GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2005
SESSION LAW 2005-400
SENATE BILL 319
AN ACT establishing the north carolina self-insurance security system and clarifying the procedures by which subsidiary and AFFILIATE companies may be licensed as self-insurers for workers compensation and to make other conforming and technical changes to the workers compensation laws respecting individual self-insurers in article 5 of chapter 97 of the general statutes.
The General Assembly of North Carolina enacts:
SECTION 1.1. The title of Article 4 of Chapter 97 reads as rewritten:
"Article 4.
North Carolina Self-Insurance Guaranty Security
Association."
SECTION 1.2. G.S. 97-130 reads as rewritten:
"§ 97-130. Definitions.
As used in this Article:
(1)
"Association" means the North Carolina Self-Insurance Guaranty Security
Association established by G.S. 97-131.
(1a) "Association Aggregate Security System" means the security system established by the Association under G.S. 97-133 whereby individual self-insurers collectively secure their aggregate self-insured workers' compensation liabilities through the North Carolina Self-Insurance Security Association.
(2) "Board" means the Board of Directors of the Association established by G.S. 97-132.
(3) "Commissioner" means the North Carolina Commissioner of Insurance.
(4) "Covered claim" means an unpaid claim against an insolvent individual self-insurer or group self-insurer that relates to an injury that occurs while the individual self-insurer or group self-insurer is a member of the Association and that is compensable under this Chapter.
(5) "Fund" means
the North Carolina Self-Insurance Guaranty Security Fund
established by G.S. 97-133.
(5a) "Group" or "Group self-insurer" means a group self-insurer licensed by the Commissioner under Part 1, Article 47 of Chapter 58 of the General Statutes.
(5b) "Individual self-insurer" means an individual employer licensed by the Commissioner under Article 5 of this Chapter.
(6) "Member self-insurer"
or "member" means a self-insurer which is authorized by the
Commissioner to self-insure pursuant to G.S. 97-93 and G.S. 97-94.an
individual self-insurer or group self-insurer that is required to be a member
of the Association under this Article or Part 1, Article 47 of Chapter 58 of
the General Statutes.
(7) "Plan" means the Plan of Operation authorized by G.S. 97-134.
(8) "Self-insurer"
means either: (i) an individual employer who has demonstrated under
G.S. 97-93 the financial ability to directly pay compensation in the
amounts and manner and when due as provided in this Chapter or (ii) a group of
two or more employers who have agreed to pool their liabilities under this
Chapter pursuant to G.S. 97-93.
(9) "Servicing facility" means those persons delegated by the Board and approved by the Commissioner to settle or compromise claims and to expend Fund assets to pay claims."
SECTION 2. G.S. 97-131 reads as rewritten:
"§ 97-131. Creation.
(a) There is created a
nonprofit unincorporated legal entity to be known as the North Carolina Self-Insurance
Guaranty Security Association. The Association is to provide
mechanisms for the payment of covered claims under self-insurance coverage, against
member self-insurers, to avoid excessive delay in payment, payment
of covered claims, to avoid financial loss to claimants because of the
insolvency of a member self-insurer, and to assist, when called upon
to do so by the Commissioner, to assist the Commissioner in the detection
of self-insurer insolvencies.insolvencies, to fund the Association
Aggregate Security System, and to capitalize the Fund to ensure the
availability of financial resources to pay covered claims and to fund the
activities of the Association.
(b) All individual self-insurers
and group self-insurers shall be and remain members of the Association as a
condition of authority being licensed to self-insure in this State
under G.S. 97-93. State. The Association shall perform its
functions under a Plan of Operation established or amended, or both, by the
Board and approved by the Commissioner, and shall exercise its powers through
the Board.
(1) A An
individual self-insurer or a group self-insurer shall be deemed to be a
member of the Association for purposes of another self-insurer'smember's
insolvency, as defined in G.S. 97-135, when:
a. The individual self-insurer or group self-insurer is a member of the Association when an insolvency occurs, or
b. The individual self-insurer or group self-insurer has been a member of the Association at some point in time during the 12-month period immediately preceding the insolvency in question.
(2) A An
individual self-insurer or a group self-insurer shall be deemed to be a member
of the Association for purposes of its own insolvency if it is a member when
the compensable injury occurs.
(3) In determining the
membership of the Association pursuant to for the purposes of subdivisions
(1) and (2) of this subsection for any date after the effective date of this
Article, no employer individual self-insurer or group of
employers claiming self-insurer statusself-insurer may be deemed to
be a member of the Association on any date after the effective date of this
Article, unless that employer or is on that date licensed as an
individual self-insurer by the Commissioner under Article 5 of this Chapter or
a group of employers is at that time authorized licensed as a
group self-insurer by the Commissioner pursuant to G.S. 97-93
and G.S. 97-94.under Article 47 of Chapter 58 of the General
Statutes."
SECTION 3. G.S. 97-132 reads as rewritten:
"§ 97-132. Board of directors.
The Board shall consist of not less than nine persons directors
serving terms as established in the Plan. The members of the Board directors
shall be selected by the member self-insurers, members of the
Association, subject to the approval of the Commissioner, and shall serve
for terms which shall not exceed three years. If no members of the Board are
selected within 60 days after the effective date of this Article, the
Commissioner may appoint the initial members of the Board. three-year
terms and until a successor is elected and qualified. There is no limitation on
the number of terms a director may serve. In approving selections to the
Board, the Commissioner shall consider, among other things, whether all
member individual self-insurers and group self-insurers are fairly
represented. Members of the Board Directors may be reimbursed
from the assets of the Association for expenses incurred by them as members
of the Board.directors."
SECTION 4. G.S. 97-133 reads as rewritten:
"§ 97-133. Powers and duties of the Association.
(a) The Association shall:
(1) Repealed by Session Laws 1999-219, s. 7.2, effective June 25, 1999.
(1a) Administer a fund, to be known as the North Carolina Self-Insurance Security Fund, which shall receive the assets of the North Carolina Self-Insurance Guaranty Fund previously established under subdivision (2) of this subsection, the assessments required by subdivisions (2a) and (3a) of this subsection and any other sums received by the Association. In its discretion, the Board may determine that the assets of the Fund should be segregated or that a separate accounting shall be made in order to identify that portion of the Fund which represents assessments paid by individual self-insurers and that portion of the Fund which represents assessments paid by group self-insurers. If the Board segregates the Fund in this manner, the Association shall thereafter pay covered claims against individual member self-insurers from that portion of the Fund that represents assessments against individual self-insurers and shall thereafter pay covered claims against group member self-insurers from that portion of the Fund that represents assessments against group self-insurers. The costs of administering the Association shall be borne by the Fund. The Association is authorized to secure insurance, primary excess insurance, reinsurance, bonds, other insurance, financial guarantees and related financial instruments to effectuate the purposes of the Association. The Board will invest the Fund assets pursuant to an investment policy adopted by the Board and reviewed and approved annually by the Department of the State Treasurer. The earnings from investment of Fund assets shall be placed in or credited to the Fund.
