CHAPTER 4. WORKERS' COMPENSATION SELF-INSURANCE GROUPS
§ 401. Scope.
This chapter shall apply to workers' compensation self-insurance groups of public and private employers. Groups which are
issued a certificate of authority by the Commissioner shall be subject to this chapter and Chapters 1, 3, 7, 11, 13, 17, 21,
23, 25, 26, 27 and 59 of this title and subchapters IV and V of Chapter 23 of Title 19, as well as any regulations promulgated
under those chapters, except as otherwise provided herein.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 402. Definitions.
For purposes of this chapter:
(1) "Administrator" means an individual, partnership or corporation engaged by a workers' compensation self-insurance group's
board of trustees to carry out the policies established by the group's board of trustees and to provide day-to-day management
of the group.
(2) "Commissioner" means the Commissioner of Insurance.
(3) "Insolvent" or "insolvency" means the same as "impairment" or "insolvency" as those terms are defined in § 5901(1) of
this title as if the group were a reciprocal insurer.
(4) "Net premium" means premium derived from standard premium adjusted by any advance premium discounts.
(5) "Service company" means a person or entity which provides services not provided by the administrator, including but not
limited to:
a. Claims adjustment;
b. Safety engineering;
c. Compilation of statistics and the preparation of premium, loss, and tax reports;
d. Preparation of other required self-insurance reports;
e. Development of members' assessments and fees; and
f. Administration of a claim fund.
(6) "Standard premium" means the premium derived from the filed rates adjusted by experience modification factors but before
advance premium discounts.
(7) "Workers' compensation" when used as a modifier of "benefits," "liabilities," or "obligations," means both workers' compensation
and employers' liability.
(8) "Workers' compensation self-insurance group" or "group" means a not-for-profit unincorporated association consisting of
5 or more private or public employers who are engaged in the same or similar type of business, who are members of the same
bona fide trade or professional association which has been in existence for not less than 5 years and who enter into agreements
to pool their liabilities for workers' compensation benefits and employers' liability in this State.
(9) "Public employer" means a county, incorporated municipality, school district, parking authority or other instrumentality
or political subdivision of the State itself.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 403. Authority to act as a workers' compensation self-insurance group.
No person, association or other entity shall act as a workers' compensation self-insurance group unless it has been issued
a certificate of authority by the Commissioner.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 404. Qualifications for initial approval and continued authority to act as a workers' compensation self-insurance group.
(a) A proposed workers' compensation self-insurance group shall file with the Commissioner its application for a certificate
of approval accompanied by a nonrefundable filing fee in accordance with § 701 of this title. The application shall include
the group's name, location of its principal office, date or organization, name and address of each member and such other information
as the Commissioner may reasonably require, together with the following:
(1) Proof of compliance with subsection (b) of this section;
(2) A copy of the articles of association, if any;
(3) A copy of agreements with the administrator and with any service company;
(4) A copy of the by-laws of the proposed group;
(5) A copy of the agreement between the group and each member securing the payment of workers' compensation benefits, which
shall include provision for payment of assessments as provided for in § 419 of this title;
(6) Designation of the initial board of trustees and administrator;
(7) The address in this State where the books and records of the group will be maintained at all times;
(8) A pro forma financial statement, on a form acceptable to the Commissioner, showing the financial ability of the group
to pay the workers' compensation obligations of its members; and
(9) Proof of payment to the group by each member of not less than 25% of that member's 1st year estimated annual net premium
on a date prescribed by the Commissioner. Each payment shall be considered to be part of the 1st-year premium payment of each
member if the proposed group is granted a certificate of approval.
(b) To obtain and to maintain its certificate of authority, a workers' compensation self-insurance group shall comply with
the following requirements as well as any other requirements established by law or regulation:
(1) A combined net worth of all members of a group of private employers of at least $1,000,000. Specific and aggregate excess
insurance in a form, in an amount and by an insurance company acceptable to the Commissioner for a group of public employers.
(2) Security in a form and amount prescribed by the Commissioner which shall be provided by a surety bond, security deposit
or financial security endorsement, or any combination thereof. If a surety bond is used to meet the security requirement,
it shall be issued by a corporate surety company authorized to transact business in this State. If a security deposit is used
to meet the security requirement, securities shall be limited to bonds or other evidences of indebtedness issued, assumed
or guaranteed by the United States of America or by an agency or instrumentality thereof; certificates of deposit in a federally
insured bank; shares or savings deposits in a federally insured savings and loan association or credit union; or any bond
or security issued by a state of the United States of America and backed by the full faith and credit of the state. Any such
securities shall be deposited in accordance with § 1504 of this title and assigned to and made negotiable by the Chairperson
of the Industrial Accident Board and the Commissioner pursuant to a trust document acceptable to the Commissioner. Interest
accruing on a negotiable security so deposited shall be collected and transmitted to the depositor, provided the depositor
is not in default. A financial security endorsement, issued as part of an acceptable excess insurance contract, may be used
to meet all or part of the security requirement. The bond, security deposit or financial security endorsement shall be:
a. For the benefit of the State solely to pay claims and associated expenses; and
b. Payable upon the failure of the group to pay workers' compensation benefits that it is legally obligated to pay.
The Commissioner may establish and adjust, from time to time, requirements for the amount of security based on differences
among groups in their size, types of employment, years in existence and other relevant factors.
(3) Specific and aggregate excess insurance in a form, in an amount and by an insurance company acceptable to the Commissioner.
The Commissioner may establish minimum requirements for the amount of specific and aggregate excess insurance based on differences
among groups in their size, types of employment, years in existence and other relevant factors, and may permit a group to
meet this requirement by placing in a designated depository securities of the type referred to in paragraph (2) of this subsection.
(4) An estimated annual standard premium of at least $250,000 during a group's 1st year of operation.
(5) An indemnity agreement jointly and severally binding the group and each member thereof to meet the workers' compensation
obligations of each member. The indemnity agreement shall be in a form prescribed by the Commissioner and shall include minimum
uniform substantive provisions prescribed by the Commissioner. Subject to the Commissioner's approval, a group may add other
provisions needed because of its particular circumstances.
(6) A fidelity bond for the administrator in a form and amount prescribed by the Commissioner.
(7) A fidelity bond for the service company in a form and amount prescribed by the Commissioner. The Commissioner may also
require the service company providing claim services to furnish a performance bond in a form and amount prescribed by the
Commissioner.
(c) A group shall notify the Commissioner of any change in the information required to be filed under subsection (a) of this
section or in the manner of its compliance with subsection (b) of this section no later than 30 days after the change.
(d) The Commissioner shall evaluate the information provided by the application required to be filed under subsection (a)
of this section to assure that no gaps in funding exist and that funds necessary to pay workers' compensation benefits will
be available on a timely basis.
(e) The Commissioner shall act upon a completed application for a certificate of approval within 60 days. If, because of the
number of applications, the Commissioner is unable to act upon an application within this period, the Commissioner shall have
an additional 60 days to act.
(f) The Commissioner shall issue to the group a certificate of approval upon finding that the proposed group has met all requirements
or the Commissioner shall issue an order refusing the certification, setting forth reasons for refusal upon finding that the
proposed group does not meet all requirements.
(g) Each workers' compensation self-insurance group shall be deemed to have appointed the Commissioner as its attorney to
receive service of legal process issued against it in this State. The appointment shall be irrevocable, shall bind any successor
in interest and shall remain in effect as long as there is in this State any obligation or liability of the group for workers'
compensation benefits.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 405. Certificate of authority; termination.
(a) The certificate of authority issued by the Commissioner to a workers' compensation self-insurance group authorizes the
group to provide workers' compensation benefits and employer's liability coverage. The certificate of authority remains in
effect until terminated at the request of the group or revoked by the Commissioner, pursuant to § 423 of this title.
(b) The Commissioner shall not grant the request of any group to terminate its certificate of authority unless the group has
insured or reinsured all incurred workers' compensation obligations with an authorized insurer under an agreement filed with
and approved in writing by the Commissioner. Such obligations shall include both known claims and expenses associated therewith
and claims incurred but not reported and expenses associated therewith.
Subject to the approval of the Commissioner, a group may merge with another group engaged in the same or similar type of business
only if the resulting group assumes in full all obligations of the merging groups. The Commissioner may hold a hearing on
the merger and shall do so if any party, including a member of either group, so requests.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 406. Examinations.
The Commissioner, pursuant to Chapter 5 of this title, may examine the affairs, transactions, accounts, records and assets
and liabilities of each group as often as the Commissioner deems advisable. The expense of such examinations shall be assessed
against the group in the same manner that insurers are assessed for examinations.
