ENROLLED
COMMITTEE SUBSTITUTE
FOR
H. B. 4381
(By Delegates Kominar, Moore, Barker, Perry,
Schoen, Ashley and Walters)
[Passed March 7, 2008; in effect from passage.]
AN ACT 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be repealed; that §23-2C-2 and §23-2C-10 of said code be amended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" 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) "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" 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" 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 consists of those funds transferred to it from the Workers'
Compensation Fund and any other applicable funds. New Fund
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" 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 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" 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 in the fund remain property of the state and 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 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 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. The term does not include a self-insured employer or
private employers but 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" 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 (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 are as
provided in 85 CSR 19 (2007).
(q) "Self-Insured Employer Security Risk Pool" is a fund held
by the State Treasurer consisting of those funds paid into it
through the Insurance Commissioner's administration of 85 CSR 19
(2007). Disbursement from 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 are as
provided in 85 CSR 19:
Provided, That the liabilities are limited
to those self-insured employers who default on their claims
obligations after the termination of the commission.
(r) "Private Carrier Guaranty Fund" 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 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" 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 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" 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.
(b) To qualify for 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 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.
(c) Any employer that satisfies the requirements of subsection
(b) of this section and other qualifications established in the
plan shall be provided coverage at a premium level to be determined
or approved by the Insurance Commissioner, which premiums shall be
actuarially sound, consistent with classification and rate-making
methodologies found in the insurance industry, 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 Insurance Commissioner may 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 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) 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 voluntary
market funds as are necessary to cover 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 carrier pursuant to this section may be collected
by each carrier in the form of a surcharge.
CHAPTER 33. INSURANCE.
ARTICLE 26. WEST VIRGINIA GUARANTY ASSOCIATION ACT.
§33-26-3. Scope.
This article applies to all kinds of direct insurance, except
life, title, surety, disability, credit, mortgage guaranty and
ocean marine insurance.
§33-26-5. Definitions.
As used in this article:
(1) "Account" means any one of the 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 the unpaid claims if the insurer
issuing the policy becomes an insolvent insurer after the effective
date of this article and 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" 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 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 three separate accounts:
(1) The automobile insurance account;
(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:
(a) Is obligated to the extent of the covered claims existing prior to the determination of insolvency, and for those claims
arising within thirty days after the determination of insolvency,
but the obligation 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 is the association 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 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. A default judgment or stipulated judgment against the
insolvent insurer, or against the insured of an insolvent insurer,
is not binding against the association.
(b) Is the insurer to the extent of its obligation on the
covered claims and to such extent 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
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 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 the settlements, releases and judgments may be
properly contested.
(e) Shall notify 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 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 persons 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 contracts that are
necessary to carry out the purpose of this article.
(e) Perform other acts 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, is required to exhaust first his or her right under 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 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.