Senate Bill No. 123
(By Senators Tomblin (Mr. President) and Sprouse
By Request of the Executive)
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[Introduced January 13, 2003; referred to the Committee on
Economic Development; and then to the Committee on the
Judiciary.]
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A BILL to amend and reenact section nine, article two, chapter
twenty-three of the code of West Virginia, one thousand nine
hundred thirty-one, as amended; to amend and reenact section
one, article three of said chapter; and to further amend said
chapter by adding thereto a new article, designated article
four-d, all relating to workers' compensation generally;
providing for the elimination of the second injury and second
injury reserve fund for all new claims and/or for claims where
eligibility for permanent total disability has not yet been
determined as of the enactment of this legislation; providing
for the administration of claims by employers authorized to
self-insure their obligations; promulgation of rules by the
commissioner; establishing special account known as workers' compensation deficit reduction account; transferring certain
assets of the workers' compensation division to the workers'
compensation deficit reduction account; transferring certain
workers' compensation claim liabilities to the workers'
compensation deficit reduction account; providing funding of
payments for claim liabilities; providing for reduction of the
fund deficit over an established period of time; transferring
of interest earned to the workers' compensation deficit
reduction account; authorizing the workers' compensation
division to borrow from workers' compensation fund assets to
meet immediate claim and operating expenses; requiring the
workers' compensation division to provide the commissioner
annually an estimate of the expected claim payments from the
fund; and establishing an assessment process to ensure
collection of sufficient income.
Be it enacted by the Legislature of West Virginia:
That section nine, article two, chapter twenty-three of the
code of West Virginia, one thousand nine hundred thirty-one, as
amended, be amended and reenacted; that section one, article three
of said chapter be amended and reenacted; and that said chapter be
further amended by adding thereto a new article, designated article
four-d, all to read as follows:
ARTICLE 2. EMPLOYERS AND EMPLOYEES SUBJECT TO CHAPTER; EXTRATERRITORIAL COVERAGE.
§23-2-9. Election of employer to be self-insured and to provide
own system of compensation; mandatory participation in
second injury reserve; exceptions; catastrophe
coverage; self administration; regulation of
self-insurers.
(a) Notwithstanding any provisions of this chapter to the
contrary, the following types of employers may apply for permission
to self-insure their workers' compensation risk including their
risk of catastrophic injuries.
Except as provided for in
subsection (e) of this section, no employer may self-insure its
second injury risk;
(1) The types of employers are:
(A) Any employer who is of sufficient capability and financial
responsibility to ensure the payment to injured employees and the
dependents of fatally injured employees of benefits provided for in
this chapter at least equal to value to the compensation provided
for in this chapter; or
(B) Any employer of such capability and financial
responsibility who maintains its own benefit fund or system of
compensation to which its employees are not required or permitted
to contribute and whose benefits are at least equal to value to
those provided for in this chapter.
(2) In order to be approved for self-insurance status, the
employer must:
(A) Have an effective health and safety program at its
workplace; and
(B) Provide security or bond in an amount
and/or form to be
determined by the
division with concurrence of the compensation
programs performance council,
and which shall balance the employers
financial condition based upon an analysis of its audited financial
statements and the full accrued value
of future claim liability
based upon generally accepted
actuarial and accounting principles
of the employer's existing and expected liability; and
(C) Security or bond which may be in such form as the
commissioner and the compensation programs performance council
created pursuant to section one, article three, chapter
twenty-one-a of this code permits.
(3) Any employer whose record upon the books of the division
shows a liability, as determined on an accrued basis against the
workers' compensation fund incurred on account of injury to or
death of any of the employer's employees, in excess of premiums
paid by such employer, shall not be granted the right, individually
and directly or from such benefit funds or system of compensation,
to be self-insured until the employer has paid into the workers'
compensation fund the amount of such excess of liability over premiums paid, including the employer's proper proportion of the
liability incurred on account of catastrophes
or second injuries as
defined in section one, article three of this chapter and charged
against such fund.
(4) Upon a finding that the employer has met all of the
requirements of this section, the employer may be permitted
self-insurance status. An annual review of each self-insurer's
continuing ability to meets its obligations and the requirements of
this section shall be made by the workers' compensation division.
This review shall include a redetermination of the amount of
security or bond which shall be provided by the employer. Failure
to provide any new amount or form of security or bond may, in the
division's discretion, cause the employer's self-insurance status
to be terminated. The security or bond provided by employers prior
to the second day of February, one thousand nine hundred ninety
five, shall continue in full force and effect until the performance
of the employer's annual review and the entry of any appropriate
decision on the amount or form of the employer's security or bond.
