AN ACT Relating to qualifications for industrial insurance self-insurers; amending RCW 51.14.020; and adding a new section to chapter 51.14 RCW.

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

Sec. 1. Section 27, chapter 289, Laws of 1971 ex. sess. as last amended by section 1, chapter 57, Laws of 1986 and RCW 51.14.020 are each amended to read as follows:

(1) An employer may qualify as a self-insurer by establishing to the director's satisfaction that he or she has sufficient financial ability to make certain the prompt payment of all compensation under this title and all assessments which may become due from such employer. Each application for certification as a self-insurer submitted by an employer shall be accompanied by payment of a fee of one hundred fifty dollars or such larger sum as the director shall find necessary for the administrative costs of evaluation of the applicant's qualifications. Any employer who has formerly been certified as a self-insurer and thereafter ceases to be so certified may not apply for certification within three years of ceasing to have been so certified.

(2) A self-insurer may be required by the director to supplement existing financial ability by depositing in an escrow account in a depository designated by the director, money and/or corporate or governmental securities approved by the director, or a surety bond written by any company admitted to transact surety business in this state filed with the department. The money, securities, or bond shall be in an amount reasonably sufficient in the director's discretion to insure payment of reasonably foreseeable compensation and assessments but not less than the employer's normal expected annual claim liabilities and in no event less than one hundred thousand dollars. In arriving at the amount of money, securities, or bond required under this subsection, the director shall take into consideration the financial ability of the employer to pay compensation and assessments and his or her probable continuity of operation. The money, securities, or bond so deposited shall be held by the director to secure the payment of compensation by the self-insurer and to secure payment of his or her assessments. The amount of security may be increased or decreased from time to time by the director. The income from any securities deposited may be distributed currently to the self-insurer.

(3) Securities or money deposited by an employer pursuant to subsection (2) of this section shall be returned to him or her upon his or her written request provided the employer files the bond required by such subsection.

(4) If the employer seeking to qualify as a self-insurer has previously insured with the state fund, the director shall require the employer to make up his or her proper share of any deficit or insufficiency in the state fund as a condition to certification as a self-insurer.

(5) A self-insurer may reinsure a portion of his or her liability under this title with any reinsurer authorized to transact such reinsurance in this state: PROVIDED, That the reinsurer may not participate in the administration of the responsibilities of the self-insurer under this title. Such reinsurance may not exceed eighty percent of the liabilities under this title.

(6) For purposes of the application of this section, the department may adopt separate rules establishing the security requirements applicable to units of local government. In setting such requirements, the department shall take into consideration the ability of the governmental unit to meet its self-insured obligations, such as but not limited to source of funds, permanency, and right of default.

(7) For the purposes of the application of this section, the department shall adopt separate rules for evaluating both the financial ability and the security requirements of applicants created as a result of the purchase of a business by the employees of the immediate predecessor of the applicant. The rules shall provide for consideration of the financial health of the predecessor and the good will value of the business both before and after the employee purchase.

NEW SECTION. Sec. 2. A new section is added to chapter 51.14 RCW to read as follows:

The director shall not deny certification that the employer is qualified as a self-insurer solely on the basis that the employer is a new entity and thus unable to meet certain requirements of this chapter that inherently require a period of preexistence if:

(1) The employer is an entity created as a result of the purchase of the business by the employees of the immediate predecessor;

(2) The immediate predecessor or predecessors were certified as self-insurers on a more or less continuous basis during the ten-year period immediately preceding the transfer;

(3) The applicant will conduct essentially the same business as its predecessor, at the same facility or facilities, utilizing primarily the same work force;

(4) The applicant demonstrates to the satisfaction of the director a high probability of continuity of operation evidenced by at least the following:

(a) Access to the markets and customers of the predecessor; and

(b) Clear ability to maintain production and sales approximately equal to that of the predecessor; and

(5) The other requirements of this chapter are met.