70 Del. Laws, c. 540, § 1.;
§ 407. Board of trustees; membership, powers, duties and prohibitions.
Each group shall be operated by a board of trustees which shall consist of not less than 5 persons whom the members of a group
elect for stated terms of office. At least two-thirds of the trustees shall be employees, officers or directors of members
of the group. The group's administrator, service company or any owner, officer, employee of or any other person affiliated
with such administrator or service company shall not serve on the board of trustees of the group. All trustees shall be residents
of this State or officers of corporations authorized to do business in this State. The board of trustees of each group shall
ensure that all claims are paid promptly and take all necessary precautions to safeguard the assets of the group, including
all of the following:
(1) The board of trustees shall:
a. Maintain responsibility for all monies collected or disbursed from the group and segregate all monies into a claims fund
account and an administrative fund account. At least 70% of the net premium shall be placed into a designated depository for
the sole purpose of paying claims, allocated claims expenses, reinsurance or excess insurance and special fund contributions,
including 2nd injury and other loss-related funds. This shall be called the "claims fund account." The remaining net premium
shall be placed into a designated depository for the payment of taxes, general regulatory fees and assessments and administrative
costs. This shall be called the "administrative fund account." The Commissioner may approve an administrative fund account
of more than 30% and a claims fund account of less than 70% only if the group shows to the Commissioner's satisfaction that:
1. More than 30% is needed for an effective safety and loss control program; or
2. The group's aggregate excess insurance attaches at less than 70%.
b. Maintain minutes of its meetings and make the minutes available to the Commissioner.
c. Designate an administrator to carry out the policies established by the board of trustees and to provide day-to-day management
of the group and delineate in the written minutes of its meetings the areas of authority it delegates to the administrator.
d. Retain an independent certified public accountant to prepare the statement of financial condition required by § 411(a)
of this title.
(2) The board of trustees shall not:
a. Extend credit to individual members for payment of a premium, except pursuant to payment plans approved by the Commissioner.
b. Borrow any monies from the group or in the name of the group except in the ordinary course of business, without first advising
the Commissioner of the nature and purpose of the loan and obtaining prior approval from the Commissioner.
70 Del. Laws, c. 540, § 1.;
§ 408. Group membership; termination; liability.
(a) An employer joining a workers' compensation self-insurance group after the group has been issued a certificate of authority
shall:
(1) Submit an application for membership to the board of trustees or its administrator; and
(2) Enter into the indemnity agreement required by § 404(b)(5) of this title. Membership takes effect no earlier than each
member's date of approval.
The application for membership and its approval shall be maintained as permanent records of the board of trustees.
(b) Individual members of a group shall be subject to cancellation by the group pursuant to the by-laws of the group. In addition,
individual members may elect to terminate their participation in the group. The group shall notify the Commissioner and the
workers' compensation agency of the termination or cancellation of a member within 10 days and shall maintain coverage of
each canceled or terminated member for 30 days after notice, at the terminating member's expense, unless the group is notified
sooner by the workers' compensation agency that the canceled or terminated member has procured workers' compensation insurance,
has become an approved self-insurer or has become a member of another group.
(c) The group shall pay all workers' compensation benefits for which each member incurs liability during its period of membership.
A member who elects to terminate its membership or is canceled by a group remains jointly and severally liable for workers'compensation
obligations of the group and its members which were incurred during the canceled or terminated member's period of membership.
(d) A group member is not relieved of its workers' compensation liabilities incurred during its period of membership except
through payment by the group or the member of required workers' compensation benefits.
(e) The insolvency or bankruptcy of a member does not relieve the group or any other member of liability for the payment of
any workers' compensation benefits incurred during the insolvent or bankrupt member's period of membership.
70 Del. Laws, c. 540, § 1.;
§ 409. Service companies.
(a) No service company or its employees, officers or directors shall be an employee, officer or director of, or have either
a direct or indirect financial interest in, an administrator. No administrator or its employees, officer or directors shall
be an employee, officer or director of, or have either a direct or indirect financial interest in, a service company.
(b) The service contract shall state that, unless the Commissioner permits otherwise, the service company shall handle, to
their conclusion, all claims and other obligations incurred during the contract period.
70 Del. Laws, c. 540, § 1.;
§ 410. Licensing of agent.
Except for a salaried employee of a group, its administrator or its service company, any person soliciting membership for
a workers' compensation self-insurance group must be licensed as provided in Chapter 17 of this title.
70 Del. Laws, c. 540, § 1.;
§ 411. Financial statements and other reports.
(a) Each group shall submit to the Commissioner a statement of financial condition audited by an independent certified public
accountant on or before the last day of the 6th month following the end of the group's fiscal year. The financial statement
shall be on a form prescribed by the Commissioner and shall include, but not be limited to, actuarially appropriate reserves
for:
(1) Known claims and expenses associated therewith;
(2) Claims incurred but not reported and expenses associated therewith;
(3) Unearned premiums; and
(4) Bad debts,
which reserves shall be shown as liabilities.
(b) An actuarial opinion regarding reserves for:
(1) Known claims and expenses associated therewith; and
(2) Claims incurred but not reported and expenses associated therewith shall be included in the audited financial statement.
The actuarial opinion shall be given by a member of the American Academy of Actuaries or other qualified loss reserve specialist
as defined in the annual statement adopted by the National Association of Insurance Commissioners.
(c) No person shall make any untrue statement of a material fact, or omit to state a material fact necessary in order to make
the statement made, in light of the circumstances under which it is made, not misleading, in connection with the solicitation
of membership in a group.
(d) The Commissioner may prescribe the format and frequency of other reports which may include, but shall not be limited to,
payroll audit reports, summary loss reports and quarterly financial statements.
70 Del. Laws, c. 540, § 1.;
§ 412. Taxes.
Groups shall be subject to subchapter V of Chapter 23 of Title 19 for the payment of premium tax.
70 Del. Laws, c. 540, § 1.;
§ 413. Fees and assessments.
Groups shall be subject to subchapter V of Chapter 23 of Title 19 for the payment of fees and assessments.
70 Del. Laws, c. 540, § 1.;
§ 414. Misrepresentation prohibited.
No person shall make a material misrepresentation or omission of a material fact in connection with the solicitation of membership
of a group nor violate any provision of Chapters 17 and 23 of this title or any regulations thereunder.
70 Del. Laws, c. 540, § 1.;
§ 415. Investments.
Funds not needed for current obligations may be invested by the board of trustees in accordance with Chapters 11 and 13 of
this title.
70 Del. Laws, c. 540, § 1.;
§ 416. Rates and reporting of rates.
(a) Every workers' compensation self-insurance group shall file and adhere to rates, rules and classifications pursuant to
Chapter 26 of this title.
(b) Premium contributions to the group shall be determined by applying the rates and rules to the appropriate classification
of each member which may be adjusted by each member's experience credit or debit. Subject to approval by the Commissioner,
premium contributions may also be reduced by an advance premium discount reflecting the group's expense levels and loss experience.
(c) A group may contract with an advisory organization approved by the Commissioner for assistance in developing appropriate
rates.
(d) Each group shall be audited at least annually by an auditor acceptable to the Commissioner to verify proper classifications,
experience rating, payroll and rates. A report of the audit shall be filed with the Commissioner in a form acceptable to the
Commissioner. A group or any member thereof may request a hearing on any objections to the classifications. If the Commissioner
determines that, as a result of an improper classification, a member's premium contribution is insufficient, the commissioner
shall order the group to assess that member an amount equal to the deficiency. If the Commissioner determines that, as a result
of an improper classification, a member's premium is excessive, the commissioner shall order the group to refund to the member
the excess collected. The audit shall be at the expense of the group.
70 Del. Laws, c. 540, § 1.;
§ 417. Refunds.
(a) Any monies for a fund year in excess of the amount necessary to fund all obligations for that fund year may be declared
to be refundable by the board of trustees not less than 12 months after the end of the fund year with the Commissioner's approval.
(b) Each member shall be given a written description of the refund plan at the time of application for membership. A refund
for any fund year shall be paid only to those employers who remain participants in the group for the entire fund year. Payment
of a refund based on a previous fund year shall not be contingent on continued membership in the group after that fund year.
70 Del. Laws, c. 540, § 1.;
§ 418. Premium payment; reserves.
(a) Each group shall establish to the satisfaction of the Commissioner a premium payment plan which shall include:
(1) An initial payment by each member of at least 25% of that member's annual premium before the start of the group's fund
year; and
(2) Payment of the balance of each member's annual premium in monthly or quarterly installments.