(5) Whenever a self-insured employer shall furnish security or
bond, including replacement and amended bonds and other securities,
as security to ensure the employer's or guarantor's payment of all
obligations under this chapter for which the security or bond was
furnished, such security or bond shall be in the most current form or forms approved and authorized by the division for use by the
employer or its guarantors, surety companies, banks, financial
institutions or others in its behalf for such purpose.
(b) Each self-insured employer shall, on or before the last
day of the first month of each quarter, file with the division a
certified statement of the total gross wages and earnings of all of
the employer's employees subject to this chapter for the preceding
quarter. Each self-insured employer shall pay into the workers'
compensation fund as portions of its self-insured premium tax:
(1) A sum sufficient to pay the employer's proper portion of
the expense of the administration of this chapter;
(2) A sum sufficient to pay the employer's proper portion of
the expense of claims for those employers who are in default in the
payment of premium taxes or other obligations;
(3) A sum sufficient to pay the employer's fair portion of the
expenses of the disabled workers' relief fund;
and
(4) A sum sufficient to maintain as an advance deposit an
amount equal to the previous quarter's payment of each of the
foregoing three sums;
and
(5) A sum sufficient to pay the employer's deficit
amortization assessment.
(c) The required payments to the employer's injured employees
or dependents of fatally injured employees as benefits provided for by this chapter including
second injury benefits and catastrophe
injury benefits, if applicable, shall constitute the remaining
portion of the self-insurer's premium tax.
(1) If an employer defaults in the payment of any portion of
its self-insured premium taxes, the division may, in an appropriate
case, determine the full accrued value based upon generally
accepted
actuarial and accounting principles of the employer's
liability including the costs of all awarded claims and of all
incurred but not reported claims. The amount so determined may
then, in an appropriate case, be assessed against the employer and
the division may demand and collect the present value of such
defaulted tax liability. Interest shall accrue upon the demanded
amount as provided for in section thirteen of this article until
the premium tax is fully paid. Payment of all amounts then due to
the division and to the employer's employees is a sufficient basis
for reinstating the employer to good standing with the fund.
(2) Such premium tax assessments are special revenue taxes
under and according to the provisions of state workers'
compensation law and are deemed to be tax claims, as priority
claims or administrative expense claims according to those
provisions under the law provided in the United States bankruptcy
code. In addition, as the same was previously intended by the
prior provisions of this section, this amendment and reenactment is for the purpose of clarification of the taxing authority of the
workers' compensation division.
(d) Each self-insured employer shall elect whether or not to
self-insure its catastrophic injury risk as defined in subsection
(C), section one, article three of this chapter.
Nothing in this
chapter prohibits the self-insured employer from insuring its
catastrophic risk through a policy of excess insurance obtained
through a private insurance carrier.
(1) If the employer does not elect to self-insure its
catastrophic risk, then the employer shall pay premium taxes for
this coverage in the same manner as is provided for in section four
of this article and in rules adopted to implement such section.
Until such rules are adopted, the employer's premium taxes shall be
determined in accordance with the provisions of chapter one hundred
seventy-four, acts of the Legislature, one thousand nine hundred
ninety one. If the employees of such an employer suffer injury or
death from a catastrophe, then the payment of the resulting
benefits shall be made from the catastrophe reserve of the surplus
fund provided for in subsection (b), section one, article three of
this chapter. Such an employer's catastrophic liability shall not
be included in the liabilities upon which the employer's security
or bond is determined in subsection (a) of this section.
(2) If an otherwise self-insured employer elects
not to
self insure its catastrophic risk, then the security or bond required in
subsection (a) of this section shall include the liability for the
catastrophic risk.
(e)(1) Any self-insured employer who was, prior to the second
day of February, one thousand nine hundred ninety-five, permitted
to self-insure its second injury risk as defined in subsection (d),
section one, article three of this chapter, may elect to continue
to self-insure its second injury risk for so long as it meets the
requirements of this chapter. Any employer which was previously
permitted to self-insure its second injury risk who then elects to
terminate that self-insurance status shall not thereafter be
permitted to self-insure its second injury risk.
