WORKERS' COMPENSATION
REINSURANCE ASSOCIATION
REINSURANCE AGREEMENT
EFFECTIVE JANUARY 1, 1999
I. NATURE AND SCOPE OF AGREEMENT
A. PURPOSE. The purpose of this Reinsurance Agreement is to set forth
the basic conditions of the reinsuring agreement between the
Workers' Compensation Reinsurance Association ("Association") and
the Member. This Agreement is based on the Association's Enabling
Act (Minn. Stat. Section 79.34, et seq.), its Plan of Operation
("Plan"), and its Operating Rules. The provisions of the Enabling
Act, Plan, and Operating Rules shall be controlling over the
provisions of this Agreement. This Agreement is not intended to
independently establish any rights, liabilities, or obligations for
either the Association or the Member.
Reference: Plan, Article VI.K.
B. PARTIES. This Agreement is solely between the Member and the
Association. All affiliated insurers or self-insurers within a
holding company system shall be considered a single entity for
purposes of the exercise of all rights and duties of membership in
the Association. Nothing in this Agreement shall establish any
rights in favor of any third party. Nothing in this Agreement shall
create any liability or responsibility on the part of the
Association for actions of the Member or other members. Nothing in
this Agreement shall limit the Member's liability to employers,
employees and others under Minn. Stat. chs. 79 and 176 and other
Minnesota law.
References: Minn. Stat. Section 79.34. subd. 1.
Plan, Article VI. E.I., and VI. M.
C. DEFINITIONS. To the extent defined in the Plan or in Operating
Rules, the words used in this Agreement shall have the meanings
given them by the Plan and Operating Rules.
Reference: Plan, Article I.
D. TERMS OF AGREEMENT CONFORMED TO ENABLING ACT, PLAN, AND OPERATING
RULES. The terms of this Agreement which are in conflict with the
Enabling Act, other provisions of Minnesota Law, the Plan, or
Operating Rules are hereby amended to conform thereto. This
Agreement shall be deemed to be automatically amended to conform to
any amendment to the Enabling Act, other provisions of Minnesota
law, the Plan, or the Operating Rules, or to the adoption of other
Minnesota law or Operating Rules after the effective date of this
Agreement. Such automatic amendment to this Agreement shall be
effective on the effective date of the amendment to the Enabling
Act, other provisions of Minnesota law, Plan, or Operating Rules, or
the adoption of other Minnesota law or Operating Rules.
Reference: Plan, Article IX. E.
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II. REINSURING AGREEMENTS
A. LIABILITY OF ASSOCIATION. The Association shall reinsure the
Member's Minnesota workers' compensation liability and shall
indemnify the Member for 100 percent of the amount of ultimate loss
arising out of each occurrence compensable under Minn. Stat. Ch. 176
to the extent that the ultimate loss exceeds the Member's retention
limit in effect at the time of the loss occurrence and subject to
the terms and conditions of the Enabling Act, Plan, and Operating
Rules.
References: Minn. Stat Section 79.34, subd.2.
Plan, Article VI. A.
B. MEMBER'S DUTIES. The Member shall comply with all requirements of
the Enabling Act, Plan, and Operating Rules. These requirements
include, but are not limited to, the following: The Member shall
reinsure its Minnesota workers' compensation liability with the
Association, pay all benefits for losses reinsured by the Association,
belong to the Association, accept indemnification from the Association,
and report to the Association claims which may involve liability to the
Association.
References: Minn. Stat. Section 79.34, subds. 1 and 2.
Plan, Article III. and Article VI.A.
III. RETENTION LIMITS
The Member shall select the low, high or super retention limit for each
calendar year. The retention limits may be changed annually on January
1. The Member shall notify the Association by certified mail of any
change of its retention limit selection by December 1 of the year
preceding the coverage year. All affiliated insurers or self-insurers
within a holding company system shall select the same retention limit.
If the Association is not notified of the Member's change of retention
limit for the next coverage year by December 1, the Member shall be
deemed to have chosen for the next coverage year the same retention
limit (low, high, or super retention limit) which was in effect on
December 1.
References: Minn. Stat. Section 79.34, subds. 1 and 2.
Plan, Article VI.A.
IV. REINSURANCE PROVIDED BY ASSOCIATION EXCLUSIVE
A Member selecting the high or super retention limit shall not purchase
reinsurance for losses below its retention limit except in certain
circumstances specified by statute. A
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Member selecting the low retention limit may purchase reinsurance from
other organizations to provide indemnification for losses below its
retention limit. A Member shall not issue large deductible policies in
Minnesota for deductible amounts in excess of its selected retention
limit.