(2) Assess each
member of the Association as follows:
a. Each
individual member self-insurer shall be annually assessed an amount equal to
two percent (2%) of the annual gross premiums, as determined under
G.S. 105-228.5(b), (b1), and (c), that would have been paid by that member
self-insurer for workers' compensation insurance during the prior calendar
year; and payment to the Association shall be made no later than May 15
following the close of that calendar year. Where any such assessment is paid
based in whole or in part upon estimates of annual gross premiums for the prior
calendar year, there shall be made in the next year's assessment an adjustment
of the assessment of such prior year based on actual audited annual gross
premiums. Each group member self-insurer shall be annually assessed an amount
equal to two percent (2%) of the annual gross premiums, as determined under
G.S. 105-228.5(b), (b1), and (c), of the group member self-insurer during
the prior calendar year; and payment to the Association shall be made no later
than May 15 following the close of that calendar year. Regardless of the size
of the Fund, during its first 12 months of membership, no member self-insurer
may discount or reduce this two percent (2%) assessment. For the purpose of
making the assessments authorized by this subsection and subsections (c) and
(d) of this section, the Secretary of Revenue shall provide to the Association
the self-insurer premium and payroll information as determined under
G.S. 105-228.5(b), (b1) and (c), and the Commissioner shall provide to the
Association the group self-insurer premium information reported to the
Commissioner under G.S. 58-47-75 and G.S. 58-2-165.
b. Each
member self-insurer shall be notified of the assessment no later than 30 days
before it is due.
c. If
a self-insurer is a member of the Association for less than a full calendar
year, the annual gross premiums shall be adjusted by that portion of the year
the self-insurer is not a member of the Association.
d. If
application of the contribution rates referenced in sub-subdivision a. of this
subdivision would produce an amount in excess of the five million dollar
($5,000,000) limits of the fund, an equitable proration may be made; provided
that every self-insurer that becomes a member of the Association shall pay an
initial assessment, in an amount established by the Board, regardless of the
size of the fund at the time the member joins the Association.
(2a) Establish, operate, and maintain the Association Aggregate Security System as defined in G.S. 97-130 and G.S. 97-165 as follows:
a. The Association shall annually prepare and submit to the Commissioner a written plan to provide an Association Aggregate Security System through a combination of cash on deposit in the Fund, securities, surety bonds, irrevocable letters of credit, insurance or other financial instruments or guarantees owned or entered into by the Association and acceptable to the Commissioner. The written plan shall include, but not be limited to, (i) a description of the institutions that will issue or guarantee the securities, surety bonds, irrevocable letters of credit, insurance or other financial instruments or guarantees, including, but not limited to, the credit rating, financial strength, and AM best rating, if applicable to the institutions (ii) applicable cash flow information and financial assumptions (iii) a description of the methodology to be used by the Association to assess and collect the Association Aggregate Security System assessments to be made pursuant to subdivision (3a) of this subsection and (iv) a proposed timetable for the release of existing individual company deposits posted pursuant to G.S. 97-185(c), provided, however, that no individual company deposits posted pursuant to G.S. 97-185(c) shall be released without the written consent of the Commissioner. The noncash elements of the composite security may be one-year or multiple-year instruments.
b. Within 90 days following the submission of the initial plan under sub-subdivision a. of this subdivision, the Commissioner shall either approve or disapprove the initial plan and shall notify the Association in writing. If the Commissioner does not approve or disapprove the initial plan within 90 days following submission, then the initial plan shall be deemed to be approved by the Commissioner. All subsequent plans shall be either approved or disapproved within 60 days following submission.
c. The Commissioner shall also determine the total undiscounted claims liability of each individual self-insurer that will participate in the Association Aggregate Security System as well as the aggregate total undiscounted outstanding claims liabilities of all the individual self-insurers that are to participate in the Association Aggregate Security System and shall notify the Association of this determination.
d. Upon approval by the Commissioner of the Association's plan for the Association Aggregate Security System, the Association shall assess the individual self-insurers that participate in the Association Aggregate Security System pursuant to subdivision (3a) of this subsection.
e. If the Commissioner disapproves the plan for any year, every self-insurer shall deposit with the Commissioner, or continue to deposit, the amount required by G.S. 97-185(b3) in the manner prescribed by G.S. 97-185(c).
f. Group self-insurers shall not participate in the Association Aggregate Security System.
(3) Administer a
fund, to be known as the North Carolina Self-Insurance Guaranty Fund, which
shall receive the assessments required in subdivision (2) of this subsection.
Once the Fund reaches five million dollars ($5,000,000), no further assessments
shall be made except initial assessments of new member self-insurers that are
required to be made in subdivision (2)d. of this subsection. Assessments may be
subsequently made only to maintain the Fund at a level of five million dollars
($5,000,000). In its discretion, the Board may determine that the assets of the
Fund should be segregated, or, that a separate accounting shall be made, in
order to identify that portion of the Fund which represents assessments paid by
individual self-insurers and that portion of the Fund which represents
assessments paid by group self-insurers. If the Board determines to segregate
the Fund in this manner, the Association shall thereafter pay covered claims
against individual member self-insurers from that portion of the Fund which
represents assessments against individual self-insurers and shall thereafter
pay covered claims against group member self-insurers from that portion of the
Fund which represents assessments against group self-insurers. The cost of
administration incurred by the Association shall be borne by the Fund and the
Association is authorized to secure reinsurance and bonds and to otherwise
invest the assets of the Fund to effectuate the purpose of the Association,
subject to the approval of the Commissioner. All earnings from investment of
Fund assets shall be placed in or credited to the Fund.
The Association may purchase
primary excess insurance from an insurer licensed by the Commissioner for the
appropriate lines of authority to defray its exposure to loss occasioned by the
default of one of its members. The terms of any excess insurance so purchased
shall be limited to providing coverage of liabilities which exceed the Fund's
assets after the payment by member self-insurers of the maximum post-insolvency
assessment provided in subdivision (c)(1) of this section herein and the
Association shall fund any such purchase by levying a special assessment on its
members for this purpose or by application of any unencumbered earnings of the
Fund or any other available funds. The Association may obtain from each member
any information the Association may reasonably require in order to facilitate
the securing of this primary excess insurance. The Association shall establish
reasonable safeguards designed to insure that information so received is used
only for this purpose and is not otherwise disclosed;
(3a) Assess members of the Association as follows:
a. Association Aggregate Security System assessments. - The Association shall assess each individual self-insurer participating in the Association Aggregate Security System a security system assessment. The amount of the security system assessment charged to each individual self-insurer participating in the Association Aggregate Security System shall be based on the Association's reasonable consideration of all of the following factors:
1. The total amount of assessments necessary to provide aggregate security for all participating individual self-insurers.
