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.