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Introduced Version House Bill 501 History

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Key: Green = existing Code. Red = new code to be enacted
H. B. 501


(By Mr. Speaker, Mr. Kiss, and Delegate Trump)
[By Request of the Executive]
[Introduced November 13, 2005.]




A BILL to amend and reenact §23-2C-1, §23-2C-4 and §23-2C-15 of the Code of West Virginia, 1931, as amended; and to amend said code by adding thereto a new section, designated §23-2C-3a, all relating generally to workers compensation; providing a statement of intent to meet the provisions of section three hundred fifty one of the Internal Revenue Code; providing that the West Virginia Employers' Mutual Insurance Company may not be dissolved prior to the first day of January, two-thousand nine; providing that the West Virginia Employers' Mutual Insurance Company shall not transact insurance beyond workers' compensation and such insurance incidental to workers' compensation insurance; providing that the West Virginia Employers' Mutual Insurance Company shall file amended articles of incorporation and amended bylaws; nullifying certain actions taken by the provisional board of the West Virginia Employers' Mutual Insurance Company; providing for the appointment and terms of office for the board of directors for the West Virginia Employers' Mutual Insurance Company; providing a statement of intent to qualify for a federal taxation exemption; providing that the West Virginia Employers' Mutual Insurance Company shall offer coverage to employers of West Virginia until the first day of January, two-thousand nine; and making certain technical corrections. Be it enacted by the Legislature of West Virginia:

That §23-2C-1, §23-2C-4 and §23-2C-15 of the Code of West Virginia, 1931, as amended, be amended and reenacted; and that said code be amended by adding thereto a new section, designated §23-2C- 3a, all to read as follows:
ARTICLE 2C. EMPLOYERS' MUTUAL INSURANCE COMPANY.
§23-2C-1. Findings and purpose.
(a) The Legislature finds that:
(1) There is a long-term actuarial funding crisis in the state-run monopolistic workers' compensation system;
(2) Similar short-term and long-term crises have been ongoing during the past two decades;
(3) During the current crisis, employers in West Virginia find it increasingly difficult to afford the rates charged by the workers' compensation commission for workers' compensation coverage and that paying said rates adversely impacts employers' ability to compete in a global economic environment;
(4) The cost of obtaining workers' compensation coverage from the state system may result in many employers leaving the state;
(5) Employers' access to competitive workers' compensation rates and the resulting economic development benefit is of utmost importance to the citizens of West Virginia;
(6) A mechanism is needed to provide an enduring solution to this recurring workers' compensation crisis;
(7) An employers' mutual insurance company or a similar entity has proven to be a successful mechanism in other states for helping employers secure insurance and for stabilizing the insurance market;
(8) There is a substantial public interest in creating a method to provide a stable workers' compensation insurance market in this state;
(9) The state-run workers' compensation program is a substantial actual and potential liability to the state;
(10) There is substantial public benefit in transferring certain actual and potential future liability of the state to the private sector and creating a stable self-sufficient entity which will be a potential source of workers' compensation coverage for employers in this state;
(11) A stable, financially viable insurer in the private sector will aid in providing a continuing source of insurance funds to compensate injured workers; and
(12) Because the public will greatly benefit from the formation of an employers' mutual insurance company, state efforts to encourage and support the formation of such an entity, including providing funding for the entity's initial capital, is in the clear public interest.
(b) The purpose of this article is to create a mechanism for the formation of an employers' mutual insurance company that will provide:
(1) A means for employers to obtain workers' compensation insurance that is reasonably available and affordable; and
(2) Compensation to employees of mutual policyholders who suffer work place injuries as defined in chapter twenty-three of this code.
(c) The further purpose of this article is to transfer New Fund assets relating to the workers' compensation insurance business to the company, including a reasonable level of policyholder surplus, and for the company to assume the New Fund liabilities related to the transferred assets. It is the intent of this section to provide for the initial capitalization of the company to comply with and to meet the requirements of section 351 and related sections of the Internal Revenue Code.
§23-2C-3a. Employers' mutual insurance company - additional provisions enacted in November, 2005.

(a) Notwithstanding any other provisions of this article to the contrary, the employers' mutual insurance company:
(1) May not be dissolve prior to the first day of January, two thousand nine; and
(2) May not transact such other kinds of property and casualty insurance for which the company is otherwise qualified under the provisions of this code prior to the first day of January, two thousand nine.
(b) As soon as practical following the effective date of this section, the company established pursuant to the provisions of this article shall, through a vote of a majority of its provisional board, file its amended articles of incorporation and amended bylaws with the insurance commissioner and apply for a license with the insurance commissioner to transact insurance in this state. Notwithstanding any other provision of this code, the insurance commissioner shall act on the documents within fifteen days of the filing by the company.

