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Regular Session, 2010
SENATE BILL NO. 510
BY SENATOR LONG
WORKERS' COMPENSATION. Provides relative to workers' compensation self-insurance
funds. (gov sig)
AN ACT1
To amend and reenact R.S. 22:48(A)(15), 2055(3)(a)(ii) and (f), (4), (8), and (9), R.S.2
23:1195(A)(1) and (3), and 1196(A)(5) and to enact R.S. 22:2055(3)(a)(iii), relative3
to workers' compensation self-insurance funds; to provide with respect to covered4
claims of the Insurance Guaranty Association; to provide for definitions; to provide5
with respect to trade or professional associations and workers' compensation self-6
insurance funds; to provide for retroactive application; and to provide for related7
matters.8
Be it enacted by the Legislature of Louisiana:9
Section 1. R.S. 22:48(A)(15), 2055(3)(a)(ii) and (f), (4), (8), and (9) are hereby10
amended and reenacted and R.S. 22:2055(3)(a)(iii) is hereby enacted to read as follows: 11
§48. Types of insurers and other risk bearing entities12
A. The following entities are regulated by specific provisions in the Louisiana13
Insurance Code:14
* * *15
(15) Group self insurers, however, any trust or arrangement formed under16
Subpart J of Part 1 of Chapter 10 of Title 23 of the Louisiana Revised Statutes17 SB NO. 510
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of 1950, is not insurance, shall not be deemed to be insurance, and shall be1
regulated under the provisions of said Title 23.2
* * *3
§2055. Definitions4
As used in this Part:5
* * *6
(3)(a) "Covered claim" means an unpaid claim, including one for unearned7
premiums by or against the insured or agent, which arises out of and is within the8
coverage and not in excess of the applicable limits of an insurance policy to which9
this Part applies issued by an insurer, if such insurer becomes an insolvent insurer10
after September 1, 1970, and:11
(i) * * *12
(ii) The claimant is an arrangement or trust formed under Subpart J of13
Part 1 of Chapter 10 of Title 23 of the Louisiana Revised Statutes of 1950, and14
is principally domiciled in this state at the time of the insured event; or15
(ii) (iii) The property from which the claim arises is permanently located in16
this state.17
* * *18
(f) "Covered claim" shall not include any claim asserted for coverage under19
a policy when the net worth of the insured for whom coverage would allegedly be20
owed exceeds twenty-five fifty million dollars on December thirty-first of the year21
immediately preceding the date of the determination of the insolvency of the insurer.22
However, an insured's net worth on such date shall be deemed to include the23
aggregate net worth of the insured and all of its subsidiaries and affiliates as24
calculated on a consolidated basis. An "affiliate" of the insured includes any person25
or entity who directly, or indirectly through one or more intermediaries, controls or26
is controlled by or is under common control with the insured. "Control" means the27
possession, direct or indirect, of the power to direct or cause the direction of the28
management and policies of the controlled person or entity, whether through the29 SB NO. 510
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ownership of voting securities, by contract, or otherwise. The consolidated net worth1
of the insured and all of its subsidiaries and affiliates shall be calculated on the basis2
of their fair market values. The member employers of an arrangement or trust3
formed under Subpart J of Part 1 of Chapter 10 of Title 23 of the Louisiana4
Revised Statutes of 1950, shall not be deemed to be affiliates of the arrangement5
or trust, and shall not be included in the determination of the net worth of the6
arrangement or trust. The failure or refusal of a person or entity to return a net7
worth affidavit to the association after two requests therefor shall create a rebuttable8
presumption that the noncompliant person or entity had a net worth in excess of9
twenty-five million dollars on December thirty-first of the year immediately10
preceding the date of the determination of the insolvency of the insurer. An insured11
for the purposes of this provision shall not include any state or local governmental12
agency or subdivision thereof.13
(4)(a) "Insurance" shall have the meaning specified in R.S. 22:46.14
(b) "Insurer" shall have the meaning specified in R.S. 22:46.15
(a) (c) "Insolvent insurer" means:16
(i) An insurer authorized to transact insurance in this state either at the time17
the policy was issued or when the insured event occurred, and18
(ii) Against whom an order of liquidation with a finding of insolvency has19
been entered by a final judgment of a court of competent jurisdiction in the insurer's20
state of domicile or of this state, and which order of liquidation has not been stayed21
or been the subject of a perfected suspensive appeal or other comparable order.22
(b) (d) Any person, and any attorney who represents a person, who files a23
petition against the association alleging as a basis for the claim the insolvency of an24
insurer, where said insurer is not an insolvent insurer within the meaning of R.S.25
22:2055(4)(a), shall pay the reasonable expenses incurred because of the filing of the26
petition, including a reasonable attorney's fee, subject to the following conditions:27
(i) The association shall furnish to either the person or his attorney, by28
ordinary service of process, hand delivery, or certified mail, return receipt requested,29 SB NO. 510
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written notification that the insurer is not an insolvent insurer within the meaning of1
R.S. 22:2055(4)(a); and2
(ii) If, within sixty days of the receipt of such notification, the person or his3
attorney has not dismissed the petition, with prejudice and at plaintiff's cost.4
* * *5
(8) "Insurance policy" means an insurance contract as defined in R.S. 22:864,6
issued by an insurer, and shall not include an agreement whereby an insurer agrees7
to assume and carry out directly with the policyholder any of the policy obligations8
