RÉSUMÉ DIGEST
ACT 586 (HB 1078) 2022 Regular Session Seabaugh
New law authorizes the creation of a self-insurance fund for the purpose of providing auto
coverage for vehicles that transport timber and agriculture products and names the fund as
the La. Agriculture Transportation Group Self-Insured Fund.
New law provides that any five or more La. timber or agriculture companies, who are not
public entities, each of whom has a positive net worth and is financially solvent, may pool
their liabilities and self-insure for the purposes of maintaining automobile coverage for
timber and agriculture transportation vehicles. New law provides that members of the fund
must also be members of one or more bona fide trade or professional associations.
New law defines "bona fide trade or professional association" as an active trade or
professional association that promotes La. timber or agriculture production, is charted and
domiciled in Louisiana, has been in existence and conducted regular meetings for at least five
years, and is not established for the primary purpose of operating a self-insured fund.
New law provides that no fund can become operative until the fund is issued a certificate of
authority by the Dept. of Insurance after the department has approved the application for the
fund and the documents required to establish solvency and the ability to properly manage and
pay claims.
New law provides that no person may solicit membership for a fund unless they are licensed
by the department as a property and casualty producer. New law sets forth requirements for
insurance producers who solicit membership for the fund and for the payment of
commissions.
New law provides that the rates for coverage, or the costs of premiums, that may be charged
to the members must be in an amount that is actuarially justified. New law further provides
that once the rate filing is made to the department, the premium rates may be charged to the
members of the fund for automobile coverage within 90 days after the rate filing is made,
unless disapproved within the 90 day period.
New law provides that, in order to maintain financial stability of the fund, the Dept. of
Insurance is to require two or more timber or agriculture companies to maintain a combined
net worth of $1,000,000, or five or more principals of the member companies to maintain a
combined net worth of $1,000,000. New law further provides that financial statements must
not be more than one year old when submitted to the department of insurance for approval
of the self-insurance fund. New law requires further security in the form of excess insurance
or reinsurance in an amount and in a form that is approved by the Dept. of Insurance to insure
the ability to properly manage and pay claims.
New law provides that to further the financial stability of the self-insured fund, the members
will pay a percentage over and above their premiums to establish a reserve account. New law
further provides that the reserve account will be maintained at all times while the self-insured
fund is in operation and no payments can be made from the reserve account unless approved
by the department.
New law provides that, if the fund employs one or more third-party administrators, each
third-party administrator of the fund must post a bond. New law provides that, if the fund
employs its own administrator, the fund is required to purchase a bond, errors-and- omissions
insurance, or other security that is approved by the Dept. of Insurance.
New law requires a self-insurer's fund maintain a minimum of $750,000 in premiums in the
fund for the first year and $2,000,000 in premiums for each year thereafter.
New law provides for agreements to pool liabilities to be set forth in the indemnity
agreement or other instruments. New law provides for annual premium audits to be
conducted by an independent audit firm that is approved by the department. New law provides for proper audits by the fund in a form that is acceptable to the
department. New law does not prohibit the legislative auditor from also reviewing the
records and conducting an audit of the fund.
New law provides that each member must sign mutual indemnity agreements to cover the
risk of liability covered by the fund, and copies of the agreements will be presented to the
Dept. of Insurance when the application is made for approval of the fund. New law requires
that proof of advanced payments to the fund of at least 25% of each member's first year
estimated annual earned premiums be provided with the application.
New law provides that monies deposited into the fund may be invested in certain interest-
bearing or interest-accruing investments and in certain bonds and securities that are
publically traded or have a certain minimum rating with Moody's, Standard and Poor's, or
Fitch.
New law further provides that the department may impose fines and penalties for failure to
comply with requirements to operate the fund as required by new law. New law further
provides that the department may revoke the authority to operate the fund or issue cease and
desist orders if the requirements of new law are not maintained by the fund and its members.
New law provides for standards to which self-insurers must adhere and provides for authority
for the department to take action when a self-insurer is in hazardous financial condition.
New law provides that any administrative hearing that is necessary to resolve a dispute
related to the regulation of the fund is to be conducted by the division of administrative law
in accordance with existing law.
New law provides that, if the fund becomes insolvent, the Dept. of Insurance will require the
fund to submit a plan to take necessary action to restore solvency and the plan must be
approved by the department. New law provides that, if the fund cannot be restored, the Dept.
of Insurance is authorized by new law to execute delinquency proceedings and place the fund
into confidential administrative supervision, conservation, rehabilitation, or liquidation. New
law further provides that the 19th Judicial District Court has exclusive jurisdiction to hear
any delinquency proceeding instituted by the department for the failure of a fund to comply
with the approved corrective action plan and the court may issue an injunction to restrain the
fund and its officers, agents, directors, or employees from transacting any insurance business
or disposing of property until further action by the court.
New law provides that an examination of the fund is to be made by the department at least
every five years. New law provides that the examiners are to be appointed by the
department, who is to instruct them on the scope of the examination in order to determine
if the fund is operating in compliance with new law, and the examiners expenses are to be
paid by the fund.
New law authorizes the department to employ investigators to investigate complaints
received against a fund that is approved to operate under new law or against any
unauthorized group self-insurance fund that is reported to be operating in this state.
New law authorizes a fund that wishes to dissolve to apply to the department. New law
further provides the requirements for the dissolution of the fund, including the requirements
for payment of future claims and the methods to secure future obligations of the fund.
Effective upon signature of the governor (June 17, 2022).
(Adds R.S. 3:4351.1-4351.16)