References: Minn. Stat. Section 79.34, subd. 2.
Minn. Department of Commerce, Bulletin 91-5
V. COVERAGE
A. GENERAL SCOPE. The reinsurance provided by the Association shall
cover only benefits under Minn. Stat. Ch. 176 which are paid by the
Member, provided that for losses incurred on or after January 1,
1984, the reinsurance provided shall cover benefits paid by the
Member under the workers' compensation law of another state when the
injured worker is eligible for benefits under Minn. Stat. Section
176.041, subds. 2 or 3, but elects to receive benefits under the
workers' compensation statute of such other state, as provided in
Minn. Stat. Section 79.34 subd. 7. Any amounts paid by a Member
pursuant to Minn. Stat. Sections 176.183, 176.221, 176.225 and
176.82 shall not be included in ultimate loss and shall not be
indemnified by the Association. Employers' liability coverage is not
provided by the Association. The Association does not cover claims
under the Federal Employers' Liability Act, the Xxxxx Act, the
Longshoremen's and Harbor Workers' Compensation Act, or any other
federal law.
References: Minn. Stat. Section 79.34, subds. 2 and 7.
Minn. Stat. Section 176.041, subds. 2 and 3
Plan, Article VI.
B. PER OCCURRENCE BASIS. Coverage shall be provided on a per
occurrence basis, as determined by the Association, except in the
case of occupational disease, where coverage is provided on a per
person per occurrence basis.
References: Minn. Stat. Section 79.34, subd. 2.
Plan, Article I. N. and Article VI.
C. CLAIMS EXPENSES. Claims expenses, assessments, damages and penalties
shall not be indemnified by the Association. Claims expenses include
investigation and legal expenses, court costs, interest and
penalties. Expenses subject to indemnification include expenditures
incurred in the preparation and development of a rehabilitation plan
submitted to the Department of Labor and Industry and in the
provision of rehabilitation services rendered in accordance with
such a rehabilitation plan.
References: Minn. Stat. Section 79.34, subd. 2.
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Plan, Article I., Section H.
Operating Rule for Clarification of the Definition of
Claim Expenses.
D. ASSESSMENTS. Assessments, including Special Compensation Fund
assessments under Minn. Stat. Sections 176.129 and 176.131 (repealed
effective July 1, 1992), shall not be reimbursed by the Association.
References: Minn. Stat. Sections 176.129 and 79.34, subd. 2.
Plan, Article VI. V.
E. EFFECTIVE DATE. Coverage shall be effective on the date the Member
joins the Association. In no case shall the Association be liable
for benefits for occurrences taking place prior to October 1, 1979.
The Association shall have no liability for death benefits where an
injury prior to October 1, 1979, causes death on or after October 1,
1979. Effective January 1, 1984, certain benefits paid pursuant to
the workers' compensation laws of other states will be covered, as
provided in Article V. A. of this Agreement.
References: Minn. Stat. Section 79.34, subds. 2 and 7.
VI. PREMIUMS
A. ANNUAL PREMIUM. The Member shall pay an annual premium for the
reinsurance coverage provided by the Association at the rate
determined by the Board of Directors of the Association ("Board of
Directors") and approved by the Minnesota Commissioner of Labor and
Industry ("Commissioner"). Estimated premium shall be calculated in
accordance with procedures established in the Operating Rule for
Determination of Exposure Base. The estimated exposure base for a
Member may be revised after six months of the coverage year if the
member verifies that its current annualized six month exposure base
is at least fifteen percent higher or lower than its estimated
exposure base. When the actual exposure base figures for the
billing year become available, the actual premium shall be
calculated. A premium adjustment shall be made as provided in
Article VI. of this Agreement.
References: Minn. Stat. Section 79.35(d).
Plan, Article VI. D.
Operating Rule for Determination of Exposure Base.
B. BILLING OF PREMIUM. The estimated premium shall be billed on a
quarterly basis, and shall be payable within 30 days of the date of
the premium notice, with late payments subject to interest charges
established by the Board of Directors.
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Reference: Plan, Article VI. D.3.
C. OFFSET. The Association may offset indemnification payable to the
Member against premium payable by the Member. Premiums payable shall
not be offset against indemnification claimed by the Member.
References: Plan, Article VI. D.3.c.