(b) Each group shall establish and maintain actuarially appropriate loss reserves which shall include reserves for:
(1) Known claims and expenses associated therewith; and
(2) Claims incurred but not reported and expenses associated therewith.
(c) Each group shall establish and maintain bad debt reserves based on the historical experience of the group or other groups.
70 Del. Laws, c. 540, § 1.;
§ 419. Deficits and insolvencies.
(a) If the assets of a group are at any time insufficient to enable the group to discharge its legal liabilities and other
obligations and to maintain the reserves required of it under this chapter, it shall forthwith make up the deficiency or levy
an assessment upon its members for the amount needed to make up the deficiency.
(b) In the event of a deficiency in any fund year, the deficiency shall be made up immediately, either from:
(1) Surplus from a fund year other than the current fund year;
(2) Administrative funds;
(3) Assessment of the membership, if ordered by the group; or
(4) Such alternate method as the Commissioner may approve or direct.
The Commissioner shall be notified prior to any transfer of surplus funds from 1 fund year to another.
(c) If the group fails to assess its members or to otherwise make up such deficit within 30 days, the Commissioner may order
it to do so.
(d) If the group fails to make the required assessment of its members within 30 days after the Commissioner orders it do so,
or if the deficiency is not fully made up within 60 days after the date on which the assessment is made or within such longer
period of time as may be specified by the Commissioner, the group shall be deemed to be insolvent or impaired.
(e) Notwithstanding subsections (a) through (d) of this section, the Commissioner may at any time proceed against an insolvent
group in the same manner as the Commissioner would proceed against an insolvent or impaired domestic insurer in this State
as prescribed in Chapter 59 of this title. The Commissioner shall have the same powers and limitations in such proceedings
as are provided under those laws.
(f) In the event of delinquency proceedings against a group, the Commissioner may levy an assessment upon its members for
such an amount as the Commissioner determines to be necessary to discharge all liabilities of the group, including the reasonable
cost of liquidation or rehabilitation.
70 Del. Laws, c. 540, § 1.;
§ 420. Guaranty mechanism.
In the event of a liquidation pursuant to § 419 of this title, after exhausting the security required pursuant to § 404(b)(2)
of this title, the Commissioner may levy an assessment against all groups to assure prompt payment of benefits. The assessment
on each group shall be based on the proportion that the premium of each group bears to the total premium of all groups. The
Commissioner may exempt a group from assessment upon finding that the payment of the assessment would render the group insolvent.
The assessment shall not relieve any member of an insolvent group of its joint and several liability. After an assessment
is made, the Commissioner shall take action to enforce the joint and several liability provisions of the insolvent group's
indemnity agreement, and shall recoup:
(1) All costs incurred by the Commissioner in enforcing such joint and several liability provisions;
(2) Amounts that the Commissioner assessed any other groups pursuant to this section; and
(3) Any obligations included within § 419(f) of this title.
70 Del. Laws, c. 540, § 1.;
§ 421. Monetary penalties.
After notice and opportunity for a hearing, the Commissioner may impose a monetary penalty on any person or group found to
be in violation of any provision of this chapter or title or of any rules or regulations pursuant to § 329 of this title and
Chapter 101 of Title 29. The amount of any monetary penalty shall be paid to the Commissioner for the use of the State.
70 Del. Laws, c. 540, § 1.;
§ 422. Cease and desist orders.
(a) After notice and opportunity for a hearing, unless there are exigent circumstances, the Commissioner may issue an order
requiring a person or group to cease and desist from engaging in an act or practice found to be in violation of any provision
of this chapter or title or of any rules or regulations promulgated thereunder. Unless there are exigent circumstances, a
minimum of 10 days' notice will be provided prior to a hearing. If exigent circumstances are present, the person or group
will be offered a hearing within 10 days after the issuance of the order.
(b) Upon a finding, after notice and opportunity for a hearing, that any person or group has violated any cease and desist
order, the Commissioner may do any or all of the following:
(1) Impose a monetary penalty of not more than $15,000, in the case of an individual, or not more than $50,000, in the case
of a group or corporation, for each and every act or violation of the order; or
(2) Revoke or suspend the group's certificate of authority or any insurance license held by the person; or
(3) Place the group or person under supervision; or
(4) Permanently enjoin the conduct or enter any remedial order.
70 Del. Laws, c. 540, § 1.;
§ 423. Revocation of certificate of authority.
(a) After notice and opportunity for a hearing, the Commissioner may revoke or suspend a group's certificate of authority
if it:
(1) Is found to be insolvent or impaired;
(2) Fails to pay any premium tax, regulatory fee or assessment or special fund contribution imposed upon it; or
(3) Fails to comply with any of the provisions of this chapter and title or with any rules promulgated thereunder or with
any lawful order of the Commissioner within the time prescribed.
(b) In addition, the Commissioner may revoke or suspend a group's certificate of authority if, after notice and opportunity
for hearing, the Commissioner finds that:
(1) Any certificate of authority that was issued to the group was obtained by fraud;
(2) There was a material misrepresentation in the application for the certificate of authority; or
(3) The group or its administrator has misappropriated, converted, illegally withheld or refused to pay over upon proper demand
any monies that belong to a member, an employee of a member or a person otherwise entitled thereto and that have been entrusted
to the group or its administrator in its fiduciary capacities.
70 Del. Laws, c. 540, § 1.;
§ 424. Notice and hearings.
All notices and hearings shall be as provided in Chapter 3 of this title and Chapter 101 of Title 29.
70 Del. Laws, c. 540, § 1.;
§ 425. Rules and regulations.
The Commissioner shall have power to make rules and regulations in order to implement this chapter.
CHAPTER 4. WORKERS' COMPENSATION SELF-INSURANCE GROUPS
§ 401. Scope.
This chapter shall apply to workers' compensation self-insurance groups of public and private employers. Groups which are
issued a certificate of authority by the Commissioner shall be subject to this chapter and Chapters 1, 3, 7, 11, 13, 17, 21,
23, 25, 26, 27 and 59 of this title and subchapters IV and V of Chapter 23 of Title 19, as well as any regulations promulgated
under those chapters, except as otherwise provided herein.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 402. Definitions.
For purposes of this chapter:
(1) "Administrator" means an individual, partnership or corporation engaged by a workers' compensation self-insurance group's
board of trustees to carry out the policies established by the group's board of trustees and to provide day-to-day management
of the group.
(2) "Commissioner" means the Commissioner of Insurance.
(3) "Insolvent" or "insolvency" means the same as "impairment" or "insolvency" as those terms are defined in § 5901(1) of
this title as if the group were a reciprocal insurer.
(4) "Net premium" means premium derived from standard premium adjusted by any advance premium discounts.
(5) "Service company" means a person or entity which provides services not provided by the administrator, including but not
limited to:
a. Claims adjustment;
b. Safety engineering;
c. Compilation of statistics and the preparation of premium, loss, and tax reports;
d. Preparation of other required self-insurance reports;
e. Development of members' assessments and fees; and
f. Administration of a claim fund.
(6) "Standard premium" means the premium derived from the filed rates adjusted by experience modification factors but before
advance premium discounts.
(7) "Workers' compensation" when used as a modifier of "benefits," "liabilities," or "obligations," means both workers' compensation
and employers' liability.
(8) "Workers' compensation self-insurance group" or "group" means a not-for-profit unincorporated association consisting of
5 or more private or public employers who are engaged in the same or similar type of business, who are members of the same
bona fide trade or professional association which has been in existence for not less than 5 years and who enter into agreements
to pool their liabilities for workers' compensation benefits and employers' liability in this State.
(9) "Public employer" means a county, incorporated municipality, school district, parking authority or other instrumentality
or political subdivision of the State itself.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 403. Authority to act as a workers' compensation self-insurance group.
No person, association or other entity shall act as a workers' compensation self-insurance group unless it has been issued
a certificate of authority by the Commissioner.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 404. Qualifications for initial approval and continued authority to act as a workers' compensation self-insurance group.