2. The individual self-insurer's total workers' compensation liabilities under the Act.
3. The financial strength and creditworthiness of the participating individual self-insurer.
4. Any other relevant factors.
b. Special assessment. - In the event that there are covered claims against an insolvent member or members and the assets of the Fund are not sufficient to pay the obligations of the Association, then the Association may collect a special assessment from the members in an amount sufficient to pay the aggregate value of such covered claims. Each member's special assessment shall be determined by the Board and shall be based on the proportion of the member's total obligations under the Act to the aggregate total of all members' obligations under the Act.
c. Initial assessments. - An individual self-insurer that becomes a member and does not initially participate in the Association Aggregate Security System shall pay an initial assessment to the Association in an amount determined by the Board. A group self-insurer, upon receiving its initial license from the Commissioner, shall pay an initial assessment to the Association in an amount determined by the Board.
d. Each member shall be notified of assessments no later than 30 days before the assessment is due.
e. Delinquent assessments, except as otherwise provided, shall bear interest at a rate to be established by the Board.
(4) Be obligated to the
extent of covered claims occurring prior to the determination of the member
self-insurer's insolvency, or occurring after such determination but prior to
the obtaining by the self-insurer of workers' compensation insurance as
otherwise required under this Chapter.pay covered claims.
(5) After paying any claim
resulting from a self-insurer's insolvency, covered claim, be
subrogated to the rights of the injured employee and dependents and be entitled
to enforce liability against the self-insurer or any third party by any
appropriate action brought in its own name or in the name of the injured
employee and dependents;dependents.
(6) Assess the Fund in
an amount necessary to pay only:Expend Fund assets in amounts necessary
to pay all of the following:
a. The
obligations for of the Association under this Article subsequent
to an insolvency;insolvency.
b. The
expenses of handling covered claims subsequent to an insolvency;insolvency.
c. The cost of
examinations under G.S. 97-137; andG.S. 97-137.
d. The costs of implementing and operating the Association Aggregate Security System.
e. Other
All other expenses authorized by this Article;Article.
(7) 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. The Association may review settlements to which the insolvent self-insurermember
was a party to determine the extent to which such settlements may be properly contested;contested.
(8) Notify such persons as
the Commissioner directs under G.S. 97-136;G.S. 97-136.
(9) Handle claims through
its employees directors, its employees, or through one or more self-insurersmembers
or other persons designated as servicing facilities. Designation of a servicing
facility is subject to the approval of the Commissioner, but designation of a
member self-insurer as a servicing facility may be declined by such self-insurer;member.
(10) 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;Association.
(11) Pay the any other
expenses of the Association authorized by this section; andsection.
(12) Establish in the Plan a
mechanism to calculate the assessments required by subdivisions (2) and (3) of
this subsection by a simple and equitable means to convert from policy or fund
years that are different from a calendar year.
(b) The Association may:
(1) Employ or retain such persons
persons, including, but not limited to, adjustors, brokers, accountants,
attorneys, financial advisors, investment bankers, placement agents, and
consultants, as the Board may determine are necessary to handle claims
claims, and perform other duties of of, provide
services to, and consult with the Association;Association.
(2) Borrow funds necessary
to effect the purposes of this Article in accord with the Plan;Plan,
including entering into standby lines of credit.
(3) Sue or be sued;sued.
(4) Negotiate and become a
party to such contracts as are necessary to carry out the purpose of this section;
andsection.
(5) Perform such other acts as are necessary or proper to effectuate the purpose of this section.
(6) Reimburse the Department of Insurance up to twenty thousand dollars ($20,000) for consultants retained by the Department to review the initial plan submitted pursuant to G.S. 97-133(a)(2a).
(c) In the
event that the assets of the Fund are not sufficient to pay the obligations of
the Association, then the Association shall impose an additional assessment
upon its members, which shall be known as a post-insolvency assessment which
shall be imposed as follows:
(1) Each
individual member self-insurer shall be assessed in an amount not to exceed two
percent (2%) each year of the annual gross premiums, as determined under
G.S. 105-228.5(b), (b1), and (c), that would have been paid by that member
self-insurer during the prior calendar year. The assessments of each individual
member self-insurer shall be in the proportion that the annual gross premiums,
as determined under G.S. 105-228.5(b), (b1), and (c), of the individual
member self-insurer for the premium calendar year bears to the annual gross
premiums of all individual member self-insurers for the preceding calendar
year. For group member self-insurers, the assessment shall not exceed two
percent (2%) each year the annual premium collected by that group member self-insurer
during the prior calendar year. The assessments of each group member self-insurer
shall be in the proportion that the annual gross premiums of the group member
self-insurer for the premium calendar year bears to the annual gross premiums
of all group member self-insurers for the preceding calendar year.
(2) Each member
self-insurer shall be notified of the assessment no later than 30 days before
it is due.
(3) The
Association may exempt or defer, in whole or in part, the assessment of any
member self-insurer, if the assessment would cause that member's financial
statement to reflect liabilities in excess of assets.
(4) Delinquent
assessments, except as provided in subdivision (3) of this subsection, shall
bear interest at the rate to be established by the Board, but not to exceed the
discount rate of the Federal Reserve Bank, Richmond, Virginia, on the due date
of the assessment, plus four percent (4%) annually, computed from the due date
of the assessment.
(5) The
Association shall establish in the Plan a mechanism to calculate the
assessments required by subdivision (1) of this subsection by a simple and
equitable means to convert from policy or fund years that are different from a
calendar year.
(c1) The Association shall provide in its Plan that the functions of administration and adjusting claims shall not be performed by the same entity that provides legal representation to the Association for claims.
(d) No
individual member self-insurer may be assessed in any calendar year an amount
greater than two and one-half percent (2.5%) of the annual gross premiums, as
determined under G.S. 105-228.5(b), (b1), and (c), that would have been
paid by that individual member self-insurer during the prior calendar year. No
group member self-insurer may be assessed in any calendar year an amount
greater than two and one-half percent (2.5%) of the annual gross premiums of
that group member self-insurer during the prior calendar year. If the maximum assessment
does not provide in any one year an amount sufficient to make all necessary
payments, the funds available shall be prorated and the unpaid portion shall be
paid as soon thereafter as funds become available. There shall be established
in the Plan a mechanism to calculate the assessments required by this section
by a simple and equitable means to convert from policy or fund years that are
different from a calendar year."
SECTION 5. G.S. 97-134 reads as rewritten:
"§ 97-134. Plan of Operation.
The Plan is as follows:
(1) The Association shall
submit to the Commissioner a Plan and any amendments necessary or suitable to
assure the fair, reasonable, and equitable administration of the Association.
The Plan and any amendments become effective upon approval in writing by the
Commissioner. If the Association at any time fails to submit a suitable Plan
or suitable amendment to the Plan the Commissioner shall, after notice and
hearing, adopt such reasonable rules as are necessary or advisable to effectuate
this Article. Such The rules shall continue in force until
modified by the Commissioner or superseded by a Plan submitted by the
Association and approved by the Commissioner.
(2) All member self-insurers shall comply with the Plan.
