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H.B. 397

             1     

WORKERS' COMPENSATION AMENDMENTS

             2     
2007 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Ron Bigelow

             5     
Senate Sponsor: ____________

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill modifies provisions in the Insurance Code, Independent Entities Code, Utah
             10      Labor Code, and other statutes to provide for the privatization of the Workers'
             11      Compensation Fund and to provide for an assigned risk plan to cover the residual
             12      workers' compensation insurance market.
             13      Highlighted Provisions:
             14          This bill:
             15          .    removes references to the Workers' Compensation Fund throughout the code
             16      effective on the transition date;
             17          .    enacts the Workers' Compensation Insurance Regulation chapter to provide for the
             18      creation of a Utah Workers' Compensation Assigned Risk Plan including:
             19              .    defining terms;
             20              .    providing for selection of a plan administrator and one or more servicing
             21      carriers;
             22              .    addressing rates;
             23              .    providing for a reserve for the plan; and
             24              .    addressing deficits;
             25          .    provides a process for the privatization of the Workers' Compensation Fund
             26      including:
             27              .    superseding the requirements of the Independent Entities Code;


             28              .    requiring financial audits and actuarial studies;
             29              .    requiring a ruling from the Internal Revenue Service;
             30              .    providing for the creation of a successor mutual insurance company;
             31              .    providing for a transition date;
             32              .    requiring the transfer of assets to the reserve for the assigned risk plan;
             33              .    requiring the return of certain surpluses, if any; and
             34              .    providing for the assumption of liabilities and transfer of assets to the successor
             35      mutual insurance company;
             36          .    provides for the repeal of the privatization process after the transition date;
             37          .    lists outstanding issues related to the implementation of this bill; and
             38          .    makes technical and conforming amendments.
             39      Monies Appropriated in this Bill:
             40          None
             41      Other Special Clauses:
             42          This bill has multiple effective dates and requires further action by the Legislature in
             43      the 2008 Annual General Session to take effect.
             44          This bill provides revisor instructions.
             45      Utah Code Sections Affected:
             46      AMENDS:
             47          11-8-3, as last amended by Chapter 222, Laws of Utah 2000
             48          31A-1-105, as last amended by Chapter 222, Laws of Utah 2000
             49          31A-15-103, as last amended by Chapter 90, Laws of Utah 2004
             50          31A-19a-401, as last amended by Chapter 222, Laws of Utah 2000
             51          31A-21-101, as last amended by Chapter 197, Laws of Utah 2006
             52          31A-22-309, as last amended by Chapter 59, Laws of Utah 2001
             53          31A-26-103, as last amended by Chapter 222, Laws of Utah 2000
             54          31A-35-103, as enacted by Chapter 293, Laws of Utah 1998
             55          34A-2-102, as last amended by Chapter 222, Laws of Utah 2000
             56          34A-2-103, as last amended by Chapter 295, Laws of Utah 2006
             57          34A-2-107, as last amended by Chapter 114, Laws of Utah 2001
             58          34A-2-201, as last amended by Chapter 222, Laws of Utah 2000


             59          34A-2-203, as last amended by Chapter 275, Laws of Utah 2006
             60          34A-2-209, as renumbered and amended by Chapter 375, Laws of Utah 1997
             61          34A-2-210, as enacted by Chapter 375, Laws of Utah 1997
             62          34A-2-211, as last amended by Chapter 222, Laws of Utah 2000
             63          34A-2-406, as last amended by Chapter 222, Laws of Utah 2000
             64          51-7-2, as last amended by Chapter 277, Laws of Utah 2006
             65          51-7-4, as last amended by Chapters 71 and 178, Laws of Utah 2005
             66          58-59-306, as repealed and reenacted by Chapter 260, Laws of Utah 2003
             67          59-9-101, as last amended by Chapter 44, Laws of Utah 2006
             68          63-5b-102, as last amended by Chapter 139, Laws of Utah 2006
             69          63-38a-102, as last amended by Chapter 71, Laws of Utah 2005
             70          63-55b-131, as last amended by Chapter 82, Laws of Utah 2006
             71          63E-1-102, as last amended by Chapter 46, Laws of Utah 2006
             72          63E-1-203, as last amended by Chapter 159, Laws of Utah 2002
             73          67-4-2, as last amended by Chapter 222, Laws of Utah 2000
             74      ENACTS:
             75          31A-40-101, Utah Code Annotated 1953
             76          31A-40-102, Utah Code Annotated 1953
             77          31A-40-201, Utah Code Annotated 1953
             78          31A-40-202, Utah Code Annotated 1953
             79          31A-40-203, Utah Code Annotated 1953
             80          31A-40-204, Utah Code Annotated 1953
             81          31A-40-205, Utah Code Annotated 1953
             82          31A-40-301, Utah Code Annotated 1953
             83          31A-40-302, Utah Code Annotated 1953
             84          31A-40-303, Utah Code Annotated 1953
             85          31A-40-304, Utah Code Annotated 1953
             86          31A-40-305, Utah Code Annotated 1953
             87          31A-40-306, Utah Code Annotated 1953
             88          31A-40-307, Utah Code Annotated 1953
             89          31A-40-308, Utah Code Annotated 1953


             90          31A-40-309, Utah Code Annotated 1953
             91          31A-40-310, Utah Code Annotated 1953
             92      REPEALS:
             93          31A-22-1001, as last amended by Chapter 222, Laws of Utah 2000
             94          31A-33-101, as last amended by Chapter 222, Laws of Utah 2000
             95          31A-33-102, as last amended by Chapter 222, Laws of Utah 2000
             96          31A-33-103, as last amended by Chapter 222, Laws of Utah 2000
             97          31A-33-103.5, as last amended by Chapters 33 and 116, Laws of Utah 2001
             98          31A-33-104, as last amended by Chapter 14, Laws of Utah 2006
             99          31A-33-105, as last amended by Chapter 107, Laws of Utah 1998
             100          31A-33-106, as last amended by Chapter 275, Laws of Utah 2006
             101          31A-33-107, as last amended by Chapter 130, Laws of Utah 1999
             102          31A-33-108, as last amended by Chapter 252, Laws of Utah 2003
             103          31A-33-109, as renumbered and amended by Chapter 240, Laws of Utah 1996
             104          31A-33-110, as last amended by Chapter 204, Laws of Utah 1997
             105          31A-33-111, as last amended by Chapter 130, Laws of Utah 1999
             106          31A-33-112, as renumbered and amended by Chapter 240, Laws of Utah 1996
             107          31A-33-113, as last amended by Chapter 116, Laws of Utah 2001
             108          31A-33-114, as renumbered and amended by Chapter 240, Laws of Utah 1996
             109          31A-33-115, as renumbered and amended by Chapter 240, Laws of Utah 1996
             110          31A-33-116, as renumbered and amended by Chapter 240, Laws of Utah 1996
             111          31A-33-117, as last amended by Chapter 375, Laws of Utah 1997
             112          31A-33-118, as last amended by Chapter 107, Laws of Utah 1998
             113     
             114      Be it enacted by the Legislature of the state of Utah:
             115          Section 1. Section 11-8-3 is amended to read:
             116           11-8-3. Department of Environmental Quality to negotiate loans for sewage
             117      facilities.
             118          (1) The Department of Environmental Quality may negotiate loans from the Retirement
             119      Systems Fund, State Land Principal Fund, [Workers' Compensation Fund,] or any state trust
             120      and agency fund which has sums available for loaning, as these funds are defined in Title 51,


             121      Chapter 5, Funds Consolidation Act, not to exceed $1,000,000 in any fiscal year for the
             122      purposes of providing the funding for the loans provided for in Section 11-8-2 .
             123          (2) The terms of any borrowing and repayment shall be negotiated between the
             124      borrower and the lender consistent with the legal duties of the lender.
             125          Section 2. Section 31A-1-105 is amended to read:
             126           31A-1-105. Presumption of jurisdiction.
             127          (1) Any insurer[, including the Workers' Compensation Fund created under Chapter
             128      33,] that provides coverage of a resident of this state, property located in this state, or a
             129      business activity conducted in this state, or that engages in any activity described in
             130      Subsections 31A-15-102 (2)(a) through (h), is:
             131          (a) doing an insurance business in this state; and
             132          (b) subject to the jurisdiction of the [insurance] commissioner and the courts of this
             133      state under Sections 31A-2-309 and 31A-2-310 to the extent of that coverage or activity.
             134          (2) Any person doing or purporting to do [an insurance] business in this state as
             135      defined in Section 31A-1-301 is subject to the jurisdiction of the insurance commissioner and
             136      this title, unless the insurer can establish that the exemptions of Section 31A-1-103 apply.
             137          (3) This section does not limit the jurisdiction of the courts of this state under other
             138      applicable law.
             139          Section 3. Section 31A-15-103 is amended to read:
             140           31A-15-103. Surplus lines insurance -- Unauthorized insurers.
             141          (1) Notwithstanding Section 31A-15-102 , a foreign insurer that has not obtained a
             142      certificate of authority to do business in this state under Section 31A-14-202 may negotiate for
             143      and make insurance contracts with persons in this state and on risks located in this state,
             144      subject to the limitations and requirements of this section.
             145          (2) For contracts made under this section, the insurer may, in this state, inspect the
             146      risks to be insured, collect premiums and adjust losses, and do all other acts reasonably
             147      incidental to the contract, through employees or through independent contractors.
             148          (3) (a) Subsections (1) and (2) do not permit any person to solicit business in this state
             149      on behalf of an insurer that has no certificate of authority.
             150          (b) Any insurance placed with a nonadmitted insurer shall be placed with a surplus
             151      lines producer licensed under Chapter 23a, Insurance Marketing - Licensing Producers,


             152      Consultants, and Reinsurance Intermediaries.
             153          (c) The commissioner may by rule prescribe how a surplus lines producer may:
             154          (i) pay or permit the payment, commission, or other remuneration on insurance placed
             155      by the surplus lines producer under authority of the surplus lines producer's license to one
             156      holding a license to act as an insurance producer; and
             157          (ii) advertise the availability of the surplus lines producer's services in procuring, on
             158      behalf of persons seeking insurance, contracts with nonadmitted insurers.
             159          (4) For contracts made under this section, nonadmitted insurers are subject to Sections
             160      31A-23a-402 and 31A-23a-403 and the rules adopted under those sections.
             161          (5) A nonadmitted insurer may not issue workers' compensation insurance coverage to
             162      employers located in this state, except for stop loss coverages issued to employers securing
             163      workers' compensation under Subsection 34A-2-201 [(3)] (2).
             164          (6) (a) The commissioner may by rule prohibit making contracts under Subsection (1)
             165      for a specified class of insurance if authorized insurers provide an established market for the
             166      class in this state that is adequate and reasonably competitive.
             167          (b) The commissioner may by rule place restrictions and limitations on and create
             168      special procedures for making contracts under Subsection (1) for a specified class of insurance
             169      if:
             170          (i) there have been abuses of placements in the class; or [if]
             171          (ii) the policyholders in the class, because of limited financial resources, business
             172      experience, or knowledge, cannot protect their own interests adequately.
             173          (c) The commissioner may prohibit an individual insurer from making any contract
             174      under Subsection (1) and all insurance producers from dealing with the insurer if:
             175          (i) the insurer [has] willfully [violated] violates this section, Section 31A-4-102 ,
             176      31A-23a-402 , or 31A-26-303 , or any rule adopted under any of these sections;
             177          (ii) the insurer [has failed] fails to pay the fees and taxes specified under Section
             178      31A-3-301 ; or
             179          (iii) the commissioner has reason to believe that the insurer is in an unsound condition
             180      or is operated in a fraudulent, dishonest, or incompetent manner or in violation of the law of its
             181      domicile.
             182          (d) (i) The commissioner may issue lists of unauthorized foreign insurers whose


             183      solidity the commissioner doubts, or whose practices the commissioner considers
             184      objectionable.
             185          (ii) The commissioner shall issue lists of unauthorized foreign insurers the
             186      commissioner considers to be reliable and solid.
             187          (iii) In addition to the lists described in Subsections (6)(d)(i) and (ii), the commissioner
             188      may issue other relevant evaluations of unauthorized insurers.
             189          (iv) An action may not lie against the commissioner or any employee of the department
             190      for any written or oral communication made in, or in connection with the issuance of, the lists
             191      or evaluations described in this Subsection (6)(d).
             192          (e) A foreign unauthorized insurer shall be listed on the commissioner's "reliable" list
             193      only if the unauthorized insurer:
             194          (i) [has delivered] delivers a request to the commissioner to be on the list;
             195          (ii) [has established] establishes satisfactory evidence of good reputation and financial
             196      integrity;
             197          (iii) [has delivered] delivers to the commissioner a copy of [its] the foreign
             198      unauthorized insurer's current annual statement certified by the foreign unauthorized insurer
             199      and continues each subsequent year to file its annual statements with the commissioner within
             200      60 days of its filing with the insurance regulatory authority where it is domiciled;
             201          (iv) (A) (I) is in substantial compliance with the greater of:
             202          (Aa) the solvency standards in Chapter 17, Part 6, Risk-Based Capital[,]; or [maintains]
             203          (Bb) maintaining capital and surplus of at least $15,000,000[, whichever is greater,];
             204      and
             205          (II) maintains in the United States an irrevocable trust fund in either a national bank or
             206      a member of the Federal Reserve System, or maintains a deposit meeting the statutory deposit
             207      requirements for insurers in the state where it is made, which trust fund or deposit:
             208          [(I)] (Aa) shall be in an amount not less than $2,500,000 for the protection of all of the
             209      insurer's policyholders in the United States;
             210          [(II)] (Bb) may consist of cash, securities, or investments of substantially the same
             211      character and quality as those which are "qualified assets" under Section 31A-17-201 ; and
             212          [(III)] (Cc) may include as part of the trust arrangement a letter of credit that qualifies
             213      as acceptable security under Subsection 31A-17-404 (3)(c)(iii); or


             214          (B) in the case of any "Lloyd's" or other similar incorporated or unincorporated group
             215      of alien individual insurers, maintains a trust fund that:
             216          (I) shall be in an amount not less than $50,000,000 as security to its full amount for all
             217      policyholders and creditors in the United States of each member of the group;
             218          (II) may consist of cash, securities, or investments of substantially the same character
             219      and quality as those which are "qualified assets" under Section 31A-17-201 ; and
             220          (III) may include as part of this trust arrangement a letter of credit that qualifies as
             221      acceptable security under Subsection 31A-17-404 (3)(c)(iii); and
             222          (v) for an alien insurer not domiciled in the United States or a territory of the United
             223      States, is listed on the Quarterly Listing of Alien Insurers maintained by the National
             224      Association of Insurance Commissioners International Insurers Department.
             225          (7) (a) [A] Unless the producer gives an applicant notice in writing of the known
             226      deficiencies of one of the following insurers on the producer's investigation, and explains the
             227      need to place the business with that insurer, a surplus lines producer may not, either knowingly
             228      or without reasonable investigation of the financial condition and general reputation of the
             229      insurer, place insurance under this section with:
             230          (i) a financially unsound [insurers or with insurers] insurer;
             231          (ii) an insurer engaging in unfair practices[,]; or [with]
             232          (iii) an otherwise substandard [insurers, unless the producer gives the applicant notice
             233      in writing of the known deficiencies of the insurer or the limitations on his investigation, and
             234      explains the need to place the business with that insurer] insurer.
             235          (b) A copy of [this] the notice required by Subsection (7)(a) shall be kept in the office
             236      of the producer for at least five years.
             237          (c) To be financially sound, an insurer shall satisfy standards that are comparable to
             238      those applied under the laws of this state to authorized insurers. [Insurers]
             239          (d) An insurer on the "doubtful or objectionable" list under Subsection (6)(d) and
             240      [insurers] an insurer not on the commissioner's "reliable" list under Subsection (6)(e) are
             241      presumed substandard.
             242          (8) (a) A policy issued under this section shall:
             243          (i) include a description of the subject of the insurance [and];
             244          (ii) indicate the coverage, conditions, and term of the insurance[,];