(a) A proposed workers' compensation self-insurance group shall file with the Commissioner its application for a certificate
of approval accompanied by a nonrefundable filing fee in accordance with § 701 of this title. The application shall include
the group's name, location of its principal office, date or organization, name and address of each member and such other information
as the Commissioner may reasonably require, together with the following:
(1) Proof of compliance with subsection (b) of this section;
(2) A copy of the articles of association, if any;
(3) A copy of agreements with the administrator and with any service company;
(4) A copy of the by-laws of the proposed group;
(5) A copy of the agreement between the group and each member securing the payment of workers' compensation benefits, which
shall include provision for payment of assessments as provided for in § 419 of this title;
(6) Designation of the initial board of trustees and administrator;
(7) The address in this State where the books and records of the group will be maintained at all times;
(8) A pro forma financial statement, on a form acceptable to the Commissioner, showing the financial ability of the group
to pay the workers' compensation obligations of its members; and
(9) Proof of payment to the group by each member of not less than 25% of that member's 1st year estimated annual net premium
on a date prescribed by the Commissioner. Each payment shall be considered to be part of the 1st-year premium payment of each
member if the proposed group is granted a certificate of approval.
(b) To obtain and to maintain its certificate of authority, a workers' compensation self-insurance group shall comply with
the following requirements as well as any other requirements established by law or regulation:
(1) A combined net worth of all members of a group of private employers of at least $1,000,000. Specific and aggregate excess
insurance in a form, in an amount and by an insurance company acceptable to the Commissioner for a group of public employers.
(2) Security in a form and amount prescribed by the Commissioner which shall be provided by a surety bond, security deposit
or financial security endorsement, or any combination thereof. If a surety bond is used to meet the security requirement,
it shall be issued by a corporate surety company authorized to transact business in this State. If a security deposit is used
to meet the security requirement, securities shall be limited to bonds or other evidences of indebtedness issued, assumed
or guaranteed by the United States of America or by an agency or instrumentality thereof; certificates of deposit in a federally
insured bank; shares or savings deposits in a federally insured savings and loan association or credit union; or any bond
or security issued by a state of the United States of America and backed by the full faith and credit of the state. Any such
securities shall be deposited in accordance with § 1504 of this title and assigned to and made negotiable by the Chairperson
of the Industrial Accident Board and the Commissioner pursuant to a trust document acceptable to the Commissioner. Interest
accruing on a negotiable security so deposited shall be collected and transmitted to the depositor, provided the depositor
is not in default. A financial security endorsement, issued as part of an acceptable excess insurance contract, may be used
to meet all or part of the security requirement. The bond, security deposit or financial security endorsement shall be:
a. For the benefit of the State solely to pay claims and associated expenses; and
b. Payable upon the failure of the group to pay workers' compensation benefits that it is legally obligated to pay.
The Commissioner may establish and adjust, from time to time, requirements for the amount of security based on differences
among groups in their size, types of employment, years in existence and other relevant factors.
(3) Specific and aggregate excess insurance in a form, in an amount and by an insurance company acceptable to the Commissioner.
The Commissioner may establish minimum requirements for the amount of specific and aggregate excess insurance based on differences
among groups in their size, types of employment, years in existence and other relevant factors, and may permit a group to
meet this requirement by placing in a designated depository securities of the type referred to in paragraph (2) of this subsection.
(4) An estimated annual standard premium of at least $250,000 during a group's 1st year of operation.
(5) An indemnity agreement jointly and severally binding the group and each member thereof to meet the workers' compensation
obligations of each member. The indemnity agreement shall be in a form prescribed by the Commissioner and shall include minimum
uniform substantive provisions prescribed by the Commissioner. Subject to the Commissioner's approval, a group may add other
provisions needed because of its particular circumstances.
(6) A fidelity bond for the administrator in a form and amount prescribed by the Commissioner.
(7) A fidelity bond for the service company in a form and amount prescribed by the Commissioner. The Commissioner may also
require the service company providing claim services to furnish a performance bond in a form and amount prescribed by the
Commissioner.
(c) A group shall notify the Commissioner of any change in the information required to be filed under subsection (a) of this
section or in the manner of its compliance with subsection (b) of this section no later than 30 days after the change.
(d) The Commissioner shall evaluate the information provided by the application required to be filed under subsection (a)
of this section to assure that no gaps in funding exist and that funds necessary to pay workers' compensation benefits will
be available on a timely basis.
(e) The Commissioner shall act upon a completed application for a certificate of approval within 60 days. If, because of the
number of applications, the Commissioner is unable to act upon an application within this period, the Commissioner shall have
an additional 60 days to act.
(f) The Commissioner shall issue to the group a certificate of approval upon finding that the proposed group has met all requirements
or the Commissioner shall issue an order refusing the certification, setting forth reasons for refusal upon finding that the
proposed group does not meet all requirements.
(g) Each workers' compensation self-insurance group shall be deemed to have appointed the Commissioner as its attorney to
receive service of legal process issued against it in this State. The appointment shall be irrevocable, shall bind any successor
in interest and shall remain in effect as long as there is in this State any obligation or liability of the group for workers'
compensation benefits.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 405. Certificate of authority; termination.
(a) The certificate of authority issued by the Commissioner to a workers' compensation self-insurance group authorizes the
group to provide workers' compensation benefits and employer's liability coverage. The certificate of authority remains in
effect until terminated at the request of the group or revoked by the Commissioner, pursuant to § 423 of this title.
(b) The Commissioner shall not grant the request of any group to terminate its certificate of authority unless the group has
insured or reinsured all incurred workers' compensation obligations with an authorized insurer under an agreement filed with
and approved in writing by the Commissioner. Such obligations shall include both known claims and expenses associated therewith
and claims incurred but not reported and expenses associated therewith.
Subject to the approval of the Commissioner, a group may merge with another group engaged in the same or similar type of business
only if the resulting group assumes in full all obligations of the merging groups. The Commissioner may hold a hearing on
the merger and shall do so if any party, including a member of either group, so requests.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 406. Examinations.
The Commissioner, pursuant to Chapter 5 of this title, may examine the affairs, transactions, accounts, records and assets
and liabilities of each group as often as the Commissioner deems advisable. The expense of such examinations shall be assessed
against the group in the same manner that insurers are assessed for examinations.
70 Del. Laws, c. 540, § 1.;
§ 407. Board of trustees; membership, powers, duties and prohibitions.
Each group shall be operated by a board of trustees which shall consist of not less than 5 persons whom the members of a group
elect for stated terms of office. At least two-thirds of the trustees shall be employees, officers or directors of members
of the group. The group's administrator, service company or any owner, officer, employee of or any other person affiliated
with such administrator or service company shall not serve on the board of trustees of the group. All trustees shall be residents
of this State or officers of corporations authorized to do business in this State. The board of trustees of each group shall
ensure that all claims are paid promptly and take all necessary precautions to safeguard the assets of the group, including
all of the following:
(1) The board of trustees shall:
a. Maintain responsibility for all monies collected or disbursed from the group and segregate all monies into a claims fund
account and an administrative fund account. At least 70% of the net premium shall be placed into a designated depository for
the sole purpose of paying claims, allocated claims expenses, reinsurance or excess insurance and special fund contributions,
including 2nd injury and other loss-related funds. This shall be called the "claims fund account." The remaining net premium
shall be placed into a designated depository for the payment of taxes, general regulatory fees and assessments and administrative
costs. This shall be called the "administrative fund account." The Commissioner may approve an administrative fund account
of more than 30% and a claims fund account of less than 70% only if the group shows to the Commissioner's satisfaction that:
1. More than 30% is needed for an effective safety and loss control program; or
2. The group's aggregate excess insurance attaches at less than 70%.
b. Maintain minutes of its meetings and make the minutes available to the Commissioner.
c. Designate an administrator to carry out the policies established by the board of trustees and to provide day-to-day management
of the group and delineate in the written minutes of its meetings the areas of authority it delegates to the administrator.
d. Retain an independent certified public accountant to prepare the statement of financial condition required by § 411(a)
of this title.
(2) The board of trustees shall not:
a. Extend credit to individual members for payment of a premium, except pursuant to payment plans approved by the Commissioner.
b. Borrow any monies from the group or in the name of the group except in the ordinary course of business, without first advising
the Commissioner of the nature and purpose of the loan and obtaining prior approval from the Commissioner.
70 Del. Laws, c. 540, § 1.;
§ 408. Group membership; termination; liability.
(a) An employer joining a workers' compensation self-insurance group after the group has been issued a certificate of authority
shall:
(1) Submit an application for membership to the board of trustees or its administrator; and
(2) Enter into the indemnity agreement required by § 404(b)(5) of this title. Membership takes effect no earlier than each
member's date of approval.
The application for membership and its approval shall be maintained as permanent records of the board of trustees.