(3) The Plan shall:
a. Establish
the procedures whereby all the powers and duties of the Association under
G.S. 97-133 will be performed;performed.
b. Establish
procedures for handling assets of the Association;investing and
managing Fund assets.
c. Adopt a
reasonable mechanism and procedure to achieve equity in assessing the funds
required in G.S. 97-133. Consideration shall be given to adjustments for
audited payroll, differential effects caused by rate changes, and other
relevant factors;members under G.S. 97-133.
d. Establish
the amount and method of reimbursing members of the Board under G.S. 97-132;G.S.
97-132.
e. Establish
procedures by which claims may be filed with the Association and establish
acceptable forms of proof of covered claims. A list of such claims shall be
periodically submitted to the Association;
f.
Establish regular places and times for meetings of the Board;Board.
g. Establish procedures
for records to be kept of all financial transactions of the Association, its
agents, and the Board;Board.
h. Provide
that any member self-insurer aggrieved by any final action or decision of the
Association may appeal to the Commissioner within 30 days after the action or decision;decision.
i.
Establish the procedures whereby selections for the Board shall be submitted to
the Commissioner; andCommissioner.
j. Contain additional provisions necessary or proper for the execution of the powers and duties of the Association."
SECTION 6.1. G.S. 97-135 reads as rewritten:
"§ 97-135. Insolvency.
A member self-insurer shall be insolvent for the purposes of this Article under any of the following circumstances:
(1) Determination of
insolvency by a court of competent jurisdiction; orjurisdiction.
(2) Institution of
bankruptcy proceedings by or regarding the member self-insurer; orself-insurer.
(3) The Board determines that the member self-insurer's total liabilities exceed its total assets or the member self-insurer is unable or ceases to pay its debts as they fall due or in the ordinary course of business.
(4) A member self-insurer is deemed to be insolvent, bankrupt, or in default as defined by the terms of any security instrument created pursuant to the Association Aggregate Security System."
SECTION 6.2. G.S. 97-136 reads as rewritten:
"§ 97-136. Powers and duties of the Commissioner.
(a) The Commissioner shall
notify shall:
(1) Notify the Association of the existence of an insolvent member self-insurer not later than 30 days after he receives notice of an insolvency pursuant to the standards set forth in G.S. 97-135.
(2) Approve or disapprove the plan for an Association Aggregate Security System as required under G.S. 97-133(a)(2a)b. and notify the Association of the information required under G.S. 97-133(a)(2a)c.
(b) The Commissioner may:
(1) Require that the
Association notify the insureds of the insolvent member self-insurer and any
other interested parties of the insolvency and of their rights under this
Article. Such The notifications shall be by mail at their last
known addresses, where available; but if required information for notification
is not available, notice by publication in a newspaper of general circulation
in this State shall be sufficient; and
(2) Revoke the designation
of any servicing facility if he the Commissioner finds
claims are being handled unsatisfactorily."
SECTION 7. G.S. 97-140 reads as rewritten:
"§ 97-140. Nonduplication of recovery.
Any person having a covered claim that may be recovered under more than one insurance or self-insurance guaranty or security association or its equivalent shall seek recovery first from the association of the place or residence of the claimant. Any recovery under this Article shall be reduced by the amount of recovery from any other insurance guaranty or security association or its equivalent."
SECTION 8. G.S. 97-143 reads as rewritten:
"§ 97-143. Use of deposits made by insolvent member self-insurers.
After the Commissioner has notified the Association, under
G.S. 97-136(a), that a member is insolvent, the Commissioner shall assign
and deliver to the Association, and the Association is authorized to expend the
any deposit made by the insolvent member under G.S. 58-47-90 or
G.S. 97-185, to the extent the deposit is needed by the Association to pay
covered claims against the insolvent member as required by this Article, and to
the extent the deposit is needed to pay expenses of the Association relating to
covered claims against the insolvent member. For insolvent individual member
self-insurers that participate in the Association Aggregate Security System,
the Association is authorized to pursue recovery under every instrument,
contract, and form of security comprising the composite security. The
Association shall account to the Commissioner and the insolvent member or its
successor for all deposits received from the Commissioner under this
section."
SECTION 9. G.S. 97-165 reads as rewritten:
"§ 97-165. Definitions.
As used in this Article:
(1) 'Act' means the Workers' Compensation Act established in Article 1 of this Chapter.
(1a) 'Affiliate of' or 'person affiliated with' a specific person means a person that indirectly through one or more intermediaries or directly controls, is controlled by, or is under common control with the person specified.
(1b) 'Association Aggregate Security System' means the security system established pursuant to G.S. 97-133 whereby individual self-insurers collectively secure their aggregate self-insured workers' compensation liabilities under the Act through the North Carolina Self-Insurance Security Association.
(2) 'Certified audit'
means an audit on which a certified public accountant expresses his or her
professional opinion that the accompanying statements fairly present the
financial position of the self-insurer, self-insurer or the
guarantor, in conformity with generally accepted accounting principles.accounting
principles generally accepted in the United States.
(3) 'Certified public
accountant' or 'CPA' means a CPA who is in good standing with the American
Institute of Certified Public Accountants and in all states in which the CPA is
licensed to practice. A CPA shall be recognized as independent as long as the
CPA conforms to the standards of the profession, as contained in the Code of
Professional Ethics of the American Institute of Certified Public Accountants
and Rules and Regulations and Code of Ethics and Rules of Professional Conduct
of the North Carolina State Board of Certified Public Accountant Examiners, or
similar code. The Commissioner may hold a hearing to determine whether a CPA is
independent and, considering the evidence presented, may rule that the CPA is
not independent for purposes of expressing an opinion on the GAAP financial
statement and require the individual self-insurer or the guarantor to
replace the CPA with another whose relationship with the individual self-insurer
or the guarantor is independent within the meaning of this definition.
(4) 'Commissioner' means the Commissioner of Insurance.
(4a) 'Control', 'controlling', 'controlled by', and 'under common control with' mean the direct or indirect possession of the power to direct or cause the direction of the management and policies of a person through ownership of or through proxies for voting of greater than fifty percent (50%) of the voting securities, or in the case of a not-for-profit entity, the power to direct or cause the direction of the management and policies of the entity.
(5) 'Corporate surety' means an insurance company authorized by the Commissioner to write surety business in this State.
(6) 'GAAP financial
statement' means a financial statement as defined by generally accepted accounting
principles.principles generally accepted in the United States.
(6a) 'Guarantor' means a person within the same holding company system who controls the applicant, whose financial statement is used by the applicant to become a self-insurer under the Act, and who has guaranteed the payment of the self-insurer's liability under the Act.
(7) 'Hazardous financial condition' means that, based on its present or reasonably anticipated financial condition, a self-insurer or guarantor is insolvent or, although not yet financially impaired or insolvent, is unlikely to be able to meet its obligations with respect to known claims and reasonably anticipated claims or to pay other obligations in the normal course of business.
(7a) 'Holding company system' means an entity comprising two or more affiliated persons.
(8) 'Management' means those persons who are authorized to direct or control the operations of a self-insurer.
(8a) 'Person' means an individual, corporation, partnership, limited liability company, association, joint stock company, trust, unincorporated organization, or any similar entity or any combination of the foregoing acting in concert.
