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Introduced Version Senate Bill 472 History

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Key: Green = existing Code. Red = new code to be enacted
Senate Bill No. 472

(By Senator Minard)

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[Introduced January 28, 2008; referred to the Committee on Banking and Insurance; and then to the Committee on Finance.]

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A BILL to repeal §23-2C-9 of the Code of West Virginia, 1931, as amended; to amend and reenact §23-2C-2 and §23-2C-10 of said code; and to amend and reenact §33-26-3, §33-26-5, §33-26-6, §33-26-8 and §33-26-12 of said code, all relating to an assigned risk plan and guaranty association account for workers' compensation insurance; defining terms; eliminating certain funds in the Treasurer's office and transferring moneys in such funds to the Old Fund; eliminating the requirement that private carriers maintain an office in this state; providing for the establishment and operation of an assigned risk plan; making workers' compensation insurance applicable to the Insurance Guaranty Association Act; establishing a new account to be administered by the West Virginia Insurance Guaranty Association; modifying standards for paying duplicate claims; and providing that limits on benefits payable by the guaranty association are not applicable to obligations arising out of workers' compensation insurance.

Be it enacted by the Legislature of West Virginia:
That §23-2C-9 of the Code of West Virginia, 1931, as amended, be repealed; that §23-2C-2 and §23-2C-10 of said code be amended and reenacted; and that §33-26-3, §33-26-5, §33-26-6, §33-26-8 and §33-26-12 of said code be amended and reenacted, all to read as follows:
CHAPTER 23. WORKERS' COMPENSATION.

