2780-S

AN ACT Relating to private school liability insurance; adding a new chapter to Title 48 RCW; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. This chapter is intended to provide the exclusive source of authority for private schools to jointly self‑insure risks, jointly purchase insurance or reinsurance, and to contract for risk management, claims, and administrative services. This chapter shall be liberally construed to grant private schools maximum flexibility in self-insuring to the extent the self-insurance programs are operated in a safe, sound, and financially secure manner. This chapter is intended to require prior approval for the establishment of every joint private school self-insurance program. This chapter is not intended to authorize or regulate self-insurance of unemployment compensation under chapter 50.44 RCW, or industrial insurance under chapter 51.14 RCW.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Risk assumption" means a decision to absorb the private school's financial exposure to a risk of loss without the creation of a formal program of advance funding of anticipated losses.

(2) "Self-insurance" means jointly advance funding and managing financial exposure to a risk of loss that is not transferred through the purchase of an insurance policy or contract.

(3) "Private school" means a school approved under chapter 28A.195 RCW.

(4) "Property and liability risks" includes the risk of property damage or loss sustained by a private school and the risk of claims arising from the tortious or negligent conduct or any error or omission of the private school, its officers, employees, agents, or volunteers as a result of which a claim may be made against the private school.

(5) "State risk manager" or "risk manager" means the state risk manager of the division of risk management within the department of general administration.

NEW SECTION. Sec. 3. (1) The governing body of a private school may join or form a self-insurance program together with other private schools, and may jointly purchase insurance or reinsurance with other private schools for property and liability risks only as permitted under this chapter. In addition, the self-insurance program may contract for or hire personnel to provide risk management, claims, and administrative services in accordance with this chapter.

(2) The agreement to form a joint self-insurance program shall be made under rules established by the state risk manager.

(3) Every joint self-insurance program shall be periodically audited by an independent certified public accountant, and is subject to regulation by the state risk manager.

(4) If provided for in the agreement or contract, a joint self‑insurance program may, in conformance with this chapter:

(a) Contract or otherwise provide for risk management and loss control services;

(b) Contract or otherwise provide legal counsel for the defense of claims and other legal services;

(d) Jointly purchase insurance and reinsurance coverage in such form and amount as the program's participants agree by contract; and

(e) Possess any other powers and perform all other functions reasonably necessary to carry out the purposes of this chapter.

(5) A private school that has decided to assume a risk of loss must have available for inspection by the state risk manager a written report indicating the class of risk or risks the governing body of the private school has decided to assume. The private school must also provide a plan for reinsurance, a trust fund, or stop-loss policy to cover self-insured amounts or retentions.

(6) Every joint self-insurance program governed by this chapter shall appoint the risk manager as its attorney to receive service of, and upon whom shall be served, all legal process issued against it in this state upon causes of action arising in this state.

(a) Service upon the risk manager as attorney shall constitute service upon the program. Service upon joint insurance programs formed under this chapter can be had only by service upon the risk manager. At the time of service, the plaintiff shall pay to the risk manager a fee to be set by the risk manager, and considered as costs in the action.

(b) With the initial filing for approval with the risk manager, each joint self-insurance program shall designate by name and address the person to whom the risk manager shall forward legal process so served upon him or her. The joint self-insurance program may change such person by filing a new designation.

(c) The appointment of the risk manager as attorney shall be irrevocable, shall bind any successor in interest to the assets or liabilities of the joint self-insurance program, and shall remain in effect as long as there is in force in this state any contract made by the joint self-insurance program or liabilities or duties arising therefrom.

(d) The risk manager shall keep a record of the day and hour of service upon him or her of all legal process. A copy of the process, by registered mail with return receipt requested, shall be sent by the risk manager, to the person designated for the purpose by the joint self-insurance program in its most recent such designation filed with the risk manager. No proceedings shall be had against the joint self-insurance program, and the program shall not be required to appear, plead, or answer, until the expiration of forty days after the date of service upon the risk manager.

NEW SECTION. Sec. 4. The state risk manager shall adopt rules governing the management and operation of joint private school self‑insurance programs covering property or liability risks. All rules shall be appropriate for the type of program and class of risk covered. The state risk manager's rules shall include:

(1) Standards for the management, operation, and solvency of self‑insurance programs, including the necessity and frequency of actuarial analyses and claims audits;

(2) Standards for claims management procedures; and

(3) Standards for contracts between self-insurance programs and private businesses including standards for contracts between third‑party administrators and programs.

NEW SECTION. Sec. 5. Before the establishment of a joint self‑insurance program covering property or liability risks by private schools, private schools must obtain the approval of the state risk manager. Risk manager approval is not required for the establishment of an individual private school self-insurance program covering property or liability risks. The private schools proposing creation of a self-insurance program requiring prior approval shall submit a plan of management and operation to the state risk manager that provides at least the following information:

(1) The risk or risks to be covered, including any coverage definitions, terms, conditions, and limitations;

(2) The amount and method of financing the benefits or covered risks, including the initial capital and proposed rates and projected premiums;

(3) The proposed claim reserving practices;

(4) The proposed purchase and maintenance of insurance or reinsurance in excess of the amounts retained by the self-insurance program;

(5) The legal form of the program, including but not limited to any bylaws, charter, or trust agreement;

(6) The agreements with members of the program defining the responsibilities and benefits of each member and management;

(7) The proposed accounting, depositing, and investment practices of the program;

(8) The proposed time when actuarial analysis will be first conducted and the frequency of future actuarial analysis;

(9) A designation of the individual upon whom service of process shall be executed on behalf of the program and a designation of the individual to whom service of process shall be forwarded by the risk manager on behalf of the program;

(10) All contracts between the program and private persons providing risk management, claims, or other administrative services;

(11) A professional analysis of the feasibility of creation and maintenance of the program; and

(12) Any other information required by rule of the state risk manager that is necessary to determine the probable financial and management success of the program or that is necessary to determine compliance with this chapter.

