TITLE 11 LABOR AND WORKERS’ COMPENSATION
CHAPTER 4 WORKERS’ COMPENSATION
PART 8 INDIVIDUAL
SELF-INSURANCE
11.4.8.1 ISSUING AGENCY: Workers’ Compensation Administration.
[11.4.8.1 NMAC - Rp, 11.4.8.1 NMAC,
10/1/15]
11.4.8.2 SCOPE: This rule applies to all corporations,
companies or other entities applying for self-insurance, those who are or were
certified for self-insurance, and to their agents and representatives.
[11.4.8.2 NMAC - Rp, 11.4.8.1 NMAC,
10/1/15]
11.4.8.3 STATUTORY AUTHORITY: Chapter 52 NMSA
1978.
[11.4.8.3 NMAC - Rp, 11.4.8.3 NMAC,
10/1/15]
11.4.8.4 DURATION: Permanent.
[11.4.8.4 NMAC - Rp, 11.4.8.4 NMAC,
10/1/15]
11.4.8.5 EFFECTIVE DATE: October 1, 2015, unless a later date is cited
at the end of a section.
[11.4.8.5 NMAC - Rp, 11.4.8.5 NMAC,
10/1/15]
11.4.8.6 OBJECTIVE: The purpose of these rules is establish the
minimum qualification criteria for a private company or qualifying public
entity to apply to the director for permission to self-insure their workers’
compensation risk and to establish the criteria to maintain such self-insured
status after it is granted by the director.
[11.4.8.6 NMAC - Rp, 11.4.8.6 NMAC,
10/1/15]
11.4.8.7 DEFINITIONS:
A. “Approved
excess insurer” means an insurer domiciled within the United States of America
or an alien insurer listed in the national association of insurance
commissioner’s (NAIC) quarterly listing of alien insurers with a rating of “A”
or better by A.M. Best or similar rating organization approved by the director.
B. “Approved
security” means a letter of credit or surety bond issued by an approved
financial institution or surety respectively and used for the payment of claims
and related expenses in the event of default by the employer and for
reimbursement to the guarantee fund for any benefits paid by the fund on behalf
of the employer.
C. “Approved
surety” means a financial institution with at least one location in New Mexico
or a New Mexico admitted carrier, that is not in the control of the
self-insured, and that has a rating of “A” or better from A.M. Best, a rating
of “good” or better by Bauer Financial, or similar ratings from organizations
approved by the director.
D. “Completed
application” means an application for certificate of self-insurance that demonstrates
all the eligibility criteria and that attaches all required documentation, as
set forth in these rules.
E. “Director”
means the director of the workers’ compensation administration.
F. “Financially
solvent” means an employer’s current and continuing ability to pay, as they
become due, all existing and future obligations, including workers’
compensation benefits to which it is or becomes obligated under the Act.
G. “Guarantee
fund” means the fund created by Paragraph (A) of Section 52-8-7 NMSA 1978 to
provide benefits to workers and the families of workers of private individual
self-insurers who become insolvent or otherwise unable to meet their financial
obligations.
H. “Guarantee
board” means the board of directors of the self-insurers’ guarantee fund
commission.
I. “Parent”
means ownership of a subsidiary entity of greater than 50 percent.
J. “Reserves”
means the value of claims without regard to expected excess insurance or other
recoveries.
K. “Risk
management program” means an entity’s claims administration personnel, policies
and procedures, safety program and personnel, and adequate excess insurance.
L. “Tangible
net worth” means net worth less intangible assets.
[11.4.8.7 NMAC - Rp, 11.4.8.7 NMAC,
10/1/15]
11.4.8.8: INDIVIDUAL
SELF-INSURANCE:
A. An employer
seeking to be certified as a self-insurer under the Act shall make application
on a form prescribed by the director.
B. The
director shall notify the chairman of the guarantee board of the identity of
any applicant for self-insurance within 15 days of the receipt of the
application. The guarantee board shall respond in writing to the director
within 30 days of receipt of the notification or be deemed to have expressed no
objection to the applicant’s membership in the commission. The administration’s
self-insurance audit staff shall take any written objections into account when
making its final recommendation to the director.
C. The
director may decline to approve an application for self-insurance if not
satisfied that the employer will be able to meet all its obligations under the
Act and these rules.
D. Eligibility: Applicants for self-insurance must
demonstrate the following base eligibility criteria, each of which must be
continuously maintained during the period of self-insurance to maintain
eligibility:
(1) a
current tangible net worth of at least two million, five hundred thousand
dollars ($2,500,000);
(2) the
employer has been in business for a period of not less than three years. This
requirement may be waived by the director under circumstances where the form of
business organization has changed within the three year period but the
management and function of the business entity has substantially stayed the
same;
(3) a
strong trend of financial health and financial solvency;
(4) an
acceptable risk management program;
(5) workers’
compensation specific excess insurance from an approved excess insurer with retention
of two hundred fifty thousand dollars ($250,000) or less per occurrence and
statutory upper limits; an acceptable policy of excess insurance shall provide
coverage for all provisions of the Act, contain no exclusion of such coverage,
and include a current New Mexico amendatory endorsement;
(6) an
approved security issued in favor of the New Mexico self-insurers' guarantee
fund;
(7) a
bona fide employment relationship exists between the employer and the employees
which it proposes to self-insure; employees who receive wages from or are under
the control of any other entity with respect to the day to day supervision and
assignment of the work may not come under an individual self-insurance program;
employee leasing companies are prohibited from receiving a certificate of
self-insurance;
(8) if
the employer is a subsidiary, a parental guarantee from the subsidiary’s
upper-most parent in a form acceptable to the director; a parent company may
self-insure its subsidiaries under one certificate in the name of the parent
provided the parent meets all eligibility criteria and provides parental
guarantees for the subsidiaries and guarantees by each subsidiary for the
other(s); and
(9) any
other reasonable criteria deemed necessary by the director to guarantee payment
of workers’ compensation claims to injured workers.