(c) Notwithstanding any provision of subsection (g), section three of this article to the contrary, in the event the Governor certifies to the Legislature that revenue bonds issued pursuant to article two-d, chapter twenty-three of this code have been retired and that the unfunded liability of the old fund has been paid or has been provided for in its entirety, whichever occurs last, then
(1) The premiums surcharge imposed by subdivision (2), subsection (f), section three of this article shall not sunset and shall continue to be remitted in accordance with the provisions of subsection (f); and
(2) The premiums surcharge imposed by subdivision (3), subsection (f), section three of this article shall sunset and not be collectible with respect to workers' compensation insurance premiums paid when the policy is renewed on or after the first day of the month following the month in which the Governor makes the certification.

(d) Except as may otherwise be provided in this subsection, all provisions of section three of this article shall remain in full force and effect.
§23-2C-4. Governance and organization.
(a) (1) The commission shall implement the initial formation and organization of the company as provided by this article.
(2) From the inception of the company, until the first day of January, two thousand six, the company shall be governed by a provisional board of directors consisting of the three-persons on the executive committee of the workers' compensation board of managers and four members of the Legislature. Two members of the West Virginia Senate and two members of the West Virginia House of Delegates shall serve as advisory nonvoting members of the board. The Governor shall appoint the legislative members to the board. No more than three of the legislative members shall be of the same political party. The provisional board shall have the authority to function as necessary to establish the company and cause it to become operational, including the right to contract on behalf of the company. Each voting board member shall receive compensation of not more than three hundred fifty dollars per day and actual and necessary expenses for each day during which he or she is required to and does attend a meeting of the board.
(3) The provisional board shall develop procedures for the nomination of the board of directors that will succeed the provisional board on the first day of January, two thousand six, and for the conduct of the election, to be held no later than the first day of November, two thousand five, and shall give notice of the election to the current subscribers to the workers' compensation fund. These procedures shall be exempt from the provisions of article three, chapter twenty-nine-a of this code.
(4) (3) Except as limited by this section and applicable insurance rules and statutes, the company may: (1) On its own; (2) through the formation or acquisition of subsidiaries; or (3) through a joint enterprise, offer:
(A) Workers' compensation insurance in a state other than West Virginia to the extent it also provides workers' compensation or occupational disease insurance coverage to the employer pursuant to chapter twenty-three of this code;
(B) Other workers' compensation products and services and related products and services in West Virginia or other states; and
(C) Other property and casualty insurance in West Virginia and other states on or after the first day of January, two thousand nine.
(b) Any election process for the board of directors developed, implemented, and overseen by the company's provisional board prior to the effective date of the amendments to this section enacted during the Fifth Extraordinary Session of the Legislature in two thousand five is nullified and the designation of the company's initial board of directors shall be governed by the following: Effective the first day of January, two thousand six, the company shall be governed by a board of directors consisting of seven directors, as follows:
(1) Three owners or officers of an entity that has purchased or will immediately upon termination of the commission purchase and maintain an active workers' compensation insurance policy from the company who shall be appointed by the Governor. At least one shall be a certified public accountant with financial management or pension or insurance audit expertise and at least one shall be an attorney with financial management experience.
(2) Two directors who shall be appointed by the Governor who have substantial experience as an officer or employee of a company in the insurance industry, one of whom is from a company with less than fifty employees;
(3) One director with general knowledge and experience in business management who is an officer and employee of the company and is responsible for the daily management of the company; and
(4) The chief executive officer of the company.
(c) The directors and officers of the company are to be chosen in accordance with the articles of incorporation and bylaws of the company. The initial board of directors selected appointed by the governor shall serve for the following terms: (1) Two for four-year terms; (2) two for three-year terms; (3) two for two-year terms; and (4) one for a one-year term. Thereafter, the directors shall serve staggered terms of four years. No director chosen may serve more than two consecutive terms, except for the chief executive officer of the company from the termination of the commission through the thirty-first day of December, two thousand eight and may be not removed from that position except for cause.
(d) Any board vacancy that occurs from the termination of the commission through the thirty-first day of December, two thousand eight, shall be filled through appointment by the governor for the unexpired term.
(e) The members of the initial board of directors shall thereafter serve the following terms: (1) Three for four year terms; and (2) two for three year terms, with said terms to be determined by a majority vote of the board of directors. Upon expiration of said terms or upon a vacancy of the board following the thirty-first day of December, two thousand eight, the directors of the company are to be chosen in accordance with the articles of incorporation and bylaws of the company, as amended.