             245          (iii) indicate the premium charged and premium taxes to be collected from the
             246      policyholder[,]; and
             247          (iv) state the name and address of the policyholder and insurer.
             248          (b) If the direct risk is assumed by more than one insurer, the policy shall state the
             249      names and addresses of all insurers and the portion of the entire direct risk each has assumed.
             250          (c) All policies issued under the authority of this section shall have attached or affixed
             251      to the policy the following statement: "The insurer issuing this policy does not hold a certificate
             252      of authority to do business in this state and thus is not fully subject to regulation by the Utah
             253      insurance commissioner. This policy receives no protection from any of the guaranty
             254      associations created under Title 31A, Chapter 28, Guaranty Associations."
             255          (9) Upon placing a new or renewal coverage under this section, the surplus lines
             256      producer shall promptly deliver to the policyholder or [his] the policyholder's agent evidence of
             257      the insurance consisting either of the policy as issued by the insurer or, if the policy is not then
             258      available, a certificate, cover note, or other confirmation of insurance complying with
             259      Subsection (8).
             260          (10) If the commissioner finds it necessary to protect the interests of insureds and the
             261      public in this state, the commissioner may by rule subject policies issued under this section to
             262      as much of the regulation provided by this title as is required for comparable policies written by
             263      authorized foreign insurers.
             264          (11) (a) Each surplus lines transaction in this state shall be examined to determine
             265      whether [it] the surplus lines transaction complies with:
             266          (i) the surplus lines tax levied under Chapter 3, Administration of the Insurance Laws;
             267          (ii) the solicitation limitations of Subsection (3);
             268          (iii) the requirement of Subsection (3) that placement be through a surplus lines
             269      producer;
             270          (iv) placement limitations imposed under Subsections (6)(a), (b), and (c); and
             271          (v) the policy form requirements of Subsections (8) and (10).
             272          (b) The examination described in Subsection (11)(a) shall take place as soon as
             273      practicable after the transaction. The surplus lines producer shall submit to the examiner
             274      information necessary to conduct the examination within a period specified by rule.
             275          (c) (i) The examination described in Subsection (11)(a) may be conducted by the


             276      commissioner or by an advisory organization created under Section 31A-15-111 and authorized
             277      by the commissioner to conduct these examinations. The commissioner is not required to
             278      authorize any additional advisory organizations to conduct examinations under this Subsection
             279      (11)(c).
             280          (ii) The commissioner's authorization of one or more advisory organizations to act as
             281      examiners under this Subsection (11)(c) shall be:
             282          (A) by rule[. In addition, the authorization shall be]; and
             283          (B) evidenced by a contract, on a form provided by the commissioner, between the
             284      authorized advisory organization and the department.
             285          (d) (i) The person conducting the examination described in Subsection (11)(a) shall
             286      collect a stamping fee of an amount not to exceed 1% of the policy premium payable in
             287      connection with the transaction.
             288          (ii) Stamping fees collected by the commissioner shall be deposited in the General
             289      Fund. The commissioner shall establish this stamping fee by rule. Stamping fees collected by
             290      an advisory organization are the property of the advisory organization to be used in paying the
             291      expenses of the advisory organization.
             292          (iii) Liability for paying the stamping fee is as required under Subsection 31A-3-303 (1)
             293      for taxes imposed under Section 31A-3-301 . The commissioner shall adopt a rule dealing with
             294      the payment of stamping fees. If stamping fees are not paid when due, the commissioner or
             295      advisory organization may impose a penalty of 25% of the fee due, plus 1-1/2% per month
             296      from the time of default until full payment of the fee.
             297          (iv) Fees relative to policies covering risks located partially in this state shall be
             298      allocated in the same manner as under Subsection 31A-3-303 (4).
             299          (e) The commissioner, representatives of the department, advisory organizations,
             300      representatives and members of advisory organizations, authorized insurers, and surplus lines
             301      insurers are not liable for damages on account of statements, comments, or recommendations
             302      made in good faith in connection with their duties under this Subsection (11)(e) or under
             303      Section 31A-15-111 .
             304          (f) Examinations conducted under this Subsection (11) and the documents and
             305      materials related to the examinations are confidential.
             306          Section 4. Section 31A-19a-401 is amended to read:


             307           31A-19a-401. Scope of part.
             308          (1) This part applies to workers' compensation insurance and employers' liability
             309      insurance written in connection with [it] workers' compensation insurance.
             310          (2) All insurers writing workers' compensation coverage[, including the Workers'
             311      Compensation Fund created under Chapter 33,] are subject to this part.
             312          Section 5. Section 31A-21-101 is amended to read:
             313           31A-21-101. Scope of Chapters 21 and 22.
             314          (1) Except as provided in Subsections (2) through (6), this chapter and Chapter 22,
             315      Contracts in Specific Lines, apply to all insurance policies, applications, and certificates:
             316          (a) delivered or issued for delivery in this state;
             317          (b) on property ordinarily located in this state;
             318          (c) on persons residing in this state when the policy is issued; or
             319          (d) on business operations in this state.
             320          (2) This chapter and Chapter 22 do not apply to:
             321          (a) an exemption provided in Section 31A-1-103 ;
             322          (b) an insurance policy procured under Sections 31A-15-103 and 31A-15-104 ;
             323          (c) an insurance policy on business operations in this state:
             324          (i) if:
             325          (A) the contract is negotiated primarily outside this state; and
             326          (B) the operations in this state are incidental or subordinate to operations outside this
             327      state; and
             328          (ii) except that insurance required by a Utah statute must conform to the statutory
             329      requirements; or
             330          (d) other exemptions provided in this title.
             331          (3) (a) Sections 31A-21-102 , 31A-21-103 , 31A-21-104 , Subsections 31A-21-107 (1)
             332      and (3), and Sections 31A-21-306 , 31A-21-308 , 31A-21-312 , and 31A-21-314 apply to ocean
             333      marine and inland marine insurance.
             334          (b) Section 31A-21-201 applies to inland marine insurance that is written according to
             335      manual rules or rating plans.
             336          (4) A group or blanket policy is subject to this chapter and Chapter 22, except:
             337          (a) a group or blanket policy outside the scope of this title under Subsection


             338      31A-1-103 (3)(h); and
             339          (b) other exemptions provided under Subsection (5).
             340          (5) The commissioner may by rule exempt any class of insurance contract or class of
             341      insurer from any or all of the provisions of this chapter and Chapter 22 if the interests of the
             342      Utah insureds, creditors, or the public would not be harmed by the exemption.
             343          (6) Workers' compensation insurance[, including that written by the Workers'
             344      Compensation Fund created under Chapter 33, Workers' Compensation Fund,] is subject to this
             345      chapter and Chapter 22.
             346          (7) Unless clearly inapplicable, any provision of this chapter or Chapter 22 applicable
             347      to either a policy or a contract is applicable to both.
             348          Section 6. Section 31A-22-309 is amended to read:
             349           31A-22-309. Limitations, exclusions, and conditions to personal injury
             350      protection.
             351          (1) (a) A person who has or is required to have direct benefit coverage under a policy
             352      which includes personal injury protection may not maintain a cause of action for general
             353      damages arising out of personal injuries alleged to have been caused by an automobile
             354      accident, except where the person has sustained one or more of the following:
             355          (i) death;
             356          (ii) dismemberment;
             357          (iii) permanent disability or permanent impairment based upon objective findings;
             358          (iv) permanent disfigurement; or
             359          (v) medical expenses to a person in excess of $3,000.
             360          (b) Subsection (1)(a) does not apply to a person making an uninsured motorist claim.
             361          (2) (a) Any insurer issuing personal injury protection coverage under this part may only
             362      exclude from this coverage benefits:
             363          (i) for any injury sustained by the insured while occupying another motor vehicle
             364      owned by or furnished for the regular use of the insured or a resident family member of the
             365      insured and not insured under the policy;
             366          (ii) for any injury sustained by any person while operating the insured motor vehicle
             367      without the express or implied consent of the insured or while not in lawful possession of the
             368      insured motor vehicle;


             369          (iii) to any injured person, if the person's conduct contributed to [his] that person's
             370      injury:
             371          (A) by intentionally causing injury to [himself] the person; or
             372          (B) while committing a felony;
             373          (iv) for any injury sustained by any person arising out of the use of any motor vehicle
             374      while located for use as a residence or premises;
             375          (v) for any injury due to war, whether or not declared, civil war, insurrection, rebellion
             376      or revolution, or to any act or condition incident to any of the foregoing; or
             377          (vi) for any injury resulting from the radioactive, toxic, explosive, or other hazardous
             378      properties of nuclear materials.
             379          (b) [The provisions of this Subsection do] This Subsection (2) does not limit the
             380      exclusions which may be contained in other types of coverage.
             381          (3) The benefits payable to any injured person under Section 31A-22-307 are reduced
             382      by:
             383          (a) any benefits which that person receives or is entitled to receive as a result of an
             384      accident covered in this code under any workers' compensation or similar statutory plan; and
             385          (b) any amounts which that person receives or is entitled to receive from the United
             386      States or any of its agencies because that person is on active duty in the military service.
             387          (4) When a person injured is also an insured party under any other policy, including
             388      those policies complying with this part, primary coverage is given by the policy insuring the
             389      motor vehicle in use during the accident.
             390          (5) (a) Payment of the benefits provided for in Section 31A-22-307 shall be made on a
             391      monthly basis as expenses are incurred.
             392          (b) Benefits for any period are overdue if they are not paid within 30 days after the
             393      insurer receives reasonable proof of the fact and amount of expenses incurred during the
             394      period. If reasonable proof is not supplied as to the entire claim, the amount supported by
             395      reasonable proof is overdue if not paid within 30 days after that proof is received by the
             396      insurer. Any part or all of the remainder of the claim that is later supported by reasonable proof
             397      is also overdue if not paid within 30 days after the proof is received by the insurer.
             398          (c) If the insurer fails to pay the expenses when due, these expenses shall bear interest
             399      at the rate of 1-1/2% per month after the due date.


             400          (d) The person entitled to the benefits may bring an action in contract to recover the
             401      expenses plus the applicable interest. If the insurer is required by the action to pay any overdue
             402      benefits and interest, the insurer is also required to pay a reasonable [attorney's] attorney fee to
             403      the claimant.
             404          (6) Every policy providing personal injury protection coverage is subject to the
             405      following:
             406          (a) that where the insured under the policy is or would be held legally liable for the
             407      personal injuries sustained by any person to whom benefits required under personal injury
             408      protection have been paid by another insurer, [including the Workers' Compensation Fund
             409      created under Chapter 33,] the insurer of the person who would be held legally liable shall
             410      reimburse the other insurer for the payment, but not in excess of the amount of damages
             411      recoverable; and
             412          (b) that the issue of liability for that reimbursement and its amount shall be decided by
             413      mandatory, binding arbitration between the insurers.
             414          Section 7. Section 31A-26-103 is amended to read:
             415           31A-26-103. Workers' compensation claims.
             416          In addition to being subject to this and other chapters of this title, insurers writing
             417      workers' compensation insurance in this state[, including the Workers' Compensation Fund
             418      created under Chapter 33,] are subject to the Labor Commission with respect to claims for and
             419      payment of compensation and benefits.
             420          Section 8. Section 31A-35-103 is amended to read:
             421           31A-35-103. Exemption from other sections of this title.
             422          Bail bond surety companies are [exempted] exempt from:
             423          (1) Title 31A, Chapter 3, Department Funding, Fees, and Taxes, except Section
             424      31A-3-103 ;
             425          (2) Title 31A, Chapter 4, Insurance in General, except Sections 31A-4-102 , 31A-4-103 ,
             426      31A-4-104 , and 31A-4-107 ;
             427          (3) Title 31A, Chapter 5, Domestic Stock and Mutual Insurance Corporations, except
             428      Section 31A-5-103 , and
             429          (4) Title 31A, Chapters 6, 6a, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 24, 25,
             430      26, 27, 28, 29, 30, 31, 32, [33, and] 34, and 40.


