No. 37127 (New Rule): Rule R612-400. Workers' Compensation Insurance, Self-Insurance and Waivers

(New Rule)

DAR File No.: 37127
Filed: 12/28/2012 02:24:53 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The substance of this rule is currently found in Rules R612-3, R612-5, R612-6, R612-12, and R612-4, which will be repealed. The Labor Commission is repealing all existing Industrial Accident Division rules to allow those rules to be consolidated, reorganized, and reenacted in a format that is more logical and user friendly.

Summary of the rule or change:

The proposed Rule R612-400 contains the substance of existing Rules R612-3, R612-5, R612-6, R612-12, and R612-4, which are being repealed. (DAR NOTE: The proposed repeal of Rule R612-3 is under DAR No. 37131, the proposed repeal of Rule R612-4 is under DAR No. 37132, the proposed repeal of Rule R612-5 is under DAR No. 37133, the proposed repeal of Rule R612-6 is under DAR No. 37134, and the proposed repeal of Rule R612-12 is under DAR No. 37140 in this issue, January 15, 2013, of the Bulletin.)

State statutory or constitutional authorization for this rule:

• Section 34A-2-101 et seq.
• Section 34A-3-101 et seq.
• Section 34A-1-104 et seq.
• Subsection 59-9-101(2)
• Section 78B-8-402
• Section 78B-8-404

Anticipated cost or savings to:

the state budget:

Because the substantive provisions of the new rule are the same as an existing rule that is being repealed, enactment of the new rule will not result in costs or savings to the state budget.

local governments:

Because the substantive provisions of the new rule are the same as an existing rule that is being repealed, enactment of the new rule will not result in costs or savings to local government.

small businesses:

Because the substantive provisions of the new rule are the same as an existing rule that is being repealed, enactment of the new rule will not result in costs or savings to small businesses.

persons other than small businesses, businesses, or local governmental entities:

Because the substantive provisions of the new rule are the same as an existing rule that is being repealed, enactment of the new rule will not result in costs or savings to other affected persons.

Compliance costs for affected persons:

Reenactment of the substantive provisions currently found in Rules R612-3, R612-5, R612-6, R612-12, and R612-4, will not change interested parties' rights or duties and will not impose any compliance costs on affected persons.

Comments by the department head on the fiscal impact the rule may have on businesses:

The repeal of existing Rules R612-3, R612-5, R612-6, R612-12, and R612-4, coupled with reenactment of the rule's substantive provisions in a more logical format, is intended to make the rule easier to find and use by businesses and all other stakeholders in the workers' compensation system. The Commission does not anticipate that the improved organization of these rules will result in any fiscal impact on businesses.

Sherrie Hayasi, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Labor Commission
Industrial Accidents
HEBER M WELLS BLDG
160 E 300 S
SALT LAKE CITY, UT 84111-2316

Direct questions regarding this rule to:

• Ron Dressler at the above address, by phone at 801-530-6841, by FAX at 801-530-6804, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

02/14/2013

This rule may become effective on:

02/21/2013

Authorized by:

Sherrie Hayashi, Commissioner

RULE TEXT

R612. Labor Commission, Industrial Accidents.

R612-400. Workers' Compensation Insurance, Self-Insurance and Waivers.

R612-400-1. Notification of Workers' Compensation Insurance Coverage.

Any insurance carrier subject to the policy reporting requirements of Section 34A-2-205 may satisfy such reporting requirements by either of the following methods:

1. The insurance carrier may directly file the required information electronically with the Industrial Accidents Division in accordance with the International Association of Industrial Accidents Boards and Commissions (IAIABC) standards and format.

2. Alternatively, the insurance carrier may use an agent to file the required information electronically with the Industrial Accidents Division in accordance with IAIABC standards and format, provided that the agent has been authorized by the Labor Commission as meeting its electronic filing standards.

 

R612-400-2. Employee Leasing Company Workers' Compensation Policy Endorsements.

2.1. Workers' Compensation Coverage for Client Companies Under an Endorsement Arrangement.

An insurance company licensed to write workers' compensation coverage in the state of Utah underwriting an employee leasing company as the named insured shall insure all of the primary insured's client companies under an umbrella policy and shall provide a separate endorsement for each client company unless the client company provides workers' compensation coverage under a separate policy.

2.2. Notification of a New Policy and Endorsements.

A. Any insurance carrier underwriting a new policy naming an employee leasing company as the primary insured shall notify the division in writing or by electronic means within ten working days of the new policy including all client companies covered under the policy. The notification shall include all the information as specified in this rule.