(e) For those employers previously permitted to self-insure
their second injury risks, the amount of the security or bond
required in subsection (a) of this section shall include the
liability for that risk. All
self-insured second injury benefits
provided for by this chapter which are awarded to the employer's
employees
which constitute second injury life awards shall
then be
paid by the employer and not the division.
(3)(A) For those employers which do not self-insure their
second injury risk, the premium tax for second injury coverage
shall be determined by the rules which implement section four of
this article. Such rules may provide for merit rate adjustments of the amount of premium tax to be paid based upon the accrued costs
to be determined under generally accepted accounting principles of
second injury benefits paid and to be paid to the employer's
employees. Until such rules are adopted, the employer's premium
taxes shall be determined in accordance with the provisions of
chapter one hundred seventy-four, acts of the Legislature, one
thousand nine hundred ninety-one.
(B) In case there is a second injury to an employee of any
employer making such second injury premium tax payments, the
employer shall be liable to pay compensation or expenses arising
from or necessitated by the second injury and such compensation and
expenses shall be charged against the employer. After the
completion of these payments, the employee shall be paid the
remainder of the compensation and expenses that would be due for
permanent total disability from the second injury reserve of the
surplus fund. Such additional compensation and expenses shall not
be charged against such employer.
(f) The
division, with concurrence of the compensation
programs performance council, may create, implement, establish and
administer a perpetual self-insurance security risk pool of funds,
sureties, securities, insurance provided by private insurance
carriers or other states' programs, and other property, of both
real and personal properties, to secure the payment of obligations of self-insured employers. If such pool is created,
the division
with concurrence of the compensation programs performance council
shall adopt rules for the organizational plan, participation,
contributions and other payments which may be required of
self-insured employers under this section. The council
in order to
create and fund such a risk pool, may adopt a rule authorizing the
division to assess each self-insured employer in proportion
according to each employer's portion of the unsecured obligation
and liability or to assess according to some other method provided
for by rule which shall properly create and fund such risk pool to
serve the needs of employees, employers, and the workers'
compensation fund by providing adequate security. The council, in
funding such security risk pool, may authorize the division to use
any assessments, premium tax assessments and revenues and
appropriations as may be made available to the division.
(g) Any self-insured employer which has had a period of
inactivity due to the nonemployment of employees which results in
its reporting of no wages on quarterly reports to the division for
a period of four or more consecutive quarters shall have its status
at the division inactivated and shall be required to apply for
reactivation to status as a self-insured employer prior to its
reemployment of employees. Despite such inactivation, the
self-insured employer shall continue to make payments on all awards for which it is responsible. Upon application for reactivation of
its status as an operating self-insured employer, the employer must
document that it meets the eligibility requirements needed to
maintain self-insured status under this section and any rules
adopted to implement it. If the employer is unable to requalify
and obtain approval for reactivation, the employer shall, effective
with the date of employment of any employee, become a subscriber to
the workers' compensation fund, but shall continue to be a
self-insurer as to the prior period of active status and to furnish
security or bond and meets its prior self-insurance obligations.
(h) In any case under the provisions of this section that
shall require the payment of compensation or benefits by an
employer in periodical payments and the nature of the case makes it
possible to compute the present value of all future payments, then
the division may, in its discretion, at any time compute and permit
to be paid into the workers' compensation fund an amount equal to
the present value of all unpaid future payments on the award or
awards for which liability exists in trust. Thereafter, such
employer shall be discharged from any further portion of premium
tax liability upon such award or awards and payment of the award or
awards shall be assumed by the division.
(i) Any employer subject to this chapter, who shall elect to
carry the employer's own risk by being self-insured and who has complied with the requirements of this section and of any
applicable rules, shall not be liable to respond in damages at
common law or by statute for the injury or death of any employee,
however occurring, after such election's approval and during the
period that the employer is allowed to carry the employer's own
risk.
(j) Notwithstanding any provisions in this chapter to the
contrary, self-insured employers shall, effective the first day of
July, two thousand three, administer their own claims. The
commissioner shall, with concurrence of the compensation programs
performance council, develop and publish such rules as necessary to
regulate the performance of employers granted permission to
self-insure their obligations under this chapter. Such rules shall
be promulgated at least thirty days prior to the first day of July,
two thousand three.
(k) An employer granted permission to self-insure under this
chapter shall at all times be bound by and comply with all of the
provisions of this chapter, and with such rules relating to the
self-insurance claims administration as may be promulgated by the
commissioner. Self-insured employers and/or their representatives
shall be audited on a basis and a frequency to be determined by the
commissioner, but in no instance less often than biannually.