             431          Section 9. Section 31A-40-101 is enacted to read:
             432     
CHAPTER 40. WORKERS' COMPENSATION INSURANCE REGULATION

             433     
Part 1. General Provisions

             434          31A-40-101. Title.
             435          This chapter is known as "Workers' Compensation Insurance Regulation."
             436          Section 10. Section 31A-40-102 is enacted to read:
             437          31A-40-102. Definitions.
             438          As used in this chapter:
             439          (1) Notwithstanding Section 31A-1-301 , "employer" is as defined in Section
             440      34A-2-103 .
             441          (2) "Plan" means the Utah Workers' Compensation Assigned Risk Plan created by rule
             442      in accordance with Section 31A-40-202 .
             443          (3) "Plan administrator" is the organization selected under Subsection 31A-40-202 (4).
             444          (4) "Plan reserve" means the Workers' Compensation Assigned Risk Plan Reserve
             445      created in Section 31A-40-204 .
             446          (5) "Policy servicing and claims administration support" shall be defined by the
             447      commissioner by rule made in accordance with Title 63, Chapter 46a, Utah Administrative
             448      Rulemaking Act.
             449          (6) "Residual market employer" means an employer who:
             450          (a) is required to obtain workers' compensation coverage under Title 34A, Chapters 2
             451      and 3; and
             452          (b) can verify in writing in accordance with the plan that the employer is unable, except
             453      under the plan, to obtain workers' compensation insurance from at least two workers'
             454      compensation insurers.
             455          (7) "Servicing carrier" means a workers' compensation insurer selected as a servicing
             456      carrier in accordance with Subsection 31A-40-202 (5).
             457          (8) "Transition date" means the date determined in accordance with Section
             458      31A-40-307 .
             459          (9) "Workers' compensation insurer" means an insurer licensed to write workers'
             460      compensation insurance in this state.
             461          Section 11. Section 31A-40-201 is enacted to read:


             462     
Part 2. Workers' Compensation Assigned Risk Plan Act

             463          31A-40-201. Title.
             464          This part is known as the "Workers' Compensation Assigned Risk Plan Act."
             465          Section 12. Section 31A-40-202 is enacted to read:
             466          31A-40-202. Utah Workers' Compensation Assigned Risk Plan creation.
             467          (1) (a) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             468      the commissioner shall by rule create an assigned risk plan known as the "Utah Workers'
             469      Compensation Assigned Risk Plan":
             470          (i) to provide workers' compensation insurance for a residual market employer who:
             471          (A) applies for workers' compensation insurance under the plan; and
             472          (B) qualifies for workers' compensation insurance under the plan; and
             473          (ii) that takes effect on the transition date.
             474          (b) The plan is not an agency or division of the department.
             475          (2) The plan shall provide for the equitable apportionment among the workers'
             476      compensation insurers of the workers' compensation insurance provided in accordance with
             477      Subsection (1).
             478          (3) A workers' compensation insurer shall participate in the plan.
             479          (4) In accordance with Title 63, Chapter 56, Utah Procurement Code, the
             480      commissioner shall select a person to be the plan administrator who:
             481          (a) is authorized to provide actuarial and administrative support for the plan; and
             482          (b) shall be a nationally recognized rating and administrative organization.
             483          (5) (a) The commissioner shall establish eligibility criteria for a workers' compensation
             484      insurer to qualify as a servicing carrier to provide policy servicing and claims administration
             485      support under the plan including requiring that a servicing carrier be:
             486          (i) licensed and actively writing workers' compensation insurance in the state; and
             487          (ii) in good standing in its participation in the plan.
             488          (b) The plan administrator shall solicit bids from workers' compensation insurers to act
             489      as a servicing carrier.
             490          (c) After the bid process under Subsection (5)(b), the commissioner shall select one or
             491      more workers' compensation insurers to be servicing carriers.
             492          (d) A servicing carrier shall begin servicing its workers' compensation insurance


             493      obligations under the plan as of the transfer date.
             494          (6) The commissioner may adopt a premium adjustment plan for any risk insured
             495      through the plan that:
             496          (a) has frequency or severity problems; or
             497          (b) has any exposure that is greater than average for the class.
             498          Section 13. Section 31A-40-203 is enacted to read:
             499          31A-40-203. Rates.
             500          (1) (a) A servicing carrier shall submit rates for the plan to the commissioner for
             501      approval by no later than 30 days before the transition date.
             502          (b) After initial rates are approved by the commissioner, new or modified rates may be
             503      submitted to the commissioner for the commissioner's approval.
             504          (c) The commissioner may approve a retrospective rating plan for any risk insured
             505      under the plan.
             506          (2) (a) A rate may not be used under the plan unless approved by the commissioner.
             507          (b) An approved rate may not take effect less than 30 days after the day on which the
             508      commissioner approves the rate.
             509          (c) A rate filing is considered approved if the commissioner fails to make a
             510      determination within 30 days after the day on which a rate filing is made.
             511          (3) A rate approved by the commissioner shall reflect:
             512          (a) loss experience for residual market employers; and
             513          (b) expenses and cost of capital needed to support the provision of workers'
             514      compensation insurance under the plan to the extent that it is actuarially appropriate so that the
             515      plan is self-supporting.
             516          (4) In accordance with Chapter 19a, Part 2, General Rate Regulation, the commissioner
             517      may:
             518          (a) approve a rate filing that meets the requirements of Section 31A-19a-201 ;
             519          (b) approve an assessment submitted by the plan administrator on workers'
             520      compensation insurance offered under the plan; or
             521          (c) disapprove a rate filing in accordance with Section 31A-19a-206 .
             522          (5) Notwithstanding any other provisions of this part, a rating organization may make
             523      rate filings under this section.


             524          Section 14. Section 31A-40-204 is enacted to read:
             525          31A-40-204. Workers' Compensation Assigned Risk Plan Reserve.
             526          (1) (a) There is created the "Workers' Compensation Assigned Risk Plan Reserve" to
             527      assist in maintaining the financial stability of the plan.
             528          (b) The plan reserve shall consist of:
             529          (i) assets deposited in accordance with Section 31A-40-308 ;
             530          (ii) assets deposited in accordance with Subsection (4); and
             531          (iii) interest and earnings on the plan reserve.
             532          (2) The commissioner shall act as trustee of the plan reserve, except that the state
             533      treasurer shall:
             534          (a) invest the plan reserve by following the procedures and requirements of Title 51,
             535      Chapter 7, State Money Management Act; and
             536          (b) deposit all interest or other earnings derived from the plan reserve into the plan
             537      reserve.
             538          (3) The assets of the plan reserve are for the exclusive benefit of the plan and may not
             539      be diverted or appropriated for any purpose other than as provided in Section 31A-40-205 .
             540          (4) If the successor mutual insurance company, as defined in Section 31A-40-302 ,
             541      ceases to write workers' compensation insurance in this state, within 30 days from the day on
             542      which the successor mutual insurance company no longer writes a policy of workers'
             543      compensation insurance in this state, the successor mutual company shall transfer to the plan
             544      reserve all assets held in trust for the purpose of providing workers' compensation in Utah for
             545      injuries and diseases including all administrative expenses.
             546          Section 15. Section 31A-40-205 is enacted to read:
             547          31A-40-205. Deficits.
             548          (1) The commissioner shall determine whether or not there is a deficit for the plan in a
             549      fiscal year within 24 months of the end of the fiscal year.
             550          (2) A deficit in the plan in any single fiscal year shall be eliminated, by the
             551      commissioner at the commissioner's discretion:
             552          (a) directing the Division of Finance to transfer monies from the accumulated interest
             553      and earnings from the plan reserve;
             554          (b) imposing an assessment on workers' compensation insurance offered under the


             555      plan, which may include an assessment that constitutes a separate charge on a policy issued
             556      under the plan; or
             557          (c) doing a combination of Subsections (2)(a) and (b).
             558          Section 16. Section 31A-40-301 is enacted to read:
             559     
Part 3. Privatization of the Workers' Compensation Fund Act

             560          31A-40-301. Title.
             561          This part is known as the "Privatization of the Workers' Compensation Fund Act."
             562          Section 17. Section 31A-40-302 is enacted to read:
             563          31A-40-302. Definitions.
             564          As used in this part:
             565          (1) "Assets" means property of all kinds, real and personal, tangible and intangible, and
             566      includes:
             567          (a) cash;
             568          (b) stock or other investments;
             569          (c) goodwill;
             570          (d) real property;
             571          (e) an ownership interest;
             572          (f) a license;
             573          (g) a cause of action; and
             574          (h) any similar property.
             575          (2) "Injury Fund" means the Injury Fund as defined in Section 31A-33-101 .
             576          (3) "Subsidiary of the Workers' Compensation Fund" means:
             577          (a) a subsidiary of the Workers' Compensation Fund;
             578          (b) an entity controlled by the Workers' Compensation Fund; or
             579          (c) a joint enterprise controlled by the Workers' Compensation Fund.
             580          (4) "Successor mutual insurance company" means the mutual insurance company
             581      granted the certificate of authority or license under Section 31A-40-306 .
             582          (5) "Workers' Compensation Fund" means the nonprofit, quasi-public corporation
             583      established by Chapter 33, Workers' Compensation Fund.
             584          Section 18. Section 31A-40-303 is enacted to read:
             585          31A-40-303. Relationship to Independent Entities Code.


             586          This part supersedes Title 63E, Independent Entities Code, as to requirements for:
             587          (1) the privatization of the Workers' Compensation Fund; and
             588          (2) the transfer of the Injury Fund.
             589          Section 19. Section 31A-40-304 is enacted to read:
             590          31A-40-304. Financial audits and actuarial studies.
             591          (1) (a) On or before September 1, 2007, the commissioner shall contract with a
             592      nationally recognized accounting firm and a nationally recognized actuarial consulting firm to
             593      conduct:
             594          (i) one or more financial audits of the Workers' Compensation Fund and all
             595      subsidiaries of the Workers' Compensation Fund; and
             596          (ii) one or more actuarial studies of the adequacy of the reserve of the Workers'
             597      Compensation Fund and of all the subsidiaries of the Workers' Compensation Fund.
             598          (b) At a minimum, the audits and studies required by this section shall provide the
             599      information required by Sections 31A-40-308 and 31A-40-309 .
             600          (2) The cost of any audit or study conducted under this section shall be paid by the
             601      Workers' Compensation Fund from the Injury Fund.
             602          (3) (a) After the completion of the audits and studies conducted under this section, the
             603      commissioner shall make a report to the governor.
             604          (b) The commissioner's report shall include:
             605          (i) a discussion of the findings of the audits and studies; and
             606          (ii) a statement as to whether the assets of the Workers' Compensation Fund and the
             607      monies from the Injury Fund that are to be transferred to the successor mutual insurance
             608      company in accordance with Sections 31A-40-307 and 31A-40-310 are adequate to:
             609          (A) permit the payment of all liabilities under policies of insurance assumed by the
             610      successor mutual insurance company as determined on the basis of sound actuarial principles;
             611      and
             612          (B) cover all outstanding indebtedness or other liabilities of the Workers'
             613      Compensation Fund.
             614          Section 20. Section 31A-40-305 is enacted to read:
             615          31A-40-305. Internal Revenue Service ruling.
             616          The Workers' Compensation Fund shall obtain a private letter ruling from the United


             617      States Internal Revenue Service indicating that neither the state nor the successor mutual
             618      insurance company will have any tax liability as the result of the privatization of the Workers'
             619      Compensation Fund in accordance with this part.
             620          Section 21. Section 31A-40-306 is enacted to read:
             621          31A-40-306. Creation of a successor mutual insurance company.
             622          (1) In accordance with Chapter 5, Domestic Stock and Mutual Insurance Corporations,
             623      the board of directors of the Workers' Compensation Fund shall:
             624          (a) on or before September 30, 2008, submit a mutualization plan to the commissioner;
             625      and
             626          (b) after submitting a mutualization plan as required by Subsection (1)(a), organize a
             627      mutual insurance company to:
             628          (i) write workers' compensation insurance, including workers' compensation insurance
             629      in this state; and
             630          (ii) be the successor organization to the Workers' Compensation Fund.
             631          (2) (a) The successor mutual insurance company organized under this section shall
             632      apply for a certificate of authority or license under this title to write workers' compensation
             633      insurance in this state.
             634          (b) If the commissioner determines that the successor mutual insurance company meets
             635      the requirements of this title to obtain the certificate of authority or license described in
             636      Subsection (2)(a), the commissioner shall grant the successor mutual insurance company the
             637      certificate of authority or license.
             638          (3) The certificate of authority of the Workers' Compensation Fund expires on the
             639      transition date.
             640          Section 22. Section 31A-40-307 is enacted to read:
             641          31A-40-307. Transition date.
             642          (1) (a) The Legislature may enact during the 2008 Annual General Session a process to
             643      determine a transition date as provided in this section.
             644          (b) The transition date process may provide for:
             645          (i) a certification by the governor that the requirements of this part have been complied
             646      with by all persons required to take an action under this part and Section 31A-40-202
             647      including:


             648          (A) the commissioner;
             649          (B) the Workers' Compensation Fund; and
             650          (C) the successor mutual insurance company;
             651          (ii) a period of time after the certification of not less than 30 days to prepare for the
             652      implementation of the transition; and
             653          (iii) a process by which the governor provides a copy of the governor's certification to:
             654          (A) the speaker of the House of Representatives;
             655          (B) the president of the Senate;
             656          (C) the commissioner;
             657          (D) the Workers' Compensation Fund;
             658          (E) the successor mutual insurance company; and
             659          (F) the Office of Legislative Research and General Counsel; and
             660          (iv) a deadline by which the persons take the actions required by this part and Section
             661      31A-40-202 .
             662          (2) On the transition date:
             663          (a) the Workers' Compensation Fund shall transfer the assets of the Injury Fund to the
             664      successor mutual insurance company in accordance with Section 31A-40-310 ;
             665          (b) the Workers' Compensation Fund shall transfer the assets of the Workers'
             666      Compensation Fund to the successor mutual insurance company;
             667          (c) the successor mutual insurance company shall assume all debts and liabilities of the
             668      Workers' Compensation Fund;
             669          (d) the Workers' Compensation Fund is dissolved and shall file any necessary
             670      dissolution documents with the Division of Corporations and Commercial Code; and
             671          (e) the plan shall take effect including the plan administrator and any servicing carrier
             672      assuming their obligations under the plan.
             673          Section 23. Section 31A-40-308 is enacted to read:
             674          31A-40-308. Transfer of assets to plan reserve.
             675          (1) As part of an actuarial study required by Section 31A-40-304 , the Workers'
             676      Compensation Fund shall identify all policies that are risks associated with residual market
             677      employers that may be required to seek workers' compensation insurance from the plan.
             678          (2) The nationally recognized actuarial consulting firm performing the actuarial study


             679      described in Subsection (1) shall determine the percentage of the annual premium volume
             680      currently paid by policyholders to the Workers' Compensation Fund that is represented by the
             681      risks identified under Subsection (1).
             682          (3) Based on the determination under Subsection (2), the successor mutual insurance
             683      company shall deposit into the plan reserve no later than two years after the transition date
             684      assets that are equal in value to a proportional share of the Workers' Compensation Fund's
             685      assets for any policy of record with the Workers' Compensation Fund on the transition date
             686      that:
             687          (a) is nonrenewed due to risk characteristics; and
             688          (b) becomes a risk related to a residual market employer in the 24 months following
             689      the transition date.
             690          Section 24. Section 31A-40-309 is enacted to read:
             691          31A-40-309. Return of excess surplus.
             692          (1) If an audit or study conducted under Section 31A-40-304 finds that the premium to
             693      surplus ratio of the Workers' Compensation Fund is 2 to 1 or less, the commissioner may order
             694      the successor mutual insurance company to issue an extraordinary dividend to policyholders of
             695      record of the Workers' Compensation Fund on January 1, 2008.
             696          (2) The successor mutual insurance company shall issue a dividend required by the
             697      commissioner under this section within 30 days of the transition date.
             698          Section 25. Section 31A-40-310 is enacted to read:
             699          31A-40-310. Assumption of liabilities and transfer of assets by the successor
             700      mutual insurance company.
             701          As of the transition date, the successor mutual insurance company shall:
             702          (1) assume all debts and liabilities of the Workers' Compensation Fund; and
             703          (2) subject to Subsection 31A-40-204 (4), hold in an irrevocable trust the Injury Fund
             704      assets for the purpose of providing workers' compensation in Utah for injuries and diseases
             705      including all administrative expenses.
             706          Section 26. Section 34A-2-102 is amended to read:
             707           34A-2-102. Definition of terms.
             708          As used in this chapter:
             709          (1) "Average weekly wages" means the average weekly wages as determined under


             710      Section 34A-2-409 .
             711          (2) "Award" means a final order of the commission as to the amount of compensation
             712      due:
             713          (a) any injured employee; or
             714          (b) the dependents of any deceased employee.
             715          (3) "Compensation" means the payments and benefits provided for in this chapter or
             716      Chapter 3, Utah Occupational Disease Act.
             717          (4) (a) "Decision" means the ruling of:
             718          (i) an administrative law judge; or[,]
             719          (ii) in accordance with Section 34A-2-801 , the commissioner or Appeals Board; and
             720          (b) may include:
             721          [(a)] (i) an award or denial of medical, disability, death, or other related benefits under
             722      this chapter or Chapter 3, Utah Occupational Disease Act; or
             723          [(b)] (ii) another adjudicative ruling in accordance with this chapter or Chapter 3, Utah
             724      Occupational Disease Act.
             725          (5) "Director" means the director of the division, unless the context requires otherwise.
             726          (6) "Disability" means an administrative determination that may result in an
             727      entitlement to compensation as a consequence of becoming medically impaired as to function.
             728      Disability can be total or partial, temporary or permanent, industrial or nonindustrial.
             729          (7) "Division" means the Division of Industrial Accidents.
             730          (8) "Impairment" is a purely medical condition reflecting any anatomical or functional
             731      abnormality or loss. Impairment may be either temporary or permanent, industrial or
             732      nonindustrial.
             733          (9) "Order" means an action of the commission that determines the legal rights, duties,
             734      privileges, immunities, or other interests of one or more specific persons, but not a class of
             735      persons.
             736          (10) (a) "Personal injury by accident arising out of and in the course of employment"
             737      includes any injury caused by the willful act of a third person directed against an employee
             738      because of the employee's employment.
             739          (b) "Personal injury by accident arising out of and in the course of employment" does
             740      not include a disease, except as the disease results from the injury.


