RULE 054.00.94-004 - Rule #54 - Arkansas Workers Compensation Insurance Plan
RULE 054.00.94-004. Rule #54 - Arkansas Workers Compensation Insurance Plan
SECTION 1. AUTHORITY
This Rule and Regulation is adopted and promulgated by the Insurance Commissioner for the State of Arkansas ("Commissioner") pursuant to the authority vested in the Commissioner by Act 561 of 1991 [codified at Arkansas Code §§ 23-67-201 et seq.]; Act 1155 of 1993 [An Act amending Arkansas Code §§ 23-67-201 et seq.] ; Act 796 of 1993 [An Act amending Chapter 9 of Title 11, Arkansas Code]; Act 1269 of 1993 [An Act supplementing Chapter 67 of Title 23, Arkansas Code]; and by Arkansas Code §§ 23-61-108, 23-67-119, 23-79-109, and 25-15-201 et seq.
SECTION 2. EFFECTIVE DATE
The provisions of this Rule and Regulation shall become effective March 31, 1994.
SECTION 3. PURPOSE
The purpose of this Rule and Regulation, as amended, is to reform the mandatory Workers' Compensation Insurance Plan ("WCIP" or "Plan") to assure coverage for employers who are in good faith entitled, but unable to procure, workers' compensation and employers' liability insurance in the voluntary market, and to provide for the fair, efficient, and equitable operation and regulation of the Plan.
SECTION 4. DEFINITIONS
A. "Commissioner" shall mean the Insurance Commissioner of the State of Arkansas.
B. "Plan" or "WCIP", shall mean the Arkansas workers' Compensation Insurance Plan.
C. "Plan Administrator" means such organization or organizations to which the responsibility for administering the affairs of the Plan may, from time to time, be delegated, including but not limited to such functions and duties as rates, forms, and statistics.
D. "National Council on Compensation Insurance" or "Council" means a rating organization or advisory organization of that name which is licensed in this State to make and file rates, classifications, and rating plans for workers' compensation insurance including rates for the residual market.
E. "Producer" means a person designated by and representing an employer which said person is properly licensed to sell or place workers' compensation and employers' liability insurance in the State of Arkansas whose privileges under the Plan have not been suspended or revoked by the Commissioner.
F. "Affiliated Insurers" means an insurer that directly, or indirectly through one (1) or more intermediaries, controls, or is controlled by, or is under common control with, the insurer specified. The term "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an insurer, whether through the ownership of voting securities, by contract, or otherwise. Control shall be deemed to exist if any person or business enterprise, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies, representing ten (10) percent or more of the voting securities of any other insurer.
G. "Servicing Carrier" means an insurer selected by the Commissioner pursuant to Section 12(1) hereof to receive and service assignments on behalf of the Plan.
H. "Employer" means any business organization or enterprise that is required by statute to maintain workers compensation insurance in this State, regardless of the domicile or principal place of business of such organization or enterprise. The term shall include any business organizations or enterprises that are affiliated as a result of common management or common ownership.
I. "Articles of Agreement" or "Articles" means the reinsurance mechanism authorized under this Plan to provide reinsurance to the servicing carriers on employers assigned to them under this Plan, and to assure equitable and efficient distribution of its profits and losses among the participating carriers, which said agreement and any amendments thereto shall be provided to and approved by the Commissioner but which, in cases of conflict between them and this Rule and Regulation, shall be subordinate to this Rule and Regulation.
J. "Workers' Compensation Insurance" means:
(a) Statutory workers' compensation and occupational disease coverage as required by Arkansas Code §§ 11-9-401 et. seq., 23-67-119, and 23-67-201 et seq., including also liability under the Longshore and Harbor "Workers' Compensation Act, as amended, and the Federal Coal Mine Health and Safety Act of 1969, as amended;
(b) Employers liability insurance written in connection with a workers' compensation policy; and
(c) Such other coverages as approved by the Commissioner.
K. "Net Premiums Written" means the gross direct premiums charged less all premiums (except dividends and savings refunded under participating policies) returned to insureds for all Workers Compensation and Occupational Disease Insurance, exclusive of premiums for employers subject to this Plan, and for employers written under the National Defense Projects Rating Plan and under excess policies.
L. "Collected Premium" means the gross direct premium charged and physically collected and receipted for all employers subject to this Plan.
M. "Voluntary Offer of Coverage" means a legitimate, good faith offer of workers' compensation insurance made by a workers' compensation insurer to an employer on a "voluntary" basis outside this Plan, which said offer is either:
(i) of such workers' compensation insurance on a monoline basis and on a reasonable rating plan approved for use in Arkansas by the Commissioner for that insurer; or
(ii) of such workers' compensation insurance in combination or coordination with other property and/or casualty coverages and limits desired by the employer and as such insurer may also offer; provided however, that such insurer shall apply its filed rating plan (including all applicable discounts or credits) to such employer in a good faith, non-discriminatory manner. "Voluntary Offer of Coverage" shall in no event be interpreted as including or referring to an offer, entreaty or opportunity presented for coverage under any type of self-insured workers' compensation plan.
Neither the Plan Administrator(s) nor the servicing carrier(s) shall have a responsibility to determine whether the putative voluntary offer of coverage is truly "voluntary", but any agent or broker and any insurer knowingly submitting an offer of workers compensation coverage to an employer which does not meet the above definition of a bona fide "voluntary offer" may be in violation of Ark. Code Ann. §§ 23-66-205 et. seq. and Section 19.D. of this Rule and Regulation.
N. "Good faith bona fide dispute" means a dispute between an employer and an insurer where the employer, or someone on its behalf, has provided written notice of the dispute to the insurer. The employer must have given reasonable notice to the insurer of the specific areas of the dispute and have requested voluntary resolution or conciliation of the matter(s) in dispute.