Furthermore, owners, directors, or employees of employers otherwise licensed to write workers' compensation insurance in this state or licensed or otherwise authorized to act as a third-party administrator shall not be eligible to be nominated, appointed, elected or serve on the company's board of directors.
(d) (f) The executive director shall prepare and file amended articles of incorporation and bylaws in accordance with the provisions of this article, as amended, and the provisions of chapters thirty-one and thirty-three of this code.
(g) It is the intent of this Legislation to create an entity exempt from federal taxation, as provided for in Internal Revenue Code Section 501(c)(27)(B), for as long as the company meets the federal qualification requirements of section 501(c)(27)(B)(ii) of the Internal Revenue Code.
§23-2C-15. Mandatory coverage; changing of coverage.
(a) Effective upon termination of the commission, all subscriber policies with the commission shall novate to the company and all employers otherwise shall purchase workers' compensation insurance from the company, unless permitted to self-insure their obligations. The company shall assume responsibility for all new fund obligations of the subscriber policies which novate to the company or which are issued thereafter. Each subscriber whose policy novates to the company shall also have its advanced deposit credited to its account with the company. Employers purchasing workers' compensation insurance from the company shall have the right to designate a representative or agent to act on its behalf in any and all matters relevant to coverage and claims as administered by the company.
(b) Effective the first day of July, two thousand eight, an employer may elect to: (1) Continue to purchase workers' compensation insurance from the company; (2) purchase workers' compensation insurance from another private carrier licensed and otherwise authorized to transact workers' compensation insurance in this state; or (3) self-insure its obligations if it satisfies all requirements of this code to so self-insure and is permitted to do so: Provided, That all state and local governmental bodies, including, but not limited to, all counties and municipalities and their subdivisions and including all boards, colleges, universities and schools, shall continue to purchase workers' compensation insurance from the company through the thirtieth day of June, two thousand twelve. The company and other private carriers shall be permitted to sell workers' compensation insurance through licensed agents in the state. To the extent that a private carrier markets workers' compensation insurance through a licensed agent, it shall be subject to all applicable provisions of chapter thirty-three of the code. All employers' must immediately notify the insurance commissioner of its private carrier and any change thereto.
(c) An employer may elect to change its private insurer carrier on or after the first day of July, two thousand eight, if the employer has:
(1) Given at least thirty days' notice to the insurance commissioner of the change of insurer; and
(2) Furnished evidence satisfactory to the insurance commissioner that the payment of compensation has otherwise been secured.
(d) Each private carrier and employer shall notify the insurance commissioner if an employer has changed his or her insurer or has allowed his or her insurance to lapse within twenty-four hours or by the end of the next working day, whichever is later, after the insurer has notice of the change or lapse. Every employer shall post a notice upon its premises in a conspicuous place identifying its industrial insurer. The notice must include the insurer's name, business address and telephone number and the name, business address and telephone number of its nearest adjuster in this state. The employer shall at all times maintain the notice provided for the information of his or her employees. Release of employer policy information and status by the industrial council and the insurance commissioner shall be governed by section four, article one, chapter twenty-three of this code. The insurance commissioner shall collect and maintain information related to officers, directors and ten percent or more owners of each carrier's policy holders. The private carrier shall provide said information to the insurance commissioner.
(e) Any rule promulgated by the workers' compensation board of managers empowering agencies of this state to revoke or refuse to grant, issue or renew any contract, license, permit, certificate or other authority to conduct a trade, profession or business to or with any employer whose account is in default with the commission shall be fully enforceable by the insurance commissioner against the employer in policy default with a private carrier.
(f) Effective the first day of July, two thousand eight January, two thousand nine, the company may decline to offer coverage to any applicant. Effective the first day of July, two thousand eight January, two thousand nine, the company and private carriers may cancel a policy or decline to renew a policy upon the issuance of sixty days written advance notice to the policyholder: Provided, That cancellation of the policy by the carrier for failure of consideration to be paid by the policyholder is effective after fifteen days advance written notice of cancellation to the policyholder.


NOTE: The purpose of this bill is to qualify the West Virginia Employers' Mutual Insurance Company ("the Company") for a federal tax exemption under section 501(c)(27)(B) of the Internal Revenue Code and ensure that the Company's capitalization is consistent with the requirements of section 351 of the Internal Revenue Code.
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