             741          (11) "Safe" and "safety," as applied to any employment or place of employment, means
             742      the freedom from danger to the life or health of employees reasonably permitted by the nature
             743      of the employment.
             744          [(12) "Workers' Compensation Fund" means the nonprofit, quasi-public corporation
             745      created in Title 31A, Chapter 33, Workers' Compensation Fund.]
             746          Section 27. Section 34A-2-103 is amended to read:
             747           34A-2-103. Employers enumerated and defined -- Regularly employed --
             748      Statutory employers.
             749          (1) (a) The state, and each county, city, town, and school district in the state are
             750      considered employers under this chapter and Chapter 3, Utah Occupational Disease Act.
             751          (b) For the purposes of the exclusive remedy in this chapter and Chapter 3, Utah
             752      Occupational Disease Act, prescribed in Sections 34A-2-105 and 34A-3-102 , the state is
             753      considered to be a single employer and includes any office, department, agency, authority,
             754      commission, board, institution, hospital, college, university, or other instrumentality of the
             755      state.
             756          (2) (a) Except as provided in Subsection (4), each person, including each public utility
             757      and each independent contractor, who regularly employs one or more workers or operatives in
             758      the same business, or in or about the same establishment, under any contract of hire, express or
             759      implied, oral or written, is considered an employer under this chapter and Chapter 3, Utah
             760      Occupational Disease Act.
             761          (b) As used in this Subsection (2):
             762          (i) "Independent contractor" means any person engaged in the performance of any work
             763      for another who, while so engaged, is:
             764          (A) independent of the employer in all that pertains to the execution of the work;
             765          (B) not subject to the routine rule or control of the employer;
             766          (C) engaged only in the performance of a definite job or piece of work; and
             767          (D) subordinate to the employer only in effecting a result in accordance with the
             768      employer's design.
             769          (ii) "Regularly" includes all employments in the usual course of the trade, business,
             770      profession, or occupation of the employer, whether continuous throughout the year or for only a
             771      portion of the year.


             772          (3) (a) The client company in an employee leasing arrangement under Title 58, Chapter
             773      59, Professional Employer Organization Registration Act, is considered the employer of leased
             774      employees and shall secure workers' compensation benefits for them by complying with
             775      Subsection 34A-2-201 (1) [or (2)] and commission rules.
             776          (b) An insurance carrier may underwrite workers' compensation secured in accordance
             777      with Subsection (3)(a) showing the leasing company as the named insured and each client
             778      company as an additional insured by means of individual endorsements.
             779          (c) Endorsements shall be filed with the division as directed by commission rule.
             780          (d) The division shall promptly inform the Division of Occupation and Professional
             781      Licensing within the Department of Commerce if the division has reason to believe that [an
             782      employee leasing company] a professional employer organization is not in compliance with
             783      Subsection 34A-2-201 (1) [or (2)] and commission rules.
             784          (4) A domestic employer who does not employ one employee or more than one
             785      employee at least 40 hours per week is not considered an employer under this chapter and
             786      Chapter 3, Utah Occupational Disease Act.
             787          (5) (a) As used in this Subsection (5):
             788          (i) (A) "agricultural employer" means a person who employs agricultural labor as
             789      defined in Subsections 35A-4-206 (1) and (2) and does not include employment as provided in
             790      Subsection 35A-4-206 (3); and
             791          (B) notwithstanding Subsection (5)(a)(i)(A), only for purposes of determining who is a
             792      member of the employer's immediate family under Subsection (5)(a)(ii), if the agricultural
             793      employer is a corporation, partnership, or other business entity, "agricultural employer" means
             794      an officer, director, or partner of the business entity;
             795          (ii) "employer's immediate family" means:
             796          (A) an agricultural employer's:
             797          (I) spouse;
             798          (II) grandparent;
             799          (III) parent;
             800          (IV) sibling;
             801          (V) child;
             802          (VI) grandchild;


             803          (VII) nephew; or
             804          (VIII) niece;
             805          (B) a spouse of any person provided in Subsection (5)(a)(ii)(A)(II) through (VIII); or
             806          (C) an individual who is similar to those listed in Subsections (5)(a)(ii)(A) or (B) as
             807      defined by rules of the commission; and
             808          (iii) "nonimmediate family" means a person who is not a member of the employer's
             809      immediate family.
             810          (b) For purposes of this chapter and Chapter 3, Utah Occupational Disease Act, an
             811      agricultural employer is not considered an employer of a member of the employer's immediate
             812      family.
             813          (c) For purposes of this chapter and Chapter 3, Utah Occupational Disease Act, an
             814      agricultural employer is not considered an employer of a nonimmediate family employee if:
             815          (i) for the previous calendar year the agricultural employer's total annual payroll for all
             816      nonimmediate family employees was less than $8,000; or
             817          (ii) (A) for the previous calendar year the agricultural employer's total annual payroll
             818      for all nonimmediate family employees was equal to or greater than $8,000 but less than
             819      $50,000; and
             820          (B) the agricultural employer maintains insurance that covers job-related injuries of the
             821      employer's nonimmediate family employees in at least the following amounts:
             822          (I) $300,000 liability insurance, as defined in Section 31A-1-301 ; and
             823          (II) $5,000 for health care benefits similar to benefits under health care insurance as
             824      defined in Section 31A-1-301 .
             825          (d) For purposes of this chapter and Chapter 3, Utah Occupational Disease Act, an
             826      agricultural employer is considered an employer of a nonimmediate family employee if:
             827          (i) for the previous calendar year the agricultural employer's total annual payroll for all
             828      nonimmediate family employees is equal to or greater than $50,000; or
             829          (ii) (A) for the previous year the agricultural employer's total payroll for nonimmediate
             830      family employees was equal to or exceeds $8,000 but is less than $50,000; and
             831          (B) the agricultural employer fails to maintain the insurance required under Subsection
             832      (5)(c)(ii)(B).
             833          (6) An employer of agricultural laborers or domestic servants who is not considered an


             834      employer under this chapter and Chapter 3, Utah Occupational Disease Act, may come under
             835      this chapter and Chapter 3, Utah Occupational Disease Act, by complying with:
             836          (a) this chapter and Chapter 3, Utah Occupational Disease Act; and
             837          (b) the rules of the commission.
             838          (7) (a) If any person who is an employer procures any work to be done wholly or in
             839      part for the employer by a contractor over whose work the employer retains supervision or
             840      control, and this work is a part or process in the trade or business of the employer, the
             841      contractor, all persons employed by the contractor, all subcontractors under the contractor, and
             842      all persons employed by any of these subcontractors, are considered employees of the original
             843      employer for the purposes of this chapter and Chapter 3, Utah Occupational Disease Act.
             844          (b) Any person who is engaged in constructing, improving, repairing, or remodelling a
             845      residence that the person owns or is in the process of acquiring as the person's personal
             846      residence may not be considered an employee or employer solely by operation of Subsection
             847      (7)(a).
             848          (c) A partner in a partnership or an owner of a sole proprietorship is not considered an
             849      employee under Subsection (7)(a) if the employer who procures work to be done by the
             850      partnership or sole proprietorship obtains and relies on either:
             851          (i) a valid certification of the partnership's or sole proprietorship's compliance with
             852      Section 34A-2-201 indicating that the partnership or sole proprietorship secured the payment of
             853      workers' compensation benefits pursuant to Section 34A-2-201 ; or
             854          (ii) if a partnership or sole proprietorship with no employees other than a partner of the
             855      partnership or owner of the sole proprietorship, a workers' compensation policy issued by an
             856      insurer pursuant to Subsection 31A-21-104 (8) stating that:
             857          (A) the partnership or sole proprietorship is customarily engaged in an independently
             858      established trade, occupation, profession, or business; and
             859          (B) the partner or owner personally waives the partner's or owner's entitlement to the
             860      benefits of this chapter and Chapter 3, Utah Occupational Disease Act, in the operation of the
             861      partnership or sole proprietorship.
             862          (d) A director or officer of a corporation is not considered an employee under
             863      Subsection (7)(a) if the director or officer is excluded from coverage under Subsection
             864      34A-2-104 (4).


             865          (e) A contractor or subcontractor is not an employee of the employer under Subsection
             866      (7)(a), if the employer who procures work to be done by the contractor or subcontractor obtains
             867      and relies on either:
             868          (i) a valid certification of the contractor's or subcontractor's compliance with Section
             869      34A-2-201 ; or
             870          (ii) if a partnership, corporation, or sole proprietorship with no employees other than a
             871      partner of the partnership, officer of the corporation, or owner of the sole proprietorship, a
             872      workers' compensation policy issued by an insurer pursuant to Subsection 31A-21-104 (8)
             873      stating that:
             874          (A) the partnership, corporation, or sole proprietorship is customarily engaged in an
             875      independently established trade, occupation, profession, or business; and
             876          (B) the partner, corporate officer, or owner personally waives the partner's, corporate
             877      officer's, or owner's entitlement to the benefits of this chapter and Chapter 3, Utah
             878      Occupational Disease Act, in the operation of the partnership's, corporation's, or sole
             879      proprietorship's enterprise under a contract of hire for services.
             880          (f) (i) For purposes of this Subsection (7)(f), "eligible employer" means a person who:
             881          (A) is an employer; and
             882          (B) procures work to be done wholly or in part for the employer by a contractor,
             883      including:
             884          (I) all persons employed by the contractor;
             885          (II) all subcontractors under the contractor; and
             886          (III) all persons employed by any of these subcontractors.
             887          (ii) Notwithstanding the other provisions in this Subsection (7), if the conditions of
             888      Subsection (7)(f)(iii) are met, an eligible employer is considered an employer for purposes of
             889      Section 34A-2-105 of the contractor, subcontractor, and all persons employed by the contractor
             890      or subcontractor described in Subsection (7)(f)(i)(B).
             891          (iii) Subsection (7)(f)(ii) applies if the eligible employer:
             892          (A) under Subsection (7)(a) is liable for and pays workers' compensation benefits as an
             893      original employer under Subsection (7)(a) because the contractor or subcontractor fails to
             894      comply with Section 34A-2-201 ;
             895          (B) (I) secures the payment of workers' compensation benefits for the contractor or


             896      subcontractor pursuant to Section 34A-2-201 ;
             897          (II) procures work to be done that is part or process of the trade or business of the
             898      eligible employer; and
             899          (III) does the following with regard to a written workplace accident and injury
             900      reduction program that meets the requirements of Subsection 34A-2-111 (3)(d):
             901          (Aa) adopts the workplace accident and injury reduction program;
             902          (Bb) posts the workplace accident and injury reduction program at the work site at
             903      which the eligible employer procures work; and
             904          (Cc) enforces the workplace accident and injury reduction program according to the
             905      terms of the workplace accident and injury reduction program; or
             906          (C) (I) obtains and relies on:
             907          (Aa) a valid certification described in Subsection (7)(c)(i) or (7)(e)(i);
             908          (Bb) a workers' compensation policy described in Subsection (7)(c)(ii) or (7)(e)(ii); or
             909          (Cc) proof that a director or officer is excluded from coverage under Subsection
             910      34A-2-104 (4);
             911          (II) is liable under Subsection (7)(a) for the payment of workers' compensation benefits
             912      if the contractor or subcontractor fails to comply with Section 34A-2-201 ;
             913          (III) procures work to be done that is part or process in the trade or business of the
             914      eligible employer; and
             915          (IV) does the following with regard to a written workplace accident and injury
             916      reduction program that meets the requirements of Subsection 34A-2-111 (3)(d):
             917          (Aa) adopts the workplace accident and injury reduction program;
             918          (Bb) posts the workplace accident and injury reduction program at the work site at
             919      which the eligible employer procures work; and
             920          (Cc) enforces the workplace accident and injury reduction program according to the
             921      terms of the workplace accident and injury reduction program.
             922          Section 28. Section 34A-2-107 is amended to read:
             923           34A-2-107. Workers' compensation advisory council.
             924          (1) The commissioner shall appoint a workers' compensation advisory council
             925      composed of:
             926          (a) the following voting members:


             927          (i) five employer representatives; and
             928          (ii) five employee representatives; and
             929          (b) the following nonvoting members:
             930          [(i) a representative of the Workers' Compensation Fund;]
             931          [(ii)] (i) a representative of [a] two private insurance [carrier] carriers;
             932          [(iii)] (ii) a representative of health care providers;
             933          [(iv)] (iii) the Utah insurance commissioner or the insurance commissioner's designee;
             934      and
             935          [(v)] (iv) the commissioner or the commissioner's designee.
             936          (2) Employers and employees shall consider nominating members of groups who
             937      historically may have been excluded from the council, such as women, minorities, and
             938      individuals with disabilities.
             939          (3) (a) Except as required by Subsection (3)(b), as terms of current council members
             940      expire, the commissioner shall appoint each new member or reappointed member to a two-year
             941      term beginning July 1 and ending June 30.
             942          (b) Notwithstanding the requirements of Subsection (3)(a), the commissioner shall, at
             943      the time of appointment or reappointment, adjust the length of terms to ensure that the terms of
             944      council members are staggered so that approximately half of the council is appointed every two
             945      years.
             946          (4) (a) When a vacancy occurs in the membership for any reason, the replacement shall
             947      be appointed for the unexpired term.
             948          (b) The commissioner shall terminate the term of any council member who ceases to be
             949      representative as designated by the member's original appointment.
             950          (5) The council shall confer at least quarterly for the purpose of advising the
             951      commission, the division, and the Legislature on:
             952          (a) the Utah workers' compensation and occupational disease laws;
             953          (b) the administration of the laws described in Subsection (5)(a); and
             954          (c) rules related to the laws described in Subsection (5)(a).
             955          (6) Regarding workers' compensation, rehabilitation, and reemployment of employees
             956      who are disabled because of an industrial injury or occupational disease the council shall:
             957          (a) offer advice on issues requested by:


             958          (i) the commission;
             959          (ii) the division; and
             960          (iii) the Legislature; and
             961          (b) make recommendations to:
             962          (i) the commission; and
             963          (ii) the division.
             964          (7) The commissioner or the commissioner's designee shall serve as the chair of the
             965      council and call the necessary meetings.
             966          (8) The commission shall provide staff support to the council.
             967          (9) (a) (i) [Members who are not government employees] A member of the council
             968      who is not a government employee may not receive compensation or benefits for [their] the
             969      member's services, but may receive per diem and expenses incurred in the performance of the
             970      member's official duties at the rates established by the Division of Finance under Sections
             971      63A-3-106 and 63A-3-107 .
             972          (ii) [Members] A member of the council who is not a government employee may
             973      decline to receive per diem and expenses for [their] the member's service.
             974          (b) (i) [State] A state government officer [and] or employee [members] member who
             975      [do] does not receive salary, per diem, or expenses from [their] the state government officer's
             976      or employee's agency for [their] the member's service may receive per diem and expenses
             977      incurred in the performance of [their] the member's official duties from the council at the rates
             978      established by the Division of Finance under Sections 63A-3-106 and 63A-3-107 .
             979          (ii) [State] A state government officer [and] or employee [members] member may
             980      decline to receive per diem and expenses for [their] the member's service.
             981          Section 29. Section 34A-2-201 is amended to read:
             982           34A-2-201. Employers to secure workers' compensation benefits for employees.
             983          An employer shall secure the payment of workers' compensation benefits for its
             984      employees by:
             985          [(1) insuring, and keeping insured, the payment of this compensation with the Workers'
             986      Compensation Fund;]
             987          [(2)] (1) insuring, and keeping insured, the payment of this compensation with any
             988      [stock corporation or mutual association] insurer authorized to transact the business of workers'


             989      compensation insurance in this state; or
             990          [(3)] (2) obtaining approval from the division in accordance with Section 34A-2-201.5
             991      to pay direct compensation as a self-insured employer in the amount, in the manner, and when
             992      due as provided for in this chapter or Chapter 3, Utah Occupational Disease Act.
             993          Section 30. Section 34A-2-203 is amended to read:
             994           34A-2-203. Payment of premiums for workers' compensation.
             995          [(1) Until June 30, 2007, a department, commission, board, or other agency of the state
             996      shall pay the insurance premium on its employees direct to the Workers' Compensation Fund.]
             997          [(2)] (1) Beginning July 1, 2007, the state shall secure the payment of workers'
             998      compensation benefits for its employees:
             999          (a) by:
             1000          [(i) insuring, and keeping insured, the payment of this compensation with the Workers'
             1001      Compensation Fund;]
             1002          [(ii)] (i) insuring, and keeping insured, the payment of this compensation with [any
             1003      stock corporation or mutual association] an insurer authorized to transact the business of
             1004      workers' compensation insurance in this state; or
             1005          [(iii)] (ii) paying direct compensation as a self-insured employer in the amount, in the
             1006      manner, and when due as provided for in this chapter or Chapter 3, Utah Occupational Disease
             1007      Act;
             1008          (b) in accordance with Title 63A, Chapter 4, Risk Management; and
             1009          (c) subject to Subsection [(3)] (2).
             1010          [(3)] (2) (a) If the state determines to secure the payment of workers' compensation
             1011      benefits for its employees by paying direct compensation as a self-insured employer in the
             1012      amount, in the manner, and due as provided for in this chapter or Chapter 3, Utah Occupational
             1013      Disease Act, the state is:
             1014          (i) exempt from Section 34A-2-202.5 and Subsection 34A-2-704 (14); and
             1015          (ii) required to pay a premium assessment as provided in Section 34A-2-202 .
             1016          (b) If the state chooses to pay workers' compensation benefits for its employees
             1017      through insuring under Subsection [(2)(a)(i) or (ii)] (1)(a)(i), the state shall obtain that
             1018      insurance in accordance with Title 63, Chapter 56, Utah Procurement Code.
             1019          Section 31. Section 34A-2-209 is amended to read:


             1020           34A-2-209. Employer's penalty for violation -- Notice of noncompliance -- Proof
             1021      required -- Admissible evidence -- Criminal prosecution.
             1022          (1) (a) (i) Any employer who fails to comply, and every officer of a corporation or
             1023      association that fails to comply, with Section 34A-2-201 is guilty of a class B misdemeanor.
             1024          (ii) Each day's failure to comply with Subsection (1)(a)(i) is a separate offense.
             1025          (b) All funds, fines, or penalties collected or assessed under Subsection (1)(a) shall be
             1026      deposited in the Uninsured Employers' Fund created by Section 34A-2-704 and used for the
             1027      purposes of that fund.
             1028          (c) If the division sends written notice of noncompliance by certified mail to the
             1029      last-known address of the employer, corporation, or officers of a corporation or association,
             1030      and the employer, corporation, or officers do not within ten days provide to the division proof
             1031      of compliance, the notice and failure to provide proof constitutes prima facie evidence that the
             1032      employer, corporation, or officers are in violation of this section.
             1033          (2) (a) (i) If the division has reason to believe that an employer is conducting business
             1034      without securing the payment of compensation [in one of the three ways] as provided in
             1035      Section 34A-2-201 , the division may give the employer, or in the case of an employer
             1036      corporation, the corporation or the officers of the corporation, notice of noncompliance by
             1037      certified mail to the last-known address of the employer, corporation, or officers, and if the
             1038      employer, corporation, or officers do not, within ten days, provide to the division proof of
             1039      compliance, the employer and every officer of an employer corporation is guilty of a class B
             1040      misdemeanor.
             1041          (ii) Each day's failure to comply with Subsection (2)(a)(i) is a separate offense.
             1042          (b) All funds, fines, or penalties collected or assessed under Subsection (2)(a) shall be
             1043      deposited in the Uninsured Employers' Fund created by Section 34A-2-704 and used for the
             1044      purposes of that fund.
             1045          (3) All forms and records kept by the division or its designee pursuant to Section
             1046      34A-2-205 are admissible as evidence to establish noncompliance under this section.
             1047          (4) The commission or division on behalf of the commission is authorized to prosecute
             1048      or request the attorney general or district attorney to prosecute a criminal action in the name of
             1049      the state to enforce the provisions of this chapter or Chapter 3, Utah Occupational Disease Act.
             1050          Section 32. Section 34A-2-210 is amended to read:


             1051           34A-2-210. Power to bring suit for noncompliance.
             1052          (1) (a) The commission or the division on behalf of the commission may maintain a
             1053      suit in any court of the state to enjoin any employer, within this chapter or Chapter 3, Utah
             1054      Occupational Disease Act, from further operation of the employer's business, when the
             1055      employer fails to provide for the payment of benefits [in one of the three ways] as provided in
             1056      Section 34A-2-201 .
             1057          (b) Upon a showing of failure to provide for the payment of benefits, the court shall
             1058      enjoin the further operation of the employer's business until the payment of these benefits has
             1059      been secured by the employer as required by Section 34A-2-201 . The court may enjoin the
             1060      employer without requiring bond from the commission or division.
             1061          (2) If the division has reason to believe that an employer is conducting a business
             1062      without securing the payment of compensation [in one of the three ways] as provided in
             1063      Section 34A-2-201 , the division may give the employer five days written notice by registered
             1064      mail of the noncompliance and if the employer within the five days written notice does not
             1065      remedy the default:
             1066          (a) the commission or the division on behalf of the commission may file suit under
             1067      Subsection (1); and
             1068          (b) the court may, ex parte, issue without bond a temporary injunction restraining the
             1069      further operation of the employer's business.
             1070          Section 33. Section 34A-2-211 is amended to read:
             1071           34A-2-211. Noncompliance by employer.
             1072          (1) (a) In addition to the remedies specified in Section 34A-2-210 , if the division has
             1073      reason to believe that an employer is conducting business without securing the payment of
             1074      benefits [in one of the three ways provided in] as required under Section 34A-2-201 , the
             1075      division may give that employer written notice of the noncompliance by certified mail to the
             1076      last-known address of the employer.
             1077          (b) If the employer does not remedy the default within 15 days after [delivery of] the
             1078      day on which the notice is delivered, the division may issue an order requiring the employer to
             1079      appear before the division and show cause why the employer should not be ordered to comply
             1080      with Section 34A-2-201 .
             1081          (c) If it is found that the employer [has] failed to provide for the payment of benefits


             1082      [in one of the three ways provided in] in accordance with Section 34A-2-201 , the division may
             1083      require any employer to comply with Section 34A-2-201 .
             1084          (2) (a) Notwithstanding Subsection (1), the division may impose a penalty against the
             1085      employer under this Subsection (2):
             1086          (i) subject to the notice and other requirements of Title 63, Chapter 46b,
             1087      Administrative Procedures Act; and
             1088          (ii) if the division believes that an employer of one or more employees is conducting
             1089      business without securing the payment of benefits [in one of the three ways provided in] in
             1090      accordance with Section 34A-2-201 .
             1091          (b) The penalty imposed under Subsection (2)(a) shall be the greater of:
             1092          (i) $1,000; or
             1093          (ii) three times the amount of the premium the employer would have paid for workers'
             1094      compensation insurance based on the rate filing [of the Workers' Compensation Fund]
             1095      designated by the commissioner of a servicing carrier under Title 31A, Chapter 40, Workers'
             1096      Compensation Insurance Regulation, during the period of noncompliance.
             1097          (c) For purposes of Subsection (2)(b)(ii), the premium is calculated by applying rates
             1098      and rate multipliers to the payroll basis under Subsection (2)(d), using the highest rated
             1099      employee class code applicable to the employer's operations.
             1100          (d) The payroll basis for the purpose of calculating the premium penalty shall be 150%
             1101      of the state's average weekly wage multiplied by the highest number of workers employed by
             1102      the employer during the period of the employer's noncompliance multiplied by the number of
             1103      weeks of the employer's noncompliance up to a maximum of 156 weeks.
             1104          (3) The penalty imposed under Subsection (2) shall be deposited in the Uninsured
             1105      Employers' Fund created by Section 34A-2-704 and used for the purposes of that fund.
             1106          (4) (a) An employer who disputes the determination, imposition, or amount of a
             1107      penalty imposed under Subsection (2) shall request a hearing before an administrative law
             1108      judge within 30 days of:
             1109          (i) the date [of issuance of] on which the administrative action imposing the penalty is
             1110      issued; or
             1111          (ii) the administrative action becomes a final order of the commission.
             1112          (b) The employer's request for a hearing under Subsection (4)(a) shall specify the facts


             1113      and grounds that are the basis of the employer's objection to the determination, imposition, or
             1114      amount of the penalty.
             1115          (c) An administrative law judge's decision under this Subsection (4) may be reviewed
             1116      pursuant to Part 8, Adjudication.
             1117          (5) (a) After a penalty has been issued and becomes a final order of the commission,
             1118      the division on behalf of the commission may file an abstract for any uncollected penalty in the
             1119      district court.
             1120          (b) The abstract filed under Subsection (5)(a) shall state:
             1121          (i) the amount of the uncollected penalty;
             1122          (ii) reasonable [attorneys'] attorney fees;
             1123          (iii) costs of collection; and
             1124          (iv) court costs.
             1125          (c) The filed abstract shall have the effect of a judgment of that court.
             1126          (6) Any administrative action issued by the division under this section shall:
             1127          (a) be in writing;
             1128          (b) be sent by certified mail to the last-known address of the employer;
             1129          (c) state the findings and administrative action of the division; and
             1130          (d) specify its effective date, which may be immediate or may be at a later date.
             1131          (7) The final order of the commission under this section, upon application by the
             1132      division on behalf of the commission made on or after the effective date of the order to a court
             1133      of general jurisdiction in any county in this state, may be enforced by an order to comply
             1134      entered ex parte and without notice by the court.
             1135          Section 34. Section 34A-2-406 is amended to read:
             1136           34A-2-406. Exemptions from chapter for employees temporarily in state.
             1137          (1) Any employee who has been hired in another state and the employee's employer are
             1138      exempt from this chapter and Chapter 3, Utah Occupational Disease Act, while the employee is
             1139      temporarily within this state doing work for the employee's employer if:
             1140          (a) the employer has furnished workers' compensation insurance coverage under the
             1141      workers' compensation or similar laws of the other state;
             1142          (b) the coverage covers the employee's employment while in this state; and
             1143          (c) [(i)] the extraterritorial provisions of this chapter and Chapter 3 are recognized in


             1144      the other state and employers and employees who are covered in this state are likewise
             1145      exempted from the application of the workers' compensation or similar laws of the other state[;
             1146      or].
             1147          [(ii) the Workers' Compensation Fund:]
             1148          [(A) is an admitted insurance carrier in the other state; or]
             1149          [(B) has agreements with a carrier and is able to furnish workers' compensation
             1150      insurance or similar coverage to Utah employers and their subsidiaries or affiliates doing
             1151      business in the other state.]
             1152          (2) The benefits under the workers' compensation or similar laws of the other state are
             1153      the exclusive remedy against an employer for any injury, whether resulting in death or not,
             1154      received by an employee while working for the employer in this state.
             1155          (3) A certificate from an authorized officer of the industrial commission or similar
             1156      department of the other state certifying that the employer is insured in the other state and has
             1157      provided extraterritorial coverage insuring the employer's employees while working in this
             1158      state is prima facie evidence that the employer carries compensation insurance.
             1159          Section 35. Section 51-7-2 is amended to read:
             1160           51-7-2. Exemptions from chapter.
             1161          The following funds are exempt from this chapter:
             1162          (1) funds invested in accordance with the participating employees' designation or
             1163      direction pursuant to a public employees' deferred compensation plan established and operated
             1164      in compliance with Section 457 of the Internal Revenue Code of 1986, as amended;
             1165          [(2) funds of the Workers' Compensation Fund;]
             1166          [(3)] (2) funds of the Utah State Retirement Board;
             1167          [(4)] (3) funds of the Utah Housing Corporation;
             1168          [(5)] (4) endowment funds of higher education institutions; and
             1169          [(6)] (5) permanent and other land grant trust funds established pursuant to the Utah
             1170      Enabling Act and the Utah Constitution.
             1171          Section 36. Section 51-7-4 is amended to read:
             1172           51-7-4. Transfer of functions, powers, and duties relating to public funds to state
             1173      treasurer -- Exceptions -- Deposit of income from investment of state money.
             1174          (1) Unless otherwise required by the Utah Constitution or applicable federal law, the