D. ANNUAL ADJUSTMENT OF PREMIUM. The Association shall annually provide
to the Member a statement indicating adjustments for previous years'
premium. Amounts due the Association as a result of the adjustment
shall be paid by the Member within 30 days of the billing date, with
late payments subject to interest charges established by the Board
of Directors. Amounts due the Member shall be credited to the
Member's premium account with the Association, and any credit
premium balance shall be refunded to the Member within 30 days.
References: Plan, Article VI. D.2.b.
Operating Rule for Determination of Exposure Base.
Operating Rule for Annual and Audit Premium Adjustment
Refunds
E. INTERIM ADJUSTMENT OF PREMIUM. A Member who ceases doing business in
Minnesota or a self-insurer Member who ceases to be an approved
self-insurer may request an interim adjustment of estimated annual
premium.
Reference: Operating Rule for Interim Adjustment of Estimated Annual
Premium.
F. SURPLUS DISTRIBUTIONS AND DEFICIENCY ASSESSMENTS. The Board of
Directors may declare a distribution of surplus or assessment of
deficiencies in the form of member excess or deficient premiums or
policyholder excess surplus or deficiencies as required by the
Operating Rule for the Determination of Surplus. Such distributions
or assessments may result from statutory changes, changes in the
exposure base, or a profit or loss. Distributions of surplus and
deficiency assessments shall be made as required by the Board of
Directors in accordance with the Enabling Act, Plan and Operating
Rule for the Determination of Surplus as they have been interpreted
by the courts.
References: Minn. Stat. Section 79.34, et seq.
Plan, Article VI. D. 1.d. and VI. N.
Operating Rule for the Determination of Surplus
G. CATASTROPHIC PREMIUMS. In the event that benefits paid or expected to
be paid on a claim in a calendar year exceed the prefunded limit in
effect at the time the loss was
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incurred, the Association shall calculate and charge to all Members
an additional premium for that year sufficient to cover the payments
in excess of the prefunded limit. The premium shall be charged and
collected in the same manner as the annual premium.
References: Minn. Stat. Section 79.35(d).
H. PREMIUM AUDITS. The Association may inspect and audit any Member's
records to determine the accuracy of the premium calculation. The
Member shall timely provide all information requested and shall in
all respects cooperate fully in providing information during the
course of an audit.
References: Plan, Article VI.D.2.f.
VII. REIMBURSEMENT PROCEDURE
Requests for reimbursement shall be submitted in a form approved by the
Association. The first request shall be submitted within six months
after the Member's payments on a loss exceed the Member's Retention
Limit. Thereafter the Member, if entitled to indemnification by the
Association, shall file a reimbursement request form semi-annually
until the claim is closed. The request shall be submitted to the
Association during the month of the anniversary and half-year
anniversary of the loss occurrence date provided that, if the initial
reimbursement request for a claim was submitted prior to December 1,
1983, the Member may, at its option, continue to submit reimbursement
requests in January and July. The Member and the Association may, in
the alternative, agree upon a semi-annual reimbursement cycle, whereby
all of the Member's reimbursement requests, regardless of loss
occurrence date, are filed on the same cycle. If a claim settles on a
full, final and complete basis, or the claim file is closed, a
reimbursement request may be filed at anytime. If payments for which
reimbursement is due exceed $30,000 in the three months following a
regularly scheduled reimbursement date, a reimbursement request may be
filed in the following month. The reimbursement request shall itemize
all payments since submission of the last reimbursement request.
Proper and complete reimbursement requests shall be promptly paid by
the Association.
References: Plan, Article VI.
Operating Rule for Reimbursement Procedures.
VIII. MANAGEMENT OF CLAIMS AND LOSSES
A. CLAIMS. The Member shall have the primary responsibility for the
investigation, management, and defense of all claims and losses
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If the Association determines that the claims procedures or
practices of a Member are inadequate to properly limit the
liabilities of the Association, or may, in any way, jeopardize the
interests of the Association, the Association may withhold
reimbursements from the Member until it determines that the
deficiencies in the claims procedures have been resolved, or the
Association may, with the approval of the Board of Directors and at
the Member's expense, undertake directly or contract with another
person, including another Member, to adjust or assist in the
adjustment of a Claim or Claims which create a potential liability
to the Association. The Association may charge the costs and
expenses of these activities, including legal expenses, to the
Member, and the Member shall cooperate fully with the Association in
such claims management. If the Board of Directors determines that
the claims procedures or practices of a Member are inadequate to
properly service the liabilities of the Association, or may, in any
way, jeopardize the interests of the Association, the Association
may also recommend to the Commissioner and the Commissioner of
Commerce that an Insurer Member's license to transact workers'
compensation insurance, or a Self-insurer Member's authorization to
self-insure workers' compensation liability, pursuant to Minn. Stat.
