Loading (50 kb)...'
(continued)
Note: Authority cited: Sections 54, 55, 3701.8 and 3702.10, Labor Code. Reference: Sections 59, 129, 3700, 3701, 3701.5, 3701.8, 3702, 3702.3, 3702.5, 3702.6, 3702.10, 3703, 3705, 3740-3747 and 3850, Labor Code; Section 6500, Government Code; and Sections 995.430, 996.320 and 996.330, Code of Civil Procedure.
s 15202. Advisory Committee.
The Manager shall appoint an ad hoc committee to advise the Manager on proposed regulations relating to self-insurance.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 54, 55, 59, 3702.10 and 6160, Labor Code.
s 15203. Application.
(a) Every employer desiring to procure an initial certificate to self-insure its workers' compensation liabilities shall make application on;
(1) Form A4-1 (Rev. 2/92) for private individual employer applicants seeking an individual Certificate to Self Insure;
(2) Form A4-2 (Rev. 2/92) for public employer applicants;
(3) Form A4-3 (Rev. 1/94) for a private group employer and their members seeking an group Certificate to Self Insure.
(4) Form A4-3M (Rev 1/94) for each member of a group seeking an affiliate certificate.
(5) Form A4-5 (Rev. 11/97) for an interim self insurer seeking a permanent Certificate to Self Insure.
Note 1: The current application forms for private and public employers are contained in Plates A-1, A-2, A-3 and A-4 of the Appendix following the last article in these Group 2 regulations.
Note 2: A new application may be required when an existing self insurer reincorporates, merges, changes ownership, or adds a new or separate subsidiary or affiliate to its existing workers' compensation self insurance program. In some cases, it may be possible to amend and transfer an existing certificate without a new application.
(b) A complete application to self insure by a private employer (Form A4-1 (Rev. 2/92) shall include all attachments requested on the application form itself, and, as applicable, the following:
(1) A current, certified, independently audited financial statement complete with all schedules and notes for the past three years;
Note: The application of a private sector subsidiary or affiliate may include the consolidated financial statement of its parent in lieu of the subsidiary's financial statement.
(2) An unaudited financial statement or published quarterly report, or a consolidated financial statement for the current year or portion thereof;
(3) An Agreement of Assumption and Guarantee of Liabilities for each self insurer and subsidiary or affiliate applicant executed by the parent employer or majority owner, or partners;
(4) A Resolution authorizing the application to self insure and empowering employees or officers of the applicant employer to sign the application form and any other necessary documents on behalf of the applicant employer;
(5) A Resolution by the general partners, or parent corporation authorizing the execution of the Agreement of Assumption and Guarantee of Liabilities on behalf of a subsidiary or affiliate applicant employer;
(6) Original Certificates of Status or other appropriate registration documents showing that the applicant employer is licensed or registered to do business in California;
(7) An evaluation of the applicant's injury and illness prevention program or proof of a DOSH inspection pursuant to Section 15353 of these regulations; and
(8) Payment of any required application filing fee.
(c) A complete application to self insure by a public employer (Form A4-2 (Rev. 2/92) shall include all attachments requested on the public sector application form and, as applicable, the following:
(1) An Agreement of Assumption and Guarantee of Liabilities for the predecessor agency due to a unification, merger, realignment of the boundaries of an existing self insured public agency, or name change by the successor or surviving public agency;
(2) A Resolution authorizing the application to self insure and empowering employees or officers of the applicant employer or joint powers authority to sign the application form and any other necessary documents on behalf of the applicant.
(3) All public applicants shall indicate the proposed start up date of its self insurance program as part of its application.
(d) A complete application to self insure on a Form A4-3 (Rev. 1/94) by a private group of employers shall include all the attachments requested in the application form itself, and, as applicable, the following:
(1) A proforma financial statement prepared by an independent, certified public accountant with all schedules and notes for the group applicant;
(2) A current, certified, independently audited financial statement with all schedules and notes for each proposed group member for the past two years;
Note: The application of a private sector subsidiary or affiliate of any group member may include the consolidated financial statement of its parent in lieu of the subsidiary or affiliate financial statement;
(3) An unaudited financial statement or published quarterly report, or consolidated financial statement for the current year or portion thereof;
(4) An Agreement of Assumption and Guarantee of Liabilities of Workers' Compensation Liabilities For Group Members [Form A4-3G (Rev 1/94)] for each or listing each proposed group member and any subsidiary or affiliate of each proposed group member executed by the group administrator of the group applicant, as required in Section 15203.1 of these regulations;
(5) A Resolution by the Board of Trustees [Form GR-1 (Rev. 1/94)] of the group applicant authorizing the application to become a group self insurer and empowering the group administrator and other employees or officers or Trustees of the group applicant to sign the application form and any other necessary documents on behalf of the group applicant, and, if granted a Certificate to Self Insure, the group self insurer as required in Section 15203.3(d) of these regulations.
