First Substitute S.B. 119

Senator L. Steven Poulton proposes the following substitute bill:

1 WORKERS' COMPENSATION INSURANCE
2 RELATED AMENDMENTS
3 2002 GENERAL SESSION
4 STATE OF UTAH
5 Sponsor: L. Steven Poulton
6 This act modifies the Insurance Code and makes technical changes. This act amends the
7 provisions related to reporting liabilities for assessments for workers' compensation
8 insurance. This act amends provisions related to the Workers' Compensation Fund.
9 This act affects sections of Utah Code Annotated 1953 as follows:
10 AMENDS:
11 31A-17-402, as last amended by Chapter 116, Laws of Utah 2001
12 31A-33-106, as renumbered and amended by Chapter 240 and last amended by Chapter
13 243, Laws of Utah 1996
14 Be it enacted by the Legislature of the state of Utah:
15 Section 1. Section 31A-17-402 is amended to read:
16 31A-17-402. Valuation of liabilities.
17 [The] (1) Subject to this section, the commissioner shall [adopt] make rules:
18 (a) specifying the liabilities required to be reported by [insurers] an insurer in a financial
19 [statements] statement submitted under Section 31A-2-202 ; and
20 (b) the methods of valuing [them] the liabilities described in Subsection (1)(a).
21 (2) For life insurance, [those] the methods of valuing specified pursuant to Subsection
22 (1)(b) shall be consistent with Part 5 [of this chapter], Standard Valuation Law.
23 (3) Title insurance reserves are provided for under Section 31A-17-408 .
24 (4) In determining the financial condition of an insurer, liabilities include:
25 [(l)] (a) the estimated amount necessary to pay:

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- 2 - 26 (i) all [its] the insurer's unpaid losses and claims incurred on or [prior to] before the date
27 of statement, whether reported or unreported[, together with]; and
28 (ii) the expense of adjustment or settlement of [the] a loss or claim described in this
29 Subsection (4)(a);
30 [(2)] (b) for life, accident and health insurance, and annuity contracts:
31 [(a)] (i) the reserves on life insurance policies and annuity contracts in force, valued
32 according to appropriate tables of mortality and the applicable rates of interest;
33 [(b)] (ii) the reserves for accident and health benefits, for both active and disabled lives;
34 [(c)] (iii) the reserves for accidental death benefits; and
35 [(d)] (iv) any additional reserves [which]:
36 (A) that may be required by the commissioner by rule[,]; or
37 (B) if no rule is applicable[, then] under Subsection (4)(b)(iv)(A), in a manner consistent
38 with the practice formulated or approved by the National Association of Insurance Commissioners
39 with respect to those types of insurance;
40 [(3)] (c) subject to Subsection (6), for insurance other than life, accident and health, and
41 title insurance, the amount of reserves equal to the unearned portions of the gross premiums
42 charged on policies in force, computed:
43 (i) on a daily or monthly pro rata basis; or
44 (ii) other basis approved by the commissioner; [provided that after adopting any one of the
45 methods for computing those reserves, an insurer may not change methods without the
46 commissioner's written consent;]
47 [(4)] (d) for ocean marine and other transportation insurance, reserves:
48 (i) equal to 50% of the amount of premiums upon risks covering not more than one trip
49 or passage not terminated[,]; and
50 (ii) computed:
51 (A) upon a pro rata basis; or[,]
52 (B) with the commissioner's consent, in accordance with [methods] a method provided
53 under Subsection [(3)] (4)(c); and
54 [(5) its] (e) the insurer's other liabilities[, including taxes, expenses, and other obligations]
55 due or accrued at the date of statement[.] including:
56 (i) taxes;

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House Committee Amendments 2-27-2002 kh/po 57

(ii) expenses; and
58 (iii) other obligations.
59 (5) (a) Except to the extent provided in Subsection (5)(b), in determining the financial
60 condition of an insurer of workers' compensation insurance, the insurer's liabilities do not include
61 any liability based on the liability of the Employer's Reinsurance Fund under Section 34A-2-702
62 for industrial accidents or occupational diseases occurring on or before June 30, 1994.
63 (b) Notwithstanding Subsection (5)(a), the liability of an insurer of workers' compensation
64 insurance includes any premium assessment:
65 (i) imposed under Section 59-9-101 or 59-9-101.3 ; and
66 (ii) due at the date of statement.
67 (6) After adopting a method for computing the reserves described in Subsection (4)(c), an
68 insurer may not change the method without the commissioner's written consent.
69 Section 2. Section 31A-33-106 is amended to read:
70 31A-33-106. Board of directors -- Status of the fund in relationship to the state.
71 (1) There is created a board of directors of the Workers' Compensation Fund.
72 (2) The board shall consist of seven directors.
73 (3) One [of the directors] director:
74 (a) shall be the executive director of the Department of Administrative Services or [his]
75 the executive director's designee[.]; and
76 (b) acts as the representative of the state as a policyholder of the Workers' Compensation
77 Fund.
78 (4) One [of the directors] director shall be the chief executive officer of the fund.
79 (5) (a) [The] In accordance with a plan that meets the requirements of this section , the
80 governor, with the advice and consent of the Senate, shall appoint h [ six ] FIVE h public directors as
80a follows:
81 [(a)] (i) three directors who are owners, officers, or employees of policyholders other than
82 the state, each of whom is an owner, officer, or employee of a policyholder that [have] has been
83 insured by the Workers' Compensation Fund for at least one year before [their] the appointment
84 of the director representing the policyholder; and
85 [(b)] (ii) two directors from the public in general.
86 (b) The plan described in Subsection (5)(a) shall comply with Section 31A-5-409 to the
87 extent that Section 31A-5-409 does not conflict with this section.

