide proof that it has received an
exemption from these filings.
(f) With the annual loss report each commercial self-insurance group shall report to the
commissioner any worker's compensation claim where the full, undiscounted value is estimated to
exceed $50,000, in a manner and on forms prescribed by the commissioner.
(g) Each commercial self-insurance group shall submit by May 1 a list of all members and the
percentage of premium each represents to the total group's premium for the previous calendar year.
(h) Each commercial self-insurance group shall submit by October 15 the following
documents prepared by the group's certified public accountant:
(1) a compiled combined financial statement of group members and a list of members
included in this statement. An "Agreed Upon Procedures" report, as determined by the
commissioner, indicating combined net worth, total assets, and net income of the group members
may be filed in lieu of the compiled combined financial statement; and
(2) a report that the statements which were combined have met the requirements of
subdivision 2.
(i) If any group member comprises over 25 percent of total group premium, that member's
financial statement must be reviewed or audited, and, at the commissioner's option, must be filed
with the commissioner by October 15 of the following year.
(j) Each commercial self-insurance group shall submit a copy of each member's accountant's
report letter from the reports used in compiling the combined financial statements. This
requirement does not apply to any group that has been in existence for at least three years.
    Subd. 2. Required reports from members to group. (a) Each member of the commercial
self-insurance group shall, by September 15, submit to the group its most recent annual financial
statement, together with other financial information the group may require. These financial
statements submitted must not have a fiscal year end date older than January 15 of the group's
calendar year end. Individual group members constituting at least 25 percent of the group's annual
premium shall submit to the group reviewed or audited financial statements. The remaining
members must submit compilation level statements.
(b) For groups that have been in existence for at least three years, individual group members
may satisfy the requirements of paragraph (a) by submitting compiled, reviewed, or audited
statements or the most recent federal income tax return filed by the member.
    Subd. 3. Operational audit. (a) The commissioner may conduct an operational audit
of the commercial self-insurance group's claim handling and reserve practices as well as its
underwriting procedures to determine if they adhere to the group's business plan and sound
business practices. The commissioner may select outside consultants to assist in conducting
the audit. After completion of the audit, the commissioner shall either renew or revoke the
commercial self-insurance group's authority to self-insure. The commissioner may also order any
changes deemed necessary in the claims handling, reserving practices, or underwriting procedures
of the group.
(b) The cost of the operational audit shall be borne by the commercial self-insurance group.
    Subd. 4. Unit statistical report. Each commercial self-insurance group will annually file a
unit statistical report to the Minnesota Workers' Compensation Insurers Association.
History: 1995 c 231 art 2 s 32; 1998 c 339 s 5,6; 1999 c 168 s 4; 1999 c 177 s 85,86;
2000 c 483 s 33-35; 2006 c 255 s 70
79A.24 COMMERCIAL SELF-INSURANCE GROUP SECURITY DEPOSIT.
    Subdivision 1. Annual securing of liability. Each year every commercial self-insurance
group shall secure its estimated future liability for the payment of compensation and the
performance of the obligations of its membership imposed under chapter 176. A new deposit
must be posted within 30 days of the filing of the commercial self-insurance group's annual
actuarial report with the commissioner.
    Subd. 2. Minimum deposit. The minimum deposit is 125 percent of the commercial
self-insurance group's estimated future liability for the payment of compensation as determined
by an actuary. If the group has been in existence for three years, this minimum deposit shall be
110 percent of the commercial self-insurance group's estimated future liability for the payment
of workers' compensation as determined by an actuary. Each actuarial study shall include a
projection of future losses during a one-year period until the next scheduled actuarial study, less
payments anticipated to be made during that time. Deduction should be made for the total amount
which is estimated to be returned to the commercial self-insurance group from any specific
excess insurance coverage, aggregate excess insurance coverage, and any supplementary benefits
which are estimated to be reimbursed by the special compensation fund. Supplementary 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 required reports 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 group's selected retention limit of the Workers'
Compensation Reinsurance Association. The posting or depositing of security under 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
commercial self-insurance group shall deposit as security, cash, approved government securities
as set forth in section 176.181, subdivision 2b, surety bonds or irrevocable letters of credit in any
combination in accordance with the requirements under section 79A.04, subdivision 3.
    Subd. 4. Custodial accounts. (a) All surety bonds, irrevocable letters of credit, and
documents showing issuance of any irrevocable letter of credit shall be deposited in accordance
with the provisions of section 79A.071.