(6) A Resolution by the Board of Trustees of the group applicant authorizing the execution of an Agreement of Assumption and Guarantee For Workers' Compensation Liabilities on behalf of the proposed group members and any future members of the group self insurer granted an Affiliate Certificate;
(7) An original Certificate of Status or other appropriate registration documents showing the group applicant and each group member is licensed or registered to do business in California;
(8) An evaluation of the group applicant and group members injury and illness prevention program or proof of a DOSH inspection pursuant to Section 15353 of these regulations;
(9) An original, executed Indemnity Agreement and Power of Attorney of Joint and Several Liability between the group applicant and each proposed member pursuant to Section 15479 of these regulations.
(10) Payment of the required application fee as required by Section 15204 of these regulations.
(11) A copy of the Initial Feasibility Study as required in Section 15471 of these regulations.
(12) Agreement and Undertaking for Security Deposit.
(13) Completed application forms from proposed members.
(e) A complete application to self insure on a Form A4-4 (Rev. 1/94) by each member of a group shall include all the attachments requested in the application form itself, and, as applicable, the following:
(1) A current copy of the applicant's certified, independently audited, financial statement complete with all schedules and notes; or
(2) A current copy of the applicant's reviewed financial statement prepared by a certified public accountant, complete with all schedules and notes, provided the private group self insurer can demonstrate and maintain a consolidated minimum net worth twice that required in Section 15203.2(f).
Note: If the report of the financial condition is dated more than 12 months prior to the date of this application, the Director may require interim financial statement certified by the appropriate finance officer and dated not less than 3 months from the date of this application.
(3) Resolution to be Self Insured as a Member of the Group Self Insurer.
(4) Indemnity Agreement and Power of Attorney, as required in section 15479.
(f) To any joint powers authority which pools the workers' compensation liabilities of its public agency members, the Manager shall issue a Certificate to Self Insure to the joint powers authority and the master certificate number to the joint powers authority. All members of the joint powers authority shall be issued an affiliate certificate numbers under the certificate number issued to the joint powers authority.
(g) An applicant for self insurance filing a private individual employer application, an interim self insurer application or a public employer application will be notified in writing within 14 days, that an application is complete or deficient. An applicant for self insurance filing a private group employer application, will be notified in writing within 30 days, that an application is complete or deficient. A notice indicating that the application is deficient will include a list of items required to be included or completed.
(h) Upon receipt of a complete private individual employer application or an interim self insurer application, the applicant will be notified within 45 days of the Director's decision to allow self insurance. The maximum processing time for a private individual employer application is 45 days, the minimum time is 21 days and the median time is 30 days.
(i) Upon receipt of a complete public entity application, the applicant will be notified within 30 days of approval of application. The maximum processing time for a public employer application is 30 days, the minimum time is 7 days and the median time is 14 days.
(j) Upon receipt of a complete private group employer application, the applicant will be notified within 90 days of the approval of the application. The maximum processing time for a private group employer application is 90 days, the minimum time is 30 days and the median time is 60 days.
Note: Authority cited: Sections 54, 55, 59 and 3702.10, Labor Code. Reference: Sections 3700, 3700(b), 3701, 3702, 3702.5 and 6401.7(a), Labor Code; and Sections 15374-15378, Government Code.
s 15203.1. Agreement of Assumption and Guarantee of Subsidiary's or Affiliate's Liabilities.
(a) Each private subsidiary or affiliate applicant for a Certificate to Self Insure shall provide an Agreement of Assumption and Guarantee of Liabilities executed by the parent company, general partners, or owners having controlling ownership in accordance with Section 15211.2 of these regulations.
If the parent entity, general partner(s), or owners having controlling ownership will not execute the Assumption and Guarantee agreement, the Director may:
(1) Require a deposit level of 200% of the master certificate holder's, subsidiary's or affiliate's estimated future liabilities for the payment of compensation, or higher, in lieu of the Agreement of Assumption and Guarantee of Liabilities; or
(2) Deny the application to self insure by the private applicant.
(b) Private group self insurers shall provide an individual Agreement of Assumption and Guarantee of Liabilities of Workers' Compensation Liabilities For Group Members for each group member or a single agreement listing all group members and all subsidiary or affiliates of each group member executed by the group administrator of the group applicant. If the group self insurer or group applicant will not execute the Agreement of Assumption and Guarantee of Liabilities of Workers' Compensation Liabilities For Group Members for each group member, the Director:
(1) may require a deposit level of 200% of the group self insurer's estimated future liabilities for the payment of compensation, or higher, in lieu of the Agreement of Assumption and Guarantee of Liabilities; or
(2) may deny the application to self insure by the private group applicant or group member.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3550, 3700, 3701, 3701.5, 3702, 3702.10 and 3705, Labor Code.
s 15203.2. Continuing Financial Capacity.