Section 176.181, be revoked.
References: Minn. Stat. Section 79.35(g).
Plan, Article VI.F.4.
Operating Rule for the Adjustment of Claims.
B. CLAIMS AUDITS. The Association may inspect and audit the Member's
records relating to all claims or related matters. The Member shall
timely provide all information requested and shall in all respects
cooperate fully in providing information during the course of an
audit.
References: Minn. Stat. Section 79.35(g).
Plan, Article VI.F.3.
C. REPORTING REQUIREMENTS. The Member shall promptly report to the
Association any claim meeting either of the following reporting
criteria:
1. CLAIM COST CRITERIA. When a Member estimates that the total
incurred cost (payments and reserves for future payments) of a
claim exceeds 50 percent of the retention limit which was in
effect during the year when the loss was incurred, or
2. CLAIM INJURY CRITERIA. When a claimant has suffered a serious
injury as described in the following list:
a. Central Nervous System Injury.
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(1) Spinal cord injury resulting in paraplegia or quadriplegia.
(2) Brain damage affecting cognition and/or such conditions as
permanent disorientation, behavior disorder, personality
change, seizure disorder, sensorimotor deficits, aphasia, or
coma.
b. Fatality, except for a no dependent exposure.
c. Third degree xxxxx covering 10 percent of the body, or second
degree xxxxx covering 30 percent of the body, or if
significant medical costs can be anticipated.
d. Amputations of a significant portion of one extremity or
multiple amputations.
e. Impairment of total vision by 50 percent or more.
f. Peripheral nerve damage causing major muscle dysfunction or
paralysis in an upper or lower extremity.
g. Serious internal injuries resulting from blunt, penetrating, or
crushing injuries to the chest or abdomen.
h. Multiple fractures, or significant degloving injuries, involving
more than one arm, hand, or leg, malunion, or significant
shortening of the limbs.
i. Fracture of both heel bones (bilateral os calcis).
j. Occupational disease allegedly caused by working conditions or
other job-related factors, including asbestosis, or chronic
pulmonary disease or other occupational disease which results
in disability expected to last two years or more.
References: Plan, Article VI. B.1.
Operating Rule for Claim Reporting Procedure.
D. LEGAL PROCEEDINGS. The Association may intervene in legal
proceedings under Minnesota Statutes Chapter 176 where the result of
the proceeding is considered likely to affect the interests of the
Association. The Association shall notify the affected Member prior
to intervening.
References: Minn. Stat. Section 79.36(f).
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Plan, Article VI.H.2.
Operating Rule for Intervention in Claim Proceedings.
IX. SUBROGATION, SALVAGE, AND THIRD PARTY RECOVERIES
The Member shall, to the extent permitted by law, prosecute or intervene
in any and all claims against third parties arising out of any covered
loss occurrence and all recoveries therefrom shall be applied to reduce
the loss which the Association is required to reimburse to the Member.
Should the Member fail or neglect to enforce any such claims, the
Association may be subrogated to the Member's interest in the claim. The
net proceeds recovered shall be distributed first to the Association to
the extent of amounts paid or payable in the future by the Association
for the claim. Any excess recovered by the Association shall be paid to
the Member or other person entitled to the proceeds, as determined by the
Board of Directors.
If the Member desires to waive subrogation, it must promptly notify the
WCRA and must secure advance approval by the WCRA staff before agreeing
to waive subrogation. If the Member waives its subrogation rights after a
claim has occurred without first obtaining the agreement of the
Association, and the Association determines that it was not in its best
interests to waive subrogation, the Association may refuse to indemnify
the Member for that claim to the extent of amounts which the Association
determines would have been recoverable through subrogation. The
Association may withhold reimbursements to the Member for other claims to
recover reimbursements already made on the claim where subrogation was
waived.
References: Minn. Stat. Section 79.36(g).
Plan, Article VI.E.3. and VI.G.
Operating Rule for the Adjustment of Claims.
Operating Rule for Approval of Waivers of Subrogation
X. RESOLUTION OF DISPUTES
Any member or other interested party aggrieved by any action or
decision of the Board of Directors or the Association, or any agent of
the Association, may, in addition to any other recourse available at law,
including judicial review, file a written complaint with the Association
concerning such action or decision within 30 days. The complaint will be
resolved either through binding arbitration or by the Member Appeals
Committee in accordance with the following procedures.
