• Increase Text Icon
  • Decrease Text Icon
  • Email Icon
  • Print this page
You are here: Home . rules . 2006 . 1003a-059

SUBCHAPTER G. WORKERS' COMPENSATION INSURANCE DIVISION 2. GROUP SELF-INSURANCE COVERAGE

28 TAC §5.6403

1. INTRODUCTION. The Commissioner of Insurance adopts an amendment to §5.6403(f), concerning the fingerprint requirement for the trustees of a self-insured workers' compensation group and officers of the administrator and of any service company. The amendment is adopted without changes to the proposed text published in the August 4, 2006 issue of the Texas Register (31 TexReg 6174).

2. REASONED JUSTIFICATION. The adopted amendment is necessary to conform the existing fingerprint requirement for individuals regulated under §5.6403(f), including each member of the initial board of trustees, subsequent members of the board, and the chief executive officer, president, secretary, treasurer, chief financial officer and controller of the administrator and any service company, with a new fingerprint submission requirement that the Department is adopting in amended §1.501 and new §§1.503 - 1.509. Additionally, adopted amendments to §1.501 clarify that individuals regulated under §5.6403(f) are subject to existing §1.502 of this title (relating to Licensing Persons with Criminal Backgrounds). Adopted amended §1.501 and new §§1.503 - 1.509 are also published in this edition of the Texas Register.

In the proposal the Department solicited comments as to whether having the amendment become effective no earlier than 90 days following the date the amendment is adopted by the Commissioner was a viable effective date. The Department received no comments concerning the effective date and thus considers that the 90 day time period for implementation is adequate. The Department also considers a date certain to be the most effective means for determining when individuals will be required to comply with the new fingerprint requirements, and therefore, the Department has determined that this amendment shall be effective January 1, 2007, the same date on which the new fingerprint requirements adopted in amended §1.501 and new §§1.503 - 1.509 become effective.

3. HOW THE SECTION WILL FUNCTION. The adopted amendment requires individuals regulated under §5.6403(f), including each member of the initial board of trustees, subsequent members of the board, and the chief executive officer, president, secretary, treasurer, chief financial officer and controller of the administrator and any service company, to comply with the new fingerprint submission requirement that the Department is adopting in amended §1.501 and new §§1.503 - 1.509, which are also published in this edition of the Texas Register.

4. SUMMARY OF COMMENTS. The Department did not receive any comments on the proposed amendment.

5. STATUTORY AUTHORITY. The amendment is adopted under the Occupations Code Chapter 53; Government Code Chapter 411; Labor Code Chapter 407A; and Insurance Code Chapters 801 and 36. Occupations Code Chapter 53 states the general procedure a licensing authority must employ when considering the consequences of a criminal record on granting or continuing a person's license, registration or authorization. Occupations Code §53.025 authorizes a licensing authority to issue guidelines relating to its practice under Chapter 53. Government Code §411.106 authorizes the Department to receive criminal history information from the DPS regarding insurance company principals and officers and applicants for any license, permit, or other authorization issued by the Department to engage in a regulated activity under the Insurance Code. Government Code §§411.083 and 411.087 authorize the Department to obtain, through the DPS, criminal history information from the FBI on those individuals described in Government Code §411.106. Labor Code §407A.051 authorizes the Commissioner to establish application requirements for self-insured workers' compensation groups. Labor Code §407A.008 authorizes the Commissioner to adopt rules to implement Labor Code Chapter 407A. Insurance Code §801.056 authorizes the Department to request a complete set of fingerprints from individuals controlling an insurance company, an insurance company's corporate officers, and individual applicants for any license, permit, registration, certification, or other authorization issued by the Department to engage in a regulated activity under the Insurance Code. Insurance Code §36.001 provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state.

6. TEXT.

§5.6403. Application for Initial Certificate of Approval.

(a) An association of employers that proposes to organize as a workers' compensation self-insurance group shall file with the department an application for a certificate of approval.

(b) Contents of the application must include the information required by Labor Code §407A.051.