(a) All private self insurers and all private group self insurers, shall submit annually a current, certified, independently audited financial statement complete with all notes and schedules. If the private self insurer did not prepare a current, certified, independently audited financial statement, the self insurer shall advise the Manager of that fact in writing and submit a consolidated financial statement prepared by an independent certified public accountant (CPA).
(b) Any joint powers authority which is solely responsible for the self insurance claims of its public members shall submit annually to the Manager a consolidated report of its financial condition, and/or if available, a current, certified, independently audited financial statement complete with all notes and schedules.
(c) All private group members of a private group self insurer shall annually submit a current, certified, independently audited financial statement complete with all notes and schedules to the Board of Trustees of the group self insurer. The group administrator shall make any of the financial statements available to the Manager upon request and shall advise the Manager of any group member not having a certified, independently audited financial statement.
Exception: A private group member authorized to self insure pursuant to Section 15203(e)(2), shall annually submit a current, reviewed financial statement to the Board of Trustees of the group self insurer.
(d) Impairment of solvency indicated by a marked reduction in financial strength or the lack of an independently prepared, audited financial statement, or the lack of the minimum net worth requirement set forth in subsection (e) of this section is good cause for increased security deposit or involuntary revocation of any Certificate to Self Insure, Affiliate Certificate or Subsidiary Certificate by the Director.
(e) After July 1, 1994, all private individual employer applicants for a master Certificate to Self Insure shall demonstrate and maintain a current net worth of at least $5,000,000 and average net income for the past 5 years of at least $500,000.
Exception: Any existing private self insurer granted a Certificate to Self Insure prior to the July 1, 1994 shall only need to maintain a net worth of at least $2,200,000 and an average net income for the past 5 years of at least $300,000.
(f) All private group self insurers shall demonstrate and maintain a consolidated net worth of the group members of at least $5,000,000 and a consolidated annual net income of the group members of $500,000, and sufficient income to fund:
(1) the group self insurer's actuarially projected claim liabilities at the 80% confidence level;
(2) to pay the expected administrative expenses to operate the group self insurer's business operations; and
(3) to post the security deposit required.
Note: Consolidated net worth and consolidated net income of group members shall be determined only from members with current certified, independently audited financial statement.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3700, 3701, 3702 and 3702.10, Labor Code.
s 15203.3. Resolution To Authorize Self Insurance for a Private Sector Applicant or Group Applicant.
(a) The resolution to authorize self insurance of workers' compensation required as part of the application for a certificate to self insure by any private sector applicant or private group self insurer shall be adopted by the Board of Directors of each corporation, or the general partners of an applicant partnership or joint venture, or owner of an applicant sole proprietorship, or Board of Trustees of an applicant group self insurer. The resolution to authorize self insurance shall include the following:
(1) A statement identifying the applicant by corporate or other legal name, the state of registration, and the date that the resolution was adopted;
(2) Identify by title of appointed officers or other company employees who have the authority to sign the application, execute any and all documents required for the application and do subsequent acts as required to maintain self insurance approval.
(b) If a private self insurer or group self insurer reincorporates, merges, or changes its identity, a new resolution shall be submitted to the Manager within 30 days to ratify the maintenance of the self insured's responsibility under the successor's identity. The Manager may extend the period of time for good cause.
(c) A model corporate resolution shall be included as part of the application form and the Manager shall provide separate model resolutions to self insurers which are partnerships or other non-corporate structures upon request.
(d) A group self insurer resolution Form GR-1 (Rev. 1/94) shall be attached as part of the private group employer application and executed by the group applicant Board of Trustees.
Note: The current group self insurer resolution, Form GR-1 (Rev. 1/94), is contained in Plate B of the Appendix following the last article of these Group 2 regulations.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3700, 3701, 3702 and 3702.10, Labor Code.
s 15203.4. Resolution to Self Insure for Public Entities.
(a) The resolution of the governing body of a public entity or joint powers authority seeking approval for a certificate to self insure shall be executed by the governing board and attached to the application form. The resolution shall be sealed with the seal of the adopting agency or the resolution's signatures shall be notarized.
Note: The officers of the joint powers authority which is the holder of the master Certificate to Self Insure may sign documents on behalf of the affiliated members of the JPA for self insurance purposes, including the Self Insurer's Annual Report.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3700, 3702 and 3702.10, Labor Code.
s 15203.5. Agreement and Undertaking for Security Deposit.
(a) All private employer applicants for self insurance shall execute an Agreement and Undertaking For Security Deposit as part of the application process.
(b) All security deposits shall be posted in accordance with the provisions of the Agreement and Undertaking.
(c) The form of such agreement and undertaking shall be supplied by the Manager as part of the application (Form A4-1 (Rev. 2/92) for a private individual employer and Form A4-GAU (1/94) for a private group self insurer).