(9) 'Qualified actuary' means a member in good standing of the Casualty Actuarial Society or a member in good standing of the American Academy of Actuaries, who has been approved as qualified for signing casualty loss reserve opinions by the Casualty Practice Council of the American Academy of Actuaries, and is in compliance with G.S. 58-2-171.
(10) 'Self-insurer' means an employer
who retains liability under the Act and is licensed under this Article.
individual self-insurer as defined by G.S. 97-130(5b).
(11) 'Subsidiary of' a specific person means an affiliate controlled by such person indirectly through one or more intermediaries or an affiliate directly controlled by such person."
SECTION 10. G.S. 97-170 reads as rewritten:
"§ 97-170. License applications; required information.
(a) No employer shall self-insure its workers' compensation liabilities under the Act unless it is licensed by the Commissioner under this Article. This subsection does not apply to an employer authorized to self-insure its workers' compensation liabilities under the Act prior to December 1, 1997, whose authority to self-insure its workers' compensation liabilities under the Act has not terminated after that date.
(b) An applicant for a license as a self-insurer shall file with the Commissioner the information required by subsection (d) of this section on a form prescribed by the Commissioner at least 90 days before the proposed licensing date. No application is complete until the Commissioner has received all required information. A copy of the application must also be filed with the North Carolina Self-Insurance Security Association at least 90 days before the proposed licensing date.
(c) Only an applicant
whose total fixed assets amount to five hundred thousand dollars ($500,000) or
more may apply for a license. In judging the applicant's financial strength and
liquidity relative to its ability to comply with the Act, the Commissioner
shall consider all of the following relative to the applicant's:applicant:
(1) Organizational
structure and management;management.
(2) Financial strength;strength.
(3) Source and reliability
of financial information;information.
(4) Risks to be retained;retained.
(5) Workers' compensation
loss history;history.
(6) Number of employees;employees.
(7) Claims administration;administration.
(8) Excess insurance;
andinsurance.
(9) Access to excess insurance.
(d) The license
application shall comprise be comprised of the following
information:
(1) Company name, Applicant
name; organizational structure, structure of the applicant,
including any controlling entity, subsidiaries, or affiliates; location of
principal office, office; contact person, person; organization
date, date; type of operations within this State, State;
management background, background; and addresses of all
plants or offices in this State.
(2) Certified audited GAAP
financial statements prepared by a CPA for the two most recent years. The
financial statement formulation presentation shall facilitate
application of ratio and trend analysis.
…
(6) Summary of workers'
compensation benefits paid for the last three calendar years, as well as years
and the total liability for all open claims within 30 days or some other
period acceptable to the Commissioner not to exceed 90 days, before the filing
of the application.
…
(8) Book value
of fixed assets located within the State.
(9) Proof of compliance with the claims administration provisions of Article 47 of Chapter 58 of the General Statutes.
(10) A letter of assent,
stipulating the applicant's acceptance of membership status in approval
for membership by the North Carolina Self-Insurance Guaranty Association
under Article 4 of this Chapter.Security Association.
(e) Every applicant shall
execute and file with the Commissioner an agreement, as part of the
application, in which the applicant agrees to participate in the Association
Aggregate Security System, or if excluded from the Association Aggregate
Security System, to deposit with the Commissioner pursuant to
G.S. 97-185 cash, acceptable securities, an irrevocable letter of
credit in a form acceptable to the Commissioner issued by a bank acceptable to
the Commissioner, or a surety bond issued by a corporate surety surety,
or a combination thereof, that will guarantee the applicant's compliance
with this Article and the Act pursuant to G.S. 97-185.Act."
SECTION 11. Article 5 of Chapter 97 of the General Statutes is amended by adding the following new section:
"§ 97-177. License covering applicant and any subsidiary or applicant relying on a guarantor; procedure; requirements.
(a) The Commissioner may, in the Commissioner's discretion, upon request by an applicant, issue a license to an applicant or to an applicant and one or more of its subsidiaries if all of the following requirements are satisfied:
(1) The applicant or a guarantor of the applicant executes a guaranty agreement, in a form prescribed by the Commissioner, for the payment of all workers' compensation liabilities covered under the Act. For any applicant or guarantor that is a corporation, there shall be submitted, along with the guaranty agreement, a board of directors' resolution from the respective corporation authorizing the guaranty of the liabilities of the subsidiary company or companies and granting signature authority to each person or officer executing the agreement.
(2) The applicant or guarantor files a statement with the Commissioner that lists the percentage of ownership of voting securities or proxies representing voting securities owned or held by the applicant or guarantor for each subsidiary, or in the case of a not-for-profit entity, documentation acceptable to the Commissioner evidencing control.
(3) The applicant and its guarantor or the applicant and its subsidiaries, whichever applies, satisfy the requirements of G.S. 97-170(c).
(4) All other applicable requirements for licensure under the Act are satisfied.
(b) A license issued by the Commissioner pursuant to this section shall include the name of the applicant, the name of each licensed subsidiary, and the date of issuance for each licensed subsidiary.
(c) If a self-insurer requests to add a subsidiary to its license, the Commissioner shall review the request in accordance with this section. Upon approval, the Commissioner shall issue to the self-insurer a new license that includes the newly licensed subsidiary and the date of license issuance for the newly licensed subsidiary, and the self-insurer shall return the original license to the Commissioner.
(d) A self-insurer shall neither include nor delete a subsidiary from its license without the Commissioner's prior written approval.
(e) If a controlling relationship or guaranty agreement terminates, the self-insurer shall retain all liabilities under the Act that were incurred by the self-insurer during the period of self-insurance and shall account for all such liabilities until discharged, as evidenced by reports filed with the Commissioner. Termination of a guaranty agreement does not affect the guarantor's liability for payment of liabilities arising prior to termination of the agreement."
SECTION 12. G.S. 97-180 reads as rewritten:
"§ 97-180. Reporting and records.
(a) Every self-insurer
shall submit, within 120 days after the end of its fiscal year, a certified
audited GAAP financial statement, prepared by a CPA, for that fiscal year. The
financial statement formulation presentation shall facilitate the
application of ratio and trend analysis. If the self-insurer was issued a
license pursuant to G.S. 97-177, the financial statement required under
this subsection shall be that of the guarantor.
(b) Every self-insurer
shall submit within 120 days after the end of its fiscal year a certification
report from a qualified actuary setting forth the actuary's an opinion
relating to certifying the loss and loss adjustment expense
reserves for workers' compensation obligations for in North
Carolina. The certification report shall show liabilities, excess
insurance carrier and other qualifying credits, if any, and net retained
workers' compensation liabilities. The qualified actuary shall present an
annual report to the self-insurer on the items within the scope of and
supporting the certification, within 90 days after the close of the self-insurer's
fiscal year. Upon request, the report shall be submitted to the Commissioner.
(c) Every self-insurer
shall submit within 120 days after the end of its fiscal year a report in the
form of a sworn statement prescribed by the Commissioner, setting forth the
total workers' compensation benefits paid in the previous fiscal year, as
well as and the total outstanding workers' compensation liabilities
for each loss year, recorded at the close of its fiscal year for the net
retained liability.