(c) In addition to the information required under subsection (b) of this section, an applicant must provide the following:

(1) A statement that demonstrates that the members of the group are in the same or similar type of business as required by Labor Code §407A.002(a)(1).

(A) The statement should demonstrate that the members of the group have the same governing classification.

(B) If the members of the proposed group have different governing classifications, the statement should demonstrate how the business pursuits of the members of the group are similar enough in operation in the Commissioner of Insurance's discretion to be grouped together.

(2) To aid the department in making the determination that the trade or professional association meets the requirements of Labor Code §407A.002(a)(2) that the trade or professional association has been in existence in this state for purposes other than insurance for five years before the establishment of the group, provide copies of documents relating to the organization, governance and operation of the association and a narrative describing the activities of the association. Annual reports, conventions, seminars, dues requirements, newsletters and other evidence acceptable to the Commissioner of Insurance may be submitted to aid the department in making its determination.

(3) In addition to the copy of the bylaws of the group required by Labor Code §407A.051(c)(6), submit copies of documents relating to the organization, governance and operation of the group.

(4) Projected financial statements for the 24 month period from the group's start of operations using quarterly balance sheet projections based on the group's fiscal year, quarterly cash flow schedules reflecting expenditures by category, quarterly revenue and expense projections and an actuarial projection of the group's total projected incurred liabilities for workers' compensation which demonstrate compliance with Labor Code §407A.051(c)(10) which requires the group to show its financial ability to pay the workers' compensation obligations of the employers who are members of the group and Labor Code §407A.053(c) which requires the group to post security equal to the greater of $300,000 or 25% of the group's total incurred liabilities for workers' compensation. The projections shall include an estimate of the employees to be covered on which the projections and actuarial assumptions are based. The projections must reflect the identity, qualifications and credentials of the persons making the projections.

(5) A written commitment, binder, or policy or contract of excess insurance that meets the requirements of §5.6405 of this title (relating to Excess Insurance).

(6) A performance bond for the administrator. If the administrator serves as the service company, the bond shall be in the amount of $500,000. The bond shall be in the form prescribed in §5.6408 of this title (relating to Performance Bonds).

(7) A performance bond for the service company, if there is one. The bond shall be in the form prescribed in §5.6408 of this title.

(8) An indemnity agreement executed by the members of the group indemnifying the members, jointly and severally, for the obligations of the group. At a minimum, the agreement shall include the provisions described in §5.6406 of this title (relating to Indemnity Agreement).

(9) An acknowledgement, in the form prescribed in §5.6407 of this title (relating to Acknowledgement), executed by each member of the group that it is aware that it can be called upon to pay the workers' compensation claims of another member as a result of executing the indemnity agreement in §5.6406 of this title.

(10) The statement required by §5.6404 of this title (relating to Notification to the Department).

(11) A business plan or plan of operation that describes the general business activities, safety program and organization. The plan must include the identity of the administrator, service companies, risk manager, accountant and actuary.

(d) The group must also submit the following:

(1) proof that it has received payment or a promise to pay from each member of 25% of its first year estimated modified schedule rating premium. If the group approves a member's submission of a promise to pay the 25% of premium, the employer must submit payment of the amount promised no later than 10 days after the effective date of the member's coverage with the group, or

(2) a certification by a certified public accountant and an actuary that assets and reserves of the trust satisfy the requirement of the Labor Code §407A.051(c)(11)(B).

(e) Each member of the initial board of trustees, subsequent members of the board, and the chief executive officer, president, secretary, treasurer, chief financial officer and controller of the administrator and any service company shall provide the department a completed biographical affidavit adopted by reference under §7.507(b) of this title (relating to Forms Incorporated by Reference). A biographical affidavit is not required when a person has one on file with the department.

(f) Each member of the initial board of trustees, subsequent members of the board, and the chief executive officer, president, secretary, treasurer, chief financial officer and controller of the administrator and any service company shall comply with the requirements of Chapter 1, Subchapter D of this title (relating to Effect of Criminal Conduct).



For more information, contact:

Contact Information and Other Helpful Links