(b) Individual members of a group shall be subject to cancellation by the group pursuant to the by-laws of the group. In addition,
individual members may elect to terminate their participation in the group. The group shall notify the Commissioner and the
workers' compensation agency of the termination or cancellation of a member within 10 days and shall maintain coverage of
each canceled or terminated member for 30 days after notice, at the terminating member's expense, unless the group is notified
sooner by the workers' compensation agency that the canceled or terminated member has procured workers' compensation insurance,
has become an approved self-insurer or has become a member of another group.
(c) The group shall pay all workers' compensation benefits for which each member incurs liability during its period of membership.
A member who elects to terminate its membership or is canceled by a group remains jointly and severally liable for workers'compensation
obligations of the group and its members which were incurred during the canceled or terminated member's period of membership.
(d) A group member is not relieved of its workers' compensation liabilities incurred during its period of membership except
through payment by the group or the member of required workers' compensation benefits.
(e) The insolvency or bankruptcy of a member does not relieve the group or any other member of liability for the payment of
any workers' compensation benefits incurred during the insolvent or bankrupt member's period of membership.
70 Del. Laws, c. 540, § 1.;
§ 409. Service companies.
(a) No service company or its employees, officers or directors shall be an employee, officer or director of, or have either
a direct or indirect financial interest in, an administrator. No administrator or its employees, officer or directors shall
be an employee, officer or director of, or have either a direct or indirect financial interest in, a service company.
(b) The service contract shall state that, unless the Commissioner permits otherwise, the service company shall handle, to
their conclusion, all claims and other obligations incurred during the contract period.
70 Del. Laws, c. 540, § 1.;
§ 410. Licensing of agent.
Except for a salaried employee of a group, its administrator or its service company, any person soliciting membership for
a workers' compensation self-insurance group must be licensed as provided in Chapter 17 of this title.
70 Del. Laws, c. 540, § 1.;
§ 411. Financial statements and other reports.
(a) Each group shall submit to the Commissioner a statement of financial condition audited by an independent certified public
accountant on or before the last day of the 6th month following the end of the group's fiscal year. The financial statement
shall be on a form prescribed by the Commissioner and shall include, but not be limited to, actuarially appropriate reserves
for:
(1) Known claims and expenses associated therewith;
(2) Claims incurred but not reported and expenses associated therewith;
(3) Unearned premiums; and
(4) Bad debts,
which reserves shall be shown as liabilities.
(b) An actuarial opinion regarding reserves for:
(1) Known claims and expenses associated therewith; and
(2) Claims incurred but not reported and expenses associated therewith shall be included in the audited financial statement.
The actuarial opinion shall be given by a member of the American Academy of Actuaries or other qualified loss reserve specialist
as defined in the annual statement adopted by the National Association of Insurance Commissioners.
(c) No person shall make any untrue statement of a material fact, or omit to state a material fact necessary in order to make
the statement made, in light of the circumstances under which it is made, not misleading, in connection with the solicitation
of membership in a group.
(d) The Commissioner may prescribe the format and frequency of other reports which may include, but shall not be limited to,
payroll audit reports, summary loss reports and quarterly financial statements.
70 Del. Laws, c. 540, § 1.;
§ 412. Taxes.
Groups shall be subject to subchapter V of Chapter 23 of Title 19 for the payment of premium tax.
70 Del. Laws, c. 540, § 1.;
§ 413. Fees and assessments.
Groups shall be subject to subchapter V of Chapter 23 of Title 19 for the payment of fees and assessments.
70 Del. Laws, c. 540, § 1.;
§ 414. Misrepresentation prohibited.
No person shall make a material misrepresentation or omission of a material fact in connection with the solicitation of membership
of a group nor violate any provision of Chapters 17 and 23 of this title or any regulations thereunder.
70 Del. Laws, c. 540, § 1.;
§ 415. Investments.
Funds not needed for current obligations may be invested by the board of trustees in accordance with Chapters 11 and 13 of
this title.
70 Del. Laws, c. 540, § 1.;
§ 416. Rates and reporting of rates.
(a) Every workers' compensation self-insurance group shall file and adhere to rates, rules and classifications pursuant to
Chapter 26 of this title.
(b) Premium contributions to the group shall be determined by applying the rates and rules to the appropriate classification
of each member which may be adjusted by each member's experience credit or debit. Subject to approval by the Commissioner,
premium contributions may also be reduced by an advance premium discount reflecting the group's expense levels and loss experience.
(c) A group may contract with an advisory organization approved by the Commissioner for assistance in developing appropriate
rates.
(d) Each group shall be audited at least annually by an auditor acceptable to the Commissioner to verify proper classifications,
experience rating, payroll and rates. A report of the audit shall be filed with the Commissioner in a form acceptable to the
Commissioner. A group or any member thereof may request a hearing on any objections to the classifications. If the Commissioner
determines that, as a result of an improper classification, a member's premium contribution is insufficient, the commissioner
shall order the group to assess that member an amount equal to the deficiency. If the Commissioner determines that, as a result
of an improper classification, a member's premium is excessive, the commissioner shall order the group to refund to the member
the excess collected. The audit shall be at the expense of the group.
70 Del. Laws, c. 540, § 1.;
§ 417. Refunds.
(a) Any monies for a fund year in excess of the amount necessary to fund all obligations for that fund year may be declared
to be refundable by the board of trustees not less than 12 months after the end of the fund year with the Commissioner's approval.
(b) Each member shall be given a written description of the refund plan at the time of application for membership. A refund
for any fund year shall be paid only to those employers who remain participants in the group for the entire fund year. Payment
of a refund based on a previous fund year shall not be contingent on continued membership in the group after that fund year.
70 Del. Laws, c. 540, § 1.;
§ 418. Premium payment; reserves.
(a) Each group shall establish to the satisfaction of the Commissioner a premium payment plan which shall include:
(1) An initial payment by each member of at least 25% of that member's annual premium before the start of the group's fund
year; and
(2) Payment of the balance of each member's annual premium in monthly or quarterly installments.
(b) Each group shall establish and maintain actuarially appropriate loss reserves which shall include reserves for:
(1) Known claims and expenses associated therewith; and
(2) Claims incurred but not reported and expenses associated therewith.
(c) Each group shall establish and maintain bad debt reserves based on the historical experience of the group or other groups.
70 Del. Laws, c. 540, § 1.;
§ 419. Deficits and insolvencies.
(a) If the assets of a group are at any time insufficient to enable the group to discharge its legal liabilities and other
obligations and to maintain the reserves required of it under this chapter, it shall forthwith make up the deficiency or levy
an assessment upon its members for the amount needed to make up the deficiency.
(b) In the event of a deficiency in any fund year, the deficiency shall be made up immediately, either from:
(1) Surplus from a fund year other than the current fund year;
(2) Administrative funds;
(3) Assessment of the membership, if ordered by the group; or
(4) Such alternate method as the Commissioner may approve or direct.
The Commissioner shall be notified prior to any transfer of surplus funds from 1 fund year to another.
(c) If the group fails to assess its members or to otherwise make up such deficit within 30 days, the Commissioner may order
it to do so.
(d) If the group fails to make the required assessment of its members within 30 days after the Commissioner orders it do so,
or if the deficiency is not fully made up within 60 days after the date on which the assessment is made or within such longer
period of time as may be specified by the Commissioner, the group shall be deemed to be insolvent or impaired.
(e) Notwithstanding subsections (a) through (d) of this section, the Commissioner may at any time proceed against an insolvent
group in the same manner as the Commissioner would proceed against an insolvent or impaired domestic insurer in this State
as prescribed in Chapter 59 of this title. The Commissioner shall have the same powers and limitations in such proceedings
as are provided under those laws.
(f) In the event of delinquency proceedings against a group, the Commissioner may levy an assessment upon its members for
such an amount as the Commissioner determines to be necessary to discharge all liabilities of the group, including the reasonable
cost of liquidation or rehabilitation.
70 Del. Laws, c. 540, § 1.;
§ 420. Guaranty mechanism.
In the event of a liquidation pursuant to § 419 of this title, after exhausting the security required pursuant to § 404(b)(2)
of this title, the Commissioner may levy an assessment against all groups to assure prompt payment of benefits. The assessment
on each group shall be based on the proportion that the premium of each group bears to the total premium of all groups. The
Commissioner may exempt a group from assessment upon finding that the payment of the assessment would render the group insolvent.
The assessment shall not relieve any member of an insolvent group of its joint and several liability. After an assessment
is made, the Commissioner shall take action to enforce the joint and several liability provisions of the insolvent group's
indemnity agreement, and shall recoup:
(1) All costs incurred by the Commissioner in enforcing such joint and several liability provisions;
(2) Amounts that the Commissioner assessed any other groups pursuant to this section; and
(3) Any obligations included within § 419(f) of this title.