SECTION 5. ELIGIBILITY FOR PLAN
A. Any employer required to secure the payment of workers' compensation pursuant to Arkansas Code § 11-9-404(a)(1) shall be entitled to workers' compensation insurance through the Plan, provided:
1) Within sixty (60) days preceding the date of application, the employer must have applied for workers' compensation coverage and have been rejected by at least two (2) insurers, Specifically including, where applicable, the insurer providing coverage to the employer at the time of application;
2) Within sixty (60) days preceding the date of application, the employer must not have rejected a "voluntary offer of coverage" from an insurer; and
3) The employer complies with the requirements of Section 6 and Section 8 of this Rule and Regulation in applying for workers' compensation insurance through the Plan.
B. Any employer eligible to obtain workers' compensation insurance through the Plan, as provided in Subsection (A) of this Section, must also in good faith be entitled to such insurance. Good faith will be presumed in the absence of clear and convincing evidence to the contrary. An employer is not in good faith entitled to insurance if any of the following circumstances exist:
1) If, at the time of application, a self-insured employer is aware of pending bankruptcy proceedings; insolvency; cessation or impending cessation of operations; or conditions that would probably result in occupational disease or cumulative injury claims from exposures incurred while the employer was self-insured.
2) If the employer has failed or refused to comply with all effective laws, orders, rules, or regulations made by public authorities relating to the welfare, health and safety of employees.
3) If the employer has an outstanding obligation for workers compensation premium on previous insurance; provided, however, that no employer shall be deemed to be in default of a premium obligation for purposes of this paragraph if all of the sum by which he is alleged to be in default is properly attributable to a good faith, bona fide dispute between the insurer on such previous insurance and the employer over the accuracy or legality of an audit of payroll performed by or at the request of the insurer or of the accuracy of the Classification or Classifications assigned to his employees. If the good faith, bona fide dispute has not been resolved to the mutual satisfaction of the parties within sixty (60) days of the reasonable notice to the insurer, in order for the dispute to still be considered good faith and bona fide, the employer must have instituted the review proceedings as provided by Ark. Code Ann. § 23-67-119(3)(B).
4) If the employer or its representative and/or the producer knowingly makes a material misrepresentation on the application for insurance by omission or otherwise; provided however, that in no event if on or subsequent to the effective date of insurance coverage there occurs a "compensable injury" within the meaning of Arkansas Code § 11-9-102(5) may an insurer effect a rescission of coverage to the prejudice of any such covered employee.
SECTION 6. PROCEDURE FOR APPLICATION
A. The employer, its representative and/or producer shall file a completed application in duplicate with the Plan Administrator on a form prescribed by the Plan Administrator. The application must be substantially completed, based upon information reasonably available to the employer and the producer, prior to its submission to the Plan Administrator.
B. The employer shall include as a part of the application a copy of its latest filed federal employer 940, 941, 941E, 942 or 943 form or equivalent federal-or state-required verifiable current payroll record, such as an unemployment wage report, payroll information included in a certified profit and loss statement, or employer-generated profit and loss statement with a notarized explanation why such employer is unable to provide a verifiable payroll record.
C. The employer, its representative and/or producer shall forward with the application and payroll verification an agency check, a certified check, or a cashier's check payable to the Plan Administrator for the estimated annual or deposit premium. The amount of deposit premium payable shall be as provided on the application and in the deposit premium plan as approved by the Commissioner, but nothing herein shall prohibit an insurer and an employer, after application, to mutually agree to monthly reporting of payroll and payment of premium.
D. In order to promote competition amongst servicing carriers and to improve the service thereof, the employer applying for initial coverage or renewal coverage within the Plan may strike up to a maximum of six (6) servicing carriers from the list of active eligible servicing carriers then maintained by the Commissioner and the Plan Administrator; provided, however, that in no event shall an employer be entitled to strike more than one-half of the active eligible servicing carriers; and provided further, that in no event shall an employer or a Producer acting on his behalf strike any servicing carrier from the current list unless the employer and/or his Producer representative has a good faith belief that such carrier does not provide adequate servicing of Plan business. The Commissioner has the authority to investigate the exercise of the "striking right" herein provided, to prevent any abuses thereof, to take such steps as may be reasonably necessary to prevent negative impact upon Plan administration, and to sanction violations and abuses, if any, under current law.
E. The Plan Administrator shall make available to all Producers copies of the currently approved Application for Workers' Compensation Insurance which has been approved for use in the Plan by the Commissioner or shall direct Producers to the appropriate source if the approved form be provided by another entity. The Plan Administrator shall itself make available to Producers at all times a current list of active eligible servicing carriers on the "Appendix A" to such Application which said Appendix A shall list all of the current eligible servicing carriers and addresses and provide a reasonable mechanism thereupon for striking of same in accordance with Ark. Code Ann. § 23-67-206(4) and this Rule and Regulation. Each employer or Producer representative thereof desiring to strike a servicing carrier or carriers shall physically attach the completed "Appendix A" to the Application before forwarding it to the Plan Administrator as otherwise provided herein. The basic form of "Appendix A" must be filed by the Plan Administrator as required by Ark. Code Ann. § 23-67-119. Such form need not be re-filed for approval when and as the list of current eligible servicing carriers is changed or amended, but the Plan Administrator is, nonetheless, required to provide an informational copy to the Commissioner upon the making of each change or amendment in the list. Each such "Appendix A" shall bear a revision date printed upon its face.
SECTION 7. BINDING COVERAGE, ASSIGNMENTS AND POLICY ISSUE
A. The Plan Administrator will not bind coverage if the application is not substantially completed; if payroll verification is not included; or if a check for the estimated annual or deposit premium is not included with the application. Upon determination that an application is deficient, the Plan Administrator shall immediately advise the party submitting the application by telephone or facsimile that the application is deficient, and shall further advise the party submitting the application as to what action is necessary to cure the deficiency. If such deficiency has not been cured within three (3) normal business days of such advice, the Plan Administrator shall return all materials including the check to the submitting party with an explanation of the rejection. Coverage shall not be considered bound on deficient or rejected applications; provided, however, that coverage will be considered bound from the times set forth below and through the three (3) normal business day period (ending at 5:00 p.m. on the third day) here described if the application is substantially completed and if a valid check for the estimated annual or deposit premium has been included with the application.