B. The insurance carrier shall subsequently notify the division in writing or by electronic means within ten working days of any new client company endorsements covered under a leasing company's umbrella policy after the initial policy is written giving all information as specified in this rule.

2.3. Required Information.

The following information is required on any notice sent to the division on a policy underwritten by the insurance carrier naming an employee leasing company as the primary insured.

A. Name and both mailing and physical address of the employee leasing company.

B. The policy number and effective dates of coverage for the employee leasing company.

C. Each client company's DBA's (doing business as) names(s) and mailing and physical location(s).

D. The Standard Industrial Classification (SIC) for each client company.

E. The effective dates of coverage on the endorsement for each client company.

2.4. Reporting Injuries.

The reporting of injuries as required in Section 34A-2-407 shall be in the name of the client company.

2.5. Cancellations.

Any insurance carrier underwriting an employee leasing company as the primary insured shall:

A. Give the division a 30 day advance notice in writing or by electronic means of a proposed cancellation of an employee leasing company or any client company written as an endorsement under an employee leasing company's policy.

B. Give the division notice in writing or through electronic means within ten working days after cancellation of a policy underwritten naming the employee leasing company as the primary insured and any cancellation of an endorsement of a client company covered under the primary insured.

C. Failure by an insurance carrier to notify the division of the cancellation of either the primary insured employee leasing company or a client company will result in the continuation of coverage by the insurance carrier until the division receives notification as specified in this rule.

 

R612-400-3. Workers' Compensation Rules-Self Insurance.

3.1. Application.

A. An employer seeking authorization to become self-insured under the provision of Section 34A-2-201 of the Utah Workers' Compensation Act must apply to the division through the use of a form entitled "Application for Self Insurance."

B. The division will require annual renewals for continuing self-insurance. Renewal, through the use of a form entitled "Renewal Application for Self-Insurance", will require an update of the initial information. Renewal information must be submitted at least 60 days before the self-insurance anniversary date. Failure to file a renewal application on time may result in an interruption or cancellation of self-insurance privileges.

C. The initial and all renewal applications must be completed and signed by the employer's duly authorized representative.

3.2. Qualifying Requirements.

A. To qualify, an employer must be in business for a period of not less than five years and shall demonstrate sufficient financial strength and liquidity of the business to assure that all obligations will be promptly met. An employer in business less than five years will be considered only if a pre-existing parent corporation (in business more than five years) guarantees the liability. In cases of merger or name identification change, the history of the pre-existing entity will be considered for the five year requirement. Upon applying for self-insurance privileges, the applicant must forward a current, certified financial statement or other proof of financial ability to pay direct compensation and other expenses as provided by Section 34A-2-201. Mergers occurring after an entity is self-insured will require a new application by the merged entity. However, entities whose financial information can be obtained from Dunn and Bradstreet will not be required to file financial statements unless clarification or supplemental statements are deemed appropriate or necessary.

B. Specific or aggregate excess insurance with policy limits and retention amounts acceptable are required as a condition of approval and continuation of self-insurance privileges.

C. Excess Insurance policies shall include a bankruptcy and insolvency endorsement (Form 303) for each self-insured entity. The endorsement adds the Uninsured Employer's Fund to the excess insurance policy and specifies the conditions of the Utah bankruptcy and insolvency endorsement for individual self-insureds.

D. A minimum $100,000 surety bond.

E. No corporate surety shall be eligible to write self-insurers' surety bonds or excess insurance unless authorized to transact such business in this state.

F. Surety bonds must be issued on a prescribed form entitled "Self-Insurance Aggregate Surety Bond" and shall be exchanged or replaced with another surety bond only if a 60 day notice of termination of liability is given by the bonding company. The replacement bond must be issued on a form as prescribed by the Commission. No replacements will be authorized by the Commission unless the new surety accepts the liability of the previous surety(ies) or a guarantee is filed by both (all) sureties acknowledging their respective liabilities and periods of time covering such liabilities.

G. All subsidiary companies must have the parent company guarantee liability for payment of benefits (unless such requirement is waived by the division). The form and substance of such guarantees are to be approved by the division.

H. The division may utilize services such as Dunn and Bradstreet credit ratings for the purpose of evaluating a company's financial ability to pay.

I. Entities that fall within the top two composite credit appraisal ratings by Dunn and Bradstreet (or information from an equivalent service) and their top two ratings on estimated financial strength may qualify for self-insurance in Utah with the minimum requirements as set forth in Rule R612-3-4C. Companies with a 5A or 4A estimated financial strength rating and falling within the fair composite credit appraisal of Dunn and Bradstreet may qualify for self-insurance with higher security requirements as determined by the division. The provisions herein are to be construed as optional, with the division having the option.