Note: The current agreement and undertaking form is contained in Plate H of the Appendix following the last Article of these Group 2 regulations. This agreement is contained in the application form for applicants to be self-insured after January 1, 1993. The Agreement and Undertaking for Security Deposit Form for a Group Self Insurer (Form A4-GAU (1/94) is in the Appendix following the Application for a Certificate of Consent to Self Insure By A Group of Employers.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3701, 3701.5 and 3702.10, Labor Code.
s 15203.6. Delayed Start-up of a Self Insurance Program.
(a) The certificate to self insure for public and private employers shall be initially valid for six months after the date of approval by the Director. If the self insurer has not initiated its self insurance program within the initial six month period, the approval of the certificate to self insure shall be void and a new application shall be filed for approval. Once the self insurance program has been initiated in the initial 6 month period, the certificate to self insure shall be valid until revoked by order of the Director.
Note: A private employer applicant which fails to initiate a self insurance program within three months of notification of approval by the Director may be required to establish current good standing with the Secretary of State and to provide current financial information before issuance of a certificate to self insure.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3700 and 3702.10, Labor Code.
s 15203.7. Issuance of the Certificate to Self Insure and Notice to Employees of Self Insured Status.
(a) Upon the Director's approval of an employer's application and, if required, the posting of an assumption agreement and adequate security deposit with the Department, within seven days the self insurer shall re ceive conformation of its self insured status by receipt of a Certificate to Self Insure issued and signed by the Manager.
(b) The original Certificate to Self Insure or a copy of the original certificate to self insure shall be prominently displayed at the self insurer's principal place of business in California.
(c) Notice to employees of workers' compensation coverage as required by Labor Code Section 3550 shall be accomplished by display of a copy of the self insurer's certificate to self insure accompanied by a notice stating the name of the person(s) or administrative agency responsible for claims adjustment.
(d) If a self insurer is required to provide evidence of its approved self insured status to prove compliance with Labor Code Section 3700, the Manager shall provide a Certification of Self Insurance upon request from the certificate holder.
Note: A sample Certificate of Self Insurance is contained in Plate C of the Appendix following the last article in these Group 2 regulations.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3700, 3701, 3702, 3702.10 and 3550, Labor Code.
s 15203.8. Change in Status.
(a) The self insurer, public or private shall notify the Manager in writing within 30 days of the following actions:
(1) Any amendment to the self insurer's articles, charter, or agreement of incorporation, association, or co-partnership which changes its identity or business structure or ownership in a material manner from the status as it existed at the time of issuance of its certificate to self insure; or
(2) The self insurer proposes to cease doing business entirely, proposes to cease doing business in California, or proposes to dispose of, by sale or otherwise, the controlling interest of the business for which the certificate to self insure was issued.
(b) If any self insurer desires to retain its self insured status following any amendment to the articles, charter, or agreement of incorporation, association, or copartnership which changes its identity or business structure or ownership, the self insurer shall provide to the Manager the following information:
(1) A written description of the date the event(s) occurred;
(2) Copies of Certificates of Status or other appropriate registration documents filed with the Secretary of State in which the self insurer is incorporated concerning the change of the self insurer's status; and
(3) Written notice indicating that the certificate holder will continue to provide an annual financial statement or that a financial statement will be issued by a parent corporation.
(c) If a self insured corporation reincorporates, merges, or changes its identity, a new resolution shall be submitted to the Manager in accordance with Section 15203.3 of these regulations.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3700, 3701, 3701.5, 3702, 3702.3, 3702.10 and 3703, Labor Code.
s 15203.9. Validity of Certificate to Self Insure.
(a) A certificate to self insure shall be valid only to the private corporation, partnership, company, subsidiary, affiliate public entity, joint powers authority, group self insurer, or private group member to which the certificate to self insure, affiliate certificate or subsidiary certificate was issued. Each subsidiary or affiliate shall be issued its own certificate to self insure.
(b) Except as provided in Labor Code Section 3701.7, the Manager shall issue a new certificate to self insure with an effective date no earlier than the date the application and all other documents or information required by these regulations were submitted and deemed a complete application.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3701, 3701.5 and 3702.10, Labor Code.
s 15203.10. Reinstatement of a Certificate to Self Insure.
(a) A self insurer, who because of a legal change in business or corporate structure or in its legal name, has had its self insurance privilege terminated may have its certificate to self insure reinstated without lapse, providing the employer can requalify for self insurance.
(b) To request reinstatement of a certificate to self insure, the applicant shall submit to the Manager a complete application and a statement that the applicant assumes and guarantees all workers' compensation liabilities incurred during its prior period of self insurance, and will be responsible for any additional self insured liabilities incurred after termination of its certificate to self insure. The Manager shall accept the statement of the employer's assumption of all past liabilities if signed by a corporate officer, attested to by the corporate secretary and sealed with the corporate seal. This must be confirmed within 90 days by execution of the standard Agreement of Assumption and Guarantee of Liabilities and an Assumption Resolution as part of the application before the certificate to self insure can be reinstated.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3700, 3701, 3702 and 3702.10, Labor Code.
s 15204. Application Filing Fee.
