Florida Workers’ Compensation Joint Underwriting Association Board of Governors Meeting Report: February 22

 

The Florida Workers’ Compensation Joint Underwriting Association (“FWCJUA”) Board of Governors (“Board”) met on February 22, 2011.  The following is a summary of Board actions during the meeting:

 

Legislative Update

The FWCJUA Counsel provided Board members with a brief update on pending bills in the Florida Legislature that could affect workers’ compensation and FWCJUA.   He noted that all were “repealer” bills, some of which required further study.

Of keen interest to the Board was HB 4095, which deletes a provision of Florida law that prohibits insurers from providing coverage to persons who owe money to the FWCJUA.  Board members said that such a deletion would affect the FWCJUA’s ability to collect outstanding debt, thus increasing the organization’s uncollectables, a cost that could eventually be passed on through rate increases.

“This is a big item for the JUA,” said FWCJUA Executive Director Laura Torrence.

Board members voted to set aside a maximum of $100,000 for lobbying efforts against the repeal of section 627.311 (5)(t), Florida Statutes, and directed Ms. Torrence to work with the Board Chair or Vice Chair in appropriating the funds. 

“It has a direct effect on our rate because we have to fund our uncollectables,” one Board member said.

“It would make it tougher for the JUA to collect premiums from delinquent employers or insurers who go off and have an interest in another business and start up a new business and basically try to skip out on their obligations to the JUA,”  the FWCJUA Counsel explained.  “It is written in order to identify not just people who owe money to the JUA, but also covers affiliated persons.  There is controversy over what an affiliated person is.  There is a fairly broad definition of what an affiliated person is.”

Additional workers’ compensation-related bills discussed by the Board included:

 

• HB 4073 – Would delete obsolete transitional requirements for certain policies of Florida Workers’ Compensation Joint Underwriting Association. The Board was in favor of supporting HB 4073.
• HB 4083 – Would repeal a provision relating to Florida’s Workers’ Compensation Administrator that would abolish the position. The bill also would delete obsolete transitional requirements for certain policies of Florida Workers’ Compensation Joint Underwriting Association. HB 4083 also received the Board’s support.
• HB 723 – Would exempt certain employees working in Florida and employers of such workers from Florida’s Workers’ Compensation Law under certain conditions. The bill would provide requirements for the establishment of prima facie evidence that an employer carries certain workers’ compensation insurance and would require courts to take judicial notice of the construction of certain laws. Should it become law, HB 723 would authorize the Florida Division of Workers’ Compensation to enter into agreements with workers’ compensation agencies of other states for certain purposes. The bill also would provide requirements for claims made in other states, as well as criteria for employees to be considered as being temporarily in the state. The Board requested that further study be done on HB 723.
• SB 1252 – Would change the designated person or persons who must be notified by an insurer from the “insured” to the “first-named insured” in situations involving the nonrenewal, renewal premium, cancellation or termination of workers’ compensation, employer liability or certain property and casualty insurance coverage. The bill also would change the designated person or persons who must be notified by an insurer from the “insured” to the “first-named insured” in certain situations involving the cancellation or nonrenewal of motor vehicle insurance coverage. The Board requested further study of SB 1252.
• HB 4095 – Would delete a provision prohibiting insurers from providing workers’ compensation and employer’s liability insurance to persons or to their affiliates if certain payments to joint underwriting plan operating as the Florida Workers’ Compensation Joint Underwriting Association, Inc. are delinquent. The Board indicated that it is strongly opposed to this bill and set aside the aforementioned $100,000 to fund its opposition.

 

Board Appointment Process to Fill Four Vacancies

Board members were advised that a request has been submitted to the Florida Office of Insurance Regulation (“OIR”) for calendar year 2010 for premium data needed to identify the top 20 foreign and domestic workers’ compensation carriers groups in order to start the balloting process for nominations to fill four industry representative vacancies that will occur June 30, 2011.  The OIR is expected to provide that information sometime after March 1, making it possible to assemble a slate of nominees for consideration for the May 3 meeting of the Florida Financial Services Commission, which will make the appointments.

 

Investment

After considering the FWCJUA’s current investment portfolio and having no discussion, Board members voted to reconfirm the holding of Aetna Inc. bonds, as well as the CitiGroup Inc. and Lehman Brothers bonds within the FWCJUA’s investment portfolio. 

The Board also voted to hire PFM Asset Management LLC (“PFM”) as the FWCJUA’s investment management service provider for three years, with two optional one-year extensions.   If problems should arise with PFM, Board members agreed to use Cutwater Investor Services Corp.

PFM was chosen out of five companies that responded to the FWCJUA’s Request for Proposal.  The other companies included Cutwater Investor Services Corp.; BPS Capital Management, Inc.; Morgan Stanley Smith Barney LLC and US Bancorp.  Cutwater ranked a close second to PFM.

“We felt their (PFM’s) response was not just ‘cookie cutter’ but actually addressed our needs,” Ms. Torrence said.  “We felt in the dialogue with them (PFM), we would be able to get very good service.  While their price is not exactly the lowest, the price is cost-competitive.”

 

Operations

With no discussion, the Board unanimously voted to continue using Revenue Management Systems Inc. (“RSI”) as its collection service provider and approved a five-year contract with two one-year extensions to begin on July 1, 2011. 

Two firms, RSI and Receivable Management Services  had submitted bid proposals to provide collection services.  The Board members selected RSI because the FWCJUA had used the company since 1998 with good results.  RSI also submitted the most cost-effective bid.

 

Rates and Forms

Board members unanimously agreed to authorize FWCJUA staff to book Milliman’s best estimates of the reserves for unpaid loss and loss adjustment expenses both net and gross of reinsurance for years 1994 through 2010, as well as underwriter loss adjustment expense as of December 31, 2010.

The Board also voted to authorize the filing of proposed FWCJUA Operations Manual revisions for OIR approval as soon as practicable.

Ms. Torrence said the first revision corrects an oversight and eliminates a reference to the discontinued FWCJUA Employee Leasing Application form.  The second revision outlines how premiums will be determined and redefines how members of a Limited Liability Corporation (“LLC”) are referred to.

“We had been treating members of an LLC as corporate officers. The way we were looking at exemptions was improper,” Ms. Torrence said, explaining that the original language that only addressed construction industries was broadened to include non-construction industries.

With no further business before the Board, the meeting was adjourned.

To view the meeting materials, click on the hyperlink below.

 

 

Should you have any questions or comments, please contact Colodny Fass.