             1175      functions, powers, and duties vested by law in each and every state officer, board, commission,
             1176      institution, department, division, agency, and other similar instrumentalities relating to the
             1177      deposit, investment, or reinvestment of public funds, and the purchase, sale, or exchange of any
             1178      investments or securities of or for any funds or accounts under the control and management of
             1179      these instrumentalities, are transferred to and shall be exercised by the state treasurer, except:
             1180          (a) funds assigned to the Utah State Retirement Board for investment under Section
             1181      49-11-302 ;
             1182          (b) funds of member institutions of the state system of higher education:
             1183          (i) acquired by gift, devise, or bequest, or by federal or private contract or grant;
             1184          (ii) derived from student fees or from income from operations of auxiliary enterprises,
             1185      which fees and income are pledged or otherwise dedicated to the payment of interest and
             1186      principal of bonds issued by such institutions; and
             1187          (iii) any other funds which are not included in the institution's work program as
             1188      approved by the State Board of Regents;
             1189          (c) inmate funds as provided in Section 64-13-23 or in Title 64, Chapter 9b, Work
             1190      Programs for Prisoners;
             1191          (d) trust funds established by judicial order;
             1192          [(e) funds of the Workers' Compensation Fund;]
             1193          [(f)] (e) funds of the Utah Housing Corporation; and
             1194          [(g)] (f) endowment funds of higher education institutions.
             1195          (2) All public funds held or administered by the state or any of its boards,
             1196      commissions, institutions, departments, divisions, agencies, or similar instrumentalities and not
             1197      transferred to the state treasurer as provided by this section shall be:
             1198          (a) deposited and invested by the custodian in accordance with this chapter, unless
             1199      otherwise required by statute or by applicable federal law; and
             1200          (b) reported to the state treasurer in a form prescribed by the state treasurer.
             1201          (3) Unless otherwise provided by the constitution or laws of this state or by contractual
             1202      obligation, the income derived from the investment of state money by the state treasurer shall
             1203      be deposited in and become part of the General Fund.
             1204          Section 37. Section 58-59-306 is amended to read:
             1205           58-59-306. Financial requirements, contractual relations, and allocation of rights,


             1206      duties, and obligations.
             1207          (1) Nothing contained in this chapter or in any professional employer agreement shall
             1208      affect, modify, or amend any collective bargaining agreement, or the rights or obligations of
             1209      any client, PEO, or covered employee under the federal National Labor Relations Act, the
             1210      federal Railway Labor Act, or similar state law.
             1211          (2) Nothing contained in this chapter or any professional employer agreement shall
             1212      affect, modify, or amend any state, local, or federal licensing, registration, or certification
             1213      requirement applicable to any client or covered employee.
             1214          (a) A covered employee who must be licensed, registered, or certified according to law
             1215      or regulation is considered solely an employee of the client for purposes of license, registration,
             1216      or certification requirement.
             1217          (b) A PEO may not be considered to engage in any occupation, trade, profession, or
             1218      other activity that is subject to licensing, registration, or certification requirements, or is
             1219      otherwise regulated by a governmental entity solely by entering into and maintaining a
             1220      coemployment relationship with a covered employee who is subject to the requirements or
             1221      regulation.
             1222          (c) Unless otherwise expressly agreed to by the client in the professional employer
             1223      agreement, a client has the sole right to direct and control the professional or licensed activities
             1224      of covered employees and of the client's business.
             1225          (3) With respect to a bid, contract, purchase order, or agreement entered into with the
             1226      state or a political subdivision of the state, a client company's status or certification as a small,
             1227      minority-owned, disadvantaged, or woman-owned business enterprise or as a historically
             1228      underutilized business is not affected because the client company has entered into an agreement
             1229      with a registrant or uses the services of a registrant.
             1230          (4) (a) At least quarterly, a PEO shall have an independent certified public accountant,
             1231      licensed to practice in the jurisdiction in which the PEO is domiciled, review the PEO's records
             1232      and prepare a statement indicating whether all federal, state, and local withholding taxes,
             1233      unemployment taxes, FICA taxes, workers' compensation premiums, and employee benefit
             1234      plan premiums have been paid.
             1235          (b) The PEO must provide the statement to a client upon request from the client.
             1236          (5) (a) Except as specifically provided in this chapter, the coemployment relationship


             1237      between the client and the PEO, and between each coemployer and each covered employee,
             1238      shall be governed by the professional employer agreement.
             1239          (b) Nothing contained in any professional employer agreement or this chapter shall be
             1240      considered to:
             1241          (i) diminish, abolish, or remove the rights of covered employees as to clients or
             1242      obligations of the client as to a covered employee, existing prior to the effective date of a
             1243      professional employer agreement;
             1244          (ii) terminate an employment relationship existing prior to the effective date of a
             1245      professional employer agreement; or
             1246          (iii) create any new or additional enforceable right of a covered employee against a
             1247      PEO not specifically allocated to the PEO in the professional employer agreement or this
             1248      chapter.
             1249          (c) Each professional employer agreement shall include the following:
             1250          (i) (A) the PEO shall reserve a right of direction and control over the covered
             1251      employees; and
             1252          (B) the client may retain the right to exercise the direction and control over covered
             1253      employees as is necessary to conduct the client's business, to discharge any fiduciary
             1254      responsibility which it may have, or to comply with any applicable licensure requirements;
             1255          (ii) the PEO shall have responsibility to:
             1256          (A) pay agreed upon wages and salaries to covered employees;
             1257          (B) withhold, collect, report, and remit payroll-related and unemployment taxes; and
             1258          (C) the extent the PEO has assumed responsibility in the professional employer
             1259      agreement, to make payments for employee benefits for covered employees;
             1260          (iii) the PEO and the client shall both have a right to hire, terminate, and discipline the
             1261      covered employees; and
             1262          (iv) the responsibility to obtain workers' compensation coverage for covered
             1263      employees, from a carrier licensed to do business in Utah and otherwise in compliance with all
             1264      applicable requirements, shall be specifically allocated to the client in the professional
             1265      employer agreement.
             1266          (d) Except as specifically provided in this chapter or in the professional employer
             1267      agreement, in each coemployment relationship:


             1268          (i) the client may exercise all rights and is obligated to perform all duties and
             1269      responsibilities otherwise applicable to an employer in an employment relationship;
             1270          (ii) (A) the PEO may exercise only those rights, and is obligated to perform only those
             1271      duties and responsibilities, specifically required by this chapter or set forth in the professional
             1272      employer agreement; and
             1273          (B) the rights, duties, and obligations of the PEO as coemployer with respect to any
             1274      covered employee is limited to those arising under the professional employer agreement and
             1275      this chapter during the term of coemployment by the PEO of the covered employee; and
             1276          (iii) unless otherwise expressly agreed by the PEO and the client in a professional
             1277      employer agreement, the client retains the exclusive right to direct and control the covered
             1278      employees as is necessary to conduct the client's business, to discharge any of the client's
             1279      fiduciary responsibilities, or to comply with any licensure requirements applicable to the client
             1280      or to the covered employees.
             1281          (e) With respect to each professional employer agreement entered into by a PEO, the
             1282      PEO shall provide written notice to each covered employee affected by the agreement of the
             1283      general nature of the coemployment relationship between and among the PEO, the client, and
             1284      the covered employee.
             1285          (f) (i) Except to the extent otherwise expressly provided by the applicable professional
             1286      employer agreement:
             1287          (A) a client is solely responsible for the quality, adequacy, or safety of the goods or
             1288      services produced or sold in the client's business;
             1289          (B) a client is solely responsible for directing, supervising, training, and controlling the
             1290      work of the covered employees with respect to the business activities of the client and solely
             1291      responsible for the acts, errors, or omissions of the covered employees with regard to those
             1292      activities; and
             1293          (C) a client is not liable for the acts, errors, or omissions of a PEO, or of any covered
             1294      employee of the client and a PEO when the covered employee is acting under the express
             1295      direction and control of the PEO.
             1296          (ii) Nothing in this Subsection (5)(f) shall serve to limit any contractual liability or
             1297      obligation specifically provided in a professional employer agreement, nor shall this Subsection
             1298      (5)(f) in any way limit the liabilities and obligations of any PEO or client as defined elsewhere


             1299      in this chapter.
             1300          (iii) A covered employee is not, solely as the result of being a covered employee of a
             1301      PEO, an employee of the PEO for purposes of general liability insurance, fidelity bonds, surety
             1302      bonds, employer's liability which is not covered by workers' compensation, or liquor liability
             1303      insurance carried by the PEO, unless the covered employee is included by specific reference in
             1304      the professional employer agreement and applicable prearranged employment contract,
             1305      insurance contract, or bond.
             1306          (g) A registrant under this chapter is not engaged in the sale of insurance by offering,
             1307      marketing, selling, administering, or providing PEO services or employee benefit plans for
             1308      covered employees.
             1309          (h) (i) (A) Covered employees whose services are subject to sales tax are considered
             1310      the employees of the client for purposes of collecting and levying sales tax on the services
             1311      performed by the covered employees.
             1312          (B) Nothing contained in this chapter shall relieve a client of any sales tax liability with
             1313      respect to its goods or services.
             1314          (ii) No portion of a PEO fee to a client that represents pass-through amounts to be paid
             1315      for covered employee wages, employment-related taxes, withholding, or benefits is subject to
             1316      any sales or excise tax.
             1317          (i) (i) A client and a PEO shall each be considered an employer for purposes of
             1318      sponsoring retirement and welfare benefit plans for its covered employees.
             1319          (ii) A fully insured welfare benefit plan offered to the covered employees of a single
             1320      PEO is considered a single employer welfare benefit plan and may not be considered a multiple
             1321      employer welfare arrangement, and is exempt from the licensing requirements contained in
             1322      Title 31A, Insurance Code.
             1323          (iii) PEOs are exempt from Title 31A, Chapter 30, Individual, Small, and Group
             1324      Employer Health Insurance Act.
             1325          (iv) (A) Any PEO offering workers' compensation coverage, a health benefit plan, or
             1326      any other insurance plan, must comply with all federal and state laws applicable to these
             1327      products.
             1328          (B) If the PEO chooses to use a third-party administrator for the receipt and payment of
             1329      health benefit claims, that third-party administrator must be licensed to do business in the state


             1330      under Title 31A, Insurance Code.
             1331          (C) Anything pertaining to the insurance products referred to in this section or the use
             1332      of an unlicensed third-party administrator is subject to administrative penalties and forfeitures
             1333      under Title 31A, Insurance Code.
             1334          (v) If a PEO offers to its covered employees any health benefit plan which is not fully
             1335      insured by an authorized insurer, the plan shall:
             1336          (A) utilize a third-party administrator licensed by the Utah State Insurance Department;
             1337      and
             1338          (B) hold all plan assets, including participant contributions, in a trust account.
             1339          (vi) If a PEO offers to its covered employees any health benefit plan which is not fully
             1340      insured by an authorized insurer, the PEO shall:
             1341          (A) represent that such plan is not fully insured; and
             1342          (B) deliver to each plan participant a summary plan description that accurately
             1343      describes the terms of the plan, including disclosure that the plan is self-funded or partially
             1344      self-funded.
             1345          (vii) (A) The Department of Insurance may audit on a random basis, or upon finding a
             1346      reasonable need, any health benefit plan which is not fully insured by an authorized insurer.
             1347          (B) The cost of the audit shall be borne by the PEO if there is material noncompliance.
             1348          (j) (i) The client in a coemployment relationship shall secure workers' compensation
             1349      benefits for the covered employees by complying with Subsection 34A-2-201 (1) [or (2)] and
             1350      commission rules under Subsection 34A-2-103 (3)(a).
             1351          (ii) Every authorized insurer who offers or provides Workers' Compensation Insurance
             1352      coverage to a PEO, its client companies, or both shall comply with Title 31A, Chapter 19a,
             1353      Utah Rate Regulation Act, and Chapter 21, Insurance Contracts in General, prior to the
             1354      issuance of an insurance policy.
             1355          (iii) The exclusive remedy provisions of Sections 34A-2-105 and 34A-3-102 apply to
             1356      both the client company and the PEO in a coemployer relationship under this section.
             1357          (k) (i) For purposes of Title 35A, Chapter 4, Employment Security Act, covered
             1358      employees of a registered PEO are considered the employees of the PEO, which shall be
             1359      responsible for the payment of contributions, penalties, and interest on wages paid by the PEO
             1360      to its covered employees during the term of the applicable professional employer agreement.


             1361          (ii) The PEO shall report and pay all required contributions to the unemployment
             1362      compensation fund using its state employer account number and the contribution rate of the
             1363      PEO.
             1364          (iii) On the termination of a contract between a PEO and a client or the failure by a
             1365      PEO to submit reports or make tax payments as required by this chapter, the client shall be
             1366      treated as a new employer without a previous experience record unless that client is otherwise
             1367      eligible for an experience rating.
             1368          Section 38. Section 59-9-101 is amended to read:
             1369           59-9-101. Tax basis -- Rates -- Exemptions -- Rate reductions.
             1370          (1) (a) Except as provided in Subsection (1)(b), (1)(d), or (5), every admitted insurer
             1371      shall pay to the commission on or before March 31 in each year, a tax of 2-1/4% of the total
             1372      premiums received by it during the preceding calendar year from insurance covering property
             1373      or risks located in this state.
             1374          (b) This Subsection (1) does not apply to:
             1375          (i) workers' compensation insurance, assessed under Subsection (2);
             1376          (ii) title insurance premiums taxed under Subsection (3);
             1377          (iii) annuity considerations;
             1378          (iv) insurance premiums paid by an institution within the state system of higher
             1379      education as specified in Section 53B-1-102 ; and
             1380          (v) ocean marine insurance.
             1381          (c) The taxable premium under this Subsection (1) shall be reduced by:
             1382          (i) all premiums returned or credited to policyholders on direct business subject to tax
             1383      in this state;
             1384          (ii) all premiums received for reinsurance of property or risks located in this state; and
             1385          (iii) the dividends, including premium reduction benefits maturing within the year:
             1386          (A) paid or credited to policyholders in this state; or
             1387          (B) applied in abatement or reduction of premiums due during the preceding calendar
             1388      year.
             1389          (d) (i) For purposes of this Subsection (1)(d):
             1390          (A) "Utah variable life insurance premium" means an insurance premium paid:
             1391          (I) by:


             1392          (Aa) a corporation; or
             1393          (Bb) a trust established or funded by a corporation; and
             1394          (II) for variable life insurance covering risks located within the state.
             1395          (B) "Variable life insurance" means an insurance policy that provides for life
             1396      insurance, the amount or duration of which varies according to the investment experience of
             1397      one or more separate accounts that are established and maintained by the insurer pursuant to
             1398      Title 31A, Insurance Code.
             1399          (ii) Notwithstanding Subsection (1)(a), beginning on January 1, 2006, the tax on that
             1400      portion of the total premiums subject to a tax under Subsection (1)(a) that is a Utah variable
             1401      life insurance premium shall be calculated as follows:
             1402          (A) 2-1/4% of the first $100,000 of Utah variable life insurance premiums:
             1403          (I) paid for each variable life insurance policy; and
             1404          (II) received by the admitted insurer in the preceding calendar year; and
             1405          (B) 0.08% of the Utah variable life insurance premiums that exceed $100,000:
             1406          (I) paid for the policy described in Subsection (1)(d)(ii)(A); and
             1407          (II) received by the admitted insurer in the preceding calendar year.
             1408          (iii) (A) On or before October 1, 2009, and every three years after October 1, 2009, the
             1409      Revenue and Taxation Interim Committee shall study the rate reduction contained in this
             1410      Subsection (1)(d).
             1411          (B) As part of the study required by Subsection (1)(d)(iii)(A) the Revenue and
             1412      Taxation Interim Committee shall:
             1413          (I) hear testimony from the commission and industry representatives;
             1414          (II) make recommendations concerning whether the rate reduction should be continued,
             1415      modified, or repealed; and
             1416          (III) make findings regarding:
             1417          (Aa) the cost of the rate reduction;
             1418          (Bb) the purpose and effectiveness of the rate reduction; and
             1419          (Cc) any benefits of the rate reduction to the state.
             1420          (2) (a) Every admitted insurer writing workers' compensation insurance in this state[,
             1421      including the Workers' Compensation Fund created under Title 31A, Chapter 33, Workers'
             1422      Compensation Fund,] shall pay to the tax commission, on or before March 31 in each year, a


             1423      premium assessment of between 1% and 8% of the total workers' compensation premium
             1424      income received by the insurer from workers' compensation insurance in this state during the
             1425      preceding calendar year.
             1426          (b) Total workers' compensation premium income means the net written premium as
             1427      calculated before any premium reduction for any insured employer's deductible, retention, or
             1428      reimbursement amounts and also those amounts equivalent to premiums as provided in Section
             1429      34A-2-202 .
             1430          (c) The percentage of premium assessment applicable for a calendar year shall be
             1431      determined by the Labor Commission under Subsection (2)(d). The total premium income
             1432      shall be reduced in the same manner as provided in Subsections (1)(c)(i) and (1)(c)(ii), but not
             1433      as provided in Subsection (1)(c)(iii). The tax commission shall promptly remit from the
             1434      premium assessment collected under Subsection (2):
             1435          (i) an amount of up to 7.25% of the premium income to the state treasurer for credit to
             1436      the Employers' Reinsurance Fund created under Subsection 34A-2-702 (1);
             1437          (ii) an amount equal to 0.25% of the premium income to the state treasurer for credit to
             1438      the restricted account in the General Fund, created by Section 34A-2-701 ; and
             1439          (iii) an amount of up to 0.50% and any remaining assessed percentage of the premium
             1440      income to the state treasurer for credit to the Uninsured Employers' Fund created under Section
             1441      34A-2-704 .
             1442          (d) (i) The Labor Commission shall determine the amount of the premium assessment
             1443      for each year on or before each October 15 of the preceding year. The Labor Commission shall
             1444      make this determination following a public hearing. The determination shall be based upon the
             1445      recommendations of a qualified actuary.
             1446          (ii) The actuary shall recommend a premium assessment rate sufficient to provide
             1447      payments of benefits and expenses from the Employers' Reinsurance Fund and to project a
             1448      funded condition with assets greater than liabilities by no later than June 30, 2025.
             1449          (iii) The actuary shall recommend a premium assessment rate sufficient to provide
             1450      payments of benefits and expenses from the Uninsured Employers' Fund and to maintain it at a
             1451      funded condition with assets equal to or greater than liabilities.
             1452          (iv) At the end of each fiscal year the minimum approximate assets in the Employers'
             1453      Reinsurance Fund shall be $5,000,000 which amount shall be adjusted each year beginning in


             1454      1990 by multiplying by the ratio that the total workers' compensation premium income for the
             1455      preceding calendar year bears to the total workers' compensation premium income for the
             1456      calendar year 1988.
             1457          (v) The requirements of Subsection (2)(d)(iv) cease when the future annual
             1458      disbursements from the Employers' Reinsurance Fund are projected to be less than the
             1459      calculations of the corresponding future minimum required assets. The Labor Commission
             1460      shall, after a public hearing, determine if the future annual disbursements are less than the
             1461      corresponding future minimum required assets from projections provided by the actuary.
             1462          (vi) At the end of each fiscal year the minimum approximate assets in the Uninsured
             1463      Employers' Fund shall be $2,000,000, which amount shall be adjusted each year beginning in
             1464      1990 by multiplying by the ratio that the total workers' compensation premium income for the
             1465      preceding calendar year bears to the total workers' compensation premium income for the
             1466      calendar year 1988.
             1467          (e) A premium assessment that is to be transferred into the General Fund may be
             1468      collected on premiums received from Utah public agencies.
             1469          (3) Every admitted insurer writing title insurance in this state shall pay to the
             1470      commission, on or before March 31 in each year, a tax of .45% of the total premium received
             1471      by either the insurer or by its agents during the preceding calendar year from title insurance
             1472      concerning property located in this state. In calculating this tax, "premium" includes the
             1473      charges made to an insured under or to an applicant for a policy or contract of title insurance
             1474      for:
             1475          (a) the assumption by the title insurer of the risks assumed by the issuance of the policy
             1476      or contract of title insurance; and
             1477          (b) abstracting title, title searching, examining title, or determining the insurability of
             1478      title, and every other activity, exclusive of escrow, settlement, or closing charges, whether
             1479      denominated premium or otherwise, made by a title insurer, an agent of a title insurer, a title
             1480      insurance producer, or any of them.
             1481          (4) Beginning July 1, 1986, former county mutuals and former mutual benefit
             1482      associations shall pay the premium tax or assessment due under this chapter. All premiums
             1483      received after July 1, 1986, shall be considered in determining the tax or assessment.
             1484          (5) The following insurers are not subject to the premium tax on health care insurance


             1485      that would otherwise be applicable under Subsection (1):
             1486          (a) insurers licensed under Title 31A, Chapter 5, Domestic Stock and Mutual Insurance
             1487      Corporations;
             1488          (b) insurers licensed under Title 31A, Chapter 7, Nonprofit Health Service Insurance
             1489      Corporations;
             1490          (c) insurers licensed under Title 31A, Chapter 8, Health Maintenance Organizations
             1491      and Limited Health Plans;
             1492          (d) insurers licensed under Title 31A, Chapter 9, Insurance Fraternals;
             1493          (e) insurers licensed under Title 31A, Chapter 11, Motor Clubs;
             1494          (f) insurers licensed under Title 31A, Chapter 13, Employee Welfare Funds and Plans;
             1495      and
             1496          (g) insurers licensed under Title 31A, Chapter 14, Foreign Insurers.
             1497          (6) An insurer issuing multiple policies to an insured may not artificially allocate the
             1498      premiums among the policies for purposes of reducing the aggregate premium tax or
             1499      assessment applicable to the policies.
             1500          (7) The retaliatory provisions of Title 31A, Chapter 3, Department Funding, Fees, and
             1501      Taxes, apply to the tax or assessment imposed under this chapter.
             1502          Section 39. Section 63-5b-102 is amended to read:
             1503           63-5b-102. Definitions.
             1504          (1) (a) "Absent" means:
             1505          (i) not physically present or not able to be communicated with for 48 hours; or
             1506          (ii) for local government officers, as defined by local ordinances.
             1507          (b) "Absent" does not include a person who can be communicated with via telephone,
             1508      radio, or telecommunications.
             1509          (2) "Attack" means a nuclear, conventional, biological, or chemical warfare action
             1510      against the United States of America or this state.
             1511          (3) "Department" means the Department of Administrative Services, the Department of
             1512      Agriculture and Food, the Alcoholic Beverage Control Commission, the Department of
             1513      Commerce, the Department of Community and Culture, the Department of Corrections, the
             1514      Department of Environmental Quality, the Department of Financial Institutions, the
             1515      Department of Health, the Department of Human Resource Management, the Department of


             1516      Workforce Services, the Labor Commission, the National Guard, the Department of Insurance,
             1517      the Department of Natural Resources, the Department of Public Safety, the Public Service
             1518      Commission, the Department of Human Services, the State Tax Commission, the Department
             1519      of Technology Services, the Department of Transportation, any other major administrative
             1520      subdivisions of state government, the State Board of Education, the State Board of Regents, the
             1521      Utah Housing Corporation, [the Workers' Compensation Fund,] the State Retirement Board,
             1522      and each institution of higher education within the system of higher education.
             1523          (4) "Disaster" means a situation causing, or threatening to cause, widespread damage,
             1524      social disruption, or injury or loss of life or property resulting from attack, internal disturbance,
             1525      natural phenomenon, or technological hazard.
             1526          (5) "Division" means the Division of Emergency Services and Homeland Security
             1527      established in Title 53, Chapter 2, Part 1, Emergency Services and Homeland Security Act.
             1528          (6) "Emergency interim successor" means a person designated by this chapter to
             1529      exercise the powers and discharge the duties of an office when the person legally exercising the
             1530      powers and duties of the office is unavailable.
             1531          (7) "Executive director" means the person with ultimate responsibility for managing
             1532      and overseeing the operations of each department, however denominated.
             1533          (8) "Internal disturbance" means a riot, prison break, disruptive terrorism, or strike.
             1534          (9) "Natural phenomenon" means any earthquake, tornado, storm, flood, landslide,
             1535      avalanche, forest or range fire, drought, epidemic, or other catastrophic event.
             1536          (10) (a) "Office" includes all state and local offices, the powers and duties of which are
             1537      defined by constitution, statutes, charters, optional plans, ordinances, articles, or by-laws.
             1538          (b) "Office" does not include the office of governor or the legislative or judicial offices.
             1539          (11) "Place of governance" means the physical location where the powers of an office
             1540      are being exercised.
             1541          (12) "Political subdivision" includes counties, cities, towns, townships, districts,
             1542      authorities, and other public corporations and entities whether organized and existing under
             1543      charter or general law.
             1544          (13) "Political subdivision officer" means a person holding an office in a political
             1545      subdivision.
             1546          (14) "State officer" means the attorney general, the state treasurer, the state auditor, and


             1547      the executive director of each department.
             1548          (15) "Technological hazard" means any hazardous materials accident, mine accident,
             1549      train derailment, air crash, radiation incident, pollution, structural fire, or explosion.
             1550          (16) "Unavailable" means:
             1551          (a) absent from the place of governance during a disaster that seriously disrupts normal
             1552      governmental operations, whether or not that absence or inability would give rise to a vacancy
             1553      under existing constitutional or statutory provisions; or
             1554          (b) as otherwise defined by local ordinance.
             1555          Section 40. Section 63-38a-102 is amended to read:
             1556           63-38a-102. Definitions.
             1557          As used in this chapter:
             1558          (1) (a) "Agency" means each department, commission, board, council, agency,
             1559      institution, officer, corporation, fund, division, office, committee, authority, laboratory, library,
             1560      unit, bureau, panel, or other administrative unit of the state.
             1561          (b) "Agency" does not include the legislative branch, the board of regents, the Utah
             1562      Higher Education Assistance Authority, the board of trustees of each higher education
             1563      institution, each higher education institution and its associated branches, centers, divisions,
             1564      institutes, foundations, hospitals, colleges, schools, or departments, a public education entity,
             1565      or an independent agency.
             1566          (2) (a) "Dedicated credits revenues" means revenues from collections by an agency that
             1567      are deposited directly into an account for expenditure on a separate line item and program.
             1568          (b) "Dedicated credits" does not mean:
             1569          (i) federal revenues and the related pass through or the related state match paid by one
             1570      agency to another;
             1571          (ii) revenues that are not deposited in governmental funds;
             1572          (iii) revenues from any contracts; and
             1573          (iv) revenues received by the Attorney General's Office from billings for professional
             1574      services.
             1575          (3) "Fees" means revenue collected by an agency for performing a service or providing
             1576      a function that the agency deposits or accounts for as dedicated credits or fixed collections.
             1577          (4) (a) "Fixed collections revenues" means revenue from collections:


             1578          (i) fixed by law or by the appropriation act at a specific amount; and
             1579          (ii) required by law to be deposited into a separate line item and program.
             1580          (b) "Fixed collections" does not mean:
             1581          (i) federal revenues and the related pass through or the related state match paid by one
             1582      agency to another;
             1583          (ii) revenues that are not deposited in governmental funds;
             1584          (iii) revenues from any contracts; and
             1585          (iv) revenues received by the Attorney General's Office from billings for professional
             1586      services.
             1587          (5) (a) "Governmental fund" means funds used to account for the acquisition, use, and
             1588      balances of expendable financial resources and related liabilities using a measurement focus
             1589      that emphasizes the flow of financial resources.
             1590          (b) "Governmental fund" does not include internal service funds, enterprise funds,
             1591      capital projects funds, debt service funds, or trust and agency funds as established in Section
             1592      51-5-4 .
             1593          (6) "Independent agency" means the Utah State Retirement Office[,] and the Utah
             1594      Housing Corporation[, and the Workers' Compensation Fund].
             1595          (7) "Program" means the function or service provided by an agency for which the
             1596      agency collects fees.
             1597          (8) "Revenue types" means the categories established by the Division of Finance under
             1598      the authority of this chapter that classify revenue according to the purpose for which it is
             1599      collected.
             1600          Section 41. Section 63-55b-131 is amended to read:
             1601           63-55b-131. Repeal dates, Title 31A.
             1602          (1) Section 31A-23a-415 is repealed July 1, 2011.
             1603          (2) Title 31A, Chapter 40, Part 3, Privatization of the Workers' Compensation Fund
             1604      Act, is repealed 30 days after the transition date determined under Section 31A-40-307 .
             1605          Section 42. Section 63E-1-102 is amended to read:
             1606           63E-1-102. Definitions.
             1607          As used in this title:
             1608          (1) "Authorizing statute" means the statute creating an entity as an independent entity.