J. Self-insured entities, or their parent company if such is a guarantor, that fall below either the 5A or 4A estimated financial strength rating or the top three composite credit appraisal ratings of Dunn and Bradstreet will not be allowed to self-insure. A company already self-insured that falls in the aforementioned disqualifying categories will not be allowed to continue self-insurance privileges. However, at the discretion of the division continuation of self-insurance will be considered if the following steps are taken:

1. An independent actuarial study satisfactory to the division and the employer is made of the reserve requirements of the self-insured entity, said study to be at the employer's expense. Selection of the actuary will be mutually agreed upon by the division and the employer. However, should the parties fail to agree, the division will make the final selection.

2. Satisfactory security is obtained for the reserves plus the aggregate excess retention amount.

3. Any company whose self-insurance privileges are revoked under the provisions of these rules will be required to obtain security for their reserve requirements under the foregoing two step process regardless of whether or not self-insurance privileges are continued.

4. Companies whose privileges are to be revoked will be allowed 60 days from notice to comply with steps 1 through 3 above.

5. Quarterly financial reviews will be taken of entities which retain their self-insurance privileges by following 1, 2, and 3 above.

K. Security requirements for all entities requiring security will be determined by a review of past incurred losses and application of exposure, loss, and contingency factors. The minimum acceptable bond amount is $100,000.

L. Public and eleemosynary entities are classified as special categories requiring separate consideration for self-insurance privileges and security requirements.

3.3. Administration of the Self-Insurance Program.

A. A self-insurer must procure the services of an insurance carrier or adjusting company to administer the self-insurance program with regard to claims, setting up of reserves, and safety programs; or

B. The self-insurer must show proof of sufficient and competent staff to administer the self-insurance program and provide safety engineering. The division reserves the right to train and test adjustors and administrators of self-insurance programs.

C. Whether a self-insurer hires their own adjustor or contracts with an insurance carrier or service organization, the following conditions must be met:

1. A knowledgeable contact concerning claims will be located in the state of Utah.

2. The self-insurer will maintain a toll free number or accept during office hours a reasonable number of collect calls from injured employees if either employees of the company or the division offices are in a different city than that of the adjustor.

D. The self-insurer will comply with all rules of the Commission and with the Workers' Compensation Act.

3.4. Notice of Certification for Self-Insurance or Denial and Renewal.

Upon meeting the requirements set forth in these rules, an employer shall receive a formal certificate approving self-insured status. The privilege may be renewed from year to year with renewal procedure as required by these rules. An employer whose original or renewal application for self-insurance has been denied or revoked, or who takes exception to insurance or reserve requirements, may request a review or reconsideration by the Commission. The request must be made within 20 days of the notice of Commission action issued to the employer. A request for review will not automatically extend the authorization to self-insure. However, the Commission may extend the privilege pending review. Without such an extension, the privilege is revoked on the anniversary date.

3.5. Revocation of Right to Self-Insure.

The right to self-insure may be revoked by the division for failure to comply with the rules contained herein.

 

R612-400-4. Waivers.

4.1. Authority and Purpose.

This rule is enacted under authority of 34A-1-104 of the Utah Labor Commission Act and Title 34A, Chapter Two, Part One, the Workers' Compensation Coverage Waivers Act ("the Act"). The purpose of this rule is to establish procedures for workers' compensation coverage waivers ("coverage waivers"). The rule also addresses the effect of coverage waivers and the adjudicative procedures to be followed by the Division in granting, denying, or revoking coverage waivers.

4.2. Administration by Industrial Accidents Division.

Except as otherwise provided, the Utah Labor Commission's Division of Industrial Accidents ("Division") shall administer the provisions of the Act and this rule.

4.3. Procedure for Application and Issuance of Certificate.

A. A business entity may apply for a coverage waiver by completing a form provided by the Commission, submitting required supporting documents, and paying a fee of $50. The Division's determination of whether to grant or deny a request for coverage waiver shall be conducted as informal proceedings under the Utah Administrative Procedures Act.