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- 4 - 88 (6) No two directors may represent the same policyholder.
89 (7) At least four directors appointed by the governor shall have had previous experience
90 in:
91 (i) the actuarial profession;
92 (ii) accounting;
93 (iii) investments[,];
94 (iv) risk management[,];
95 (v) occupational safety[,];
96 (vi) casualty insurance[, law]; or
97 (vii) the legal profession.
98 (8) Any director who represents a policyholder that fails to maintain workers'
99 compensation insurance through the Workers' Compensation Fund shall immediately resign from
100 the board.
101 (9) A person may not be a director if [he] that person:
102 (a) has any interest as a stockholder, employee, attorney, or contractor of a competing
103 insurance carrier providing workers' compensation insurance in Utah;
104 (b) fails to meet or comply with the conflict of interest policies established by the board;
105 or
106 (c) is not bondable.
107 (10) After notice and a hearing, the governor may remove any director for cause which
108 includes:
109 (a) neglect of duty[, inefficiency,]; or
110 (b) malfeasance.
111 (11) (a) Except as required by Subsection (11)(b), the term of office of the directors
112 appointed by the governor shall be four years, beginning July 1 of the year of appointment.
113 (b) Notwithstanding the requirements of Subsection (11)(a), the governor shall, at the time
114 of appointment or reappointment, adjust the length of terms to ensure that the terms of [board
115 members] directors are staggered so that approximately half of the board is appointed every two
116 years.
117 (12) Each director shall hold office until [his] the director's successor is appointed and
118 qualified.

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- 5 - 119 (13) When a vacancy occurs in the membership of the board for any reason, the
120 replacement shall be appointed for the unexpired term.
121 (14) The board shall annually elect a chair and other officers as needed from its
122 membership.
123 (15) (a) The board shall meet at least quarterly at a time and place designated by the chair.
124 [(16)] (b) The chair:
125 (i) may call board meetings more frequently than quarterly; and
126 (ii) shall call additional board meetings if requested to do so by a majority of the board.
127 [(17)] (16) Four directors are a quorum for the purpose of transacting all business of the
128 board.
129 [(18)] (17) Each decision of the board requires the affirmative vote of at least four
130 directors for approval.
131 [(19)] (18) (a) [Members] Directors shall receive no compensation or benefits for their
132 services, but may receive per diem and expenses incurred in the performance of the [member's]
133 director's official duties at the rates established by the Division of Finance under Sections
134 63A-3-106 and 63A-3-107.
135 (b) [Members] Directors may decline to receive per diem and expenses for their service.
136 [(20)] (c) The fund shall pay the per diem allowance and expenses from the Injury Fund
137 upon vouchers drawn in the same manner as the Workers' Compensation Fund pays its normal
138 operating expenses.
139 [(21)] (d) The executive director of the Department of Administrative Services, or [his]
140 the executive director's designee, and the chief executive officer of the Workers' Compensation
141 Fund shall serve on the board without a per diem allowance.
142 (19) The requirement that the governor, with the advice and consent of the Senate, appoint
143 the directors of the Workers' Compensation Fund specified in Subsection (5), does not:
144 (a) remove from the board of directors the managerial, financial, or operational control of
145 the Workers' Compensation Fund;
146 (b) give to the state or the governor managerial, financial, or operational control of the
147 Workers' Compensation Fund;
148 (c) consistent with Section 31A-33-105 , cause the state to be liable for any:
149 (i) obligation of the Workers' Compensation Fund; or

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- 6 - 150 (ii) expense, liability, or debt described in Section 31A-33-105 ;
151 (d) alter the legal status of the Workers' Compensation Fund as:
152 (i) a nonprofit, self-supporting, quasi-public corporation; and
153 (ii) an insurer:
154 (A) regulated under this title;
155 (B) that is structured to operate in perpetuity; and
156 (C) domiciled in the state; or
157 (e) alter the requirement that the Workers' Compensation Fund provide workers'
158 compensation:
159 (i) for the purposes set forth in Section 31A-33-102 ;
160 (ii) consistent with Section 34A-2-201 ; and
161 (iii) as provided in Section 31A-22-1001 .