GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1991

S	2 

SENATE BILL 726
Second Edition Engrossed 5/13/91

Short Title:  Workers' Comp. Security Fund.	(Public)
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Sponsors: Senator Sands.
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Referred to:  Manufacturing and Labor.
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April 22, 1991

A BILL TO BE ENTITLED
AN ACT CONCERNING THE WORKERS' COMPENSATION SECURITY FUND.
The General Assembly of North Carolina enacts:
Section 1.  Article 3 of Chapter 97 of the General Statutes reads as rewritten:
"ARTICLE 3.
"Security Fund.
"§ 97-106. Definitions.
As hereafter used in this Article, unless the context or subject matter otherwise requires:
‘Carrier' means either a stock carrier or a mutual carrier, as the context may require.
‘Commissioner' means the Insurance Commissioner of this State.
‘Fund' means the Workers' Compensation Security Fund created by this Article.
‘Fund year' means the calendar year.
‘Insolvent carrier' means a stock carrier or a mutual carrier, as the case may be, which has been  determined to be insolvent, or for which or for the assets of which a  receiver has been appointed by a court or public officer of competent  jurisdiction and authority.
‘Mutual carrier' means any mutual corporation or association and any reciprocal or interinsurance exchange authorized to transact the business of workmen's compensation insurance in this State, except an insolvent mutual carrier.
‘Stock carrier' means any stock corporation authorized to transact the business of workmen's compensation insurance in this State, except an insolvent stock carrier.
‘Workers' Compensation Act' means the Workers' Compensation Act of the State of North Carolina, being G.S. 97-1 to 97-101 as amended and supplemented or, with respect to claimants or insureds that are residents of this State at the time of the insured event, the Federal Longshoremen's and Harbor Worker's Compensation Act.
"§ 97-107. Workers' Compensation Security Fund created.
There is hereby created a fund to be known as ‘The Workers' Compensation Security Fund,' for the purpose of assuring to persons entitled thereto the compensation provided by the Workers' Compensation Act for employments insured in insolvent carriers and for valid claims for the return of unearned premiums.  Such fund shall be applicable to the payment of valid claims for the return of unearned premiums not exceeding ten thousand dollars ($10,000) per policy and for compensation or death benefits heretofore or hereafter made pursuant to the Workers' Compensation Act, and remaining unpaid, in whole or in part, by reason of the default, after the effective date of this Article, of an insolvent carrier. Expenses of administration also shall be paid from the fund as herein provided. Such fund shall consist of all contributions received and paid into the fund by carriers, as herein defined, all property and securities acquired by and through the use of moneys belonging to the fund, and of interest earned upon moneys deposited or invested as herein provided. The fund shall be administered by the Commissioner of this State in accordance with the provisions of this Article.
"§ 97-108. Verified report of premiums to be filed by every carrier.
Every carrier shall, on or before the first day of September, 1935, file with the Treasurer of the State and with the Commissioner identical returns, under oath, on a form to be prescribed and furnished by the Commissioner, stating the amount of net written premiums for the six months' period ending June 30, 1935 on policies issued, renewed or extended by such carrier, to insure payment of compensation pursuant to the Workers' Compensation Act. For the purposes of this Article ‘net written premiums' shall mean gross written premiums less return premiums on policies returned not taken, and on policies canceled. Thereafter, on or before the first day of March and September of each year, each such carrier shall file similar identical returns, stating the amount of such net written premiums for the six months' period ending, respectively, on the preceding December 31 and June 30, on policies issued, renewed or extended by such carrier.
"§ 97-109.  Contributions by carriers of 2% of net written premiums.
(a)	 For the privilege of carrying on the business of workers' compensation insurance in this State, every carrier upon filing each semiannual return as prescribed in G.S. 97-108, shall pay into the Workers' Compensation Security Fund a sum equal to two percent (2%) of its net written premiums for the period covered by the return. However, for each of the semiannual reporting periods beginning the first day after the first reporting period in 1991 and ending the last day of the first reporting period in 1996, every mutual carrier as defined in G.S. 97-106 shall pay into the fund an additional surcharge equal to one percent (1%) of its net written premiums for the period of such return.
"§ 97-110. Contributions to stop when fund equals 4% of loss reserves; resumption of contributions.
When the aggregate amount of all such payments into the fund, together with accumulated interest thereon, less all its expenditures and known liabilities, becomes equal to four per centum (4%) of the loss reserves of all carriers for the payment of benefits under the Workers' Compensation Act as of December 31, next preceding, no further contributions to said fund shall be required to  be made; provided, however, that whenever, thereafter, the amount of said fund shall be reduced below four per centum (4%) of such loss reserves as of said date by reason of payments from and known liabilities of said fund, then such contribution to said fund shall be resumed forthwith, and shall continue until said fund, over and above its known liabilities, shall be equal to four per centum (4%) of such reserves.
"§ 97-111. Rules and regulations for administration of fund; examination of books and records; penalty for failure to file report or pay assessment; revocation of license.
The Commissioner may adopt, amend and enforce rules and regulations necessary for the proper administration of said fund. In the event any carrier shall fail to file any return or make any payment required by this Article, or in case the Commissioner shall have cause to believe that any return or other statement filed is false or inaccurate in any particular, or that any payment made is  incorrect, he shall have full authority to examine all the books and records of the carrier for the purpose of ascertaining the facts and shall determine the correct amount to be paid and may proceed in any court of competent jurisdiction to recover for the benefit of the fund any sums shown to be due upon such examination and determination. Any carrier which fails to make any statement as required by this Article, or to pay any contribution to the fund when due, shall thereby forfeit to said fund a penalty of five per centum (5%) of the amount of unpaid contribution determined to be due as provided by this Article plus one per centum (1%) of such amount for each month of delay, or fraction thereof, after the expiration of the first month of such delay, but the Commissioner may upon good cause shown extend the time for filing of such return or payment. The Commissioner shall revoke the certificate of authority to do business in this State of any carrier which shall fail to comply with the provisions of this Article or to pay any penalty imposed in accordance with this Article.