70 Del. Laws, c. 540, § 1.;
§ 421. Monetary penalties.
After notice and opportunity for a hearing, the Commissioner may impose a monetary penalty on any person or group found to
be in violation of any provision of this chapter or title or of any rules or regulations pursuant to § 329 of this title and
Chapter 101 of Title 29. The amount of any monetary penalty shall be paid to the Commissioner for the use of the State.
70 Del. Laws, c. 540, § 1.;
§ 422. Cease and desist orders.
(a) After notice and opportunity for a hearing, unless there are exigent circumstances, the Commissioner may issue an order
requiring a person or group to cease and desist from engaging in an act or practice found to be in violation of any provision
of this chapter or title or of any rules or regulations promulgated thereunder. Unless there are exigent circumstances, a
minimum of 10 days' notice will be provided prior to a hearing. If exigent circumstances are present, the person or group
will be offered a hearing within 10 days after the issuance of the order.
(b) Upon a finding, after notice and opportunity for a hearing, that any person or group has violated any cease and desist
order, the Commissioner may do any or all of the following:
(1) Impose a monetary penalty of not more than $15,000, in the case of an individual, or not more than $50,000, in the case
of a group or corporation, for each and every act or violation of the order; or
(2) Revoke or suspend the group's certificate of authority or any insurance license held by the person; or
(3) Place the group or person under supervision; or
(4) Permanently enjoin the conduct or enter any remedial order.
70 Del. Laws, c. 540, § 1.;
§ 423. Revocation of certificate of authority.
(a) After notice and opportunity for a hearing, the Commissioner may revoke or suspend a group's certificate of authority
if it:
(1) Is found to be insolvent or impaired;
(2) Fails to pay any premium tax, regulatory fee or assessment or special fund contribution imposed upon it; or
(3) Fails to comply with any of the provisions of this chapter and title or with any rules promulgated thereunder or with
any lawful order of the Commissioner within the time prescribed.
(b) In addition, the Commissioner may revoke or suspend a group's certificate of authority if, after notice and opportunity
for hearing, the Commissioner finds that:
(1) Any certificate of authority that was issued to the group was obtained by fraud;
(2) There was a material misrepresentation in the application for the certificate of authority; or
(3) The group or its administrator has misappropriated, converted, illegally withheld or refused to pay over upon proper demand
any monies that belong to a member, an employee of a member or a person otherwise entitled thereto and that have been entrusted
to the group or its administrator in its fiduciary capacities.
70 Del. Laws, c. 540, § 1.;
§ 424. Notice and hearings.
All notices and hearings shall be as provided in Chapter 3 of this title and Chapter 101 of Title 29.
70 Del. Laws, c. 540, § 1.;
§ 425. Rules and regulations.
The Commissioner shall have power to make rules and regulations in order to implement this chapter.
CHAPTER 4. WORKERS' COMPENSATION SELF-INSURANCE GROUPS
§ 401. Scope.
This chapter shall apply to workers' compensation self-insurance groups of public and private employers. Groups which are
issued a certificate of authority by the Commissioner shall be subject to this chapter and Chapters 1, 3, 7, 11, 13, 17, 21,
23, 25, 26, 27 and 59 of this title and subchapters IV and V of Chapter 23 of Title 19, as well as any regulations promulgated
under those chapters, except as otherwise provided herein.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 402. Definitions.
For purposes of this chapter:
(1) "Administrator" means an individual, partnership or corporation engaged by a workers' compensation self-insurance group's
board of trustees to carry out the policies established by the group's board of trustees and to provide day-to-day management
of the group.
(2) "Commissioner" means the Commissioner of Insurance.
(3) "Insolvent" or "insolvency" means the same as "impairment" or "insolvency" as those terms are defined in § 5901(1) of
this title as if the group were a reciprocal insurer.
(4) "Net premium" means premium derived from standard premium adjusted by any advance premium discounts.
(5) "Service company" means a person or entity which provides services not provided by the administrator, including but not
limited to:
a. Claims adjustment;
b. Safety engineering;
c. Compilation of statistics and the preparation of premium, loss, and tax reports;
d. Preparation of other required self-insurance reports;
e. Development of members' assessments and fees; and
f. Administration of a claim fund.
(6) "Standard premium" means the premium derived from the filed rates adjusted by experience modification factors but before
advance premium discounts.
(7) "Workers' compensation" when used as a modifier of "benefits," "liabilities," or "obligations," means both workers' compensation
and employers' liability.
(8) "Workers' compensation self-insurance group" or "group" means a not-for-profit unincorporated association consisting of
5 or more private or public employers who are engaged in the same or similar type of business, who are members of the same
bona fide trade or professional association which has been in existence for not less than 5 years and who enter into agreements
to pool their liabilities for workers' compensation benefits and employers' liability in this State.
(9) "Public employer" means a county, incorporated municipality, school district, parking authority or other instrumentality
or political subdivision of the State itself.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 403. Authority to act as a workers' compensation self-insurance group.
No person, association or other entity shall act as a workers' compensation self-insurance group unless it has been issued
a certificate of authority by the Commissioner.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 404. Qualifications for initial approval and continued authority to act as a workers' compensation self-insurance group.
(a) A proposed workers' compensation self-insurance group shall file with the Commissioner its application for a certificate
of approval accompanied by a nonrefundable filing fee in accordance with § 701 of this title. The application shall include
the group's name, location of its principal office, date or organization, name and address of each member and such other information
as the Commissioner may reasonably require, together with the following:
(1) Proof of compliance with subsection (b) of this section;
(2) A copy of the articles of association, if any;
(3) A copy of agreements with the administrator and with any service company;
(4) A copy of the by-laws of the proposed group;
(5) A copy of the agreement between the group and each member securing the payment of workers' compensation benefits, which
shall include provision for payment of assessments as provided for in § 419 of this title;
(6) Designation of the initial board of trustees and administrator;
(7) The address in this State where the books and records of the group will be maintained at all times;
(8) A pro forma financial statement, on a form acceptable to the Commissioner, showing the financial ability of the group
to pay the workers' compensation obligations of its members; and
(9) Proof of payment to the group by each member of not less than 25% of that member's 1st year estimated annual net premium
on a date prescribed by the Commissioner. Each payment shall be considered to be part of the 1st-year premium payment of each
member if the proposed group is granted a certificate of approval.
(b) To obtain and to maintain its certificate of authority, a workers' compensation self-insurance group shall comply with
the following requirements as well as any other requirements established by law or regulation:
(1) A combined net worth of all members of a group of private employers of at least $1,000,000. Specific and aggregate excess
insurance in a form, in an amount and by an insurance company acceptable to the Commissioner for a group of public employers.
(2) Security in a form and amount prescribed by the Commissioner which shall be provided by a surety bond, security deposit
or financial security endorsement, or any combination thereof. If a surety bond is used to meet the security requirement,
it shall be issued by a corporate surety company authorized to transact business in this State. If a security deposit is used
to meet the security requirement, securities shall be limited to bonds or other evidences of indebtedness issued, assumed
or guaranteed by the United States of America or by an agency or instrumentality thereof; certificates of deposit in a federally
insured bank; shares or savings deposits in a federally insured savings and loan association or credit union; or any bond
or security issued by a state of the United States of America and backed by the full faith and credit of the state. Any such
securities shall be deposited in accordance with § 1504 of this title and assigned to and made negotiable by the Chairperson
of the Industrial Accident Board and the Commissioner pursuant to a trust document acceptable to the Commissioner. Interest
accruing on a negotiable security so deposited shall be collected and transmitted to the depositor, provided the depositor
is not in default. A financial security endorsement, issued as part of an acceptable excess insurance contract, may be used
to meet all or part of the security requirement. The bond, security deposit or financial security endorsement shall be:
a. For the benefit of the State solely to pay claims and associated expenses; and
b. Payable upon the failure of the group to pay workers' compensation benefits that it is legally obligated to pay.
The Commissioner may establish and adjust, from time to time, requirements for the amount of security based on differences
among groups in their size, types of employment, years in existence and other relevant factors.
(3) Specific and aggregate excess insurance in a form, in an amount and by an insurance company acceptable to the Commissioner.
The Commissioner may establish minimum requirements for the amount of specific and aggregate excess insurance based on differences
among groups in their size, types of employment, years in existence and other relevant factors, and may permit a group to
meet this requirement by placing in a designated depository securities of the type referred to in paragraph (2) of this subsection.
(4) An estimated annual standard premium of at least $250,000 during a group's 1st year of operation.