B. Coverage may be bound under the Plan, for applications submitted as provided in Section 6, in accordance with the following procedures:
1) For all employers, other than those formerly self-insured (either individually or as part of a group), coverage will be bound at either 12:01 a.m. on the first day following United States Postal Service postmark time and date on the envelope in which the application materials are mailed, or at the expiration of existing coverage, whichever is later.
(a) If there should be no United States Postal Service postmark, coverage will be effective at 12:01 a.m. of the date following actual receipt by the Plan Administrator, unless a later date is requested.
2) For employers formerly individually self-insured, coverage will be bound at either 12:01 a.m. not earlier than sixty (60) days following the United States Postal Service postmark time and date on the envelope in which the application materials are mailed, unless a later dated is requested.
(a) If there should be no United States Postal Service postmark, coverage will be effective at 12:01 a.m. not earlier than sixty (60) days following the date of actual receipt by the Plan Administrator, unless a later date is requested.
3) For employers who have formerly been members of self-insured groups, coverage will be bound at the earlier of:
(i) 12:01 a.m. not earlier than thirty (30) days fallowing the United States Postal Service postmark time and date on the envelope in which the application materials are mailed, unless a later date is requested;
(a) If there shall be no United States Postal Service postmark, coverage will be effective at 12:01 a.m. not earlier than thirty (30) days following actual receipt by the Plan Administrator, unless a later date is requested;
(ii) at the expiration of existing coverage under the self-insured group.
C. If coverage is bound pursuant to Subsection (B) of this Section, the Plan Administrator shall immediately issue a thirty (30) day binder in the name of the servicing carrier with copies to the insured, producer, and the servicing carrier to which the Plan Administrator assigns the employer.
D. Except where otherwise provided in this Plan, all assignments under the Plan are to be made on an intra-state basis.
E. Prior to the expiration of the binder issued under Subsection (C) of this Section, the servicing carrier shall issue and deliver a policy of insurance to the employer and forward a copy of the policy to the producer. The policy shall be issued for a term of at least one (1) year, unless a shorter term has been requested. A copy of the policy declarations and all endorsements must be filed with the Plan Administrator or its designee and forwarded to the producer. The servicing carrier shall stamp "AR WCIP" on all policies, policy declarations, and endorsements, and shall provide appropriate notice of policy issuance to the Workers Compensation Commission.
F. Any insurer who wishes to insure an employer as voluntary business may do so at any time. If such insurer is not the servicing carrier, the servicing carrier shall cancel its coverage pro rata and the assignment shall automatically terminate as of the effective date of the voluntary insurer's insurance policy.
G. Any employer desiring insurance for operations in states other than the state covered by this Plan may request its servicing carrier to furnish insurance in such additional states in accordance with Section 13 of this Rule and Regulation. Plan policies affording coverage on operations in more than one (1) state must clearly indicate the premium developed for each state separately.
SECTION 8. PLAN RATES INCLUDING ALTERNATE PREFERRED PLAN
A. All insurance under the Plan shall be written in accordance with the classifications, rates, and rating plans established for the Plan and approved by the Commissioner, except as provided herein. The Plan Administrator(s) shall file for approval with the Commissioner a rating plan which shall apply to all Arkansas risks within the Plan which shall:
(a) incorporate a tabular "debit" and "credit", system whereby employers which are experience rated will be either benefited or penalized depending upon their experience modification factor;
(b) incorporate a "merit rating plan" for all employers which are not experience rated but which will incorporate the concept of debits and credits as above to the extent that the claims experience of the employer may be readily provable to the satisfaction of the Plan Administrator.
It is to be understood that the tabular rating system and rating plan herein described shall be "revenue neutral" in that it shall be designed and implemented to produce the same amount of total revenue that is produced under current rates and rating plans approved by the Commissioner and in effect from time to time but which will, at the same time, allow the re-allocation of that total premium burden amongst all employers in accordance with their safety and loss claims experience.
B. The Plan Administrator shall also file for approval an "Alternate Preferred Plan" which shall only apply to employers within the Plan who have carried workers compensation insurance continually for at least four policy years and who have had better than average loss experience. With respect to those employers who are experience-rated, it shall apply to all employers who have an effective experience modification factor of 0.800 or less, and with respect to those employers otherwise eligible but which are not experience rated, the Plan Administrator shall, if the employer provides proof deemed satisfactory to the Plan Administrator, place such within the Alternate Preferred Plan. The Plan Administrator shall forward all employer-provided information and documentation to the servicing carrier for eligibility determination and calculation of the appropriate credit. If an employer is deemed eligible for the Alternate Preferred Plan, he or it shall receive credits against the manual rates in such amounts or percentages as may be proposed by the Plan Administrator and approved by the Commissioner.
All credit adjustments under the Alternate Preferred Plan shall be made to standard premium.
There shall be a rebuttable presumption that no employer within the WCIP or eligible for coverage thereunder pursuant to Section 5 hereof is eligible for credits under the Alternate Preferred Plan; the burden is upon the employer to demonstrate to the reasonable satisfaction of the Plan Administrator and servicing carrier that it qualifies for same for the policy year in question. Approval for credits under the Alternate Preferred Plan shall be on a policy year by policy year basis, and the employer shall upon each such request be responsible to provide the Plan Administrator and servicing carrier with all such tax returns, audits, annual reports, bank statements and the like as may be requested.
In order that the credits to be given under the Alternate Preferred Plan be "revenue neutral" within the Plan as a whole, the Plan Administrator shall devise and submit a method for offsetting the credits thereby given by increasing the burden of employers with poor experience [regardless of length of coverage by workers compensation insurance].
SECTION 9. CANCELLATION AND RENEWAL
A. A servicing carrier shall have the right to cancel prospectively and upon thirty (30) days written notice any binder issued by the Plan Administrator, or any policy it has issued under the Plan:
1) Where the employer is not eligible for the Plan as provided in Section 5 of this Rule and Regulation;
2) Where the employer refuses to implement reasonable health, safety or loss control recommendations of the servicing carrier or of a duly-authorized government agency;
3) Where the employer refuses to allow the servicing carrier reasonable access to its facilities or to its files and records for audit or inspection; or
4) Where the employer refuses to disclose to the servicing carrier the full nature and scope of the servicing carrier's exposure.
