Second Substitute S.B. 165

Text Box
- 1 -

House Floor Amendments 3-3-2004 kh/dsl This document includes House Floor Amendments incorporated into the bill on Wed, Mar 3, 2004 at 12:41 PM by kholt. --> Representative Jeff Alexander proposes the following substitute bill:

1 WORKERS' COMPENSATION AMENDMENTS
2 2004 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: Curtis S. Bramble
5
6 LONG TITLE
7 General Description:
8 This bill modifies the Insurance Code by modifying the enabling provisions of the
9 Workers' Compensation Fund and its subsidiaries.
10 Highlighted Provisions:
11 This bill:
12 . provides Workers' Compensation Fund Responsibilities for the residual market; H [ and ]
12a . AMENDS DEFINITIONS; AND h
13 . regulates a subsidiary of the fund H [ . ] ; AND
13a . PROVIDES FOR CERTAIN AUDITING BY UTAH'S INSURANCE COMMISSIONER FOR
13b COMPLIANCE WITH CERTAIN SUBSIDIARY LIMITATIONS. h
14 Monies Appropriated in this Bill:
15 None
16 Other Special Clauses:
17 None
18 Utah Code Sections Affected:
19 AMENDS:
19a H 31A-2-212, AS LAST AMENDED BY CHAPTER 265, LAWS OF UTAH 1997 h
20 31A-33-102, as last amended by Chapter 222, Laws of Utah 2000
21 31A-33-103.5, as last amended by Chapters 33 and 116, Laws of Utah 2001
21a H 63E-1-102, AS LAST AMENDED BY CHAPTERS 8 AND 291, LAWS OF UTAH 2003 h
22

Text Box
- 1a -

House Floor Amendments 3-3-2004 kh/dsl 23

Be it enacted by the Legislature of the state of Utah:
23a H Section 1. Section 31A-2-212 is amended to read:
23b 31A-2-212. Miscellaneous duties.
23c (1) Upon issuance of any order limiting, suspending, or revoking an insurer's authority to do
23d business in Utah, and on institution of any proceedings against the insurer under Chapter 27, the
23e commissioner shall notify by mail all agents of the insurer of whom the commissioner has record. The
23f commissioner may also publish notice of the order in any manner he considers necessary to protect
23g the rights of the public.
23h (2) When required for evidence in any legal proceeding, the commissioner shall furnish a
23i certificate of the authority of any licensee to transact insurance business in Utah on any particular
23j date. The court or other officer shall receive the certificate in lieu of the commissioner's testimony.
23k (3) The commissioner shall obtain and publish tables showing the average expectancy of life,
23l the values of annuities, and of life and term estates. These tables shall be for the use of courts and
23m appraisers in Utah.
23n (4) On the request of any insurer authorized to do a surety business, the commissioner shall
23o mail a certified copy of the insurer's certificate of authority to any designated public officer in this
23p state who requires that certificate before accepting a bond. That public officer shall file the certificate.
23q After a certified copy of a certificate of authority has been furnished to a public officer, it is not
23r necessary, while the certificate remains effective, to attach a copy of it to any instrument of suretyship
23s filed with that public officer. Whenever the commissioner revokes the certificate of authority or starts
23t proceedings under Chapter 27 against any insurer authorized to do a surety business, the
23u commissioner shall immediately give notice of that action to each officer who was sent a certified
23v copy under this subsection.
23w (5) When an authorized insurer doing a surety business has filed a petition for receivership, is
23x in receivership, or the commissioner has reason to believe the company is in financial difficulty, or
23y has unreasonably failed to carry out any of its contracts, the commissioner shall immediately notify
23z every judge and clerk of all courts of record in the state. Upon the receipt of the notice it is the duty of
23aa the judges and clerks to notify and require every person that has filed with the court a bond on which
23ab the company is surety, to immediately file a new bond with a new surety.
23ac (6) The commissioner shall require an insurer that issues, sells, renews, or offers health
23ad insurance coverage in this state to comply with the Health Insurance Portability and Accountability
23ae Act, P.L. 104-191, pursuant to 110 Stat. 1968, Sec. 2722.

23af (7) (a) THE COMMISSIONER SHALL EXAMINE AND AUDIT EACH SUBSIDIARY OF THE
23ag WORKERS' COMPENSATION FUND TO ENSURE COMPLIANCE WITH THE PROVISIONS OF
23ah SUBSECTION 31A-33-103.5(6) RELATED TO WORKERS' COMPENSATION FUND SUBSIDIARY
23ai REQUIREMENTS AND LIMITATIONS.
23aj (b) THE AUDIT UNDER SUBSECTION (7)(a), SHALL BE PERFORMED AT LEAST EVERY TWO
23ak YEARS. h
24 Section H [ 1 ] 2 h . Section 31A-33-102 is amended to read:
25 31A-33-102. Establishment of the Workers' Compensation Fund and the Injury