ARTICLE 2C. EMPLOYERS' MUTUAL INSURANCE COMPANY.
§23-2C-2. Definitions.
(a) "Executive director" means the Executive Director of the West Virginia Workers' Compensation Commission as provided in section one-b, article one of this chapter.
(b) "Commission" means the West Virginia Workers' Compensation Commission as provided by section one, article one of this chapter.
(c) "Insurance Commissioner" means the Insurance Commissioner of West Virginia as provided in section one, article two, chapter thirty-three of this code.
(d) "Company" or "successor to the commission" means the employers' mutual insurance company created pursuant to the terms of this article.
(e) "Policy default" shall mean means a policyholder that has failed to comply with the terms of its workers' compensation insurance policy and is consequently without workers' compensation insurance coverage.
(f) Industrial "Workers' compensation insurance" means insurance which provides all compensation and benefits required by this chapter.
(g) "Insurer" includes:
(1) A self-insured employer; and
(2) A private carrier.
(h) "Industrial Council" means the advisory group established in section five of this article.
(I) "Mutualization Transition Fund" shall be is a fund over which the State Treasurer is custodian. Moneys transferred or otherwise payable to the Mutualization Transition Fund shall be deposited in the State Treasury to the credit of the Mutualization Transition Fund. Disbursements shall be made from the Mutualization Transition Fund upon requisitions signed by the executive director, and, upon termination of the commission, the Insurance Commissioner, and shall be reasonably related to the legal, operational, consultative and human resource-related expenses associated with the establishment of the company and the transferring of personnel from the commission to the company.
(j) "New Fund" shall mean means a fund owned and operated by the commission and, upon termination of the commission, the successor organization of the West Virginia Workers' Compensation Commission and shall consist consists of those funds transferred to it from the Workers' Compensation Fund and any other applicable funds. New Fund shall include includes all moneys due and payable to the Workers' Compensation Fund for the quarters ending the thirtieth day of September, two thousand five, and the thirty-first day of December, two thousand five, which have not been collected by the Workers' Compensation Fund as of the thirty-first day of December, two thousand five.
(k) "New Fund liabilities" shall mean means all claims payment obligations (indemnity and medical expenses) for all claims, actual and incurred but not reported, for any claim with a date of injury or last exposure on or after the first day of July, two thousand five: Provided, That New Fund liabilities shall begin with claims payments becoming due and owing on said claims on or after the first day of January, two thousand six.
(l) "Old Fund" shall mean means a fund held by the State Treasurer's office consisting of those funds transferred to it from the Workers' Compensation Fund or other sources and those funds due and owing the Workers' Compensation Fund as of the thirtieth day of June, two thousand five, that are thereafter collected. The Old Fund and assets therein shall in the fund remain property of the state and shall do not novate or otherwise transfer to the company.
(m) "Old Fund liabilities" mean all claims payment obligations (indemnity and medical expenses), related liabilities and appropriate administrative expenses necessary for the administration of all claims, actual and incurred but not reported, for any claim with a date of injury or last exposure on or before the thirtieth day of June, two thousand five: Provided, That Old Fund liabilities shall include all claims payments for any claim, regardless of date of injury or last exposure, through the thirty-first day of December, two thousand five: Provided, however, That Old Fund liabilities shall include all claims with dates of injuries or last exposure prior to the first day of July, two thousand four, for bankrupt self-insured employers that had defaulted on their claims obligations which have been recognized by the commission in its actuarially determined liability number as of the thirtieth day of June, two thousand five.
(n) "Private carrier" means any insurer or the legal representative of an insurer authorized by the Insurance Commissioner to provide workers' compensation insurance pursuant to this chapter. and which maintains an office in the state. The term does not include a self-insured employer or private employers but shall does include any successor to the commission.
(o) "Uninsured Employer Fund" means a fund held by the State Treasurer's office consisting of those funds transferred to it from the Workers' Compensation Fund and any other source. Disbursements from the Uninsured Employer Fund shall be upon requisitions signed by the Insurance Commissioner, and as otherwise set forth in an exempt legislative rule promulgated by the Workers' Compensation Board of Managers.
(p) "Self-Insured Employer Guaranty Risk Pool" shall be is a fund held by the State Treasurer's office consisting of those funds transferred to it from the guaranty pool created pursuant to 85 CSR 19 (2004) (2007) and any future funds collected through continued administration of that exempt legislative rule as administered by the Insurance Commissioner. Disbursements shall be made from the Self-Insured Employer Guaranty Risk Pool upon requisitions signed by the Insurance Commissioner. The obligations of the fund shall be are as provided in 85 CSR 19 (2004) (2007).
(q) "Self-Insured Employer Security Risk Pool" shall be is a fund held by the state's State Treasurer consisting of those funds paid into it through the Insurance Commissioner's administration of 85 CSR 19 (2004) (2007). Disbursement from said the fund shall be made from the Self-Insured Employer Security Risk Pool upon requisitions signed by the Insurance Commissioner. The obligations of the fund shall be are as provided in 85 CSR 19: Provided, That said the liabilities shall be are limited to those self-insured employers who default on their claims obligations after the termination of the commission.
(r) "Private Carrier Guaranty Fund" shall be is a fund held by the State Treasurer's office consisting of funds deposited pursuant to this article. Disbursements shall be made from the Private Carrier Guaranty Fund upon requisitions signed by the Insurance Commissioner. The obligations of the fund shall be are as provided in this article. The Private Carrier Guaranty Fund terminates on the thirtieth day of June, two thousand eight, and any moneys remaining in the fund on the date of its termination shall be transferred to the Old Fund.
(s) "Assigned Risk Fund" shall be is a fund held by the State Treasurer's office consisting of funds deposited pursuant to this article. Disbursements shall be made from the Assigned Risk Fund upon requisitions signed by the Insurance Commissioner. The obligations of the fund shall be are as provided in this article. The Assigned Risk Fund terminates on the thirtieth day of June, two thousand eight, and any moneys remaining in the fund on the date of its termination shall be transferred to the Old Fund.
(t) "Comprehensive financial plan" shall mean means the plan compiled by the director for acceptance by the Insurance Commissioner identifying and forecasting cash flows, funding sources, debt terms and structures and scheduled amortization and permanent resolution of all Old Fund liabilities. The comprehensive financial plan shall provide for the retirement of the revenue bonds authorized by article two-d of this chapter and all realized and potential claims against the Old Fund shall be fully reserved. The comprehensive financial plan may include any other information the Insurance Commissioner may require as a basis for managing the post-transition fiscal soundness of the Old Fund.
(u) "Voluntary market" means the workers' compensation insurance market in which insurers voluntarily offer coverage to applicants who meet the insurers' underwriting standards or guidelines.
§23-2C-10. West Virginia adverse risk assignment.
(a) The Insurance Commissioner shall provide for the development and administration of an assigned risk plan to provide workers' compensation insurance coverage to employers who are unable to procure coverage in the voluntary market.
(a) (b) To qualify for adverse risk assignment coverage under the plan, an employer must have been categorically declined coverage by at least two insurers that are not affiliated with each other. The employer shall have has the burden of establishing that at least two unaffiliated insurers are unwilling to provide coverage at any premium level that is reasonably related to the risk presented by the employer. The assigned risk plan may also provide for other reasonable qualifications and for the termination of coverage under the plan for specified reasons.
(b) To qualify for adverse risk assignment, the employer shall make an application to the Insurance Commissioner and shall submit the evidence described in subsection (a) of this section.
(c) Upon receipt of the adverse risk assignment application, the Insurance Commissioner shall determine whether subsection (a) of this section has been satisfied. If so, the Insurance Commissioner shall, through the Assigned Risk Fund, provide
(c) Any employer that satisfies the requirements of subsection (b) of this section and other qualifications established in the plan shall be provided
coverage to the applicant at a premium level to be determined or approved by the Insurance Commissioner, which premiums shall be consistent with generally accepted accounting principles, actuarially sound, and consistent with classification and rate-making methodologies found in the insurance industry, All rates, surcharges or assessments and assignment of adverse risk employers shall be fair and equitable and financially sound in accordance with generally accepted accounting principles. and calculated to enable the plan to be self-sustaining and, to the greatest extent possible, able to operate without subsidies from employers and insurers in the voluntary market. Rates may not be excessive, inadequate or unfairly discriminatory.
(d) The coverage provided by this section shall be pursuant to a pooling arrangement managed by the Insurance Commissioner. The Insurance Commissioner may contract with designate any third party, including any private carrier or rating organization with substantial experience in administering similar programs in other states, to develop and administer this pooling arrangement. Costs necessary to operate this pooling arrangement shall be funded by premiums paid by covered employers, surcharges, if any, to covered employers and assessments to private carriers providing Workers' Compensation insurance in this state. the assigned risk plan: Provided, That the Insurance Commissioner must approve the plan prior to the plan becoming operative. The plan established pursuant to this section shall require that all private carriers participate as a condition of their authority to transact business in this state.
(e) The Workers' Compensation Board of Managers shall promulgate a rule for the establishment of the pooling mechanism and administration thereof; assessment of private carriers; and rating structure with differing rate tiers for insureds.
(f) As often as necessary
(e) In the event the plan incurs a deficit in one or more policy years, the Insurance Commissioner may assess all private carriers providing Workers' Compensation insurance in this state such voluntary market funds as are necessary to cover any deficiencies in the pooling arrangement the deficits. The assessments shall result in an equitable distribution of costs among private carriers based upon premiums received by the private carriers in the private market. Assessments made upon the policies of each private carriers carrier pursuant to this section may be collected by each carrier from its policy holders in the form of a surcharge.
CHAPTER 33. INSURANCE.