A servicing carrier shall, however, have the right to cancel prospectively upon ten (10) days' written notice if the cancellation is for nonpayment of premium when due. A servicing carrier shall have the right to extend the notice of cancellation if provided reasonable assurance of payment by the employer, but it may not extend the original due date, by more than a total of thirty (30) days.
The servicing carrier shall proceed according to Arkansas Code § 11-9-408(1)) in canceling any hinder or policy issued under the Plan, including the requisite notices to the employer and to the Workers Compensation Commission. All notices of cancellation shall state the hour and date at which the cancellation is to he effective. If, however, the employer procures other insurance or becomes self-insured as provided by law within the notice period, the cancellation date of the 'policy being cancelled shall be the effective date of the replacement coverage.
B. At least forty-five (45) days prior to the scheduled expiration date of a policy issued under the Plan, the servicing carrier shall notify the employer and the producer, in writing, and forwarding the Plan Administrator a copy, of the impending expiration and instruct the employer to request the servicing carrier to renew, provided the employer continues to be eligible for coverage under the Plan. The servicing carrier must forward the renewal proposal to the employer, with a copy to the producer and to the Plan Administrator. Within thirty (30) days after receipt of the estimated annual or minimum deposit premium, the servicing carrier shall issue a policy, properly stamped "AR WCIP," to the employer and furnish a copy of the renewal Information Page to the Plan Administrator or its designee, to the producer, and to the Workers Compensation Commission. The renewal policy shall be effective upon expiration of the current policy, or as provided in Section 7 (B)(1), whichever is later.
C. A servicing carrier unwilling to renew an employer assigned to it shall notify in writing the employer, the producer, and the Plan Administrator at least forty-five (45) days prior to the scheduled expiration date of the policy giving the reasons therefor.
D. If any employer to which this Plan applies is dissatisfied with its servicing carrier, the employer may request reassignment by submitting in writing reasonably acceptable reasons for the request to the Plan Administrator at least thirty (30) days prior to the scheduled expiration date of the policy.
E. The employer may request cancellation at any time. Once coverage is no longer needed, the servicing carrier shall cancel the coverage pro rate as of the requested data for certain reasons. Typical or normal reasons for a request for pro rata cancellation include:
(i) going out of business;
(ii) no longer any workers' compensation exposure;
(iii) the business is sold, or
(iv) the business is being insured in the voluntary market.
SECTION 10. PARTICIPATION
All insurers licensed to write and actually writing workers compensation insurance in this State are required to participate in this Plan and subscribe to the Articles of Agreement for this State. Any assessment that may be required of such carriers by reason of Ark. Code Ann. § 23-67-204(a)(6) may be offset to the extent provided under the terms of the "Take Out Credit Program" Rating Plan of the National Council on Compensation Insurance as approved by the Commissioner.
Insurers which, prior to this Regulation, provided coverage on a direct assignment basis shall continue to be responsible for all obligations arising from such operations with no reinsurance available through the Articles of Agreement.
Commencing with the effective date of this Regulation, all direct assignment carriers shall be required to participate in the Articles of Agreement. All former direct assignment carriers shall, during policy year 1994, participate in the Pool, with respect to assessments and refunds, on a prorated basis which recognizes the number of months as a Pool member in relationship to the twelve month period.
Whenever the Plan Administrator, with the consent of the Commissioner, determines the capacity of servicing carriers to handle assignments made pursuant to this Plan and this Rule and Regulation falls below a level which is adequate to handle all the assignments being made, the Commissioner may, if an adequate number of servicing carriers have not voluntarily made themselves available, appoint such number of qualified insurers as are reasonably necessary to service the needs of Arkansas employers under the Plan.
SECTION 11. PLAN ADMINISTRATOR
A. The Commissioner shall from time to time designate a Plan Administrator to administer and operate the Plan.
B. The Plan Administrator (or any successor Plan Administrator or Administrators) shall open and continually operate a centrally - located office within the State of Arkansas reasonably and readily accessible to the offices of the Commissioner and at a location and with such staffing, equipment and facilities as shall be reasonably acceptable to the Commissioner as being adequate to provide a high quality level of service to the people of the State of Arkansas.
C. The Plan Administrator shall file with the Commissioner for approval operating rules, procedures, and guidelines consistent with the provisions of this Rule and Regulation for the administration and operation of the Plan. The Plan Administrator shall publish and make available to all insurers and producers the operating rules, procedures, performance standards, and guidelines for the administration and operation of the Plan. Further, the Plan Administrator shall file for approval its schedule of fees which it proposes to remit to Producers for policies written and services provided under the Plan.
D. The Plan Administrator shall have the following duties and responsibilities in addition to any others set forth in this Plan, all of which are subject to the ultimate control and oversight of the Commissioner:
(1) administering, managing, and enforcing the Plan subject to the provisions contained herein;
(2) determining the methodology and formula for making assignments to servicing carriers pursuant to Section 15 and securing the necessary information in order to make the assignments;
(3) processing assigned risk applications pursuant to the requirements of this Plan;
(4) establishing eligibility criteria for servicing carriers and appointing servicing carriers, each of which shall be subject to the prior approval of the Commissioner;
(5) establishing written performance requirements for servicing carriers, including, but not limited to:
- verification of ongoing Plan eligibility of the employer
- timely and accurate issuance of policies and endorsements
- timely and accurate filings with administrative agencies, as required
- maintenance of premiums on policies consistent with manual rules, rates, rating plans, and classifications
- timely and accurate completion and billing of final audits
- collection of premium
- claim services, including investigation, disability management, and medical cost control
- loss control services and safety information to encourage employers to make safety a part of their business
- Cooperation with the Commissioner and with the Workers Compensation Commission and Arkansas Department of Labor in carrying out and effectuating the safety mandates of Act 796 of 1993 and such Rules and Regulations as may be promulgated thereunder
- payment of producer fees
- issuance of renewal proposals and non-renewal notices
- assurance of insured and insurer compliance with all terms and conditions of policy contract
- resolution of complaints and response to insured/producer inquiries
- reporting financial and statistical data to producers and insureds, as well as to the Commissioner
- requirement to consult with and keep insureds apprised of developments in incurred claim cases;
(6) keeping servicing carriers apprised of all required Performance Standards, monitoring servicing carrier performance and enforcing performance requirements and incentives;
(7) administering the dispute resolution mechanism as provided in Section 16;
(8) developing and implementing assigned risk operating rules and forms to the extent necessary to carry out the purposes of this Plan;
(9) informing the Commissioner of any insurer that *is improperly not participating in this Plan; and
(10) monitoring the performance and operation of the Plan and initiating and requesting approval of amendments thereto as appropriate.
