AN
ACT Relating to administration of the responsibilities of self-insurers;
amending RCW 51.14.020; adding a new section to chapter 51.14 RCW; and
providing an expiration date.
BE IT ENACTED BY THE
LEGISLATURE OF THE STATE OF WASHINGTON:
Sec.
1. RCW
51.14.020 and 1995 c 31 s 1 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)
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, or provide an irrevocable letter of credit issued by a
federally or state chartered commercial banking institution authorized to
conduct business in the state of Washington filed with the department. The
money, securities, bond, or letter of credit 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, bond, or
letter of credit 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. However, a letter
of credit shall be acceptable only if the self-insurer has a net worth of not
less than five hundred million dollars as evidenced in an annual financial
statement prepared by a qualified, independent auditor using generally accepted
accounting principles. The money, securities, bond, or letter of credit so
deposited shall be held by the director solely for the payment of compensation
by the self-insurer and his or her assessments. In the event of default the
self-insurer loses all right and title to, any interest in, and any right to
control the surety. The amount of surety 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.
(b)
The letter of credit option authorized in (a) of this subsection shall not
apply to self-insurers authorized under RCW 51.14.150 or to self-insurers who
are counties, cities, or municipal corporations.
(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. Until July 1, 2001,
subsidiary companies, holding companies, or affiliated legal entities of the
reinsurer not involved in providing reinsurance shall be allowed to 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)
The director shall adopt rules to carry out the purposes of this section
including, but not limited to, rules respecting the terms and conditions of
letters of credit and the establishment of the appropriate level of net worth
of the self-insurer to qualify for use of the letter of credit. Only letters
of credit issued in strict compliance with the rules shall be deemed
acceptable.
NEW
SECTION. Sec. 2. A
new section is added to chapter 51.14 RCW to read as follows:
(1)
Self-insurers shall report to the department any attempt by a reinsurer to
participate in the administration of the responsibilities of the self-insurer
under this title.
(2)
The department shall conduct a study of self-insurers' adjudication outcomes,
claims management practices, and other appropriate outcomes and practices. The
study shall compare outcomes and practices of self-insurers who use the
services of reinsurers and administrators that are affiliated to those of
self-insurers who use the services of unaffiliated reinsurers and
administrators, as well as to the outcomes and practices of the department.
The department shall report the results of the study to the legislature by
January 1, 2000.
(3)
The department shall adopt rules to implement this act.
(4) This section expires July 1, 2001.