"§ 97-112. Separation of Workers' Compensation Security Fund; disbursements; investments.
The fund created by this Article shall be separate and apart from any other funds so created and from all other State moneys. The State Treasurer shall be the custodian of said fund; and all disbursements from said fund shall be made by the State Treasurer upon vouchers signed by the Commissioner as hereinafter provided. The State Treasurer shall invest the assets of the fund in accordance with the provisions of G.S. 147-69.2 and 147-69.3.
"§ 97-113. Payment of claim from Workers' Compensation Security Fund when carrier insolvent; subrogation of employer paying claim; recovery against employer or receiver of insolvent carrier.
(a)	A valid claim for benefits, or installments thereof, heretofore or hereafter made pursuant to the Workers' Compensation Act, and for valid claims for the return of unearned premiums not exceeding ten thousand dollars ($10,000) per policy, which has remained or shall remain due and unpaid for 60 days, by reason of default by an insolvent carrier, shall be paid from the fund in the manner provided in this section. Any person in interest may file with the Commissioner an application for payment of benefits from the fund on a form prescribed and furnished by the Commissioner. If there has been an award, final or otherwise, a certified copy thereof shall accompany the application. The Commissioner shall thereupon certify to the State Treasurer such award for payment according to the terms of the same, whereupon payment shall be made by the State Treasurer.
(b)	Payment of benefits from the fund shall give the fund no right of recovery against the employer.
(c)	An employer may pay such award or part thereof in advance of payment from the fund and shall thereupon be subrogated to the rights of the employee or other party in interest against such fund to the extent of the amount so paid.
(d)	The State Treasurer as custodian of the fund shall be entitled to recover the sum of all liabilities of such insolvent carrier assumed by such fund from such carrier, its receiver, liquidator, rehabilitator or trustee in bankruptcy and may prosecute an action or other proceedings therefor. All moneys recovered in any such action or proceedings shall forthwith be placed to the credit of the fund by the State Treasurer to reimburse the fund to the extent of the moneys so recovered and paid.
"§ * 
"§ 97-115. Equalization of payments by reciprocal or interinsurance exchanges.
Any reciprocal or interinsurance exchange writing workers' compensation insurance in North Carolina on September 1, 1935, and continuing to underwrite this class of insurance shall, upon the fund reaching its maximum contribution and the discontinuance of any collection thereof, continue to pay into said fund as provided  in this section for a period of six years after the other members of the fund have discontinued said payments in order to equalize the contribution of all members of the fund, and thereafter such reciprocal or interinsurance exchanges shall be subject to the provisions of this section.
"§ 
"§ 
"§.
"§ 97â 
"§ 97-119. Notice of insolvency; report of claims and unpaid awards.
Forthwith upon any carrier becoming insolvent, the Commissioner shall so notify the North Carolina Industrial Commission, and the North Carolina Industrial Commission shall immediately advise the Commissioner
(1)	Of all claims for compensation pending or thereafter made against an employer insured by such insolvent carrier, or against such insolvent carrier;
(2)	Of all unpaid or continuing agreements, awards or decisions made upon claims prior to or after the date of such notice from the Commissioner; and
(3)	Of all appeals from or applications for modifications or rescission or review of such agreements, awards or decisions.
(4)	Of all claims for return of unearned premiums not exceeding ten thousand dollars ($10,000) per policy.
"§ 97-120. Right of Commissioner to defend claims against insolvent carriers; arrangement with other carriers to pay claims.
The Commissioner or his duly authorized representative may  investigate and may defend before the North Carolina Industrial Commission or any court any or all claims for compensation against an employer insured by an insolvent carrier or against such insolvent carrier and may prosecute any pending appeal or may appeal from or make application for modification or rescission or review of an agreement, award or decision against such employer or insolvent carrier. Until all such claims for compensation are closed and all such awards thereon are paid, the Commissioner, the administrator of the funds, shall be a party in interest in respect to all such claims, agreements and awards. For the purposes of this Article the Commissioner shall have exclusive power to select and employ such counsel, clerks and assistants as may be deemed necessary and to fix and determine their powers and duties, and he may also, in his discretion, arrange with any carrier or carriers to investigate and defend any or all such claims and to liquidate and pay such as are valid and the Commissioner may from time to time reimburse, from the fund, such carrier or carriers for compensation payments so made, together with reasonable allowance for the services so rendered.
"§ 97-121. Expenses of administering funds.
The expense of administering the fund shall be paid out of the fund. The Commissioner shall serve as administrator of the fund without additional compensation, but may be allowed and paid from the fund expenses incurred in the performance of his duties in connection with the fund. The compensation of those persons employed by the Commissioner shall be deemed administration expenses payable from the fund in the manner provided in G.S. 97-112. The Commissioner shall include in his regular report to the legislature a statement of the expense of administering the fund for the preceding year.
"§ 97-122. Contributions relieving carrier of posting bond or making special deposit.
Contributions made by any carrier to the fund created by this Article shall relieve such carriers from filing any surety bond or making any deposit of securities required under the provisions of any law of this State for the purpose of securing the payment of workers' compensation benefits only."
Sec. 2.  This act is effective upon ratification.