(5) An indemnity agreement jointly and severally binding the group and each member thereof to meet the workers' compensation
obligations of each member. The indemnity agreement shall be in a form prescribed by the Commissioner and shall include minimum
uniform substantive provisions prescribed by the Commissioner. Subject to the Commissioner's approval, a group may add other
provisions needed because of its particular circumstances.
(6) A fidelity bond for the administrator in a form and amount prescribed by the Commissioner.
(7) A fidelity bond for the service company in a form and amount prescribed by the Commissioner. The Commissioner may also
require the service company providing claim services to furnish a performance bond in a form and amount prescribed by the
Commissioner.
(c) A group shall notify the Commissioner of any change in the information required to be filed under subsection (a) of this
section or in the manner of its compliance with subsection (b) of this section no later than 30 days after the change.
(d) The Commissioner shall evaluate the information provided by the application required to be filed under subsection (a)
of this section to assure that no gaps in funding exist and that funds necessary to pay workers' compensation benefits will
be available on a timely basis.
(e) The Commissioner shall act upon a completed application for a certificate of approval within 60 days. If, because of the
number of applications, the Commissioner is unable to act upon an application within this period, the Commissioner shall have
an additional 60 days to act.
(f) The Commissioner shall issue to the group a certificate of approval upon finding that the proposed group has met all requirements
or the Commissioner shall issue an order refusing the certification, setting forth reasons for refusal upon finding that the
proposed group does not meet all requirements.
(g) Each workers' compensation self-insurance group shall be deemed to have appointed the Commissioner as its attorney to
receive service of legal process issued against it in this State. The appointment shall be irrevocable, shall bind any successor
in interest and shall remain in effect as long as there is in this State any obligation or liability of the group for workers'
compensation benefits.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 405. Certificate of authority; termination.
(a) The certificate of authority issued by the Commissioner to a workers' compensation self-insurance group authorizes the
group to provide workers' compensation benefits and employer's liability coverage. The certificate of authority remains in
effect until terminated at the request of the group or revoked by the Commissioner, pursuant to § 423 of this title.
(b) The Commissioner shall not grant the request of any group to terminate its certificate of authority unless the group has
insured or reinsured all incurred workers' compensation obligations with an authorized insurer under an agreement filed with
and approved in writing by the Commissioner. Such obligations shall include both known claims and expenses associated therewith
and claims incurred but not reported and expenses associated therewith.
Subject to the approval of the Commissioner, a group may merge with another group engaged in the same or similar type of business
only if the resulting group assumes in full all obligations of the merging groups. The Commissioner may hold a hearing on
the merger and shall do so if any party, including a member of either group, so requests.
70 Del. Laws, c. 540, § 1; 70 Del. Laws, c. 186, § 1.;
§ 406. Examinations.
The Commissioner, pursuant to Chapter 5 of this title, may examine the affairs, transactions, accounts, records and assets
and liabilities of each group as often as the Commissioner deems advisable. The expense of such examinations shall be assessed
against the group in the same manner that insurers are assessed for examinations.
70 Del. Laws, c. 540, § 1.;
§ 407. Board of trustees; membership, powers, duties and prohibitions.
Each group shall be operated by a board of trustees which shall consist of not less than 5 persons whom the members of a group
elect for stated terms of office. At least two-thirds of the trustees shall be employees, officers or directors of members
of the group. The group's administrator, service company or any owner, officer, employee of or any other person affiliated
with such administrator or service company shall not serve on the board of trustees of the group. All trustees shall be residents
of this State or officers of corporations authorized to do business in this State. The board of trustees of each group shall
ensure that all claims are paid promptly and take all necessary precautions to safeguard the assets of the group, including
all of the following:
(1) The board of trustees shall:
a. Maintain responsibility for all monies collected or disbursed from the group and segregate all monies into a claims fund
account and an administrative fund account. At least 70% of the net premium shall be placed into a designated depository for
the sole purpose of paying claims, allocated claims expenses, reinsurance or excess insurance and special fund contributions,
including 2nd injury and other loss-related funds. This shall be called the "claims fund account." The remaining net premium
shall be placed into a designated depository for the payment of taxes, general regulatory fees and assessments and administrative
costs. This shall be called the "administrative fund account." The Commissioner may approve an administrative fund account
of more than 30% and a claims fund account of less than 70% only if the group shows to the Commissioner's satisfaction that:
1. More than 30% is needed for an effective safety and loss control program; or
2. The group's aggregate excess insurance attaches at less than 70%.
b. Maintain minutes of its meetings and make the minutes available to the Commissioner.
c. Designate an administrator to carry out the policies established by the board of trustees and to provide day-to-day management
of the group and delineate in the written minutes of its meetings the areas of authority it delegates to the administrator.
d. Retain an independent certified public accountant to prepare the statement of financial condition required by § 411(a)
of this title.
(2) The board of trustees shall not:
a. Extend credit to individual members for payment of a premium, except pursuant to payment plans approved by the Commissioner.
b. Borrow any monies from the group or in the name of the group except in the ordinary course of business, without first advising
the Commissioner of the nature and purpose of the loan and obtaining prior approval from the Commissioner.
70 Del. Laws, c. 540, § 1.;
§ 408. Group membership; termination; liability.
(a) An employer joining a workers' compensation self-insurance group after the group has been issued a certificate of authority
shall:
(1) Submit an application for membership to the board of trustees or its administrator; and
(2) Enter into the indemnity agreement required by § 404(b)(5) of this title. Membership takes effect no earlier than each
member's date of approval.
The application for membership and its approval shall be maintained as permanent records of the board of trustees.
(b) Individual members of a group shall be subject to cancellation by the group pursuant to the by-laws of the group. In addition,
individual members may elect to terminate their participation in the group. The group shall notify the Commissioner and the
workers' compensation agency of the termination or cancellation of a member within 10 days and shall maintain coverage of
each canceled or terminated member for 30 days after notice, at the terminating member's expense, unless the group is notified
sooner by the workers' compensation agency that the canceled or terminated member has procured workers' compensation insurance,
has become an approved self-insurer or has become a member of another group.
(c) The group shall pay all workers' compensation benefits for which each member incurs liability during its period of membership.
A member who elects to terminate its membership or is canceled by a group remains jointly and severally liable for workers'compensation
obligations of the group and its members which were incurred during the canceled or terminated member's period of membership.
(d) A group member is not relieved of its workers' compensation liabilities incurred during its period of membership except
through payment by the group or the member of required workers' compensation benefits.
(e) The insolvency or bankruptcy of a member does not relieve the group or any other member of liability for the payment of
any workers' compensation benefits incurred during the insolvent or bankrupt member's period of membership.
70 Del. Laws, c. 540, § 1.;
§ 409. Service companies.
(a) No service company or its employees, officers or directors shall be an employee, officer or director of, or have either
a direct or indirect financial interest in, an administrator. No administrator or its employees, officer or directors shall
be an employee, officer or director of, or have either a direct or indirect financial interest in, a service company.
(b) The service contract shall state that, unless the Commissioner permits otherwise, the service company shall handle, to
their conclusion, all claims and other obligations incurred during the contract period.
70 Del. Laws, c. 540, § 1.;
§ 410. Licensing of agent.
Except for a salaried employee of a group, its administrator or its service company, any person soliciting membership for
a workers' compensation self-insurance group must be licensed as provided in Chapter 17 of this title.
70 Del. Laws, c. 540, § 1.;
§ 411. Financial statements and other reports.
(a) Each group shall submit to the Commissioner a statement of financial condition audited by an independent certified public
accountant on or before the last day of the 6th month following the end of the group's fiscal year. The financial statement
shall be on a form prescribed by the Commissioner and shall include, but not be limited to, actuarially appropriate reserves
for:
(1) Known claims and expenses associated therewith;
(2) Claims incurred but not reported and expenses associated therewith;
(3) Unearned premiums; and
(4) Bad debts,
which reserves shall be shown as liabilities.
(b) An actuarial opinion regarding reserves for:
(1) Known claims and expenses associated therewith; and
(2) Claims incurred but not reported and expenses associated therewith shall be included in the audited financial statement.
The actuarial opinion shall be given by a member of the American Academy of Actuaries or other qualified loss reserve specialist
as defined in the annual statement adopted by the National Association of Insurance Commissioners.
(c) No person shall make any untrue statement of a material fact, or omit to state a material fact necessary in order to make
the statement made, in light of the circumstances under which it is made, not misleading, in connection with the solicitation
of membership in a group.
(d) The Commissioner may prescribe the format and frequency of other reports which may include, but shall not be limited to,
payroll audit reports, summary loss reports and quarterly financial statements.
