Original Notice.

     Preproposal statement of inquiry was filed as WSR 04-04-100.

     Title of Rule: Workers' compensation classification plan, chapter 296-17 WAC, General reporting rules, classifications, audit and recordkeeping, rates and rating system for Washington workers' compensation insurance.

     Purpose: The department is amending the definition of occupational disease as defined in WAC 296-17-870 as a result of requests from external customers.

     Statutory Authority for Adoption: RCW 51.04.020 General authority, 51.16.035 Classification plan/base rate.

     Statute Being Implemented: RCW 51.16.035.

     Summary: Amend one experience rating rule relating to the definition of occupational disease defined in WAC 296-17-870.

     Reasons Supporting Proposal: RCW 51.16.035 requires that the department maintain actuarial solvency of the industrial insurance (workers' compensation) funds and maintain a classification plan. The department has received requests from external customers to amend the definition of occupational disease as defined in WAC 296-17-870.

     Name of Agency Personnel Responsible for Drafting: Ken Woehl, Tumwater, Washington, (360) 902-4775; Implementation: Kathy Kimbel, Tumwater, Washington, (360) 902-4739; and Enforcement: Robert Malooly, Tumwater, Washington, (360) 902-4209.

     Name of Proponent: Department of Labor and Industries, governmental.

     Rule is not necessitated by federal law, federal or state court decision.

     Explanation of Rule, its Purpose, and Anticipated Effects: The department is required by RCW 51.16.035 to establish and maintain a workers' compensation insurance classification plan that classifies all occupations or industries within the state, and to set basic rates of premium for all classifications. The department proposes to revise one experience rating rule to amend the definition of occupational disease as contained in WAC 296-17-870. This change is a request from external customers to amend the definition of occupational disease as it relates to experience rating of a business.

     Proposal Changes the Following Existing Rules: The department proposes to amend one experience rating rule that defines the definition of occupational disease as contained in WAC 296-17-870.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. The Regulatory Fairness Act (RFA), chapter 19.85 RCW, requires that the economic impact of proposed regulations be analyzed in relation to small business, and outlines the information that must be included in a small business economic impact statement (SBEIS). Preparation of an SBEIS is required when a proposed rule has the potential of placing a more than minor economic impact on business.

     However, since the proposed rule would not place a more than minor economic impact on business, the preparation of a comprehensive SBEIS is not required.

     RCW 34.05.328 does not apply to this rule adoption. RCW 51.16.035 requires the Department of Labor and Industries to establish a classification plan to include general reporting rules, risk classification definitions, and premium rates for all classifications in accordance with recognized principles of insurance.

     The rule is significant under RCW 34.05.328, however, this rule is exempt from the significant rule-making criteria because RCW 34.05.328 (5)(b)(vi) establishes that rules that set or adjust fees or rates pursuant to legislative standards are exempt from the criteria outlined in RCW 34.05.328.

     Hearing Location: Tumwater Labor and Industries Office, 7273 Linderson Way S.W., Room S119, Tumwater, WA 98504-4851, on April 27, 2004, at 8 a.m.

     Assistance for Persons with Disabilities: Contact Office of Information and Assistance by April 27, 2004, TDD (360) 902-5797.

     Submit Written Comments to: Department of Labor and Industries, Ken Woehl, Classification Services Section, P.O. Box 44148, Olympia, WA 98504-4148, or e-mail to WOEH235@lni.wa.gov or fax (360) 902-4729, by April 27, 2004.

     Date of Intended Adoption: April 30, 2004.

March 19, 2004

Paul Trause

Director

OTS-6958.1

AMENDATORY SECTION(Amending WSR 03-24-066, filed 12/1/03, effective 1/1/04)

WAC 296-17-870   Evaluation of actual losses.   Except as provided in the following subsections of this paragraph, actual losses shall include all payments as of the "valuation date" for each claim arising from an accident occurring during the experience period. Losses for claims open as of the valuation date may also include a reserve for future payments. Actual losses on claims for accidents occurring outside of the experience period shall not be included.

     (1) Valuation date. The valuation date shall be on and include December 31, one year and one day immediately preceding the effective date of premium rates as set forth in WAC 296-17-895. For experience modifications effective January 1, 1990, and thereafter, the valuation date shall be June 1, seven months immediately preceding the effective date of premium rates.

     (2) Retroactive adjustments - revision of losses between valuation dates. No claim value shall be revised between valuation dates and no retroactive adjustment of an experience modification shall be made because of disputation concerning the judgment of the claims examiner or because of subsequent developments except as specifically provided in the following cases:

     (a) In cases where loss values are included or excluded through mistake other than error of judgment.

     (b) In cases where a third party recovery is made, subject to subsection (4)(a) of this section.

     (c) In cases where the claim qualifies as a second injury claim under the provisions of RCW 51.16.120.

     (d) In cases where a claim, which was previously evaluated as a compensable claim, is closed and is determined to be noncompensable (ineligible for benefits other than medical treatment).

     (e) In cases where a claim is closed and is determined to be ineligible for any benefits.

     In the above specified cases retroactive adjustment of the experience modification shall be made for each rating in which the claim was included. Retroactive adjustments will not be made for rating periods more than ten years prior to the date on which the claim status was changed.

     (3) Average death value. Each fatality occurring to a worker included within the mandatory or elective coverage of Title 51 RCW shall be assigned the "average death value." The "average death value" shall be the average incurred cost for all such fatalities occurring during the experience period. The average death value is set forth in WAC 296-17-880 (Table II).