(b) Upon the commissioner sending a request to renew, request to post, or request to increase
a security deposit, a perfected security interest is created in the commercial self-insurance group's
and member's assets in favor of the commissioner to the extent of any then unsecured portion
of the commercial self-insurance group's incurred liabilities. The perfected security interest is
transferred to any cash or securities thereafter posted by the commercial self-insurance group with
the commissioner of finance and is released only upon either of the following:
(1) the acceptance by the commissioner of a surety bond or irrevocable letter of credit for the
full amount of the incurred liabilities for the payment of compensation; or
(2) the return of cash or securities by the commissioner. The commercial self-insurance
group loses all right, title, and interest in and any right to control all assets or obligations posted
or left on deposit as security. In the event of a declaration of 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 commercial self-insurance group security fund for application to the commercial
self-insurance group's incurred liability.
(c) No securities in physical form on deposit with the commissioner of finance or the
commissioner or custodial accounts assigned to the state shall be released or exchanged without
an order from the commissioner. No security can be exchanged more than once every 90 days.
(d) Any securities deposited with the commissioner of finance or with a custodial account
assigned to the commissioner of finance or letters of credit or surety bonds held by the
commissioner may be exchanged or replaced by the depositor with any other acceptable securities
or letters of credit or surety bond of like amount so long as the market value of the securities or
amount of the surety bonds or letter of credit equals or exceeds the amount of the deposit required.
If securities are replaced by surety bond, the commercial self-insurance group must maintain
securities on deposit in an amount sufficient to meet all outstanding workers' compensation
liability arising during the period covered by the deposit of the replaced securities.
History: 1995 c 231 art 2 s 33; 1998 c 339 s 7-9; 1999 c 168 s 5; 2000 c 483 s 36; 2003 c
112 art 2 s 50
79A.25 DEFAULT OF A COMMERCIAL SELF-INSURANCE GROUP.
    Subdivision 1. Notice of insolvency, bankruptcy, or default. The commissioner of labor
and industry shall notify the commissioner and the commercial self-insurance group security fund
if the commissioner of labor and industry has knowledge that any commercial self-insurance
group has failed to pay workers' compensation benefits as required by chapter 176. If the
commissioner determines that a court of competent jurisdiction has declared the commercial
self-insurance group to be bankrupt or insolvent and the commercial self-insurance group has
failed to pay workers' compensation as required by chapter 176 or if the commissioner issues
a certificate of default against a commercial self-insurance group for failure to pay workers'
compensation as required by chapter 176, then the security deposit posted by the commercial
self-insurance group shall be utilized to administer and pay the commercial self-insurance group's
workers' compensation obligation.
    Subd. 2. Revocation of certificate to self-insure. (a) The commissioner shall revoke the
commercial self-insurance group's certificate to self-insure once notified of the commercial
self-insurance group's bankruptcy, insolvency, or upon issuance of a certificate of default.
The revocation shall be completed as soon as practicable, but no later than 30 days after the
commercial self-insurance group's security has been called.
(b) The commissioner shall also revoke a commercial self-insurance group's authority to
self-insure on the following grounds:
(1) failure to comply with any lawful order of the commissioner;
(2) failure to comply with any provision of chapter 176;
(3) a deterioration of the commercial self-insurance group's financial condition affecting
its ability to pay obligations in chapter 176;
(4) committing an unfair or deceptive act or practice as defined in section 72A.20; or
(5) failure to abide by the plan of operation of the Workers' Compensation Reinsurance
Association.
    Subd. 3. Notice by commissioner. In the event of bankruptcy, insolvency, or certificate of
default, the commissioner shall immediately notify by certified mail the commissioner of finance,
the surety, the issuer of an irrevocable letter of credit, and any custodian of the security. At
the time of notification, the commissioner shall also call the security and transfer and assign it
to the commercial self-insurance group security fund. The commissioner shall also notify by
certified mail the commercial self-insurance group's security fund and order the commercial
security fund to assume the insolvent commercial self-insurance group's obligations for which it
is liable under chapter 176.
History: 1995 c 231 art 2 s 34; 2003 c 112 art 2 s 50
79A.26 COMMERCIAL SELF-INSURANCE GROUP SECURITY FUND.
    Subdivision 1. Creation. The commercial self-insurance group security fund is established as
a nonprofit corporation pursuant to the Minnesota Nonprofit Corporation Act, sections 317A.001
to 317A.909. If any provision of the Minnesota Nonprofit Corporation Act conflicts with any
provision of this chapter, the provisions of this chapter apply. Each commercial self-insurance
group that elects to be subject to the terms of sections 79A.19 to 79A.32 rather than sections
79A.01 to 79A.18 shall participate in the commercial self-insurance group security fund. This
participation shall be a condition of maintaining its certificate to self-insure.