of another insurer, such as cut-through endorsements, reinsurance endorsements,9
facultative reinsurance agreements, treaty reinsurance agreements, and other such10
agreements, when either insurer is affiliated with the other. "Affiliated" as used in11
this Section means that either insurer owns or controls, directly or indirectly, a12
majority of the voting shares of the other or the controlling interest therein, or that13
both insurers are so owned or controlled by another.14
(9) "Ocean marine insurance" includes marine insurance as defined in R.S.15
22:47(13), except for inland marine, as well as any other form of insurance,16
regardless of the name, label, or marketing designation of the insurance policy,17
which insures against maritime perils or risks and other related perils or risks, which18
are usually insured against by traditional marine insurances such as hull and19
machinery, marine builders' risks, and marine protection and indemnity. Such perils20
and risks insured against include without limitation loss, damage or expense or legal21
liability of the insured for loss, damage, or expense arising out of or incident to22
ownership, operation, chartering, maintenance, use, repair or construction of any23
vessel, craft or instrumentality in use in ocean or inland waterways, including24
liability of the insured for personal injury, illness or death or for loss of or damage25
to the property of the insured or another person, except this definition shall not26
include insurance on vessels under five tons gross weight.27
* * *28
Section 2. R.S. 23:1195(A)(1) and (3) and 1196(A)(5) are hereby amended and29 SB NO. 510
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reenacted to read as follows:1
§1195. Authorization; trade or professional association; initial financial requirements2
A.(1) Any five or more Louisiana employers who are not public entities, each3
of whom has a positive net worth, is financially solvent, and is capable of assuming4
the obligations set forth under this Chapter, and who are all members of the same5
bona fide trade or professional association may agree to pool their liabilities to their6
employees on account of personal injury and occupational disease arising out of or7
incurred during the course and scope of the employment relationship. This8
arrangement shall not be an insurer, shall not be deemed to be insurance and shall9
not be subject to the provisions of Chapter 1 of Title 22 of the Louisiana Revised10
Statutes of 1950 Louisiana Insurance Code. The member employers of the11
arrangement likewise shall not be insurers or be subject to the Louisiana12
Insurance Code.13
* * *14
(3) The arrangement shall not be a member insured of the Louisiana15
Insurance Guaranty Association, nor shall the Louisiana Insurance Guaranty16
Association be liable under any circumstances for any claims, or increments of any17
claims, made against the arrangement, however, that a claim by the arrangement18
against the Louisiana Insurance Guaranty Association shall not be precluded19
if it is otherwise a covered claim under the Insurance Guaranty Association20
Law.21
* * *22
§1196. Requirements; excess insurance; administrative and service companies;23
status; liability; refunds24
A. Each fund established pursuant to R.S. 23:1195 shall:25
* * *26
(5) Maintain at all times, on a fund-year basis, a contract or contracts of27
specific excess insurance or reinsurance of not less than two million dollars per28
occurrence and aggregate excess insurance or reinsurance of not less than two29 SB NO. 510
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million dollars. The maximum retention under the excess insurance or reinsurance1
contracts shall not exceed amounts as may be provided by the department by2
regulation. Solely for the purposes of authorizing the purchase of reinsurance3
permitted under this Subsection, each fund shall be deemed an insurer. Such excess4
insurance or reinsurance shall only be purchased from companies having a minimum5
rating of A- by A.M. Best Company, A-by Fitch Ratings, A by Weiss Ratings, A- by6
Standard & Poor's, or A3 by Moody's Investors Services, or better, and such7
reinsurance may be purchased from admitted or nonadmitted companies, provided8
that the provisions of R.S. 22:651 through 661, and Financial Accounting Standard9
Number 113 as promulgated and updated by the Financial Accounting Standards10
Board, shall apply to all such reinsurance. All excess insurance policies or11
reinsurance agreements must be approved by the department prior to use. All12
specific and aggregate excess insurance policies maintained by a fund shall be13
considered to be direct insurance for all purposes under the law, including but14
not limited to any receivership or liquidation proceeding and the Insurance15
Guaranty Association Law.16
Section 3. This Act shall be retroactive and remedial and shall apply to (1) all claims17
existing or pending on its effective date in this state and (2) to all claims existing or pending18
on its effective date against the liquidator in liquidation proceedings existing or pending in19
any other state and to all such claims arising or filed on and after its effective date. The20
provisions of this Act are interpretive and intended to correct the contrary interpretation21
given in "Louisiana Safety Association of Timbermen Self-Insurers Fund v. Louisiana22
Insurance Guaranty Association, 17 So.3d 350, 2009-0023 (La. 6/25/2009)" to the fullest23
extent allowed by the Constitution of the State of Louisiana.24
Section 4. This Act shall become effective upon signature by the governor or, if not25
signed by the governor, upon expiration of the time for bills to become law without signature26
by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If27
vetoed by the governor and subsequently approved by the legislature, this Act shall become28
effective on the day following such approval.29 SB NO. 510
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The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Cheryl Horne.
