RDCSB437 4152 4336
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
SB 437 Reengrossed 2022 Regular Session Robert Mills
Proposed 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. Transportation Agriculture Group Self-Insured Fund.
Proposed 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. Proposed law requires members of the fund
must also be members of one or more bona fide trade or professional associations. Proposed
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.
Proposed 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.
Proposed law prohibits the solicitation of membership for a fund unless they are licensed by
the department as a licensed insurance producer. Proposed law sets forth requirements for
insurance producers who solicit membership for the fund and for the payment of
commissions.
Proposed 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. Proposed 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.
Proposed 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. Proposed 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. Proposed law requires further security in the form of
excess insurance or reinsurance in an amount and in form that is approved by the Dept. of
Insurance to insure the ability to properly manage and pay claims.
Proposed 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. Proposed 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.
Proposed law provides that, if the fund employs one or more third-party administrators, each
third-party administrator of the fund must post a bond. Proposed law provides that, if the
fund employs its own administrator, the fund is required to purchase a bond, errors and
omission's insurance, or other security that is approved by the Dept. of Insurance.
Proposed law provides that a self-insurer's fund must obtain a minimum of $750,000 in
premiums in the fund for the first year and $2,000,000 in premiums for each year thereafter.
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Proposed law provides for agreements to pool liabilities to be set forth in the indemnity
agreement or other instruments. Proposed law provides for annual premium audits to be
conducted by an independent audit firm that is approved by the department.
Proposed law provides for proper audits by the fund in a form that is acceptable to the
department. Proposed law does not prohibit the legislative auditor from also reviewing the
records and conducting an audit of the fund.
Proposed law requires each member to 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. Proposed law provides
that proof of advanced payments to the fund of at least 25% of each member's first year
estimated annual earned premiums must be provided with the application.
Proposed 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.
Proposed law authorizes the department to impose fines and penalties for failure to comply
with requirements to operate the fund as required by proposed law. Proposed law further
authorizes the department to revoke the authority to operate the fund or issue cease and
desist orders if the requirements of proposed law are not maintained by the fund and its
members.
Proposed 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.
Proposed 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 Dept. of Insurance in
accordance with present law.
Proposed 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. Proposed law provides that, if the fund cannot be
restored, the Dept. of Insurance is authorized by proposed law to execute delinquency
proceedings and place the fund into confidential administrative supervision, conservation,
rehabilitation, or liquidation. Proposed 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.
Proposed law requires an examination of the fund be made by the department at least every
five years. Proposed 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 proposed law, and the examiners expenses are to be paid by
the fund.
Proposed law authorizes the department to employ investigators to investigate complaints
received against a fund that is approved to operate under proposed law or against any
unauthorized group self-insurance fund that is reported to be operating in this state.
Proposed law provides that a fund wishing to dissolve may apply to the department.
Proposed 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 August 1, 2022.
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(Adds R.S. 3:4351.1 - 3:4351.16)
Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Agriculture, Forestry,
Aquaculture, and Rural Development to the original bill
1. Adds requirements to the definition of a bona fide trade or professional
association.
2. Adds a requirement for a reserve account.
3. Transfers administrative hearings from the Dept. of Insurance to the Division
of Administrative Law.
4. Makes technical changes.
Senate Floor Amendments to engrossed bill
1. Provides for administration hearings to be conducted by the Department of
Insurance.
2. Technical amendment only.
Summary of Amendments Adopted by House
The Committee Amendments Proposed by House Committee on Agriculture, Forestry,
Aquaculture, and Rural Development to the reengrossed bill:
1. Clarify the name of the fund is the La. Agriculture Transportation Group Self-
Insured Fund.
2. Expand the definition of "timber or agriculture transportation vehicle" to include
a vehicle used by an operator or principal.
3. Make technical changes.
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