     (4) Third-party recovery - effect on experience modification.

     (a) For claims with injury dates prior to July 1, 1994, a potential claim cost recovery from action against a third party, either by the injured worker or by the department, shall not be considered in the evaluation of actual losses until such time as the third-party action has been completed. If a third-party recovery is made after a claim had previously been used in an experience modification calculation, the experience modification shall be retroactively adjusted. The department shall compute a percentage recovery by dividing the current valuation of the claim into the amount recovered or recoverable as of the recovery date, and shall reduce both primary and excess losses previously used in the experience modification calculation by that percentage.

     (b) For claims with injury dates on or after July 1, 1994, if the department determines that there is a reasonable potential of recovery from an action against a third party, both primary and excess values of the claim shall be reduced by fifty percent for purposes of experience modification calculation, until such time as the third-party action has been completed. This calculation shall not be retroactively adjusted, regardless of the final outcome of the third-party action. After a third-party recovery is made, the actual percentage recovery shall be applied to future experience modification calculations.

     (c) For third-party actions completed before July 1, 1996, the claim shall be credited with the department's net share of the recovery, after deducting attorney fees and costs. For third-party actions completed on or after July 1, 1996, the claim shall be credited with the department's gross share of the recovery, before deducting attorney fees and costs.

     (d) Definitions:

     (i) As used in this section, "recovery date" means the date the money is received at the department or the date the order confirming the distribution of the recovery becomes final, whichever comes first.

     (ii) As used in this section, "recoverable" means any amount due as of the recovery date and/or any amount available to offset case reserved future benefits.

     (5) Second injury claims. The primary and excess values of any claim which becomes eligible for second injury relief under the provisions of RCW 51.16.120, as now or hereafter amended, shall be reduced by the percentage of relief granted.

     (6) Occupational disease claims. When a claim results from an employee's exposure to an occupational disease hazard, the "date of injury," for the purpose of experience rating, will be the date the disability was diagnosed and that gave rise to the filing of a claim for benefits. ((The cost of a claim for occupational disease will be prorated among the state fund employers who contributed to the condition. All exposure associated with nonstate fund employers will be excluded from the pro rata calculation. To determine the percentage of liability that an employer is responsible for, the department will divide the amount of time the employee worked for the employer that exposed the employee to the hazard by the total length of state fund employment attributable to the occupational disease hazard.

     State fund employers will be charged their pro rata share of an occupational disease claim when:

     • They exposed the worker to the hazard that gave rise to the occupational disease;

     • Responsible for at least ten percent of the state fund injurious exposure; and

     • The injurious exposure falls within the experience rating period.)) The cost of any occupational disease claim, paid from the accident fund and medical aid fund and arising from exposure to the disease hazard under two or more employers, shall be prorated to each period of employment involving exposure to the hazard. Each insured employer who had employed the claimant during the experience period, and for at least ten percent of the claimant's exposure to the hazard, shall be charged for his/her share of the claim based upon the prorated costs.

     (7) Maximum claim value. No claim shall enter an employer's experience record at a value greater than the "maximum claim value." The maximum claim value is set forth in WAC 296-17-880 (Table II).

     (8) Catastrophic losses. Whenever a single accident results in the deaths or total permanent disability of three or more workers employed by the same employer, costs charged to the employer's experience shall be limited as required by RCW 51.16.130.

     (9) Acts of terrorism. Whenever any worker insured with the state fund sustains an injury or occupational disease as a result of an incident certified to be an act of terrorism under the U.S. Terrorism Risk Insurance Act of 2002, the costs of the resulting claim shall be excluded from the experience rating computation of the worker's employer.

     (10) Claims filed by preferred workers. The costs of subsequent claims filed by certified preferred workers will not be included in experience calculations, as provided in WAC 296-16-010.

[Statutory Authority: RCW 51.04.020, 51.16.035, 51.32.073, and 51.18.010. 03-24-066, § 296-17-870, filed 12/1/03, effective 1/1/04. Statutory Authority: RCW 51.16.035. 98-18-042, § 296-17-870, filed 8/28/98, effective 10/1/98; 96-12-039, § 296-17-870, filed 5/31/96, effective 7/1/96. Statutory Authority: RCW 51.04.020(1) and 51.16.035. 90-13-018, § 296-17-870, filed 6/8/90, effective 7/9/90; 89-24-051 (Order 89-22), § 296-17-870, filed 12/1/89, effective 1/1/90. Statutory Authority: RCW 51.16.035 and 51.04.020. 88-24-012 (Order 88-30), § 296-17-870, filed 12/1/88, effective 1/1/89. Statutory Authority: RCW 51.16.035. 88-16-012 (Order 88-12), § 296-17-870 filed 7/22/88, effective 1/1/89; 81-24-042 (Order 81-30), § 296-17-870, filed 11/30/81, effective 1/1/82. Statutory Authority: RCW 51.04.020(1) and 51.16.035. 78-12-043 (Order 78-23), § 296-17-870, filed 11/27/78, effective 1/1/79; Order 75-38, § 296-17-870, filed 11/24/75, effective 1/1/76; Order 74-40, § 296-17-870, filed 11/27/74, effective 1/1/75; Order 73-22, § 296-17-870, filed 11/9/73, effective 1/1/74.]

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