(d) Upon the request of the Commissioner, every self-insurer shall submit a report of its annual payroll information. The report shall summarize payroll, by annual amount paid, and the number of employees, by classification, using the rules, classifications, and rates in the most recently approved Workers' Compensation and Employers' Liability Insurance Manual governing the audits of payrolls and the adjustments of premiums. Every self-insurer shall maintain true and accurate payroll records. These payroll records shall be maintained to allow for verification of the completeness and accuracy of the annual payroll report.
(e) Every self-insurer
shall report promptly to the Commissioner changes in the names and addresses
name or address of the businesses it self-insures or intends to
self-insure, as well as self-insurer or guarantor; significant
changes in the financial condition, condition of the self-insurer,
guarantor, or any affiliate, including bankruptcy filings, filings;
and changes in its business organizational structure,
including its divisions, subsidiaries, affiliates, and internal
organization. subsidiaries and affiliates. Any change shall be
reported in writing to the Commissioner within 10 days after the effective date
of the change. Upon request by the Commissioner, a self-insurer shall
provide the Commissioner copies of documents or information deemed necessary to
determine whether any change has affected the privilege of the employer to self-insure."
SECTION 13. G.S. 97-185 reads as rewritten:
"§ 97-185. Deposits; surety bonds; letters of credit.
(a) (Effective
January 1, 2005, until January 1, 2006) Every self-insurer shall
deposit with the Commissioner an amount not less than seventy-five percent
(75%) of the self-insurer's total undiscounted outstanding claim liability per
the most recent certification from a qualified actuary as required by
G.S. 97-180(b), but not less than five hundred thousand dollars
($500,000), or such other greater amount as the Commissioner prescribes based
on, but not limited to, the financial condition of the self-insurer and the
risk retained by the self-insurer.
(a) (Effective
January 1, 2006) Every self-insurer shall deposit with the
Commissioner an amount not less than one hundred percent (100%) of the self-insurer's
total undiscounted outstanding claim liability per the most recent
certification from a qualified actuary as required by G.S. 97-180(b), but
not less than five hundred thousand dollars ($500,000), or such other greater
amount as the Commissioner prescribes based on, but not limited to, the
financial condition of the self-insurer and the risk retained by the self-insurer.
(a1) All individual self-insurers as defined in G.S. 97-130(5b) shall participate in the Association Aggregate Security System established under G.S. 97-131 unless excluded by the Board of Directors of the North Carolina Self-Insurance Security Association. The Board of Directors of the North Carolina Self-Insurance Security Association shall exclude all of the following from the Association Aggregate Security System:
(1) Individual self-insurers whose licenses have previously been revoked by the Commissioner.
(2) Individual self-insurers with a debt rating as established by Standard & Poor's Rating Service or by Moody's Investor Service, below the minimum Standard & Poor's and Moody's ratings established in the written plan for the Association Aggregate Security System submitted by the Association and approved by the Commissioner under G.S. 97-133(a)(2a).
(3) Individual self-insurers that have defaulted on the payment of its self-insured workers' compensation liabilities from participation in the Association Aggregate Security System.
The Board of Directors of the North Carolina Self-Insurance Security Association shall notify the Commissioner of the individual self-insurers that are excluded from participating in the Association Aggregate Security System.
(b) Repealed by Session Laws 2003-115, s. 3, effective January 1, 2004.
(b1) Notwithstanding
subsection (a) of this section, member self insurers with a debt rating of BBB
or better from Standard and Poor's Rating Service, a division of McGraw Hill,
Inc., or an equivalent rating from another national rating agency shall deposit
with the Commissioner an amount not less than twenty five percent (25%) of the
self insurer's total undiscounted outstanding claim liability per the most
recent certification from a qualified actuary as required by G.S. 97
180(b), but not less than five hundred thousand dollars ($500,000). The
Commissioner shall consider and may, in the Commissioner's discretion, increase
or reduce the deposit to a greater or lesser percentage of the member self
insurer's claims liability based on the financial strength of the self insurer
and other financial information submitted by the self insurer.
(b2) An individual self-insurer that is excluded from participation in the Association Aggregate Security System, including individual self-insurers that are granted a license to self-insure after the North Carolina Self-Insurance Security Association annually implements the Association Aggregate Security System, shall deposit with the Commissioner an amount not less than one hundred percent (100%) of the individual self-insurer's total undiscounted outstanding claims liability per the most recent report from a qualified actuary as required by G.S. 97-180(b), but not less than five hundred thousand dollars ($500,000), or such greater amount as the Commissioner prescribes based on, but not limited to, the financial condition of the individual self-insurer and the risk retained by the individual self-insurer.
(b3) During any period of time that no Association Aggregate Security System is in effect, individual self-insurers with a debt rating of BBB or better from Standard & Poor's Rating Service, a division of McGraw Hill, Inc., or an equivalent rating from another national rating agency shall deposit with the Commissioner an amount not less than twenty-five percent (25%) of the individual self-insurer's total undiscounted outstanding claims liability per the most recent report from a qualified actuary as required by G.S. 97-180(b), but not less than five hundred thousand dollars ($500,000). An individual self-insurer licensed pursuant to G.S. 97-177 may utilize the debt rating of its guarantor for the purpose of establishing the application of this subsection. The Commissioner shall consider and may, in the Commissioner's discretion, increase or reduce the deposit to a greater or lesser percentage of the individual self-insurer's claims liability based on the financial strength of the individual self-insurer and other financial information submitted by the individual self-insurer. All other individual self-insurers shall deposit with the Commissioner an amount not less than one hundred percent (100%) of the individual self-insurer's total undiscounted outstanding claims liability per the most recent report from a qualified actuary as required by G.S. 97-180(b), but not less than five hundred thousand dollars ($500,000), or such greater amount as the Commissioner prescribes based on, but not limited to, the financial condition of the individual self-insurer and the risk retained by the individual self-insurer.
(c) Deposits received,
changes to existing deposits, or deposits exchanged after the effective date of
this section, shall comprise be comprised of one or more of the
following:
(1) Interest-bearing bonds of the United States of America.
(2) Interest-bearing bonds of the State of North Carolina, or of its cities or counties.
(3) Certificates of deposit issued by any solvent bank domesticated in the State of North Carolina that have a maturity of one year or greater.
(4) Surety bonds in a form acceptable to the Commissioner and issued by a corporate surety. A surety bond deposited pursuant to this subsection shall require that the surety reimburse the Commissioner, or his successors, assigns, or transferees, for any costs incurred in the collection of the proceeds of the surety bond, including reasonable attorneys' fees, and any costs incurred in administering the insolvent self- insurer's workers' compensation claims.
(4a) Irrevocable letters of credit in
a form acceptable to the Commissioner issued by a bank acceptable to the
Commissioner. An irrevocable letter of credit deposited pursuant to this
subsection shall require that the bank reimburse the Commissioner, or his successor,
successors, assigns, or transferees for any costs incurred in the
collection of the proceeds of the letter of credit, including reasonable
attorneys' fees.
