SENATE BILL REPORT

ESB 5808

BYSenators Lee, Matson, McMullen, Warnke and Vognild

Authorizing the use of an irrevocable letter of credit by an employer choosing to self-insure under the industrial insurance act.

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):February 16, 1989; February 28, 1989

Majority Report:  Do pass as amended.

      Signed by Senators Lee, Chairman; Anderson, Vice Chairman; McMullen, Matson, Murray, Smitherman, Warnke, Williams.

Senate Staff:David Cheal (786-7576)

                  April 19, 1989

House Committe on Commerce & Labor

AS PASSED SENATE, MARCH 14, 1989

BACKGROUND:

Employers may insure their industrial insurance obligations either through the state fund or they may seek to qualify as a self-insurer.  To obtain certification as a self-insurer,  employers must establish to the Director of the Department of Labor and Industries' satisfaction that they have sufficient financial resources to meet all present and future obligations under the industrial insurance law.

The department may also require self-insurers to supplement their present ability to meet their industrial insurance obligations by depositing in an escrow account cash, securities, or a surety bond.

When a worker covered by industrial insurance is awarded a pension or dies as a result of an industrial injury, the department or self-insurer must make provision for future payment of the required benefits.  The Department of Labor and Industries must place an appropriate amount in the reserve fund or the self-insurer must pay cash into the reserve fund, depending on whether the injured worker's employer insured through the state fund or was self-insured.

As an alternative to the cash payment, a self-insurer may file a bond or assign a savings account from a commercial bank to the department.  Under this alternative, the department pays benefits directly to the claimant or beneficiary and the department is reimbursed periodically from the bond or assigned account.

SUMMARY:

An irrevocable letter of credit is added to the list of instruments that self-insurers may deposit in an escrow account to guarantee their future ability to meet industrial insurance obligations.  The issuer of the letter of credit is required to be a state or federally chartered bank authorized to do business in Washington.

In addition to the current provisions for purchasing bonds or assigning cash accounts, self-insurers are allowed to purchase annuities to secure pension obligations.  The department shall adopt rules governing this alternative.  The adequacy of the annuity can be adjusted periodically based upon redeterminations by the Insurance Commissioner as to the outstanding obligations of the case.

Under the alternative of either the bond, assigned account, or annuity, the self-insurer makes payments directly to the claimant.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Jody Moran, Department of Labor & Industries; Peter Robertson (for); Deena Pease (for)

HOUSE AMENDMENT:

The use of letters of credit to secure general obligations of self-insurers is limited to employers with a net worth of $500,000 or more.

The Department of Labor and Industries is substituted for the Insurance Commissioner to evaluate annuities submitted to secure pension obligations.

An injured worker may review his or her claim file if the Director of Labor and Industries determines, under department rules, that the review is in the worker's interest.

If a dispute arises in a worker's compensation case concerning whether the injury is a new injury or an aggravation of an old injury, the Department of Labor and Industries is authorized to make an initial determination.  Benefits must be paid according to the department's order, pending final resolution of the dispute.

The Department of Labor and Industries must notify the Employment Security Department when an injured worker has received more than 13 weeks of continuous time-loss payments.  (This allows the Employment Security Department to "freeze" the worker's wage credits in case of a future unemployment compensation claim.)

Self-insured employers must provide a copy of a worker's claim file at no cost within 15 days of a request.

Self-insured employers must notify the Department of Labor and Industries within ten days of any written protest by an injured worker to an appealable order.

Industrial insurance refunds earned by state agencies under the retrospective rating programs are deposited in an account to be appropriated to the agencies for programs that promote employee safety and early, appropriate return to work.