Text Box
- 2 -

House Floor Amendments 3-3-2004 kh/dsl 26

Fund.
27 (1) (a) There is created a nonprofit, quasi-public corporation to be known as the
28 Workers' Compensation Fund created by this chapter.
29 (b) The purpose of the fund is to:
30 (i) insure Utah employers against liability for compensation based on job-related
31 accidental injuries and occupational diseases; [and]
32 (ii) assure payment of this compensation to Utah employees who are entitled to it under
33 Title 34A, Chapters 2, Workers' Compensation Act, and 3, Utah Occupational Disease Act[.];
34 and
35 (iii) write all workers' compensation insurance H IN ACCORDANCE WITH SECTION
35a 31A-33-105 h for which application is made, H INCLUDING THE RESIDUAL MARKET, h
36 provided:
37 (A) the employer pays for the coverage; and
38 (B) the employer complies with reasonable contractual requirements .
39 (2) (a) There is created an Injury Fund, which shall be maintained by the Workers'
40 Compensation Fund.
41 (b) The Injury Fund shall consist of all assets acquired from premiums and penalties
42 paid into the Injury Fund and interest and dividends earned on those assets.
43 (c) The Injury Fund is the sole source of monies to:
44 (i) pay losses sustained on account of the insurance provided; and
45 (ii) pay salaries and other expenses of the Workers' Compensation Fund in accordance
46 with this chapter.
46a H (3) IN ACCORDANCE WITH TITLE 63, CHAPTER 46A, UTAH ADMINISTRATIVE RULEMAKING
46b ACT, THE COMMISSIONER SHALL MAKE RULES THAT DEFINE THE RESIDUAL MARKET. h
47 Section H [ 2 ] 3 h . Section 31A-33-103.5 is amended to read:
48 31A-33-103.5. Powers of Fund -- Limitations.
49 (1) The fund may form or acquire subsidiaries or enter into a joint enterprise:
50 (a) in accordance with Section 31A-33-107 ; and
51 (b) except as limited by this section and applicable insurance rules and statutes.
52 (2) Subject to applicable insurance rules and statutes, the fund may only offer:
53 (a) workers' compensation insurance in Utah;
54 (b) workers' compensation insurance in a state other than Utah to the extent necessary
55 to:

56 (i) accomplish its purpose under Subsection 31A-33-102 (1)(b); and

Text Box
- 3 -

House Floor Amendments 3-3-2004 kh/dsl 57

(ii) provide workers' compensation or occupational disease insurance coverage to Utah
58 employers and their employees engaged in interstate commerce; H [ and ] h
59 (c) workers' compensation products and services in Utah or other states H [ . ] ; AND
59a (d) REINSURANCE RELATED TO WORKERS COMPENSATION RISK OF UTAH EMPLOYERS
59b AND THEIR EMPLOYEES, EXCEPT AS LIMITED BY THE LAWS OF ANOTHER JURISDICTION FOR
59c EMPLOYEES OUTSIDE OF THIS STATE. h
60 (3) Subject to applicable insurance rules and statutes, a subsidiary of the fund may:
61 (a) offer workers' compensation insurance coverage only:
62 (i) in a state other than Utah; and
63 (ii) (A) to insure the following against liability for compensation based on job-related
64 accidental injuries and occupational diseases:
65 (I) an employer, as defined in Section 34A-2-103 , that has a majority of its employees,
66 as defined in Section 34A-2-104 , hired or regularly employed in Utah;
67 (II) an employer, as defined in Section 34A-2-103 , whose principal administrative
68 office is located in Utah;
69 (III) a subsidiary or affiliate of an employer described in Subsection (3)(a)(ii)(A)(I) or
70 (II); or
71 (IV) an employer, as defined in Section 34A-2-103 , whose purchase of insurance arises
72 solely out of the purchase of workers' compensation products and services from the fund or a
73 fund subsidiary; or
74 (B) for a state fund organization that is not an admitted insurer in the other state:
75 (I) on a fee for service basis; and
76 (II) without bearing any insurance risk; and
77 (b) offer workers' compensation products and services in Utah and other states.
78 (4) The fund shall write workers' compensation insurance in accordance with Section
79 31A-22-1001 H , INCLUDING FOR THE RESIDUAL MARKET h .
80 (5) (a) The fund may enter into a joint enterprise that offers workers' compensation
81 insurance and other coverage only in the state, provided:
82 (i) the joint enterprise offers only property or liability insurance in addition to workers'
83 compensation insurance;
84 (ii) the fund may not bear any insurance risk associated with the insurance coverage
85 other than risk associated with workers' compensation insurance; and
86 (iii) the offer of other insurance shall be part of an insurance program that includes
87 workers' compensation insurance coverage that is provided by the fund.