The Plan Administrator shall also be responsible for determining the expenses for the operation of the Plan, exclusive, of the Plan Administrator's expenses incurred in connection with responsibilities it has under the Articles, and shall assess each insurer participating in the Plan for those expenses on an equitable basis as determined by the Plan Administrator and approved by the Commissioner.
E. Commencing with the first quarter of 1994 and quarterly thereafter, the Plan Administrator shall file with the Commissioner a statement of expenses for the operation of the Plan and a report of the quarterly results of the servicing carriers under the Plan. The report shall include written and earned premium; paid and incurred losses; administration and servicing carrier allowances and remuneration; such other factors or elements as the Commissioner may from time to time determine; and effective for the first quarter of 1995, it shall include servicing carrier complaints reported by employers or producers. The statement and report shall be filed within ninety (90) days of the close of the applicable quarter. In addition, with regard to insurers previously authorized as direct assignment carriers, the Plan Administrator shall file annually on or before October 1 of the following year, a report of the annual results of such direct assignment carriers similar to that applicable to servicing carriers.
Further, and within ninety (90) days following the end of the fourth quarter of 1994, and annually thereafter, the Plan Administrator shall file with the Commissioner a performance review and evaluation of each servicing carrier in accord with the "Performance Standards and Procedures for Measuring Servicing Carrier Performance" in Section 12 and the criteria set forth in paragraph D.(5) above.
SECTION 12. SERVICING CARRIERS
With respect to the servicing carriers appointed by the Plan Administrator and approved by the Commissioner, the following shall apply:
(1) Eligibility to Act As a Servicing Carrier. The Plan Administrator shall establish written requirements that insurers must meet in order to be eligible to act as a servicing carrier. Those requirements shall consider, among other things, the insurer's financial standing, availability of resources, length and quality of experience in the state writing workers compensation insurance, market share, and demonstrated compliance with the mandates of Ark. Code Ann. §§ 23-67-201 et. seq. From among those insurers that are eligible and have applied to act as a servicing carrier, the Plan Administrator shall appoint a sufficient number of servicing carriers as are needed to handle the assignments made pursuant to this Plan. The Plan Administrator may terminate the servicing carrier status, subject to the approval of the Commissioner, of any insurer that fails to meet the servicing carrier requirements on a continuing basis. During the first year this Plan is in effect, any insurer that is qualified as a servicing carrier under any similar Plan which was previously in effect in this State and continues to be qualified as of the date this Plan takes effect will be deemed to be a qualified servicing carrier under this Plan.
(2) Quarterly Operations Report. Each servicing carrier shall provide a quarterly report to the Plan Administrator in such format and at such time as determined by the Plan Administrator. This report, among other things, shall provide information on the servicing carrier's operations related to Plan business in the following areas: underwriting, auditing, claims, loss control, premium collection, and customer service.
(3) Standards for Servicing Carrier Performance, Compensation, and Incentives. The Plan Administrator shall, with the approval of the Commissioner, establish written minimum levels of acceptable performance for servicing carriers and shall establish procedures for measuring servicing carrier performance. Servicing carriers shall manage losses in compliance with the performance standards established hereunder. The Plan Administrator shall also establish the compensation for servicing carriers which shall take into consideration, among other things, provisions for (a) rewarding servicing carriers for positive action targeted at reducing losses and costs, and (b) disincentives for inefficiencies and poor service, and (c) servicing carrier capacity. And, in accordance with Ark. Code § 23-67-204(k) the performance plan shall provide that no less than Thirty-three percent (33%) of the servicing carrier's remuneration shall be based upon how well or how poorly it complies with the standards for servicing carrier performance, including particularly, but not limited to, a review of collected premium as versus written premium and by review of loss ratios of its book of business and degree of improvement therein. Such compensation system shall be made effective with respect to and shall apply to all servicing carrier contracts effective on or after September 1, 1993. The Plan Administrator, as approved by the Commissioner, shall on an equitable and consistent basis provide that those monies that would otherwise have gone to servicing carriers that did not perform up to an acceptable standard shall be distributed amongst those servicing carriers that met or exceeded the performance standards.
(4) Each servicing carrier shall continually employ such number of qualified administrative personnel and dedicate such equipment and facilities to the administration of the Arkansas Workers' Compensation Insurance Plan as the Commissioner, in his reasonable discretion, deems adequate to service the needs of the Plan; and, further, the standards for servicing carrier performance shall include a requirement that each of them shall:
(i) provide a level of service equal to that provided to employer-insureds in its voluntary workers compensation line of business and assure same by putting into effect internal administrative procedures which shall assure that such is the case;
(ii) maintain with the Commissioner a list of responsible management personnel of the insurer qualified to make administrative decisions on the insurer's behalf concerning policies issued within the Plan;
(iii) keep the Commissioner continually advised, of the address and telephone number of the insurer's office servicing the Plan on its behalf;
(iv) maintain a toll-free telephone number or numbers adequate to service the Plan and keep the Commissioner, employers, the Workers Compensation Commission, and producers continually apprised of same;
(v) establish a program and procedure whereby such carriers shall not make ultimate determination as to joint settlement of claims without consulting with the employer insured; nothing herein shall be deemed to alter or abridge the servicing carrier's ultimate right and authority under the law and contract to handle and determine the defense of workers' compensation claims;
(vi) maintain its billing and rating procedure in timely compliance with applicable Orders of the Commissioner approved rate filings and approved rule and rating plans; and
(vii) such other service or performance standards including, but not limited to, matters relating to loss experience, safety and loss control success, profitability, underwriting, billing and collection of premium, audits, claims, customer service, and such accounting and statistical results reporting as may be specifically required by the Commissioner.