ARTICLE 26. WEST VIRGINIA GUARANTY ASSOCIATION ACT.
§33-26-3. Scope.

This article shall apply applies to all kinds of direct insurance, except life, title, surety, disability, credit, mortgage guaranty and ocean marine and workers' compensation insurance.
§33-26-5. Definitions.

As used in this article:
(1) "Account" means any one of the two three accounts created by section six of this article.
(2) "Association" means the West Virginia Insurance Guaranty Association created under section six of this article.
(3) "Commissioner" means the Insurance Commissioner of West Virginia.
(4) "Covered claim" means an unpaid claim, including one for unearned premiums other than retrospective premiums or other premiums subject to adjustment after the date of liquidation, which arises out of and is within the coverage of an insurance policy to which this article applies and which policy is in force at the time of the occurrence giving rise to such the unpaid claims if (a) the insurer issuing the policy becomes an insolvent insurer after the effective date of this article and (b) the claimant or insured is a resident of this state at the time of the insured occurrence, or the property from which the claim arises is permanently located in this state. "Covered claim" shall does not include (i) any amount in excess of the applicable limits of coverage provided by an insurance policy to which this article applies; nor (ii) any amount due any reinsurer, insurer, insurance pool, or underwriting association, as subrogation recoveries or otherwise from an insolvent insurer or the insured of an insolvent insurer to the extent of coverage under the insured's policy.
(5) "Insolvent insurer" means an insurer:
(A) Licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred; and
(B) Against whom an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction in the insurer's state of domicile or of this state.
(6) "Member insurer" means any person who:
(A) Writes any kind of insurance to which this article applies under section three of this article, including farmers' mutual fire insurance companies and the exchange of reciprocal or interinsurance contracts; and
(B) Is licensed to transact insurance in this state.
(7) "Net direct written premiums" means direct gross premiums written in this state on insurance policies to which this article applies, less return premiums thereon on the policies and dividends paid or credited to policyholders on such direct business. "Net direct written premiums" does not include premiums on contracts between insurers or reinsurers.
(8) "Person" includes an individual, company, insurer, association, organization, society, reciprocal, partnership, syndicate, business trust, corporation or any other legal entity.
(9) "Receiver" means receiver, liquidator, rehabilitator or conservator as the context may require.
§33-26-6. Creation of the association.

There is created a nonprofit unincorporated legal entity to be known as the West Virginia Insurance Guaranty Association. All insurers defined as member insurers in section five of this article shall be and remain members of the association as a condition of their authority to transact insurance in this state. The association shall perform its functions under a plan of operation established and approved under section nine of this article and shall exercise its powers through a board of directors established under section seven of this article. For purposes of administration and assessment, the association shall establish and maintain two three separate accounts:
(a) (1) The automobile insurance account; and
(b) (2) The workers' compensation insurance account; and
(3)
The account for all other insurance to which this article applies.
§33-26-8. Powers and duties of the association.