Text Box
- 4 -

House Floor Amendments 3-3-2004 kh/dsl 88

(b) The fund or a subsidiary of the fund may not offer, or enter into a joint enterprise
89 that offers, or otherwise participate in the offering of accident and health insurance.
90 (6) A subsidiary of the fund:
91 (a) may not:
92 (i) operate an insurance business H OR SELL INSURANCE h in Utah;
93 (ii) engage in predatory pricing or unfair competitive practices; H [ and ] OR h
94 (iii) be operated in a manner which H [ unjustly ] UNREASONABLY h enriches fund officers,
94a employees, or
95 directors;
96 (b) shall:
97 (i) operate on an arms length basis from the fund, in compliance with the provisions of
98 Title 31A, Chapter 16, Insurance Holding Companies, with agreements between the subsidiary
99 and the fund having terms no better than similar terms available from a third party unrelated to
100 either the fund or the subsidiary;
101 (ii) be fully subject to and compliant with the laws and regulatory requirements of the
102 jurisdictions where business operations occur;
103 (iii) be compliant with all federal and state tax laws, operating on a fully taxable basis
104 that does not shelter subsidiary income under the fund's federal income tax exemption; and
105 (iv) if the subsidiary is a workers' compensation insurance business operating in a state
106 other than Utah:
107 (A) cease, as of January 1, 2007, to receive reinsurance from the fund of any risk
108 insured by the subsidiary not connected to Utah as described under Subsection 3(a)(ii)(A)(I),
109 (II), or (III); and
110 (B) have a corporate structure that H [ permits ] REQUIRES h fund policyholders to elect
110a H ALL h members of the
111 subsidiary's board of directors and to approve such transactions as the subsidiary's sale, merger,
112 or dissolution.
112a1 H Section 4. Section 63E-1-102 is amended to read:
112a 63E-1-102 Definitions.
112b As used in this title:
112c (1) "Authorizing statute" means the statute creating an entity as an independent entity.
112d (2) "Committee" means the Retirement and Independent Entities Committee created in Section
112e 63E-1-201.
112f (3) "Independent corporation" means a corporation incorporated in accordance with Chapter

112g 2, Independent Corporations Act.

Text Box
- 4a -

House Floor Amendments 3-3-2004 kh/dsl 112h

(4) (a) "Independent entity" means an entity having a public purpose relating to the state or its
112i citizens that is individually created by the state or is given by the state the right to exist and conduct
112j its affairs as an:
112k (i) independent state agency; or
112l (ii) independent corporation.
112m (b) "Independent entity" includes the:
112n (i) Dairy Commission created in Title 4, Chapter 22, Dairy Promotion Act;
112o (ii) Utah Technology Finance Corporation created in Title 9, Chapter 13, Utah Technology and
112p Small Business Finance Act;
112q (iii) Heber Valley Railroad Authority created in Title 9, Chapter 3, Part 3, Heber Valley Historic
112r Railroad Authority;
112s (iv) Utah Science Center Authority created in Title 9, Chapter 3, Part 4, Utah Science Center
112t Authority;
112u (v) Utah Housing Corporation created in Title 9, Chapter 4, Part 9, Utah Housing Corporation
112v Act;
112w (vi) Utah State Fair Corporation created in Title 9, Chapter 4, Part 11, Utah State Fair
112x Corporation Act;
112y (vii) Workers' Compensation Fund created in Title 31A, Chapter 33, Workers' Compensation
112z Fund;
112aa (viii) Utah State Retirement Office created in Title 49, Chapter 11, Utah State Retirement
112ab Systems Administration;
112ac (ix) School and Institutional Trust Lands Administration created in Title 53C, Chapter 1, Part 2,
112ad School and Institutional Trust Lands Administration;
112ae (x) Utah Communications Agency Network created in Title 63C, Chapter 7, Utah
112af Communications Agency Network Act; and
112ag (xi) Utah Capital Investment Corporation created in Title 9, Chapter 2, Part 19, Utah Venture
112ah Capital Enhancement Act.
112ai (c) Notwithstanding this Subsection (4), "independent entity" does not include:
112aj (i) the Public Service Commission of Utah created in Section 54-1-1;
112ak (ii) an institution within the state system of higher education;
112al (iii) a city, county, or town;
112am (iv) a local school district;
112an (v) a special district created under the authority of Title 17A, Special Districts; or
112ao (vi) a local district created under the authority of Title 17B, Limited Purpose Local
112ap Government Entities.
112aq (5) "Independent state agency" means an entity that is created by the state, but is
112ar independent of the governor's direct supervisory control.
112as (6) "Monies held in trust" means monies maintained for the benefit of:

112at (a) one or more private individuals, including public employees;
112au (b) one or more public or private entities; or
112av (c) the owners of a quasi-public corporation.

Text Box
- 4b -

House Floor Amendments 3-3-2004 kh/dsl 112aw

(7) "Public corporation" means an artificial person, public in ownership, individually created
112ax by the state as a body politic and corporate for the administration of a public purpose relating to the
112ay state or its citizens.
112az (8) "Quasi-public corporation" means an artificial person, WHETHER OR NOT private in
112ba ownership, individually created as a corporation by the state which has accepted from the state the
112bb grant of a franchise or contract involving the performance of a public purpose relating to the state or
112bc its citizens. h