COMMITTEE SUBSTITUTE
FOR
H. B. 4381
(By Delegates Kominar, Moore, Barker, Perry,
Schoen, Ashley and Walters)
(Originating in the Committee on Finance)
[February 21, 2008]
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be repealed; that §23-2C-2 and §23-2C-10 of said code be amended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 developing and 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 for a period of three years, and thereafter,
shall contract with any qualified party, including the then current
administrator, to continue the administration of 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.
Provided,
That farmers mutual insurance companies that do not issue worker's
compensation insurance policies may not be assessed to pay for the
obligations of the association payable from the workers'
compensation insurance 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.