DIGEST
Present law provides for certain entities to be regulated by specific provisions in the
Louisiana Insurance Code. Proposed law retains present law and specifies that any trust or
arrangement formed under group self-insurance funds for workers' compensation shall not
be deemed to be insurance and shall be regulated under the provisions of Labor and Workers'
Compensation law.
Present law defines covered claim as an unpaid claim, including one for unearned premiums
by or against the insured or agent, which arises out of and is within the coverage and not in
excess of the applicable limits of an insurance policy issued by an insurer, if such insurer
becomes insolvent after September 1, 1970.
Proposed law retains present law and includes as a covered claim when the claimant is an
arrangement or trust formed under group self-insurance funds for workers' compensation and
is principally domiciled in the state at the time of the insured event.
Present law provides that a covered claim shall not include any claim asserted for coverage
under a policy when the net worth of the insured for whom coverage would allegedly be
owed exceeds $25 million on December 31
st
of the year immediately preceding the date of
the determination of the insolvency of the insurer. Proposed law retains these provisions but
increases from $25 million to $50 million the net worth provisions in present law.
Present law provides that the net worth of an insured and all of its subsidiaries and affiliates
shall be calculated on the basis of their fair market values. Proposed law retains present law
and specifies that the member employers of an arrangement or trust formed under group self-
insurance funds for workers' compensation shall not be deemed to be affiliates of the
arrangement or trust and shall not be included in the determination of the net worth of the
arrangement or trust.
Present law provides that any five or more Louisiana employers who are not public entities,
each of whom has a positive net worth, is financially solvent, and who are all members of
the same bona fide trade or professional association may agree to pool their liabilities to their
employees on account of personal injury and occupational disease arising out of or incurred
during the course and scope of the employment relationship. Provides that this arrangement
shall not be deemed to be insurance. Proposed law retains present law and clarifies that
such an arrangement shall not be an insurer and the member employers of the arrangement
likewise shall not be insurers or be subject to the Louisiana Insurance Code.
Present law provides that the arrangement shall not be a member insured of the Louisiana
Insurance Guaranty Association, nor shall the Louisiana Insurance Guaranty Association be
liable under any circumstances for any claims, or increments of any claims made against the
arrangement.
Proposed law retains present law and provides that a claim by the arrangement against the
Louisiana Insurance Guaranty Association shall not be precluded if it is otherwise a covered
claim under the Insurance Guaranty Association Law.
Present law requires each fund established by a trade or professional association maintain
at all times, a fund-year basis, a contract or contracts of specific excess insurance or
reinsurance of not less than $2,000,000 per occurrence and aggregate excess insurance or
reinsurance of not less than $2,000,000. SB NO. 510
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Proposed law retains present law and further provides that all specific and aggregate excess
insurance policies maintained by a fund shall be considered to be direct insurance for all
purposes under the law, including but not limited to any receivership or liquidation
proceeding and the Insurance Guaranty Association Law.
Adds a provision that proposed law be retroactive and remedial in application. Provides that
proposed law is intended to correct interpretation of the La. Supreme Court in "Louisiana
Safety Association of Timbermen Self-Insurers Fund v. Louisiana Insurance Guaranty
Association."
Effective upon signature of the governor or lapse of time for gubernatorial action.
(Amends R.S. 22:48(A)(15), 2055(3)(a)(ii) and (f), (4), (8), and (9), R.S. 23:1195(A)(1) and
(3), and 1196(A)(5); adds R.S. 22:2055(3)(a)(iii))