(a) Each private employer making application for a certificate to self insure shall at the time of filing the application, pay a non-refundable filing fee on the following basis:
(1) A filing fee to accompany a single application or the first of more than one application submitted together shall be $500;
(2) For each additional application submitted with the first application, the filing fee shall be an additional $100;
(3) Any subsequent applications, determined by the Manager to be necessary but not submitted with the original filing of an application, shall be considered a new application and the filing fee will be $500;
(b) Any subsequent filing of an application by an existing private self insurer to add a new subsidiary or affiliate, or required due to merger, acquisition, or reincorporation shall be considered a new application and shall be subject to the payment of the fees set forth in subsection (a).
(c) No application filing fee shall be required from a public entity making application for a certificate to self insure.
(d) Each private group self insurer making an application to obtain a certificate to self insure for the group shall at the time of filing of the group application, pay a non-refundable filing fee on the following basis:
(1) A filing fee for the group applicant as set forth in subsection (a)(1) of this section;
(2) An additional filing fee for each proposed group member submitted at the same time as the group application as set forth in subsection (a)(2) of this section;
(3) Any subsequent group member filings determined by the Manager to be necessary but not submitted with the original group application will pay a non-refundable application fee as set forth in subsection (a)(3) of this section; and
(4) Any subsequent filing of an application by an existing group self insurer to add new group members, or required due to merger, acquisition, or reincorporation shall be considered a new application and shall be subject to the payment of fees as set forth in subsection (a) of this section.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3700, 3702.5 and 3702.10, Labor Code.
s 15205. Interim Certificates.
(a) The Manager may issue an Interim Certificate of Consent to Self Insure to a subsidiary or affiliate of an existing private self insurer. The Interim Certificate of Consent to Self Insure will be issued for a period not to exceed 180-days. An application for a permanent Certificate to Self Insure as set forth in Section 15203 and the application filing fees as set forth in Section 15204 just be submitted within 90 days of issuance of an interim certificate.
(b) To qualify for an Interim Certificate, the existing private self insurer must demonstrate the following:
(1) Net worth on the last financial report filed with the Manager of Self Insurance Plans, pursuant to Section 15203.2, that shows at least $10 million in net worth,
(2) The private self insurer holding the Master Certificate of Consent to Self Insure has furnished proof satisfactory to the Manager of financial responsibility and ability to guarantee the payment of any compensation due.
(3) The subsidiary or affiliate being added to the self insurance program does not represent more than 50% of the annual payroll of the existing self insurer as reported on the most recent Self Insurers' Annual Report.
(c) A request for an Interim Certificate shall be made by the existing private self insurer in writing to the Manager and provide the following information on each subsidiary or affiliate new to the self insurance program:
(1) The full legal name, state of incorporation, and Federal Tax Identification Number;
(2) The requested effective date of the Interim Certificate;
(3) The annual payroll of the subsidiary or affiliate during the last 12 months; or, the latest 12-month period for which payroll figures are available and what 12 month period is being reported.
(4) A statement that the Master Certificate holder shall be financially responsible to pay all workers' compensation claims arising out of the period of time its subsidiary or affiliate is granted an Interim Certificate;
Note: The Manager shall prepare a model letter that will contain all the necessary information to permit the private self insurer to request issuance of an Interim Certificate. The Manager shall provide this model letter to the self insurer upon request.
(d) Upon receipt of a written request for an Interim Certificate from a private self insurer meeting the requirements set forth in Section 15205(b) and (c), the Manager shall issue the Interim Certificate within 14 days.
(1) An applicant for an interim certificate will be notified in writing within 14 days if the application is incomplete and what specific information is required.
(e) To qualify for a permanent Certificate of Consent to Self Insure, the Interim Self Insurer will be required to comply with subsections 15203(b)(3)- (b) and (b)(8) and to submit Application Form A4-5 (Rev. 11/97).
Note: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3700, 3702.5 and 3702.10, Labor Code.
s 15210. Security Deposit.
(a) Public self insurers are not required to post or maintain a security deposit with the Director for workers' compensation liabilities.
(b) Private self insurers shall post and maintain a security deposit, in accordance with the provisions of Labor Code Section 3701 and the requirements of Article 3 of this subchapter 2 and/or in accordance with Labor Code Section 3701.8 and Article 3.1 of this subchapter 2.
(c) The minimum required security deposit pursuant to Labor Code Section 3701 for existing, private self insurer's shall be equal to:
(1) 135 percent of the private self insurer's estimated future liabilities for the payment of compensation for known claims, adjusted by any previously documented reductions to known claim liability for specific excess insurance coverage pursuant to Section 15300(e) of these regulations; and
(2) a deposit, consisting of the average annual estimated future liability for the past five (5) years reported on the Self Insurer's Annual Report, posted in advance for liabilities of the current year; and
(3) an adjustment to reduce the liability to be reported on individual claims due to any new documentation of specific excess insurance coverage not previously reported pursuant to Section 15300(e) of these regulations.