(4b) The reimbursement of attorneys' fees and collections cost provided for in subdivisions (4) and (4a) of this subsection shall be no greater than fifteen percent (15%) of the penal amount of the bond and shall not come from the proceeds of the bond or the letter of credit but shall be in addition to the proceeds of the bond or the letter of credit.
(5) Any other investments that are approved by the Commissioner.
(d) All bonds or securities that are posted as a security deposit shall be valued annually at market value. If the market value is less than the face value, the Commissioner may require the self-insurer to post additional securities. In making this determination, the Commissioner shall consider the self-insurer's or guarantor's financial condition, the amount by which market value is less than face value, and the likelihood that the securities will be needed to provide benefits.
(e) Securities deposited under this section shall be assigned to the Commissioner, the Commissioner's successors, assigns, or trustees, on a form prescribed by the Commissioner in a manner that renders the securities negotiable by the Commissioner. If a self-insurer or guarantor is deemed by the Commissioner to be in a hazardous financial condition, the Commissioner may sell or collect, or both, such amounts that will yield sufficient funds to meet the self-insurer's obligations under the Act. In the case of a letter of credit, the Commissioner may draw the full amount of a letter of credit if the letter of credit is not renewed within 90 days prior to its expiration or at any time that the bank issuing the letter of credit is no longer acceptable to the Commissioner. Interest accruing on any negotiable security deposited under this Article shall be collected and transmitted to the self-insurer if the self-insurer or guarantor is not in a hazardous financial condition.
(f) No judgment creditor, other than a claimant entitled to benefits under the Act, may levy upon any deposits made under this section.
(g) Securities Pursuant
to the provisions of this section and with the approval of the Commissioner,
deposits held by the Commissioner under this section may be exchanged
or replaced by the self-insurer with other securities of like
nature and amount as long as the self-insurer is not in a hazardous financial
condition. No release shall be effectuated until replacement securities or
bonds of an equal value have been substituted. acceptable forms of deposit
in amount determined by the Commissioner. Any surety bond may deposit
to be exchanged or replaced with another surety bond that meets
the requirements of this section if 90 days' advance written notice is given to
the Commissioner. If a self-insurer ceases to self-insure or desires to replace
securities with an acceptable surety bond or bonds, the self-insurer shall
notify the Commissioner, and may recover all or a portion of the securities
deposited with the Commissioner upon posting instead an acceptable special
release bond issued by a corporate surety in an amount equal to the total value
of the securities. The special release bond shall cover all existing
liabilities under the Act plus an amount to cover future loss development and
shall remain in force until all obligations under the Act have been discharged
fully.another form of deposit shall not be released until the approved
replacement deposit is received by the Commissioner.
(h) If a self-insurer
ceases to self-insure, no deposits shall be released by the Commissioner until
the self-insurer has discharged fully all of the self-insurer's obligations
under the Act.Any self-insurer that ceases to self-insure, whether by
voluntary termination or by revocation of license, shall continue to secure and
be liable for its obligations under the Act and shall continue to report to the
Commissioner pursuant to G.S. 97-180. Upon the request of the
Commissioner, a self-insurer that ceases to self-insure shall submit filings,
as prescribed in G.S. 97-180, to determine whether the deposit is
sufficient to satisfy those workers' compensation obligations incurred during
the period that the self-insurer was licensed as a self-insurer. The
Commissioner may require an increase in the deposit amount or may grant a
reduction in the deposit amount to ensure that the deposit is sufficient to
cover all existing and future obligations incurred by the self-insurer while
subject to the provisions of the Act.
(i) An endorsement to a surety bond shall be filed with the Commissioner within 90 days after the effective date of the endorsement."
SECTION 14. G.S. 97-190 reads as rewritten:
"§ 97-190. Excess insurance.
(a) Every self-insurer, as a prerequisite for licensure under this Article, shall maintain specific and aggregate excess loss coverage through an insurance policy. A self-insurer shall maintain limits and retentions commensurate with its risk. A self-insurer's retention shall be the lowest retention suitable for the self-insurer's exposures and level of annual premium. The Commissioner may require different levels, or waive the requirement, of specific and aggregate excess loss coverage consistent with the market availability of excess loss coverage, the self-insurer's claims experience, and the self-insurer's or guarantor's financial condition.
(b) An excess insurance
policy required by this section shall be issued by either a licensed an
insurance company licensed in this State or an approved eligible
surplus lines insurance companyinsurer as defined in G.S. 58-21-10
and shall:
(1) Provide for at least 30 days' written notice of cancellation by registered or certified mail, return receipt requested, to the self-insurer and to the Commissioner.
(2) Be renewable automatically at its expiration, except upon 30 days' written notice of nonrenewal by certified mail, return receipt requested, to the self-insurer and to the Commissioner.
(c) Every self-insurer shall provide to the Commissioner evidence of coverage and any amendments within 30 days after their effective dates. Every self-insurer shall, at the request of the Commissioner, furnish copies of its excess insurance policies and amendments."
SECTION 15. G.S. 97-195 reads as rewritten:
"§ 97-195.
Revocation of license. Revocation, suspension or restriction of
license.
(a) The
Commissioner summarily may revoke a license if there is satisfactory evidence
for the revocation. In determining whether to revoke a license summarily, the
Commissioner may consider any or all of the following:
(1) Determination
of insolvency by a court of competent jurisdiction.
(2) Institution
of bankruptcy proceedings.
(3) If the self
insurer is in a hazardous financial condition.
(a1) The Commissioner may, upon at least 45 days notice and opportunity for a hearing, revoke, suspend, or restrict the license of a self-insurer if any of the following apply:
(1) The self-insurer fails or refuses to comply with any law, order, or rule applicable to the self-insurer.
(2) There is a determination of insolvency by a court of competent jurisdiction.
(3) The self-insurer is in a hazardous financial condition.
(4) The self-insurer has experienced a material loss or deteriorating operating trends, or has reported a deficit financial position.
(5) Any affiliate or subsidiary is insolvent, threatened with insolvency, or delinquent in payment of its monetary or any other obligation.
(6) The self-insurer has failed to pay premium taxes pursuant to Article 8B of Chapter 105 of the General Statutes.
(7) Contingent liabilities, pledges, or guaranties that either individually or collectively involve a total amount that in the Commissioner's opinion may affect a self-insurer's solvency.
(8) The management of a self-insurer has failed to respond to the Commissioner's inquiries about the condition of the self-insurer or has furnished false and misleading information in response to an inquiry by the Commissioner.
(9) The management of a self-insurer has filed any false or misleading sworn financial statement, has released a false or misleading financial statement to a lending institution or to the general public, or has made a false or misleading entry or omitted an entry of material amount in the filed financial information.
(10) The self-insurer has experienced, or will experience in the foreseeable future, cash flow or liquidity problems.
(11) The self-insurer has failed to make proper and timely payment of claims, as required by this Article.