    Subd. 2. Board of trustees. The commercial security fund shall be governed by a
board consisting of a minimum of three and maximum of five trustees. The trustees shall be
representatives of commercial self-insurance groups who shall be elected by the participants of
the commercial security fund, each group having one vote. The trustees initially elected by the
participants shall serve staggered terms of either two or three years. Thereafter, trustees shall be
elected to three-year terms and shall serve until their successors are elected and assume office
pursuant to the bylaws of the commercial security fund. Two additional trustees shall be appointed
by the commissioner. Initially, 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 according to the bylaws of the commercial security fund. In addition to the
trustees elected by the participants 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 commercial 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 commercial security fund. The commercial
security fund may carry out its responsibilities directly or by contract, and may purchase
services and insurance and borrow funds it deems necessary for the protection of the commercial
self-insurance group participants and their employees.
    Subd. 4. Confidential information. The commercial security fund may receive private data
concerning the financial condition of commercial self-insurance groups whose liabilities to pay
compensation have become its responsibility and shall adopt bylaws to prevent dissemination
of that information.
    Subd. 5. Employees. Commercial security fund employees are not state employees and are
not subject to any state civil service regulations.
    Subd. 6. Assumption of obligations. Upon order of the commissioner under section 79A.25,
subdivision 3
, the commercial security fund shall assume the workers' compensation obligations
of an insolvent commercial self-insurance group. The commissioner shall further order the
commercial self-insurance group security fund to commence payment of these obligations within
14 days of the receipt of this notification and order.
    Subd. 7. Act or omissions; penalties. Notwithstanding subdivision 6, the commercial
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 commercial security fund or its appointed administrator,
including, but not limited to, the penalties provided in chapter 176 unless the commercial security
fund or its appointed administrator would be subject to penalties under chapter 176 as the result of
the actions of the commercial security fund or its administrator.
    Subd. 8. Party in interest. The commercial security fund shall be a party in interest in all
proceedings involving compensation claims against an insolvent commercial self-insurance group
whose compensation obligations have been paid or assumed by the commercial security fund. The
commercial security fund shall have the same rights and defenses as the insolvent commercial
self-insurance group, 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. 9. Payments to commercial security fund. Notwithstanding sections 79A.19 to
79A.32 or chapter 176 to the contrary, in the event that the commercial self-insurance group
security fund assumes the obligations of any bankrupt or insolvent commercial self-insurance
group 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 supplementary benefit reimbursements shall be paid to the
commercial self-insurance group security fund instead of the bankrupt or insolvent commercial
self-insurance group or its successor in interest. No special compensation fund reimbursements
shall be made to the commercial security fund unless the special compensation fund assessments
under section 176.129 are paid and the required reports are made to the special compensation fund.
    Subd. 10. Insolvent commercial self-insurance group. The commercial security fund
shall have the right and obligation to obtain reimbursement from an insolvent commercial
self-insurance group up to the amount of the commercial self-insurance group's workers'
compensation obligations paid and assumed by the commercial 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 commercial self-insurance group as debtor.
    Subd. 11. Security deposits. The commercial security fund shall have the right and
obligation to obtain from the security deposit of an insolvent commercial self-insurance group the
amount of the commercial self-insurance group's compensation obligations, including reasonable
administrative and legal costs, paid or assumed by the commercial security fund. Reimbursement
of administrative costs, including legal costs, shall be subject to approval by a majority of the
commercial security fund's voting trustees. The commercial 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 commercial self-insurance group.
    Subd. 12. Legal actions. The commercial security fund shall have the right to bring an
action against any person or entity to recover compensation paid and liability assumed by the
commercial security fund, including, but not limited to, any excess insurance carrier of the
insolvent commercial self-insurance group and any person or entity whose negligence or breach
of an obligation contributed to any underestimation of the commercial self-insurance group's
accrued liability as reported to the commissioner.
    Subd. 13. Party in interest. The commercial 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
commercial self-insurance group to pay workers' compensation required under this subdivision.
    Subd. 14. Assets maintained. The commercial 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 commercial
self-insurance group pending receipt of the security deposit, surety bond proceeds, irrevocable
letter of credit, or, if necessary, assessment of the participants. The commissioner may establish
the minimum amount to be maintained by, or immediately available to, the commercial security
fund for this purpose.
    Subd. 15. Assessment. The commercial security fund may assess each of its participants a
pro rata share of the funding necessary to carry out its obligation and the purposes of sections
79A.19 to 79A.32. Total annual assessments in any calendar year shall be a percentage 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 under
this subdivision may only be used for the purposes of sections 79A.19 to 79A.32. 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.
    Subd. 16. Audit of fund. 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
commercial self-insurance group security fund shall be submitted to the commissioner and to
each commercial group participant.