The required deposit may be increased at the Director's discretion as set forth in Article 3 of these regulations. Said future liability may be ascertained from any relevant source.
(d) New private self insurers shall initially post a security deposit pursuant to Labor Code Section 3701 in an amount equal to the greater of the following:
(1) The prior three (3) years' incurred liability; or
(2) The statutory minimum required by Labor Code Section 3701(b); or
(3) A higher amount approved by the Director.
(e) The addition of a new subsidiary or affiliate private self insurer to the holder of an existing Certificate to Self Insure shall initially post a security deposit pursuant to Labor Code Section 3701 in an amount equal to the greater of the following:
(1) The average one year incurred liability for the new subsidiary or affiliate self insurer based upon the prior three years' incurred liability; or
(2) A higher amount approved by the Director.
(f) Security deposit shall be posted in the form of:
(1) A surety bond executed on State issued bond and rider forms pursuant to Section 15212 of these regulations;
(2) An irrevocable letter of credit issued by a bank or savings institution or other financial institution pursuant to Section 15215 of these regulations;
(3) Approved securities in the form of government issued or corporate issued securities, meeting the requirements of Section 15213 of these regulations;
(4) Cash in trust deposited pursuant to requirements of Section 15214 of these regulations; or
(5) Any combination of one or more of the above four types of security deposit.
(g) Failure to maintain the required amount of deposit or to post an acceptable form of deposit as set forth in this Article shall be good cause for assessment of civil penalties pursuant to Labor Code Section 3702.9(a) by the Manager and/or, in the Director's discretion, revocation of the Certificate to Self Insure.
(h) Failure to post and maintain the required amount of security deposit for a period of 60 days shall be good cause for the Manager to summarily revoke a Certificate of Consent to Self-Insure. The summary revocation of the Self Insurer's Certificate of Consent will provide for a 15-day notice of termination, without a hearing.
(1) Notwithstanding subsection (h) above, the employer may still request a hearing on the Manager's Revocation Order before the Director as provided in Article 11 of this subchapter 2.
(2) A self insurer requesting a hearing pursuant to subsection (h)(1) shall be required to provide proof of workers' compensation coverage under a policy from an admitted carrier for the period of time without security deposit or proof of compliance with the Manager's request to post security.
Note: Authority cited: Sections 54, 55, 3701.8 and 3702.10, Labor Code. Reference: Sections 59, 3700, 3701, 3701.5, 3701.8, 3702, 3702.3, 3702.6, 3702.10 and 3740-3745, Labor Code.
s 15210.1. Adjustments in the Amount of Security Deposit.
(a) Any amount of the security deposit required pursuant to Labor Code Section 3701 shall be reviewed by the Manager at least annually following receipt of the private Self-Insurer's Annual Report.
(b) The private self insurer shall post any annual increase in security deposit required pursuant to Labor Code Section 3701 indicated in the deposit calculations contained in the Self-Insurer's Annual Report or as determined by the Manager due to an audit, change in the self-insured employer's program or change in deposit rate. The deposit shall cover both prior known liabilities; plus an advance deposit for the current year liabilities based on an average estimated future liability of claims for the past 5 years; minus credit for liabilities above the retention level of specific excess workers' compensation insurance policies as reported on the current year annual report. This deposit posting is due no later than May 1 each year.
(c) At the request of any private self insurer for a reduction or where a decrease in security deposit is indicated in the deposit calculations on the annual report, no reduction of security deposit already posted shall be made without prior written authorization of the Manager. Self Insurance Plans shall review each certificate holder's annual report and the certificate holder's file to determine the extent to which a decrease in deposit, if any, may be authorized.
(d) For good cause, the Manager shall require the private self insurer to post and maintain additional security deposit or adjust the deposit rate for a specific private self insurer above the statutory minimum deposit set forth in Labor Code Sections 3701, 3701.7, and 3701.8. Good cause includes, but is not limited to, understated future liability of claims on the Self-Insurer's Annual Report; a pattern of understated liabilities in claim files audited in an audit; failure to report all claims; poor administration of claims or payment of benefits due injured workers found in the audit results of the Office of Benefits Audits and Enforcement in the Division of Workers' Compensation or audits by Self Insurance Plans; lack of an effective safety and health program as indicated by final citations issued by the Division of Occupational Safety and Health showing repeat or willful violation of safety and health regulations; impairment of financial condition of the self insurer; the result of evaluation of an application to self-insure; or to cover a period of unlawful self insurance; or being required to post security deposit in whole or part pursuant to Section 3701.8 of the Labor Code and Article 3.1 (commencing with Section 15220) of this subchapter 2.