(12) Failure to pay any North Carolina Self-Insurance Security Association assessments made pursuant to G.S. 97-133.
(13) Failure to participate in the Association Aggregate Security System or, if excluded from participation in the Association Aggregate Security System, failure to provide and maintain the deposit required by G.S. 97-185.
(b) The
Commissioner, upon at least 45 days' notice, may revoke a license if there is
satisfactory evidence for the revocation. In determining whether to revoke a
license under this subsection, the Commissioner may consider any or all of the
following:
(1) Whether the
self-insurer has experienced a material loss or deteriorating operating trends,
or reported a deficit financial position.
(2) Whether any
affiliate or subsidiary is insolvent, threatened with insolvency, or delinquent
in payment of its monetary or any other obligation.
(3) Whether the
self-insurer has failed to pay premium taxes pursuant to Article 8B of Chapter
105 of the General Statutes.
(4) Repealed by
Session Laws 2003-221, s. 15, effective June 19, 2003.
(5) Contingent
liabilities, pledges, or guaranties that either individually or collectively
involve a total amount that in the Commissioner's opinion may affect a self-insurer's
solvency.
(6) Whether the
management of a self-insurer has failed to respond to the Commissioner's
inquiries about the condition of the self-insurer or has furnished false and
misleading information in response to an inquiry by the Commissioner.
(7) Whether the
management of a self-insurer has filed any false or misleading sworn financial
statement, has released a false or misleading financial statement to a lending
institution or to the general public, or has made a false or misleading entry
or omitted an entry of material amount in the filed financial information.
(8) Whether the
self-insurer has experienced or will experience in the foreseeable future, cash
flow or liquidity problems.
(9) Whether the
self-insurer has not complied with the other provisions of this Article or the
Act.
(10) Whether the self-insurer
has failed to make proper and timely payment of claims as required by this
Article.
(c) Any self-insurer
subject to license revocation revocation, suspension, or restriction under
subsection (a) or (b) (a1) of this section may request an
administrative hearing before the Commissioner to review that order. If a
hearing is requested, a notice of hearing shall be served, and the notice shall
state the time and place of hearing and the conduct, condition, or ground on
which the Commissioner based the order. Unless mutually agreed upon between the
Commissioner and the self-insurer, the hearing shall occur not less than 10
days nor more than 30 days after notice is served and shall be either in Wake
County or in some other place designated by the Commissioner. The Commissioner
shall hold all hearings under this section privately unless the self-insurer
requests a public hearing, in which case the hearing shall be public. The
request for a hearing shall not stay the effect of the order."
SECTION 16. Article 5 of Chapter 97 of the General Statutes is amended by adding the following new section:
"§ 97-196. Civil penalties or restitution for violations; administrative procedure.
(a) Whenever the Commissioner has reason to believe that a self-insurer has violated any of the provisions of this Article, and the violation subjects the license of the self-insurer to suspension or revocation, the Commissioner may, after notice and opportunity for a hearing, proceed under the appropriate subsections of this section.
(b) If the Commissioner finds a violation of this Article, the Commissioner may, in addition to or instead of suspending or revoking the license, order the payment or a monetary penalty as provided in subsection (c) of this section or petition the Superior Court of Wake County for an order directing payment of restitution as provided in subsection (d) of this section, or both. Each day during which a violation occurs constitutes a separate violation.
(c) If the Commissioner orders the payment of a monetary penalty pursuant to subsection (b) of this section, the penalty shall not be less than one hundred dollars ($100.00) nor more than one thousand dollars ($1,000). In determining the amount of the penalty, the Commissioner shall consider the degree and extent of harm caused by the violation, the amount of money that inured to the benefit of the violator as a result of the violation, whether the violation was committed willfully, and the prior record of the violator in complying or failing to comply with laws, rules, or orders applicable to the violator. The clear proceeds of the penalty shall be remitted to the Civil Penalty and Forfeiture Fund in accordance with G.S. 115C-457.2. Payment of the civil penalty under this section shall be in addition to payment of any other penalty for a violation of the criminal laws of this State.
(d) Upon petition of the Commissioner, the court may order the self-insurer who committed a violation specified in subsection (b) of this section to make restitution in an amount that would make whole any person harmed by the violation. The petition may be made at any time, and the petition may be made in any appeal of the Commissioner's order.
(e) Restitution to any State agency for extraordinary administrative expenses incurred in the investigation and hearing of the violation may also be ordered by the court in such amount that would reimburse the agency for the expenses.
(f) Nothing in this section prevents the Commissioner from negotiating a mutually acceptable agreement with any self-insurer as to the status of the self-insurer's license or as to any civil penalty or restitution.
(g) Unless otherwise specifically provided for, all administrative proceedings under this Article are governed by Chapter 150B of the General Statutes. Appeals of the Commissioner's orders under this section shall be governed by G.S. 58-2-75."
SECTION 17. G.S. 58-2-161(a)(1)p. reads as rewritten:
"§ 58-2-161. False statement to procure or deny benefit of insurance policy or certificate.
(a) For the purposes of this section:
(1) "Insurer" has the same meaning as in G.S. 58-1-5(3) and also includes:
. . .
p. The North
Carolina Self-Insurance Guaranty Security Association under
Article 4 of Chapter 97 of the General Statutes.
…"
SECTION 18. G.S. 58-30-10(7) reads as rewritten:
"§ 58-30-10. Definitions.
As used in this Article, unless the context clearly indicates otherwise:
. . .
(7) "Domestic
guaranty association" means the Postassessment Insurance Guaranty
Association in Article 48 of this Chapter, as amended; the North Carolina Self-Insurance
Guaranty Security Association in Article 4 of Chapter 97 of the
General Statutes; the Life and Accident and Health Insurance Guaranty
Association in Article 62 of this Chapter, as amended; or any other similar
entity hereafter created by the General Assembly for the payment of claims of
insolvent insurers.
. . . "
SECTION 19. G.S. 58-47-65(f)(14) reads as rewritten:
"(f) The license application shall comprise the following information:
. . .
(14) A letter stipulating the
applicant's acceptance of membership in the North Carolina Self-Insurance Guaranty
Security Association under Article 4 of Chapter 97 of the General
Statutes.
. . . "
SECTION 20. G.S. 105-259(b)(16a) reads as rewritten:
"(b) Disclosure Prohibited. - An officer, an employee, or an agent of the State who has access to tax information in the course of service to or employment by the State may not disclose the information to any other person unless the disclosure is made for one of the following purposes:
. . .
(16a) To provide the North Carolina Self-Insurance
Guaranty Security Association information on self-insurers'
premiums as determined under G.S. 105-228.5(b), (b1), and (c) for the
purpose of collecting the assessments authorized in G.S. 97-133(a).
. . . "
SECTION 21. This act becomes effective January 1, 2006.
In the General Assembly read three times and ratified this the 24th day of August, 2005.
s/ Beverly E. Perdue
President of the Senate
s/ James B. Black
Speaker of the House of Representatives
s/ Michael F. Easley
Governor
Approved 3:42 p.m. this 14th day of September, 2005