             1609          (2) "Committee" means the Retirement and Independent Entities Committee created in
             1610      Section 63E-1-201 .
             1611          (3) "Independent corporation" means a corporation incorporated in accordance with
             1612      Chapter 2, Independent Corporations Act.
             1613          (4) (a) "Independent entity" means an entity having a public purpose relating to the
             1614      state or its citizens that is individually created by the state or is given by the state the right to
             1615      exist and conduct its affairs as an:
             1616          (i) independent state agency; or
             1617          (ii) independent corporation.
             1618          (b) "Independent entity" includes the:
             1619          (i) Dairy Commission created in Title 4, Chapter 22, Dairy Promotion Act;
             1620          (ii) Heber Valley Railroad Authority created in Title 9, Chapter 3, Part 3, Heber Valley
             1621      Historic Railroad Authority;
             1622          (iii) Utah Science Center Authority created in Title 9, Chapter 3, Part 4, Utah Science
             1623      Center Authority;
             1624          (iv) Utah Housing Corporation created in Title 9, Chapter 4, Part 9, Utah Housing
             1625      Corporation Act;
             1626          (v) Utah State Fair Corporation created in Title 9, Chapter 4, Part 11, Utah State Fair
             1627      Corporation Act;
             1628          [(vi) Workers' Compensation Fund created in Title 31A, Chapter 33, Workers'
             1629      Compensation Fund;]
             1630          [(vii)] (vi) Utah State Retirement Office created in Title 49, Chapter 11, Utah State
             1631      Retirement Systems Administration;
             1632          [(viii)] (vii) School and Institutional Trust Lands Administration created in Title 53C,
             1633      Chapter 1, Part 2, School and Institutional Trust Lands Administration;
             1634          [(ix)] (viii) Utah Communications Agency Network created in Title 63C, Chapter 7,
             1635      Utah Communications Agency Network Act; and
             1636          [(x)] (ix) Utah Capital Investment Corporation created in Title 63, Chapter 38f, Part
             1637      12, Utah Venture Capital Enhancement Act.
             1638          (c) Notwithstanding this Subsection (4), "independent entity" does not include:
             1639          (i) the Public Service Commission of Utah created in Section 54-1-1 ;


             1640          (ii) an institution within the state system of higher education;
             1641          (iii) a city, county, or town;
             1642          (iv) a local school district;
             1643          (v) a special district created under the authority of Title 17A, Special Districts; or
             1644          (vi) a local district created under the authority of Title 17B, Limited Purpose Local
             1645      Government Entities.
             1646          (5) "Independent state agency" means an entity that is created by the state, but is
             1647      independent of the governor's direct supervisory control.
             1648          (6) "Monies held in trust" means monies maintained for the benefit of:
             1649          (a) one or more private individuals, including public employees;
             1650          (b) one or more public or private entities; or
             1651          (c) the owners of a quasi-public corporation.
             1652          (7) "Public corporation" means an artificial person, public in ownership, individually
             1653      created by the state as a body politic and corporate for the administration of a public purpose
             1654      relating to the state or its citizens.
             1655          (8) "Quasi-public corporation" means an artificial person, private in ownership,
             1656      individually created as a corporation by the state which has accepted from the state the grant of
             1657      a franchise or contract involving the performance of a public purpose relating to the state or its
             1658      citizens.
             1659          Section 43. Section 63E-1-203 is amended to read:
             1660           63E-1-203. Exemptions from committee activities.
             1661          Notwithstanding the other provisions of this Part 2 and Subsection 63E-1-102 (4), the
             1662      [following independent entities are] Utah Housing Corporation created in Title 9, Chapter 4,
             1663      Part 9, Utah Housing Corporation Act, is exempt from the study by the committee under
             1664      Section 63E-1-202 [:].
             1665          [(1) the Utah Housing Corporation created in Title 9, Chapter 4, Part 9, Utah Housing
             1666      Corporation Act; and]
             1667          [(2) the Workers' Compensation Fund created in Title 31A, Chapter 33, Workers'
             1668      Compensation Fund.]
             1669          Section 44. Section 67-4-2 is amended to read:
             1670           67-4-2. Definitions.


             1671          As used in this chapter:
             1672          (1) "Federal funds" means cash received from the United States government or from
             1673      other individuals or entities for or on behalf of the United States and deposited with the state
             1674      treasurer or any agency of the state.
             1675          (2) "General Fund" means monies received into the treasury and not specially
             1676      appropriated to any other fund.
             1677          (3) "Maintain custody" means to direct the safekeeping and investment of state funds.
             1678          (4) (a) "State entity" means each department, commission, board, council, agency,
             1679      institution, officer, corporation, fund, division, office, committee, authority, laboratory, library,
             1680      unit, bureau, panel, or other administrative unit of the state.
             1681          (b) "State entity" includes independent state agencies and public corporations.
             1682          (5) (a) "State funds" means funds that are owned, held, or administered by a state
             1683      entity, regardless of the source of the funds.
             1684          (b) "State funds" includes funds of independent state agencies or public corporations,
             1685      regardless of the source of funds.
             1686          (c) "State funds" does not include funds held by the Utah State Retirement Board [or
             1687      the Workers' Compensation Fund].
             1688          (6) "Warrant" means an order in a specific amount drawn upon the treasurer by the
             1689      Division of Finance or another state agency.
             1690          Section 45. Repealer.
             1691          This bill repeals:
             1692          Section 31A-22-1001, Obligation to write workers' compensation insurance.
             1693          Section 31A-33-101, Definitions.
             1694          Section 31A-33-102, Establishment of the Workers' Compensation Fund and the
             1695      Injury Fund.
             1696          Section 31A-33-103, Legal nature of Workers' Compensation Fund.
             1697          Section 31A-33-103.5, Powers of Fund -- Limitations.
             1698          Section 31A-33-104, Workers' Compensation Fund exempted.
             1699          Section 31A-33-105, Price of insurance -- Liability of state.
             1700          Section 31A-33-106, Board of directors -- Status of the fund in relationship to the
             1701      state.


             1702          Section 31A-33-107, Duties of board -- Creation of subsidiaries -- Entering into
             1703      joint enterprises.
             1704          Section 31A-33-108, Powers and duties of chief executive officer.
             1705          Section 31A-33-109, Liability limited.
             1706          Section 31A-33-110, Audits and examinations required.
             1707          Section 31A-33-111, Adoption of rates.
             1708          Section 31A-33-112, Withdrawal of policyholders.
             1709          Section 31A-33-113, Cancellation of policies.
             1710          Section 31A-33-114, Premium assessment.
             1711          Section 31A-33-115, Interest and costs of collecting delinquent premium.
             1712          Section 31A-33-116, Dividends.
             1713          Section 31A-33-117, Availability of employers' reports.
             1714          Section 31A-33-118, Scope of chapter.
             1715          Section 46. Effective date.
             1716          (1) The amendments in this bill to the following sections take effect on the transition
             1717      date determined in accordance with Section 31A-40-307 if the Legislature enacts during the
             1718      2008 Annual General Session a process to determine a transition date in Section 31A-40-307 :
             1719          (a) Section 11-8-3 ;
             1720          (b) Section 31A-1-105 ;
             1721          (c) Section 31A-15-103 ;
             1722          (d) Section 31A-19a-401 ;
             1723          (e) Section 31A-21-101 ;
             1724          (f) Section 31A-22-309 ;
             1725          (g) Section 31A-26-103 ;
             1726          (h) Section 31A-35-103 ;
             1727          (i) Section 34A-2-102 ;
             1728          (j) Section 34A-2-103 ;
             1729          (k) Section 34A-2-107 ;
             1730          (l) Section 34A-2-201 ;
             1731          (m) Section 34A-2-203 ;
             1732          (n) Section 34A-2-211 ;


             1733          (o) Section 34A-2-406 ;
             1734          (p) Section 51-7-2 ;
             1735          (q) Section 51-7-4 ;
             1736          (r) Section 58-59-306 ;
             1737          (s) Section 59-9-101 ;
             1738          (t) Section 63-5b-102 ;
             1739          (u) Section 63-38a-102 ;
             1740          (v) Section 63E-1-102 ;
             1741          (w) Section 63E-1-203 ; and
             1742          (x) Section 67-4-2 .
             1743          (2) The amendments to Section 63-55b-131 in this bill take effect on May 4, 2008, if
             1744      the Legislature enacts during the 2008 Annual General Session a process to determine a
             1745      transition date in Section 31A-40-307 .
             1746          (3) The sections in Title 31A, Chapter 40, enacted in this bill take effect on May 4,
             1747      2008, if the Legislature enacts during the 2008 Annual General Session a process to determine
             1748      a transition date in Section 31A-40-307 .
             1749          (4) The repeal of the following sections takes effect on the transition date determined
             1750      in accordance with Section 31A-40-307 , if the Legislature enacts during the 2008 Annual
             1751      General Session a process to determine a transition date in Section 31A-40-307 :
             1752          (a) Section 31A-22-1001 ;
             1753          (b) Section 31A-33-101 ;
             1754          (c) Section 31A-33-102 ;
             1755          (d) Section 31A-33-103 ;
             1756          (e) Section 31A-33-103.5 ;
             1757          (f) Section 31A-33-104 ;
             1758          (g) Section 31A-33-105 ;
             1759          (h) Section 31A-33-106 ;
             1760          (i) Section 31A-33-107 ;
             1761          (j) Section 31A-33-108 ;
             1762          (k) Section 31A-33-109 ;
             1763          (l) Section 31A-33-110 ;


             1764          (m) Section 31A-33-111 ;
             1765          (n) Section 31A-33-112 ;
             1766          (o) Section 31A-33-113 ;
             1767          (p) Section 31A-33-114 ;
             1768          (q) Section 31A-33-115 ;
             1769          (r) Section 31A-33-116 ;
             1770          (s) Section 31A-33-117 ; and
             1771          (t) Section 31A-33-118 .
             1772          (5) (a) In determining whether or not to enact during the 2008 Annual General Session
             1773      a process to determine a transition date in Section 31A-40-307 , the Legislature may consider
             1774      issues related to both the assigned risk plan and the privatization process and make any
             1775      modifications to Title 31A, Chapter 40, Workers' Compensation Insurance Regulation, as part
             1776      of any legislation enacting a process to determine a transition date.
             1777          (b) Issues described in Subsection (5)(a) include:
             1778          (i) as to an assigned risk plan:
             1779          (A) the degree to which the assigned risk plan should be established by statute and the
             1780      extent to which it should be established by rule;
             1781          (B) the nature of the plan and the plan reserve, including for purposes of accounting
             1782      and legal responsibility in relation to the Insurance Department and the state;
             1783          (C) how to address employers who may be residual market employers and who employ
             1784      individuals in more than one state;
             1785          (D) the appropriate method to address deficits, if any, with the assigned risk plan
             1786      including use of a reserve, imposition of assessments, or use of a reinsurance pool;
             1787          (E) rating issues such as requiring merit rating or addressing small or new employers;
             1788      and
             1789          (F) ensuring that employers who are insured under the assigned risk plan are residual
             1790      market employers;
             1791          (ii) as to the privatization process:
             1792          (A) how to address constitutional issues, if any, related to directing how assets and
             1793      contracts of the Workers' Compensation Fund are treated under a privatization process;
             1794          (B) how to address issues, if any, related to liability of the state under a privatization


             1795      process;
             1796          (C) whether all conditions required by Title 31A, Chapter 40, Part 3, Privatization of
             1797      the Workers' Compensation Fund Act, can be complied with such as the requirement to obtain
             1798      a specific type of Internal Revenue Service ruling;
             1799          (D) the time it would require to accomplish the privatization and the transition to an
             1800      assigned risk plan;
             1801          (E) whether or not Title 31A, Chapter 40, Part 3, Privatization of the Workers'
             1802      Compensation Fund Act, should supersede Title 63E, Chapter 1, Part 4, Privatization of
             1803      Independent Entities, in all aspects;
             1804          (F) how subsidiaries of the Workers' Compensation Fund should be treated;
             1805          (G) whether issues related to antitrust or monopolies are raised by the privatization;
             1806          (H) whether, and if so, how to address use of the name Workers' Compensation Fund;
             1807      and
             1808          (I) whether, and if so, how to inform the public of the privatization; and
             1809          (iii) miscellaneous issues such as:
             1810          (A) how to adjust the membership of the Workers' Compensation Advisory Council;
             1811      and
             1812          (B) how the penalty for noncompliance by an employer with workers' compensation
             1813      obligations should be determined.
             1814          Section 47. Revisor instructions.
             1815          It is the intent of the Legislature that if this bill takes effect because the Legislature
             1816      enacts during the 2008 Annual General Session a process to determine a transition date in
             1817      Section 31A-40-307 , the Office of Legislative Research and General Counsel in preparing the
             1818      Utah Code database for publication:
             1819          (1) on the transition date determined in accordance with Section 31A-40-307 make the
             1820      following changes:
             1821          (a) replace the phrase "the date determined in accordance with Section 31A-40-307" in
             1822      Subsection 31A-40-102 (8) with the actual transition date;
             1823          (b) modify Subsection 31A-40-204 (1)(b) to read:
             1824          "(b) The plan reserve shall consist of:
             1825          (i) assets deposited into the plan reserve on [insert the date that is the day after the


             1826      actual transition date, but two years later];
             1827          (ii) assets deposited in accordance with Subsection (4); and
             1828          (iii) interest and earnings on the plan reserve."; and
             1829          (c) replace the phrases "successor mutual insurance company, as defined in Section
             1830      31A-40-302" and "successor mutual insurance company" in Subsection 31A-40-204 (4) with
             1831      the actual name of the successor mutual insurance company; and
             1832          (2) repeal Title 31A, Chapter 40, Part 3, Privatization of the Workers' Compensation
             1833      Fund Act, in accordance with Section 63-55b-131 .





Legislative Review Note
    as of 2-9-07 7:27 AM


As required by legislative rule and practice, the Office of Legislative Research and General
Counsel provides the following legislative review note to assist the Legislature in making its
own determination as to the constitutionality of the bill. The note is based on an analysis of
relevant state and federal constitutional law as applied to the bill. The note is not written for the
purpose of influencing whether the bill should become law, but is written to provide
information relevant to legislators' consideration of this bill. The note is not a substitute for the
judgment of the judiciary, which has authority to determine the constitutionality of a law in the
context of a specific case.

This bill, if it takes effect, requires the Workers' Compensation Fund (WCF) to transfer certain
assets to the state as a reserve for potential deficits of an assigned risk plan created to address
the residual workers' compensation market. This bill also requires the creation of a successor
mutual insurance company to the WCF. The successor mutual insurance company is then
required to hold assets representing the Injury Fund in trust until such time as the successor no
longer writes workers' compensation in Utah. At that time, the successor mutual insurance
company is required to transfer those assets to the state. These provisions are examples of
requirements in this bill that raise constitutional issues.

This bill's restrictions on the use of and requirements to transfer assets currently held by the
WCF result in a high probability that, if challenged, the bill could be held unconstitutional on
principles such as due process, equal protection, or takings. The Utah Supreme Court in
Workers' Compensation Fund v. State, 125 P.3d 852 (2005), affirmed that the "State of Utah
has no ownership interest in the Workers' Compensation Fund or its assets other than as a
policyholder." However, the Court explained that its ruling did "not prevent the Legislature
from modifying the structure and management of the WCF or adjusting the level of the State's
influence thereupon, as it sees fit" and noted "the Legislature's ability to modify [WCF's]
governing statutes." Therefore, a court would need to determine whether the state has authority
under its power to modify the structure and management of the WCF to impose requirements
on the use and transfer of assets of the WCF and its successor mutual insurance company or
whether because the WCF's assets "belong to the WCF policyholders and not to the State"
these assets could not be controlled either in the short-term or long-term by the state in a
manner different than for a private workers' compensation insurer. See also, e.g., Hansen v.
Utah State Ret. Bd.,
652 P.2d 1332 (Utah 1982); State Tax Commission v. Department of
Finance
, 576 P.2d 1297 (Utah 1978). The language of the Utah Supreme Court suggests a high
probability that the Utah Supreme Court could find that the powers of the Legislature may be
limited by constitutional concerns.

Office of Legislative Research and General Counsel


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