The written "Performance Standards and Procedures for Measuring Servicing Carrier Performance" hereunder are those currently in effect and and are those established by the Council. All of which said provisions are expressly incorporated herein and made a part hereof; such Performance Standards and Procedures for Measuring Servicing Carrier Performance may be amended and supplemented from time to time with the prior, express written approval of the Commissioner; provided, however, that no servicing carrier shall be subjected to the administrative fine or penalty provided for in subparagraph (7) hereof as to any particular performance standard of which it has not had at least three (3) month's notice. All servicing carriers shall be deemed to have Notice upon the Plan Administrator's receipt of approval from the Commissioner.
(5) Servicing carriers may, within the reasonable discretion of the Commissioner, join cooperatively with other licensed casualty insurers or general business corporations for the purpose of satisfying other duties as servicing carriers, including but not limited to policy issuance, claim review and payment, accounting and auditing and loss control and safety functions. Any insurer applying for approval as a servicing carrier, or any currently approved servicing carrier which has contracted or agreed to contract with a third party, shall make full disclosure of such party and provide the Plan Administrator and Commissioner with all such information regarding same as they may request. All such third party contractual arrangements and amendments thereof shall be subject to review, examination and approval or disapproval of the Commissioner upon request. No such contract of a servicing carrier with another entity will in any manner lessen the duties and obligations of the servicing carriers or the standards by which their performance is to be measured.
(6) Monitoring and Enforcement. The Plan Administrator, on behalf of the Commissioner, shall monitor and review servicing carrier performance by (1) reviewing the quarterly and annual reports; (2) requiring and reviewing self-audits; (3) conducting on-site audits of all servicing carriers no less often than once per triennium; however, the Commissioner may at his own initiative direct the Plan Administrator to conduct an audit of any servicing carrier whenever circumstances merit such audit; and (4) reviewing any other information available that relates to the servicing carrier. The Plan Administrator shall require servicing carriers to maintain desired performance levels and will take appropriate remedial action where necessary including, but not limited to the remuneration adjustment program discussed above, and the establishment and administration of a progressive discipline program which may lead to terminating an insurer's servicing carrier status. In order to fulfill its responsibilities under this Plan, the Plan Administrator shall have the right, itself or through authorized representatives, at all reasonable times during regular business hours, to audit and inspect the books and records of any servicing carrier with respect to any policies, claims, or related documents coming within the purview of this Plan, the Articles, or the reinsurance mechanism. Each servicing carrier shall, further, have the responsibility of reimbursing the Commissioner for any reasonable expenses of travel and lodging, including meals, which he or any of his designees may incur in carrying out their duty of monitoring and enforcement.
(7) In addition to the adjustments to remuneration of servicing carriers as discussed above and the progressive discipline procedure, servicing carriers are subject to the imposition by the Commissioner, after notice and hearing, of administrative fine or penalty in the sum of not more than One Thousand Dollars ($1,000.00) for each violation of standard. Violations of standards of performance shall be reviewed annually by the Plan Administrator and the Commissioner and determined cumulatively under each separate performance standard.
SECTION 13. INTERSTATE ASSIGNMENTS
A. Voluntary Coverage Any employer assigned under this Plan and desiring workers' compensation insurance for operations in states other than Arkansas may request its servicing carrier to furnish such insurance in such additional states. Workers' compensation insurance in such additional states may be written by the servicing carrier on a voluntary basis and in accordance with the law, rates, rules, classifications, and regulations applicable to the voluntary workers' compensation market in those states,
B. Assigned Risk Coverage.
(1) "Similar" Assigned Risk States. If the servicing carrier does not wish to provide coverage in the additional states on a voluntary basis, if those states have a Workers Compensation Insurance Plan that is similar to this Plan and if such other Plan allows employers applying for coverage thereunder to obtain coverage for their operations in Arkansas, then the servicing carrier must provide assigned risk coverage in such additional states as follows:
(1) A servicing carrier providing such insurance shall collect all premiums due on operations located in such other states. The effective date of such insurance in such additional states shall be the day after premium is received; however, in the event coverage in such additional states is on an "if any" basis, the effective date of such coverage shall be the day following receipt of an acceptable request for such insurance by the carrier. A copy of the policy Information Page and all endorsements, properly stamped "AR WCIP," shall be submitted to the appropriate Plan Administrator having jurisdiction in the state where the coverage is effected.
(2) The rates, rating plans, classifications, and policy forms used to provide coverage in such additional states shall be those applicable to residual market risks that are on file and approved by the regulators in those additional states.
(3) The servicing carrier must also be a signatory to an agreement providing reinsurance for residual market risks similar to the Articles of Agreement in each state where the coverage will be provided.
A servicing carrier unable to provide insurance for an employer in additional states in accordance with this Section 13.B. or unwilling to write voluntary coverage in accordance with Section 13.A., shall refer the request to the Plan Administrator which shall re-assign the employer to a servicing carrier or carriers that is/are able to provide coverage in accordance with this Section 13.A. and Section 13.B..
(2) All Other States. If the servicing carrier does not wish to provide coverage in an additional state on a voluntary basis, and if the state in question does not have a workers Compensation Insurance Plan that is similar to this Plan, then the servicing carrier must provide coverage for operations of an Arkansas employer in such additional state IF AND ONLY IF:
a. the employer has made application to no fewer than two (2) voluntary workers compensation insurers authorized to insure such risks in such state and has been declined, if such state in fact, has a voluntary workers' compensation insurance market; and
b. the employer has made application to either an "unsimilar" assigned risk plan, or to either a competitive or mandatory state workers compensation fund in such state and has been declined for coverage.