B. Supporting documents. 34A-2-1004 of the Workers' Compensation Coverage Waivers Act requires a business entity to submit the following documentation to support its request for a coverage waiver:

(1) a copy of two or more of the following:

(a) the business entity's federal or state income tax return that shows business income for the complete taxable year that immediately precedes the day on which the business entity submits the information;

(b) a valid business license;

(c) a license to engage in an occupation or profession, including a license under Title 58, Occupations and Professions; or

(d) documentation of an active liability insurance policy that covers the business entity's activities; or

(2) a copy of one item listed in Subsection (1) and a copy of two or more of the following:

(a) proof of a bank account for the business entity;

(b) proof that for the business entity there is:

(i) a telephone number; and

(ii) a physical location; or

(c) an advertisement of services in a newspaper of general circulation or telephone directory showing the business entity's:

(i) name; and

(ii) contact information.

C. Fee. A business entity applying for a workers' compensation coverage waiver certificate shall submit payment of a fee of $50.00. Such fees are used to defray the costs of processing and evaluating the application and are nonrefundable. If payment of the fee is made by check, the Division may delay issuance of a coverage waiver until it has verified that the check will be honored.

D. Issuance or Denial of Certificate. If the Division determines that a business entity has satisfied each requirement for a coverage waiver, the Division will issue the coverage waiver. If the Division determines that a business entity has not satisfied each requirement for a workers' compensation insurance waiver, the Division will issue a written denial to the business entity, stating the basis for denial and setting forth the business entity's appeal rights.

4.4. Duration, Renewal and Revocation.

A. Duration. Subject to revocation of a coverage waiver as provided by subparagraph C. of this section, a coverage waiver remains in effect for the following time periods:

1. A coverage waiver issued by a licensed workers' compensation insurance company prior to July 1, 2011, the effective date of the Workers' Compensation Coverage Waivers Act, shall remain effective for the period shown on the coverage waiver.

2. A coverage waiver issued by the Division after July 1, 2011, shall be effective for one year from the date the coverage waiver is issued.

B. Renewal. The Division will renew a business entity's coverage waiver if:

1. The business entity requests renewal; and

2. The business entity satisfies all requirements in effect at the time of the renewal request.

C. Revocation. If the Division has reason to believe that a business entity no longer qualifies for a coverage waiver, the Division shall institute proceedings to determine whether the business entity's coverage waiver should be revoked. Such proceedings shall be conducted as informal proceedings under the Utah Administrative Procedures Act. If the Division concludes that the business entity does not satisfy each requirement for a workers' compensation insurance waiver, the Division will issue a written order revoking the waiver certificate, stating the basis for revocation, and setting forth the business entity's appeal rights. The Division may also initiate other proceedings authorized by the Utah Workers' Compensation Act to compel the business entity to obtain workers' compensation coverage for its employees.

4.5. Review of Division Decisions to Deny or Revoke Waiver Certificate.

A business entity may challenge a Division decision to deny or revoke the business entity's coverage waiver by filing an appeal of the decision with the Commission's Adjudication Division. Such appeal proceedings shall be assigned to an administrative law judge and conducted as de novo formal adjudicatory proceedings pursuant to the Utah Administrative Procedures Act.

4.6. Effect, Verification and Limitation of Coverage Waiver.

A. Effect of coverage waiver. 34A-2-103 (7) (c) permits an employer contracting with a business entity to rely upon a valid coverage waiver issued by the Division as proof that the business entity is not required to have a workers' compensation insurance policy.

B. Verification of coverage waiver. An employer seeking to rely upon a business entity's coverage waiver shall retain the following documents:

1. A photocopy of the coverage waiver issued to the business entity by the Division; and

2. A printout of the Division's web page showing that the business entity's coverage waiver had not been revoked as of the date on which the employer contracted with the business entity.

C. Limitations to effect of coverage waiver. A coverage waiver does not excuse a business entity from obtaining and maintaining workers' compensation insurance coverage for employees who are entitled to such coverage under the Utah Workers' Compensation Act. If and when a business entity has such employees, any coverage waiver previously issued to that business entity becomes void and the business entity must immediately obtain workers' compensation coverage.

 

R612-400-5. Premium Rates for the Uninsured Employer' Fund and the Employers' Reinsurance Fund.

A. Pursuant to Section 59-9-101(2), Section 59-9-101.3 and 34A-2-202 the workers' compensation premium rates effective January 1, 2013, as established by the Labor Commission, shall be:

1. 0.15% for the Uninsured Employers' Fund;

2. 2.9% for the Employers' Reinsurance Fund;

B. The premium rates are a percentage of the total workers' compensation insurance premium income as detailed in Section 59-9-101(2)(a).

 

KEY: workers' compensation, insurance, rates, waivers

Date of Enactment or Last Substantive Amendment: 2013

Authorizing, and Implemented or Interpreted Law: 59-9-101(2)

 

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