(e) Whenever the Manager determines that a deposit increase is required to be posted by a self insurer, the Manager shall send written notice to the self insurer pursuant to Labor Code Section 3701(b) and (j) of the amount of deposit due in order to create a perfected security interest for the Self Insurer's Security Fund.
(f) Any increase in a required self insurer's security deposit due to understated liabilities on the private employer's Self Insurer's Annual Report, shall be reported to the Security Fund. The Security Fund shall be authorized to adjust the deposit assessment for the alternative composite deposit.
Note: Authority cited: Sections 54, 55, 3701.8 and 3702.10, Labor Code. Reference: Sections 59, 3700, 3701, 3701.5, 3701.7, 3701.8, 3702, 3702.3, 3702.6, 3702.10, 3740, 3741, 3742, 6319(f), 6401.7, Labor Code.
s 15210.2. Deposit Adjustment Upon Revocation of Certificate to Self Insure.
(a) As part of the revocation of a Certificate to Self Insure pursuant to Sections 15422 and 15423 of these regulations, the Manager shall determine the need for a special revocation audit of the claims of any private self insurer and the need for a deposit adjustment to secure future liabilities of the revoked private self insurer pursuant to Labor Code Section 3701 and/or Section 3701.8.
(b) The amount of deposit or deposit rate required by the Manager on a revocation of a private self insurer's certificate to self insure may be at an amount or rate above the minimum required by Labor Code Section 3701 and/or Section 3701.8. The Manager in his/her discretion shall adjust the rate of deposit or the amount of deposit down to the statutory minimum required to secure the remaining workers' compensation liabilities for a revoked self insurer as necessary over time as the liabilities of the remaining claims inventory are run off by the administrator.
Note: Authority cited: Sections 54, 55, 3701.8 and 3702.10, Labor Code. Reference: Sections 59, 129, 3700, 3701, 3701.5, 3701.8, 3702, 3702.3, 3702.6, 3702.8, 3740-3745, Labor Code.
s 15210.3. Insurance Coverage.
(a) Any self insurer shall be permitted to insure any part of its liability to secure the payment of compensation pursuant to Labor Code Section 3700 with a standard workers' compensation insurance policy issued by a carrier. Full coverage of a self insurer's workers' compensation liability under a standard workers' compensation insurance policy shall be good cause for revocation of the certificate to self insure.
(b) All self insurers shall provide the Manager with information on any standard workers' compensation insurance policies, specific excess workers' compensation insurance coverage, and any aggregate excess (stop loss) workers' compensation insurance coverage carried, as part of the Self Insurer's Annual Report or upon the request of the Manager. Evidence of any of these three types of insurance coverage shall also be provided to the Manager in the form of a Certificate of Insurance from the carrier, along with any changes, cancellations, revisions, or new policies.
(c) Upon the request of the Manager, the self insurer shall provide a Certificate of Insurance or a copy of the workers' compensation insurance policy or policies maintained by the self insurer.
(d) Specific workers' compensation insurance policies are not required to be purchased or maintained by any self insurer. A self insurer who elects to purchase an aggregate excess policy shall not be given any credit toward the security deposit to be posted due to aggregate excess insurance coverage.
Exception: Every Private group self insurer shall purchase and maintain specific excess workers' compensation insurance policy coverage as set forth in Section 15478 of these regulations.
(e) Any self insurer who elects to purchase an aggregate workers' compensation excess policy shall not be given any credit by the Manager toward the security deposit to be posted due to aggregate excess insurance coverage.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 129, 3700, 3701, 3701.5, 3702, 3740, 3743 and 3744, Labor Code.
s 15211. Deposits for Subsidiary and Affiliate Self-Insurers.
(a) With the approval of the Manager, any subsidiary or affiliate private self insurer may post a separate deposit for its workers' compensation liabilities as part of the total security deposit posted to secure the liabilities under any Certificate to Self Insure issued to any self insured program. When approved, each subsidiary or affiliate self insurer posting its own deposit shall report its workers' compensation liabilities on the self insurer's annual report as a separate reporting location.
(b) Subsidiary and affiliated self insurers may be included in the security deposit of a holding corporation that has a certificate to self insure.
(1) For purposes of these regulations, Section 189 of the California Corporations Code shall be used to define "subsidiary corporation" and "holding corporation."
(2) For purposes of these regulations, legal entities with common ownership are sufficient to qualify for a common security deposit and may be included as co-principals on the same surety bond, or as named entities on a letter of credit, or as co-trustors on securities or a cash deposit.
(c) The Manager may require certification or other proof of stock ownership of the self-insured subsidiary corporation or corporations before allowing a self insurer to be included in the deposit of another self insurer.
(d) If the private holding corporation loses its power to elect a majority of the directors of a subsidiary self-insured corporation or corporations, the holding corporation and subsidiary corporation or corporations shall notify the Manager within 30 days of the event.