Repeated violations of the provisions of this chapter shall be cause for the termination of the authority for an employer to
self-insure its obligations under this chapter.
ARTICLE 3. WORKERS' COMPENSATION FUND.
§23-3-1. Compensation fund; surplus fund; catastrophe and
catastrophe payment defined;
compensation by
employers.
(a) The commissioner shall establish a workers' compensation
fund from the premiums and other funds paid thereto by employers,
as herein provided, for the benefit of employees of employers who
have paid the premiums applicable to such employers and have
otherwise complied fully with the provisions of section five,
article two of this chapter, and for the benefit, to the extent
elsewhere in this chapter set out, of employees of employers who
have elected, under section nine, article two of this chapter, to
make payments into the surplus fund hereinafter provided for, and
for the benefit of the dependents of all such employees, and for
the payment of the administration expenses of this chapter.
(b) A portion of all premiums that shall be paid into the
workers' compensation fund by subscribers not electing to carry
their own risk under section nine, article two of this chapter,
shall be set aside to create and maintain a surplus fund to cover
the catastrophe hazard
the second injury hazard, and all losses not
otherwise specifically provided for in this chapter. The percentage to be set aside shall be determined pursuant to the
rules adopted to implement section four, article two of this
chapter and shall be in an amount sufficient to maintain a solvent
surplus fund.
(c) A catastrophe is hereby defined as an accident in which
three or more employees are killed or receive injuries, which, in
the case of each individual, consist of: Loss of both eyes or the
sight thereof; or loss of both hands or the use thereof; or loss of
both feet or the use thereof; or loss of one hand and one foot or
the use thereof. The aggregate of all medical and hospital bills
and other costs, and all benefits payable on account of a
catastrophe is hereby defined as "catastrophe payment". In case of
a catastrophe to the employees of an employer who is an ordinary
premium-paying subscriber to the fund, or to the employees of an
employer who, having elected to carry the employer's own risk under
section nine, article two of this chapter, has heretofore elected,
or may hereafter elect, to pay into the catastrophe reserve of the
surplus fund under the provisions of that section, then the
catastrophe payment arising from such catastrophe shall not be
charged against, or paid by, such employer but shall be paid from
the catastrophe reserve of the surplus fund.
(d)
(1) If For all new claims filed on or after the first day
of July, two thousand three, and/or for claims where eligibility for permanent total disability has not yet been determined as of
the first day of July, two thousand three, the following provisions
relating to second injury are not applicable. For claims filed
before the date specified above if, an employee who has a
definitely ascertainable physical impairment, caused by a previous
occupational injury, occupational pneumoconiosis or occupational
disease, irrespective of its compensability, becomes permanently
and totally disabled through the combined effect of such previous
injury and a second injury received in the course of and as a
result of his or her employment, the employer shall be chargeable
only for the compensation for such second injury:
Provided, That
in addition to such compensation, and after the completion of the
payments therefore, the employee shall be paid the remainder of the
compensation that would be due for permanent total disability out
of a special reserve of the surplus fund,
known as the second
injury reserve created in the manner hereinbefore set forth. The
procedure by which the claimant's request for a permanent total
disability award under this section is ruled upon shall require
that the issue of the claimant's degree of permanent disability
first be determined. Thereafter, by means of a separate order, a
decision shall be made as to whether the award shall be a second
injury award under this subsection or a permanent total disability
award to be charged to the employer's account or to be paid directly by the employer if the employer has elected to be
self-insured under the provisions of section nine, article two of
this chapter.
(2) If an employee of an employer, where the employer has
elected to carry his or her own risk under section nine, article
two of this chapter, and is permitted not to make payments into the
second injury reserve of surplus fund under the provisions of said
section, has a definitely ascertainable physical impairment caused
by a previous occupational injury, occupational pneumoconiosis or
occupational disease, irrespective of its compensability, and
becomes permanently and totally disabled from the combined effect
of such previous injury and a second injury received in the course
of and as a result of his or her employment, the employer shall,
upon order of the division, compensate the said employee in the
same manner as if the total permanent disability of the employee
had resulted from a single injury while in the employ of such
employer.
(e) Employers electing, as herein provided, to compensate
individually and directly their injured employees and their fatally
injured employees' dependents shall do so in the manner prescribed
by the division, and shall make all reports and execute all blanks,
forms and papers as directed by the division, and as provided in
this chapter.