In the event coverage in another state cannot be obtained in the fashion as set forth above, then the services as rendered by employees of the Arkansas employer shall be deemed to be services rendered pursuant to a contract of "employment in this State" as provided by Ark. Code Ann. § 11-9-102(12) and as amended by Section 2 of Act 796 of 1993, and the servicing carrier shall provide coverage for such operations under this Plan and under the mandate of Ark. Code Ann. § 11-9-404(a)(1); PROVIDED, HOWEVER, that in the event any employee of any such employer incurs an injury or occupational disease compensable under the law of such other State, elects to recover under such laws and is finally successful in so doing, the servicing carrier shall be entitled to recoup from such employer the additional premium, if any, that would have been billed to that employer for the services of that employee in that other State by:
(i) either the risk plan or competitive or monopolistic fund operating in such State; or
(ii) a licensed workers compensation insurer legally providing coverage to an employer in such State pursuant to the laws thereof. Such carrier recouping premium in this manner shall be entitled to recoup premium for a period of coverage equal to the period of time the injured employee performed services in such State (subject to the maximum differential, if any, between the Arkansas rates and the other State rates for a period of one policy year) and shall be entitled to bill and collect from the employer the said premiums as premium due hereunder and subject to the cancellation procedures set forth in Section 9 hereof.
C. Foreign Employers.
(1) From Similar Assigned Risk State. Employers who make application for workers' compensation insurance under another state's Workers' Compensation Insurance Plan may purchase coverage for operations in Arkansas without meeting the application requirements of this Plan, provided:
(1) the employer qualifies for such insurance under the other state's Plan;
(2) the employer is in good faith entitled to insurance under this Plan;
(3) the other state's Plan is similar to this Plan;
(4) that Plan also provides for interstate assignments; and
(5) the payroll for the employer's operation in this State is not greater than the payroll in the other state.
The rates, rating plans, classifications, and policy forms used to provide coverage in Arkansas shall be those that are applicable to residual market risks in this State and are on file and have been approved by the Commissioner.
The Administrator of the other Plan is authorized to assign employers with operations in Arkansas to the other Plan's servicing carriers subject to the following conditions:
(1) The assigned carrier must be a signatory to the Articles of Agreement in this State. In addition, if the payroll for the employer's operation in this State is greater than $250,000, the assigned carrier must also be a servicing carrier in this State.
(3) The other state's Plan must give the Plan Administrator in this State similar authority to make interstate assignments.
(2) From All Other States. Employers who are either:
(i) insured under an assigned risk plan not. "similar" to that of this State;
(ii) insured voluntarily by a workers compensation insurer from such other State; or
(iii) insured under or by a competitive or monopolistic state fund in such other state, shall be eligible for coverage under this Plan as to its known and anticipated operations in this State if it is otherwise eligible for coverage under the terms of Section 5 hereof.
D. Jurisdiction. With regard to interstate assignments and policies, this Plan shall have jurisdiction over all disputes resulting from the application of rules, programs, and procedures that are specific to this State. Disputes regarding application requirements shall be under the jurisdiction of the state's Plan where the application was filed.
SECTION 14. ASSOCIATION OR SPONSORED MULTIPLE COORDINATED POLICIES
Pursuant to the provisions of Ark. Code Ann. § 11-9-408(d) [as added by § 12 of Act 796 of 1993] and Ark. Code Ann. § 23-67-211 [as added by § 1 of Act 1269 of 1993] the Plan Administrator shall develop and administer a plan for the issuance of multiple coordinated' policies of workers' compensation and employers' liability insurance subject to the approval of the Commissioner. Such multiple coordinated or group policies may only be issued to cover groups containing no fewer than five (5) separate employers who shall not be affiliated with one another in terms of ownership, control, or right to participate in the profits of an affiliated enterprise. The "sponsor" or administrator of such policies must either be a general contractor meeting the financial capacity and continuity guidelines as shall be set forth in the rating plan and approved by the Commissioner or a recognized industry association which is incorporated or organized as a not-for-profit corporation or association and which has been in existence for no fewer than three (3) years prior to application for approval as a "sponsor". Further,
(i) each employer within the association or group must be engaged in the same general business activity as determined by the Plan Administrator and within the principles and guidelines of the Scopes of Basic Manual Classifications as published from time to time by the National Council on Compensation Insurance, or some such similar classification system as may be chosen by the Commissioner, such as the Standard Industrial Classifications Manual;
(ii) the sponsor assumes joint responsibility with each of the employers for the payment of all required premium, including deposit, and agrees in writing to subject itself to audit and review of all of his records and practices relating to the business to which the association or multiple coordinated policies shall pertain; and
(iii) the sponsor provides the Plan Administrator with such additional security in the way of cash deposit, or marketable securities, or a letter of credit from a National Banking Association unaffiliated with the sponsor as the Plan Administrator reasonably deems necessary; the Plan Administrator may adjust the amount of the required additional deposit from time to time depending upon the claim experience of the association groups and the audited and collected premium.
Multiple coordinated policies shall be issued in the name of each employer but delivered to the sponsor, and all premiums shall be calculated upon the wages paid to or received by the employers in accordance with Plan Rules. All claims experience shall be identified to each employer and records maintained relative thereto by the Plan Administrator, including experience modifiers as appropriate.
SECTION 15. ASSIGNMENT FORMULA
The Plan Administrator shall develop and provide to the Commissioner detailed procedures for the equitable distribution of employers under this Plan to servicing carriers. These procedures shall provide for the random distribution of employers based on the amount of estimated premium in the Plan, so far as practicable. The procedures shall also define those circumstances where the Plan Administrator will have the discretion to override the random selection process and shall account for the variations necessitated by the "striking procedure" set forth at Section 6 hereinabove.
SECTION 16. DISPUTE RESOLUTION PROCEDURE
Any person affected by the operation of the Plan including, but not limited to, participating companies, employers, producers, and servicing carriers, who may have a dispute with respect to any aspect of the Plan, including rating and classification, eligibility, and auditing disputes and any dispute arising under the Articles of Agreement, may seek a review of the matter by the Plan Administrator by setting forth in writing with particularity the nature of the dispute, the parties to the dispute, the relief sought and the basis thereof. The Plan Administrator, as designee of the Commissioner, may secure such additional information as it deems necessary to make a decision and shall in the instance of disputes involving, comply with all requirements of due process and Ark. Code Ann. § 23-67-119(3) and the Arkansas Appeals Board Objectives and Rules as approved by the Commissioner.