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Any dispute between a Member (or Former Member or successor in interest
of a Member) and the Association with respect to Article VI. of the Plan
or any provisions in the Reinsurance Agreement or Operating Rules adopted
by the Board of Directors relating to coverage, claim, or premium issues,
as determined by the Association, shall be decided through binding
arbitration in accordance with procedures established in Article X of the
Plan.
Any other unresolved complaint filed by a Member (or Former Member or
successor in interest of a member) shall be decided by a Member Appeals
Committee appointed in accordance with Article X. C. of the Plan. Any
Member aggrieved by a determination by the Member Appeals Committee may
appeal such determination to the Commissioner within 30 days, provided
that, in addition, such Member shall have any other recourse available at
law, including judicial review.
References: Minn Stat. Section 79.36 (h).
Plan, Article X.
XI. INSOLVENCY
If the Member becomes insolvent, indemnification for losses payable by
the Association shall be payable by the Association directly to the
Member or its liquidator, receiver, or statutory successor.
If the Member or any other member becomes insolvent, any liability of the
insolvent member to the Association shall be apportioned among the
remaining members on the same basis as reinsurance premiums are charged.
The Association shall have, on behalf of all of the remaining members,
all rights allowed by law against the estate or funds of the insolvent
member for sums due the Association, and any amounts received by the
Association as a result thereof shall be credited to the members on the
same basis as reinsurance premiums are charged.
References: Minn Stat. Section 79.34, subd. 4.
Plan, Article III. A.2.
XII. TERMINATION
The Commissioner or Commissioner of Commerce may, upon notice to a
Member, take any appropriate action against a Member pursuant to procedures
available to the Commissioner or Commissioner of Commerce, including
revocation of the license of an Insurer to transact workers' compensation
insurance or revocation of authorization of a
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Self-insurer to self-insure workers' compensation liability as authorized
by law, for failure to pay Premiums to the Association when due, failure
to comply with the Plan, Reinsurance Agreement, or Operating Rules, or
failure to comply with Minnesota law. Revocation of authority to write
workers' compensation insurance by an Insurer or to self-insure
automatically terminates membership in the Association. An Insurer may
voluntarily withdraw from membership in the Association only upon ceasing
to be authorized by the Commissioner of Commerce to transact workers'
compensation insurance in Minnesota. A Self-insurer may voluntarily
withdraw from membership in the Association only when it stops
self-insuring its workers' compensation liability, which voluntary
withdrawal is effective on the date determined by the Commissioner of
Commerce. Any unpaid Premiums which have been charged to a withdrawing or
terminated Member shall be due and payable as of the effective date of
withdrawal or termination, as determined by the Commissioner of Commerce.
A Former Member shall continue to be bound by the Act, Plan, and any
Reinsurance Agreement or Operating Rules with respect to the performance
and completion of any unsatisfied liabilities and obligations to the
Association.
References: Minn. Stat. Section 79.34, subd. 3.
Plan, Article III. A.1.
Adopted by action of the Board of Directors of the Workers' Compensation
Reinsurance Association at its meeting duly called on the 10th day of
December, 1998; and approved by the Minnesota Commissioner of Labor and
Industry on the 4th day of January, 1999.
WORKERS' COMPENSATION
REINSURANCE ASSOCIATION
By /s/ Xxx X. Xxxxxxx
----------------------------------------
Xxx X. Xxxxxxx
Its President
ATTEST
By /s/ Xxxx X. Xxxxxxx III
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Xxxx X. Xxxxxxx III
Its Secretary
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STATE OF MINNESOTA
DEPARTMENT OF LABOR AND INDUSTRY
BEFORE THE COMMISSIONER OF LABOR AND INDUSTRY
In the matter of the Amended Plan of ORDER APPROVING AMENDMENTS
Operation and Reinsurance Agreement TO THE PLAN OF OPERATION
of the Workers' Compensation AND REINSURANCE AGREEMENT
Reinsurance Association OF THE WORKERS' COMPENSATION
REINSURANCE ASSOCIATION
ORDER
In accordance with Minn. Stat. Section 79.38, subd.3 (1996) and
Articles I.AA and IX of the WCRA Plan of Operation, IT IS HEREBY ORDERED that
the Amendments to the WCRA Plan of Operation and Reinsurance Agreement, as
approved by the WCRA Board of Directors on December 10, 1998, are approved.
Dated: 1-4-99, 9:45 am /s/ Xxxxxxxx Xxxxxxx
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XXXXXXXX XXXXXXX
Commissioner of Labor and Industry