70 Del. Laws, c. 540, § 1.;
§ 412. Taxes.
Groups shall be subject to subchapter V of Chapter 23 of Title 19 for the payment of premium tax.
70 Del. Laws, c. 540, § 1.;
§ 413. Fees and assessments.
Groups shall be subject to subchapter V of Chapter 23 of Title 19 for the payment of fees and assessments.
70 Del. Laws, c. 540, § 1.;
§ 414. Misrepresentation prohibited.
No person shall make a material misrepresentation or omission of a material fact in connection with the solicitation of membership
of a group nor violate any provision of Chapters 17 and 23 of this title or any regulations thereunder.
70 Del. Laws, c. 540, § 1.;
§ 415. Investments.
Funds not needed for current obligations may be invested by the board of trustees in accordance with Chapters 11 and 13 of
this title.
70 Del. Laws, c. 540, § 1.;
§ 416. Rates and reporting of rates.
(a) Every workers' compensation self-insurance group shall file and adhere to rates, rules and classifications pursuant to
Chapter 26 of this title.
(b) Premium contributions to the group shall be determined by applying the rates and rules to the appropriate classification
of each member which may be adjusted by each member's experience credit or debit. Subject to approval by the Commissioner,
premium contributions may also be reduced by an advance premium discount reflecting the group's expense levels and loss experience.
(c) A group may contract with an advisory organization approved by the Commissioner for assistance in developing appropriate
rates.
(d) Each group shall be audited at least annually by an auditor acceptable to the Commissioner to verify proper classifications,
experience rating, payroll and rates. A report of the audit shall be filed with the Commissioner in a form acceptable to the
Commissioner. A group or any member thereof may request a hearing on any objections to the classifications. If the Commissioner
determines that, as a result of an improper classification, a member's premium contribution is insufficient, the commissioner
shall order the group to assess that member an amount equal to the deficiency. If the Commissioner determines that, as a result
of an improper classification, a member's premium is excessive, the commissioner shall order the group to refund to the member
the excess collected. The audit shall be at the expense of the group.
70 Del. Laws, c. 540, § 1.;
§ 417. Refunds.
(a) Any monies for a fund year in excess of the amount necessary to fund all obligations for that fund year may be declared
to be refundable by the board of trustees not less than 12 months after the end of the fund year with the Commissioner's approval.
(b) Each member shall be given a written description of the refund plan at the time of application for membership. A refund
for any fund year shall be paid only to those employers who remain participants in the group for the entire fund year. Payment
of a refund based on a previous fund year shall not be contingent on continued membership in the group after that fund year.
70 Del. Laws, c. 540, § 1.;
§ 418. Premium payment; reserves.
(a) Each group shall establish to the satisfaction of the Commissioner a premium payment plan which shall include:
(1) An initial payment by each member of at least 25% of that member's annual premium before the start of the group's fund
year; and
(2) Payment of the balance of each member's annual premium in monthly or quarterly installments.
(b) Each group shall establish and maintain actuarially appropriate loss reserves which shall include reserves for:
(1) Known claims and expenses associated therewith; and
(2) Claims incurred but not reported and expenses associated therewith.
(c) Each group shall establish and maintain bad debt reserves based on the historical experience of the group or other groups.
70 Del. Laws, c. 540, § 1.;
§ 419. Deficits and insolvencies.
(a) If the assets of a group are at any time insufficient to enable the group to discharge its legal liabilities and other
obligations and to maintain the reserves required of it under this chapter, it shall forthwith make up the deficiency or levy
an assessment upon its members for the amount needed to make up the deficiency.
(b) In the event of a deficiency in any fund year, the deficiency shall be made up immediately, either from:
(1) Surplus from a fund year other than the current fund year;
(2) Administrative funds;
(3) Assessment of the membership, if ordered by the group; or
(4) Such alternate method as the Commissioner may approve or direct.
The Commissioner shall be notified prior to any transfer of surplus funds from 1 fund year to another.
(c) If the group fails to assess its members or to otherwise make up such deficit within 30 days, the Commissioner may order
it to do so.
(d) If the group fails to make the required assessment of its members within 30 days after the Commissioner orders it do so,
or if the deficiency is not fully made up within 60 days after the date on which the assessment is made or within such longer
period of time as may be specified by the Commissioner, the group shall be deemed to be insolvent or impaired.
(e) Notwithstanding subsections (a) through (d) of this section, the Commissioner may at any time proceed against an insolvent
group in the same manner as the Commissioner would proceed against an insolvent or impaired domestic insurer in this State
as prescribed in Chapter 59 of this title. The Commissioner shall have the same powers and limitations in such proceedings
as are provided under those laws.
(f) In the event of delinquency proceedings against a group, the Commissioner may levy an assessment upon its members for
such an amount as the Commissioner determines to be necessary to discharge all liabilities of the group, including the reasonable
cost of liquidation or rehabilitation.
70 Del. Laws, c. 540, § 1.;
§ 420. Guaranty mechanism.
In the event of a liquidation pursuant to § 419 of this title, after exhausting the security required pursuant to § 404(b)(2)
of this title, the Commissioner may levy an assessment against all groups to assure prompt payment of benefits. The assessment
on each group shall be based on the proportion that the premium of each group bears to the total premium of all groups. The
Commissioner may exempt a group from assessment upon finding that the payment of the assessment would render the group insolvent.
The assessment shall not relieve any member of an insolvent group of its joint and several liability. After an assessment
is made, the Commissioner shall take action to enforce the joint and several liability provisions of the insolvent group's
indemnity agreement, and shall recoup:
(1) All costs incurred by the Commissioner in enforcing such joint and several liability provisions;
(2) Amounts that the Commissioner assessed any other groups pursuant to this section; and
(3) Any obligations included within § 419(f) of this title.
70 Del. Laws, c. 540, § 1.;
§ 421. Monetary penalties.
After notice and opportunity for a hearing, the Commissioner may impose a monetary penalty on any person or group found to
be in violation of any provision of this chapter or title or of any rules or regulations pursuant to § 329 of this title and
Chapter 101 of Title 29. The amount of any monetary penalty shall be paid to the Commissioner for the use of the State.
70 Del. Laws, c. 540, § 1.;
§ 422. Cease and desist orders.
(a) After notice and opportunity for a hearing, unless there are exigent circumstances, the Commissioner may issue an order
requiring a person or group to cease and desist from engaging in an act or practice found to be in violation of any provision
of this chapter or title or of any rules or regulations promulgated thereunder. Unless there are exigent circumstances, a
minimum of 10 days' notice will be provided prior to a hearing. If exigent circumstances are present, the person or group
will be offered a hearing within 10 days after the issuance of the order.
(b) Upon a finding, after notice and opportunity for a hearing, that any person or group has violated any cease and desist
order, the Commissioner may do any or all of the following:
(1) Impose a monetary penalty of not more than $15,000, in the case of an individual, or not more than $50,000, in the case
of a group or corporation, for each and every act or violation of the order; or
(2) Revoke or suspend the group's certificate of authority or any insurance license held by the person; or
(3) Place the group or person under supervision; or
(4) Permanently enjoin the conduct or enter any remedial order.
70 Del. Laws, c. 540, § 1.;
§ 423. Revocation of certificate of authority.
(a) After notice and opportunity for a hearing, the Commissioner may revoke or suspend a group's certificate of authority
if it:
(1) Is found to be insolvent or impaired;
(2) Fails to pay any premium tax, regulatory fee or assessment or special fund contribution imposed upon it; or
(3) Fails to comply with any of the provisions of this chapter and title or with any rules promulgated thereunder or with
any lawful order of the Commissioner within the time prescribed.
(b) In addition, the Commissioner may revoke or suspend a group's certificate of authority if, after notice and opportunity
for hearing, the Commissioner finds that:
(1) Any certificate of authority that was issued to the group was obtained by fraud;
(2) There was a material misrepresentation in the application for the certificate of authority; or
(3) The group or its administrator has misappropriated, converted, illegally withheld or refused to pay over upon proper demand
any monies that belong to a member, an employee of a member or a person otherwise entitled thereto and that have been entrusted
to the group or its administrator in its fiduciary capacities.
70 Del. Laws, c. 540, § 1.;
§ 424. Notice and hearings.
All notices and hearings shall be as provided in Chapter 3 of this title and Chapter 101 of Title 29.
70 Del. Laws, c. 540, § 1.;
§ 425. Rules and regulations.
The Commissioner shall have power to make rules and regulations in order to implement this chapter.