History: 1995 c 231 art 2 s 35; 1998 c 339 s 10
79A.27 INDEMNITY AGREEMENT FORM.
INDIVIDUAL AND PROPORTIONATE INDEMNITY AGREEMENT
WHEREAS, (name of company) has agreed to be and has been accepted as a member of
(name of commercial self-insurance group).
WHEREAS, (name of company) has agreed to be bound by all of the provisions of the
Minnesota Workers' Compensation Act and all rules promulgated thereunder.
WHEREAS, that (name of company) has agreed to be bound by bylaws or plan of operation
and all amendments thereto of (name of commercial self-insurance group);
NOW THEREFORE, IT IS AGREED that:
1. (Name of company) shall be jointly and severally liable for all claims and expenses of all
the members of (name of commercial self-insurance group) arising in any fund year in which
(name of company) is a member of the commercial self-insurance group.
2. (Name of commercial self-insurance group) shall assess (name of company) on
an individual and proportionate basis for its share of the total liability of the commercial
self-insurance group.
3. In the event that (name of company) is not a member for the full year, it shall be only
liable for a pro rata share of that liability.
IN WITNESS WHEREOF, the (name of company) and (name of commercial self-insurance
group) have caused this indemnity agreement to be executed by its authorized officers:

Commercial Self-Insurance Group Name
Company Name

By:

By:


date:

date:

History: 1995 c 231 art 2 s 36
79A.28 OPEN MEETING; ADMINISTRATIVE PROCEDURE ACT.
The commercial self-insurance group 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.
History: 1995 c 231 art 2 s 37
79A.29 RULES.
The commissioner may adopt, amend, and repeal rules reasonably necessary to carry out the
purposes of this chapter. Minnesota Rules, chapter 2780, shall apply to commercial self-insurance
groups unless otherwise specified by rule.
History: 1995 c 231 art 2 s 38
79A.30 GOVERNING LAW.
If there is any inconsistency between sections 79A.19 to 79A.32 and any other statute or
rule, the provisions of sections 79A.19 to 79A.32 shall govern with respect to commercial
self-insurance groups.
History: 1995 c 231 art 2 s 39
79A.31 COMMERCIAL SELF-INSURANCE GROUP SECURITY FUND MEMBERSHIP;
WITHDRAWAL FROM SELF-INSURERS' SECURITY FUND.
    Subdivision 1. Withdrawal. Any group self-insurer that is a member of the self-insurers'
security fund established under section 79A.09, may elect to withdraw from that fund and become
a member of the commercial self-insurance group security fund established under section 79A.26.
The transferring group shall be subject to the provisions and requirements of sections 79A.19
to 79A.32 as of the date of transfer. Additional security may be required pursuant to section
79A.24. Group self-insurers electing to transfer to the commercial self-insurance group fund shall
not be subject to the provisions of section 79A.06, subdivision 5, including, but not limited to,
assessments by the self-insurers' security fund. Notice of transfer must be filed by November 1 for
all transfers that must be effective at midnight on December 31.
    Subd. 2. Transfer; notice to commissioner. A group self-insurer shall provide to the
commissioner written notice of its intent to transfer membership to the commercial self-insurance
group security fund. The notice shall be sent at least 30 days prior to the date the group self-insurer
requests membership in the commercial self-insurance group security fund.
    Subd. 3. Transfer of potential and contingent liabilities. Upon transfer pursuant to
subdivision 1, the commercial self-insurance group security fund shall assume all of the past,
present, and future potential and contingent workers' compensation liabilities of the transferring
group in the event of any bankruptcy or insolvency of that group or its failure to meet its
obligations under this chapter and chapter 176.
    Subd. 4. Election. A group self-insurer established after August 1, 1995, may elect to become
a member of either the self-insurers' security fund or the commercial self-insurance group security
fund. However, once the election is made, a group may not transfer to the other security fund.
History: 1995 c 231 art 2 s 40; 1996 c 305 art 1 s 26; 1998 c 339 s 11
79A.32 REPORTING TO LICENSED DATA SERVICE ORGANIZATIONS.
    Subdivision 1. [Repealed by amendment, 2006 c 255 s 71]
    Subd. 2. Permitted activity. Through data service organizations licensed under chapter
79, self insurers may:
(1) individually, or with self-insurers commonly owned, managed, or controlled, conduct
research and collect statistics to investigate, identify, and classify information relating to causes or
prevention of losses; and
(2) at the request of a private self-insurer or self-insurer group, submit and collect data,
including payroll and loss data; and perform calculations, including calculations of experience
modifications of individual self-insured employers.
    Subd. 3. [Repealed by amendment, 2006 c 255 s 71]
History: 1995 c 231 art 2 s 41; 2006 c 255 s 71