Appeals from employers and insurers on Plan matters regarding employer disputes shall be within the jurisdiction of the mechanism established to handle such appeals under the applicable rating law i.e. Ark. Code § 23-67-119(3). All other disputes shall be handled as follows:
(1) If the dispute relates to the general operation of the Plan, excluding individual employer disputes as noted above and those arising under the Articles of Agreement, the Plan Administrator will review the matter and render a written decision with an explanation of the reasons for the decision within thirty (30) days after receipt of all the information necessary to make the decision. Any party affected by a decision made by the Plan Administrator may seek a review by a committee appointed by the President of the National Council on Compensation Insurance for such purpose. Such committee shall consist of three (3) senior officers of the Council. A request for a review by such committee must be made to the Plan Administrator in writing within thirty (30) days of the date of the Plan Administrator's decision. Any party affected by the decision of such committee may seek a de novo review by the Commissioner by requesting such review, in writing, within thirty (30) days after the date of such decision.
In reviewing any such matter not coming with the scope of Ark. Code Ann. § 23-67-119(3)(B), the Commissioner shall follow those procedures applicable to administrative hearings in this State. The Commissioner shall decide the dispute in accordance with the state law, regulation, and policy and in the interests of the reasonable and proper administration of this Plan. The Commissioner's decision shall be final, subject to court review under Ark. Code Ann. § 23-61-307.
(2) Except as provided below, if the dispute arises under the Articles of Agreement, the Administrator designated under the Articles of Agreement shall first review the matter and render a written decision with an explanation of the reasons for the decision within thirty (30) days after receipt of all the information necessary to make the decision. Any party affected by the decision may seek a review by the Board of Governors established under the Articles by requesting such review, in writing, within thirty (30) days of the date of the decision by the Administrator under the Articles of Agreement. The Board of Governors must then review the matter and render its written decision pursuant to the procedures set forth in the Articles of Agreement. Any party affected by a decision of the Board of Governors may seek a de novo review by the Commissioner by requesting such a review in writing within thirty (30) days of the date of the Board of Governors' decision.
If the dispute relates to the expulsion of a participating company under the Articles of Agreement by the Board of Governors, any appeal may be taken directly to the Commissioner without first complying with the procedures contained herein.
SECTION 17. SELF-FUNDED PLAN
It is ultimately essential for maintaining the viability of the Plan to establish and maintain rates at a level that will permit the Plan to operate as a self-funded mechanism. The Plan Administrator shall maintain necessary ratemaking data in order to permit the actuarial determination of rates and rating plans appropriate for the business insured through the Plan. All assigned carriers are required to report their experience on business written under the Plan to the Administrator in a format prescribed by the Council. It is the responsibility of the Plan Administrator to monitor both rate adequacy and Plan results. The Plan Administrator shall notify the Commissioner if excessive losses are indicated to enable the Commissioner to take corrective action.
SECTION 18. SMALL DEDUCTIBLE POLICY OPTION
The Commissioner deems a small deductible policy option to be "feasible" within the meaning of Ark. Code Ann. § 11-9-812(D), and, accordingly, a Small Deductible Policy Rating Plan which shall be applicable to both the voluntary market and to the WCIP shall be made effective, under which each employer shall have the option, in accordance with the dictates of Ark. Code Ann. § 11-9-812, of applying for coverages which incorporate deductible amounts of no less than $1,000 per incident and further deductibles in further increments of $500 each up to a maximum of $5,000 per incident. The Plan Administrator shall develop an appropriate application incorporating the deductible option and policy form, along with an actuarially sound premium adjustments for submission to and approval by the Commissioner. The Commissioner hereby determines under the dictates of Ark. Code Ann. § 11-9-812(D), however, that it is not "feasible" to require insurers or the Plan Administrator and servicing carriers to ignore claim frequency and/or severity if losses happen to be within the deductible limit chosen by an employer, and, accordingly, there shall be no prohibition against insurers, the Plan Administrator, or servicing carriers using true loss data, including frequency and severity of losses even within deductibles, for purposes of experience rating.
SECTION 19. OTHER STANDARDS AND PENALTIES
A. Any insurer, servicing carrier, or producer who refuses or neglects to comply with the provisions of this Rule and Regulation shall be subject to administrative action provided for in the Arkansas Insurance Code, Arkansas Code Annotated §§ 23-60-101, et seq.
B. Any servicing carrier who fails to comply with the requirements of Section 12 of this Rule and Regulation, as reported to the Commissioner by the Plan Administrator, may have their designations to act in such capacity hereunder suspended or revoked upon notice and hearing pursuant to Arkansas Code Annotated §§ 23-61-301, et seq.
C. No servicing carrier insuring an employer through the Plan may utilize any information gained through its administrative services for the purpose of securing other insurance business from such employer. No such carrier shall share or reveal any such proprietary information with or to any of its agents or brokers, with or to any other carrier, or, if it is a direct writer, with or to any of its in-house marketing personnel. Violation of this prohibition shall be considered an Unfair Method of Competition in violation of the Trade Practices Act.
D. No licensed agent, broker or solicitor or any insurer (whether or not a servicing carrier) may knowingly submit an offer of workers' compensation insurance coverage to an employer on a monoline basis on a rating plan that has not been previously approved by the Commissioner, nor shall any such person or entity make any offer of workers' compensation insurance in combination or coordination with other property and/or casualty coverages or limits which are not desired by the employer, nor shall such person or entity apply its filed and approved rates or rating plans (including all applicable discounts or credits) to such employer in an unfairly discriminatory manner. Any person or entity determined to have knowingly violated this prohibition shall be deemed guilty of an unfair or deceptive act or practice in the business of insurance as provided at Ark. Code Ann. §§ 23-66-205 et. seq.
SECTION 20. SEVERABILITY
If any provision of this Rule and Regulation, or the application thereof to any person or circumstance, is held invalid, such invalidity shall not affect other provisions or applications of this Rule and Regulation which can be given effect without the invalid provision or application, and to that end the provisions of this Rule and Regulation are severable.(4/1/1994)
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