W. Va. Code R. § 114-65-4

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 114-65-4 - Criteria for Establishing and Maintaining Self-Insurance Pools

4.1. Before a pool may begin to offer civil liability coverage to members, the following must be filed with the Commissioner:

4.1.a. A copy of a financial plan which must set forth:

4.1.a.1. The insurance coverages to be offered by the pool, applicable deductible levels, and the maximum level of claims to be self-insured against;

4.1.a.2. The pool's proposed rates, which should not be excessive, inadequate or unfairly discriminatory taking into account all underwriting, exposure and claims history when pricing any current or prospective pool members. A pool's rates are not subject to prior approval by the Commissioner , however appropriate regulatory action may be taken if he or she determines that the rates are not in compliance with this rule;

4.1.a.3. The amount of cash reserves as are necessary, in the exercise of sound and prudent actuarial judgment, to cover potential pool members and employee liability, expense, loss, and damage, which cash reserves may be funded by the issuance of certificates of participation by the pool and its members and reinsurance; and

4.1.a.4. The amount of aggregate excess insurance or reinsurance coverage to be purchased in the event that the pool's resources are exhausted in a given fiscal period;

4.1.b. A copy of a plan of management which describes the governing authority of the pool, which must be a board of directors, and provides the following with regard to the board:

4.1.b.1. The manner in which member contributions to the pool will be determined;

4.1.b.2. The methods for maintaining reserves, levying and collecting assessments for deficiencies, the financing of cash reserves and reinsurance, and disposing of surplus;

4.1.b.3. The basis upon which new members may be admitted to, and existing members may leave or have membership terminated by the pool;

4.1.b.4. The identification of funds and reserves by exposure areas;

4.1.b.5. The manner in which the pool will be administered in the event of termination or insolvency; and

4.1.b.6. Any other provisions that may be considered by the members or the Commissioner to be necessary or desirable for the operation of the pool;

4.1.c. A copy of the articles of incorporation;

4.1.d. A copy of the bylaws of the proposed pool;

4.1.e. A copy of the form or forms to be used for the member agreement, which must set forth at a minimum the rights, privileges and obligations of the member and the terms, coverages, limits and deductibles of the plan;

4.1.f. A copy of the proposed policy form or forms, which are not subject to prior approval by the Commissioner;

4.1.g. Designation of the initial or interim supervisory board, at least a majority of which must be pool members, and the administrator, together with pertinent biographical information for each member of the board and for the administrator or the principal officers of the corporation serving as administrator;

4.1.h. The address within West Virginia where the books and records of the pool will be maintained at all times;

4.1.i. A confirmation of a fidelity bond covering the administrator and its employees in an amount sufficient to protect the pool against the misappropriation or misuse of any monies or securities;

4.1.j. A projection of administrative expenses for the first year of operation in a dollar amount and as a percentage of the estimated annual contributions;

4.1.k. Proof of payment of contributions by members into a depository account of an amount between $250,000 and $500,000 that, in the Commissioner's discretion, constitutes sufficient capital; and

4.1.l. A composite listing of the estimated annual gross contributions which may, in addition to cash contributions, be made up of proceeds from the sale of certificates of participation in the premium stream of the pool, to be developed by each organizing member of the pool individually and in the aggregate for the pool. Contributions must be based on reasonable assumptions and certified by an actuary as to the sufficiency of the contributions.

4.1.m. The authorization given in paragraph 3, subdivision a and paragraph 2, subdivision b of this subsection and in subdivision 1 of this subsection to issue certificates of participation as a means of providing capital for the pool, establishing adequate reserves and purchasing reinsurance is limited to those political subdivisions that are authorized to issue public debt pursuant to other applicable law.

4.2. A pool's application for authorization to offer workers' compensation coverage is subject to the requirements of W.Va. Code § 23-2-9(a)(2) and W.Va. Code St. R. § 85-18-5 except that:

4.2.a. In lieu of the requirement in §5.2 of such rule that an applicant submit financial statements for the last 3 years, the pool shall be required to fully secure all of its projected claims liabilities in a form of surety approved by the Commissioner, and shall continue to fully secure its projected liabilities on an ongoing basis until such time that the pool is able to produce 3 years of audited financial statements which do meet the Commissioner's financial condition benchmarks.

4.2.b. Instead of the application being subject to approval by the Industrial Council in accordance with §5.5.a of such rule, the Commissioner is responsible for approving or disapproving the application.

4.3. Any subsequent revisions to documents filed with the Commissioner pursuant to subsection 4.1 of this section must also be filed with the Commissioner.

4.4. Every member of a group self-insurance pool shall execute a member agreement which shall set forth the rights, privileges and obligations of the member, and the terms, coverages, limits, and deductibles of the Plan. Member agreements must, at a minimum, disclose the following:

4.4.a. The coverages provided;

4.4.b. The period of the coverage;

4.4.c. The amount of any deductible per claim and in the aggregate;

4.4.d. The maximum amount of coverage to be borne by the pool;

4.4.e. The contribution amount and dates payment are due for the member;

4.4.f. The basis upon which each member's contribution is determined and under what circumstances additional assessments of the members maybe made, including the possibility that assessments may continue after the member's membership in the pool has been discontinued;

4.4.g. The circumstances under which a member's participation in the pool may be terminated, including for non payment of contributions or assessments, and a plan to be followed in the event the pool is dissolved;

4.4.h. A description of the excess coverage for the pool as to its coverage per occurrence, coverage per occurrence per person, if appropriate, and in the aggregate;

4.4.i. The pool's obligations to provide a defense for the member in the event of a claim; and

4.4.j. With respect to civil liability coverage, a prominent disclosure notice that must be signed by a duly authorized officer of the member, which must use the following or substantially similar language:

"The pool is not protected by any West Virginia insurance guaranty association against default due to insolvency. In the event of insolvency, members and persons filing claims against members may be unable to collect any amount owed to them by the pool regardless of the terms of this member agreement. In the event that the pool is in a deficit position, a member may be liable for any and all unpaid claims against the member."

4.4.k. With respect to workers' compensation coverage, a member agreement under which each member agrees to assume and discharge, jointly and severally, any liability under West Virginia workers' compensation laws of any and all employers party to the agreement and which provides that, in addition to the rights of the pool, in the event of failure of the pool to enforce such rights after reasonable notice to the pool, the Commissioner shall have the right independently to enforce on behalf of the pool the joint and several liability of its members under West Virginia workers' compensation laws and the liability of members for any unpaid contributions and assessments;

4.5. The costs of funding the pool may be allocated among the funds or accounts of the pool members on the basis of their relative exposure and loss experience. A pool member is not liable for any amount in excess of amounts payable pursuant to terms of the member agreement for participation in the pool.

4.6. The board must act diligently to limit the pool's exposure on any loss on any one risk or hazard.

4.7. The board's responsibilities include, but are not limited to, retaining control of all monies collected and directing the disbursement of such monies; levying upon the members additional assessments in proportionate amounts when needed to supplement the pool's surplus and to assure payment of its obligations; actively collecting delinquent accounts resulting from past due contributions of members and taking appropriate action to declare a delinquent member ineligible for coverage from the pool until such time as the delinquency and cost of collection have been fully recovered; and adopting its own rules and procedures as it considers necessary for the efficient and actuarially sound operation of the pool, provided the rules and procedures are consistent with this rule.

W. Va. Code R. § 114-65-4