NEW SECTION. Sec. 6. (1) Within one hundred twenty days of receipt of a plan of management and operation, the state risk manager shall either approve or disapprove the formation of the self-insurance program after reviewing the plan to determine whether the proposed program complies with this chapter and all rules adopted in accordance with this chapter.

(2) If the state risk manager denies a request for approval, the state risk manager shall specify in detail the reasons for denial and the manner in which the program fails to meet the requirements of this chapter or any rules adopted in accordance with this chapter.

(3) Whenever the state risk manager determines that a joint self‑insurance program covering property or liability risks is in violation of this chapter or is operating in an unsafe financial condition, the state risk manager may issue and serve upon the program an order to cease and desist from the violation or practice.

(a) The state risk manager shall deliver the order to the appropriate entity or entities directly or mail it to the appropriate entity or entities by registered mail with return receipt requested.

(b) If the program violates the order or has not taken steps to comply with the order after the expiration of twenty days after the cease and desist order has been received by the program, the program is deemed to be operating in violation of this chapter, and the state risk manager shall notify the attorney general of the violation.

(c) After hearing or with the consent of a program governed by this chapter and in addition to or in lieu of a continuation of the cease and desist order, the risk manager may levy a fine upon the program in an amount not less than three hundred dollars and not more than ten thousand dollars. The order levying such fine shall specify the period within which the fine shall be fully paid. The period within which such fines shall be paid shall not be less than fifteen nor more than thirty days from the date of such order. Upon failure to pay any such fine when due the risk manager shall request the attorney general to bring a civil action on the risk manager's behalf to collect the fine. The risk manager shall pay any fine so collected to the state treasurer for the account of the general fund.

(4) Each self-insurance program approved by the state risk manager shall annually file a report with the state risk manager providing:

(a) Details of any changes in the articles of incorporation, bylaws, or cooperative agreement;

(b) Copies of all the insurance coverage documents;

(c) A description of the program structure, including participants' retention, program retention, and excess insurance limits and attachment point;

(d) An actuarial analysis, if required;

(e) A list of contractors and service providers;

(f) The financial and loss experience of the program; and

(g) Such other information as required by rule of the state risk manager.

(5) No self-insurance program requiring the state risk manager's approval may engage in an act or practice that in any respect significantly differs from the management and operation plan that formed the basis for the state risk manager's approval of the program unless the program first notifies the state risk manager in writing and obtains the state risk manager's approval. The state risk manager shall approve or disapprove the proposed change within sixty days of receipt of the notice. If the state risk manager denies a requested change, the risk manager shall specify in detail the reasons for denial and the manner in which the program would fail to meet the requirements of this chapter or any rules adopted in accordance with this chapter.

NEW SECTION. Sec. 7. (1) Every joint self-insurance program covering liability or property risks shall provide for the contingent liability of participants in the program if assets of the program are insufficient to cover the program's liabilities. This provision shall be fully insured through a form of stop-loss insurance from an admitted Washington insurer.

(2) By authorizing joint self-insurance programs for private schools under this chapter and regulating these self-insurance programs through the state risk manager, the state shall not be, and shall not be deemed to be, an insurer, reinsurer, guarantor, or otherwise liable under this chapter, and the state shall not make any gift, loan, or otherwise lend its credit under this chapter.

NEW SECTION. Sec. 8. (1) The state risk manager shall establish and charge an investigation fee in an amount necessary to cover the costs for the initial review and approval of a self-insurance program. The fee must accompany the initial submission of the plan of operation and management.

(2) The costs of subsequent reviews and investigations shall be charged to the self-insurance program being reviewed or investigated in accordance with the actual time and expenses incurred in the review or investigation, as shall other costs incurred by the risk manager in administering this chapter.

NEW SECTION. Sec. 9. (1) Any person who files reports or furnishes other information required under this title, required by the risk manager under authority granted by this title, or which is useful to the risk manager or the state auditor in the administration of this title, shall be immune from liability in any civil action or suit arising from the filing of any such report or furnishing such information to the risk manager, unless actual malice, fraud, or bad faith is shown.

(2) The risk manager and the risk manager's agents and employees are immune from liability in any civil action or suit arising from the publication of any report or bulletins or arising from dissemination of information related to the official activities of the risk manager, unless actual malice, fraud, or bad faith is shown.

(3) The immunity granted by this section is in addition to any common law or statutory privilege or immunity enjoyed by such person, and nothing in this section is intended to abrogate or modify in any way such common law or statutory privilege or immunity.

NEW SECTION. Sec. 10. The state risk manager shall take all steps necessary to implement this act on its effective date. This section is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect immediately.

NEW SECTION. Sec. 11. Sections 1 through 9 of this act shall take effect July 1, 1996.

NEW SECTION. Sec. 12. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 13. Sections 1 through 9 of this act shall constitute a new chapter in Title 48 RCW.