(e) Each type of security deposit posted by a private group self insurer shall be applicable to the liabilities of all members of the group self insurer and shall be amended, if necessary, to include all new members added to the group self insurer.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 129, 3700, 3700(b), 3701, 3702, 3702.5, 3702.6, 3703, 3704, 3705 and 3740-3745, Labor Code; and Section 189, Corporations Code.
s 15211.1. Appeals to Increase in Security Deposit Due to Impaired Financial Condition of Self Insurer.
(a) Where the Manager has required an increase in security deposit due to the impaired financial status of the self insurer and the self insurer wishes to appeal the Manager's decision, upon receipt of the written appeal, the Manager shall order a detailed, third-party financial evaluation of the private self insurer in order to determine the employer's financial strength. Such a third party financial evaluation shall include, but not be limited to, a Dun & Bradstreet Risk Assessment Report. The cost of the third party financial evaluation report shall be paid by the self insurer. Upon receipt of the evaluation report, the appeal will be considered by the Manager.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Section 3701, Labor Code.
s 15211.2. Agreement of Assumption and Guarantee of Liabilities.
(a) At the discretion of the Manager, the workers' compensation liabilities of a self-insurer may be assumed and guaranteed in whole or part by any other legal entity or person.
(b) The agreement of assumption and guarantee of liabilities shall be written upon a form provided by the Manager (Form A4-6 (Rev. 11/97)).
Note: The current Agreement forms are contained in Plate D of the Appendix following the last Article of these Subchapter 2 regulations.
(c) Regardless of whether a private affiliate or subsidiary or the self insurer's parent company's financial condition is relied upon to qualify a subsidiary, affiliate or master self insurer for self insurance, the private subsidiary, affiliate or master self insurer shall provide an agreement of assumption and guarantee of liabilities executed by the owner, or controlling partners, or holding corporation or other entity acceptable to the Manager.
Exception: At the discretion of the Director, the parental assumption agreement may be waived, but if waived, the Manager shall require the self insurer to post and maintain a minimum of a 200% deposit rate, in lieu of the assumption agreement.
(d) A corporate guarantor shall provide a Board of Directors resolution which authorizes the assumption and guarantee of the liabilities of the affiliated or subsidiary company or public agency and the board resolution shall grant signature authority to the person or position title of the person signing the agreement.
Note 1: The assumption resolution may be worded in such a manner as to be applicable to only the specific applicants to self insure or the assumption resolution may list all present subsidiaries or affiliates and authorize the addition of future, unnamed additions to the assumption resolution as an attachment without execution of a new resolution.
Note 2: The Manager shall provide an acceptable model resolution to any party upon request. The current model assumption resolutions are contained in Plate E of the Appendix following the last Article of these Subchapter 2 regulations.
(e) When a self insurer reincorporates, merges, or changes its identity, the surviving entity shall execute a new Agreement of Assumption and Guarantee of Liabilities and a new assumption resolution to cover the liabilities of the prior self insurer as part of the reapplication process to continue self insurance of workers' compensation liabilities.
(f) A foreign entity (i.e. outside the United States) may execute a parental Agreement of Assumption and Guarantee of Liabilities for a subsidiary or affiliate self insurer provided such foreign entity:
(1) executes in the English language the Agreement of Assumption and Guarantee of Liabilities and the assumption resolution; and
(2) includes a statement in the Agreement of Assumption and Guarantee of Liabilities that, in the event of the Director's need to enforce the Agreement of Assumption executed by the foreign entity on behalf of a self-insured subsidiary or subsidiaries, the foreign entity will:
(A) become subject to the jurisdiction of California courts and administrative agencies; and
(B) become controlled by California law in the resolution of any dispute under the assumption and guarantee agreement.
(g) Execution of an agreement of assumption and guarantee of liabilities shall not reduce the amount of security deposit required to be posted by any self insurer as set forth in Section 15210 and 15210.1.
(h) An Assumption and Guarantee Agreement may be terminated upon receipt of a written notice of such termination and take effect 30 days after receipt of the written termination notice.
Note: The Director may approve an earlier termination date without 30 days' advance notice where a self-insurer is sold to a new owner and workers' compensation liabilities are either covered by an insurance policy or the new owner executes an Assumption and Guarantee Agreement effective on or before the date of the sale.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 129, 3700, 3701, 3701.5, 3702, 3702.5, 3702.6, 3702.10, 3703, 3705 and 3740-3744, Labor Code.
s 15211.3. Agreement and Undertaking For Security Deposit.
(a) All security deposits shall be posted in accordance with the provisions of the Agreement and Undertaking, as required in Section 15203.5 of these regulations.
Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 59, 3701, 3701.5, 3702, 3702.6, 3702.10, 3703, 3705 and 3740-3745, Labor Code. (continued)