ARTICLE 4D. WORKERS' COMPENSATION DEFICIT REDUCTION ACCOUNT.
§23-4D-1. Purpose.
The purpose of this article is to establish a fund for the
sole purpose of providing a method to account for and pay all
liabilities related to claims that occurred before the first day of
July, two thousand three, to provide a revenue source to pay such
claim liabilities, and to provide for a reduction of unfunded
liabilities over time.
§23-4D-2. Legislative findings.
(a) The Legislature hereby finds and declares that there is a
deficit in the workers' compensation fund resulting from the
failure of premiums charged employers to produce sufficient
revenues to meet the obligation for claim payments and
administrative costs of the division;
(b) The Legislature further finds that this deficit has come
into existence over time without design and unexpectedly and that
the magnitude of this deficit is so great that it imposes a threat
to the long-term viability of the fund, while hampering economic
development efforts in the state.
§23-4D-3. Creation of workers' compensation deficit reduction
account; transfer of assets.
(a) There is hereby created a special account in the state
treasury to be known as the workers' compensation deficit reduction account. All assets, less the premium deposits of regular
subscribing employers, that exist as of the first day of July, two
thousand three, in the workers' compensation fund and the
catastrophe fund established under section one, article three of
this chapter, and the disabled workers' relief fund established
under section one, article four-a of this chapter, shall be
transferred to the workers' compensation deficit reduction account.
The moneys deposited in such account are to be invested and managed
by the state investment management board.
(b) All liabilities related to unpaid claims for all years
prior to the first day of July, two thousand three, shall be paid
out of the workers' compensation deficit reduction account. The
workers' compensation deficit reduction account shall exist solely
for the purpose of receiving funds and making payments related to
liabilities on claims that occurred prior to the first day of July,
two thousand three. The assets contained in and assessment income
received by the fund shall not be used for any other purposes:
Provided, That the division shall be permitted to borrow from the
workers' compensation deficit reduction account sufficient funds to
meet the short term obligations on claims occurring on or after the
first day of July, two thousand three:
Provided, however, That the
funds so borrowed will be paid into the workers' compensation
deficit reduction account with interest accrued at the simple rate of six percent per annum by no later than the thirtieth day of
June, two thousand four.
§23-4D-4. Payment of claim benefits.
As payments of any type become due on claims that occurred
prior to the first day of July, two thousand three, the
commissioner shall request payment of the same out of the workers'
compensation deficit reduction account. Upon request of the
commissioner, the investment management board shall provide the
commissioner and the compensation programs performance council an
accounting of the income, to include investment income.
§23-4D-5. Funding.
(a) Annually not later than the thirtieth day of April, the
division shall provide the commissioner the anticipated claim
payments for the fiscal year beginning on the first day of July of
the same year on all claims occurring prior to first day of July,
two thousand three. The commissioner and the compensation programs
performance council shall develop a method and level of assessment
to develop sufficient income to meet the anticipated claim payments
for the following fiscal year. Included in the assessments shall
be an additional sum sufficient to fund a reduction in the deficit
to actuarially retire the deficit by the year two thousand
twenty-five.
(b) In calculating rates for claims occurring on or after the first day of July, two thousand three, and each fiscal year
thereafter, the division shall, using insurance industry accepted
rate-making practices, provide to the commissioner and the
compensation programs performance council for their approval rates
by industry classification sufficient to cover all future costs of
claims occurring for the subsequent fiscal year and the
administration costs of the division. Until such time that the
division accumulates a surplus over the projected unpaid
liabilities of all claims occurring on or after the first day of
July, two thousand three, equal to fifty percent of annual premium
income, no credit for investment income shall enter into the
rate-making process.
NOTE: The purpose of this bill is to eliminate second injury
and the second injury reserve fund for all new claims and/or for
claims where eligibility for permanent total disability has not yet
been determined as of the enactment of this legislation. In
addition, this bill grants self-insured employers the authority to
make disability payments, and provides the commissioner with the
authority to promulgate rules for such administration. Also, this
bill segregates the workers' compensation claim liabilities on all
claims that occurred prior to July 1, 2003. The exclusive purpose
of the workers' compensation deficit reduction fund will be to
account for and fund payments for claim liabilities in the fund,
and to reduce the fund deficit over an established period of time.
Strike-throughs indicate language that would be stricken from
the present law, and underlining indicates language that would be
added.
§§23-4D is new; therefore, strike-throughs and underscoring have been omitted.
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