(1) The association: shall
(a) Be Is obligated to the extent of the covered claims existing prior to the determination of insolvency, and for such those claims arising within thirty days after the determination of insolvency, but such the obligation shall include only includes that amount of each covered claim which is in excess of one hundred dollars and is less than three hundred thousand dollars
: Provided, That neither of these monetary limits applies to obligations arising out of covered workers' compensation claims. In no event shall is the association be obligated to a policyholder or claimant in an amount in excess of the obligations of the insolvent insurer under the policy from which the claim arises. Notwithstanding any other provision of this article, a covered claim shall does not include any claim filed with the guaranty fund after the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer. nor shall any A default judgment or stipulated judgment against the insolvent insurer, or against the insured of an insolvent insurer, be is not binding against the association.
(b) Be deemed Is the insurer to the extent of its obligation on the covered claims and to such extent shall have has all rights, duties, defenses and obligations of the insolvent insurer as if the insurer had not become insolvent.
(c) Shall allocate claims paid and expenses incurred among the two three accounts separately, and assess member insurers separately for each account amounts necessary to pay the obligations of the association under subdivision (a) of this subsection subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, the cost of examinations under section thirteen of this article and other expenses authorized by this article. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the preceding calendar year on the kinds of insurance in the account bears to the net direct written premiums of all member insurers for the preceding calendar year on the kinds of insurance in the account. Each member insurer shall be notified of the assessment not later than thirty days before it is due. No member insurer may be assessed in any one year on any account an amount greater than two percent of that member insurer's net direct written premiums for the preceding calendar year on the kinds of insurance in the account. If the maximum assessment, together with the other assets of the association in any account, does not provide in any one year in any account an amount sufficient to make all necessary payments from that account, the funds available shall be prorated and the unpaid portion shall be paid as soon thereafter after that as funds become available. The association may exempt or defer, in whole or in part, the assessment of any member insurer, if the assessment would cause the member insurer's financial statement to reflect the amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. Each member insurer may set off against any assessment, authorized payments made on covered claims and expenses incurred in the payment of such claims by the member insurer if they are chargeable to the account for which the assessment is made.
(d) Shall investigate claims brought against the association and adjust, compromise, settle, and pay covered claims to the extent of the association's obligation and deny all other claims and may review settlements, releases and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which such the settlements, releases and judgments may be properly contested.
(e) Shall notify such persons as the commissioner directs under subsection (2), section ten of this article.
(f) Shall handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the commissioner, but such the designation may be declined by a member insurer.
(g) Shall reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and shall pay the other expenses of the association authorized by this article.
(2) The association may:
(a) Employ or retain such persons as that are necessary to handle claims and perform other duties of the association.
(b) Borrow funds necessary to effect the purposes of this article in accord with the plan of operation.
(c) Sue or be sued.
(d) Negotiate and become a party to such contracts as that are necessary to carry out the purpose of this article.
(e) Perform such other acts as that are necessary or proper to effectuate the purpose of this article.
(f) Refund to the member insurers in proportion to the contribution of each member insurer to an account that amount by which the assets of the account exceed the liabilities, if, at the end of any calendar year, the board of directors finds that the assets of the association in any account exceed the liabilities of that account as estimated by the board of directors for the coming year.
§33-26-12. Nonduplication of recovery.

(1) Any person having a claim against a solvent insurer under any provision in an insurance policy other than a policy of an insolvent insurer, which is also a covered claim, shall be is required to exhaust first his or her right under such the solvent insurer's policy. Any amount payable on a covered claim under this article shall be reduced by the amount of any recovery under such the solvent insurer's policy.
(2) Any person having a claim which may be recovered under more than one Insurance Guaranty Association or its equivalent shall seek recovery first from the association of the place of residence of the insured except that if it is a first party claim for damage to property with a permanent location, he or she shall seek recovery first from the association of the location of the property, and if it is a workers' compensation claim, the person shall seek recovery first from the association of the residence of the claimant. Any recovery under this article shall be reduced by the amount of the recovery from any other insurance guaranty association or its equivalent.



NOTE: The purpose of this bill is to provide for the development of a plan by the Insurance Commissioner to provide workers' compensation coverage to employers who are unable to procure coverage in the voluntary market and to include workers' compensation insurance under the Guaranty Association Act in order to provide a means of paying claims when an workers' compensation insurer becomes insolvent.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.
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