E. Application: The employer’s application for certificate of
self-insurance shall be accompanied by documentation sufficient to demonstrate
eligibility, including the following:
(1) a
one hundred fifty dollar ($150) non-refundable filing fee made out to the
workers’ compensation administration;
(2) proof
of valid workers’ compensation insurance in force for the three years preceding
the date of application and continuing in force up to the approved date of
self-insurance;
(3) employer’s
audited financial statements for the most recent fiscal year, presented in
accordance with generally accepted accounting principles (GAAP), and financial
statements for the preceding two years;
(4) if
the employer is a corporation, proof of a resolution adopted by employer’s
board of directors authorizing and directing the corporation to undertake to
self-insure its risks and to comply with the provisions of the Act and the
rules of the director; a similar official ratification is required from the
governing body of any governmental entity;
(5) a detailed
accounting of the employer’s workers’ compensation loss history for the last
three years, and experience modifiers for the same period, which shall include
all claims covered under a claims “buy-back” program and deductible programs;
(6) an
explanation of the safety program, a copy of the safety manual, and resumes of
all personnel responsible for the New Mexico safety program;
(7) proof
of a proposed policy for workers’ compensation excess insurance that complies
with the eligibility requirements set forth in this rule, including the
declaration page of such policy and all endorsements providing or limiting
coverage in New Mexico.
(8) a
letter of intent from an approved surety to issue an approved security in an
amount and form to be specified by the director, but not less than two hundred
thousand dollars ($200,000); and
(9) proof
of compliance with Section 52-1-6.2 NMSA 1978 for the most recent year.
F. Certification.
(1) The
director shall act upon a completed application for a certificate of
self-insurance within 90 days.
(2) Upon
approval, the director shall issue a certificate acknowledging the employer’s
status as a self-insured under the act; the certificate shall be effective
continuously until terminated at the request of the self-insured or revoked by
the director.
(3) Upon
a merger or other combination by two self-insured employers, the employers may
continue to be self-insured under one certificate provided that the
administration is given adequate disclosure, and guarantees and subject to the
approval of the director.
(4) The
director may issue a provisional certificate, good for not more than one year,
to a self-insurer if the director is convinced that any defects are minor in
nature and can be corrected within the one year period.
G. Continuing
eligibility requirements: Following
certification by the director, a self-insured employer shall:
(1) notify
the director prior to liquidation, sale, or transfer of ownership and prior to
any material change in the employer’s financial condition or in New Mexico
operations;
(2) obtain
the director’s approval prior to making any material change in any excess
insurance policy or approved security;
(3) notify
the director prior to any change in the provider or scope of risk management
program;
(4) have
at least one claims representative licensed and located within New Mexico to
pay workers’ compensation claims of claimants residing or located in New
Mexico, and to ensure that all adjusters and third party administrators are
licensed in New Mexico, regardless of their physical location, and to promptly
pay all claims from accounts in financial institutions located within New
Mexico;
(5) be
subject to sanctions for any act or omission by its agents;
(6) provide
proof of coverage for excess insurance policies within 30 days of effective
date or renewal and to provide the complete policy within 60 days of effective
date or renewal; unauthorized changes appearing in any policy will require
immediate remediation by way of reinstatement of approved terms or other
measures deemed appropriate by the director; and
(7) comply
with all conditions required as stated in the employer’s self-insurance
certificate.
H. Financial
responsibility and payment of claims:
(1) The
employer shall pay claims for which it becomes obligated in accordance with the
act and these rules.
(2) The
payment of claims shall continue without regard to the self-insurance status of
the employer and without regard to any amount of security posted, whether or
not the security is called. An approved
security shall be maintained until all claims have expired, subject to
determination of the director.
(3) The
employer shall maintain a level of reserves at the full undiscounted value of
each claim, including indemnity and medical only claims, sufficient to pay all
claims and associated expenses.
(4) The
employer shall promptly pay guarantee fund assessments, provide documentation
supporting assessment calculations, and maintain in good standing membership in
the guarantee fund.
(5) The
employer shall report loss runs, regardless of type or cost, to the
administration in the format prescribed by the director on a semi-annual basis
not later than January 31 and July 31 of each year.
(6) Failure
to maintain minimum financial criteria and an approved risk management program
may result in increased security requirements, termination of self-insurance
status, or any other measure deemed necessary by the director for the
protection of benefits of injured workers and the guarantee fund.
(7) Upon
voluntary or involuntary termination of employer’s self-insurance status, the
employer shall:
(a) provide
any information requested by the director for the purpose of establishing
claims liability and financial condition;
(b) comply
with any requirement by the director to increase security;
(c) make
claims files available to the director for the performance of any audit,
examination or review, or for administration of claims in the event of a
default;
(d) notify
the administration of any changes in address/location, pertinent personnel,
claims administration services, location of claims files and related claims
personnel, and financial condition; and
(e) promptly
notify the director of the employer’s current ownership, organizational
structure and the employer’s ability to pay workers’ compensation obligations;
(8) All
government entities must have a pre-funded system. All past, present, and
future liabilities existing at any time shall be fully accounted for by liquid
assets or other assets agreeable to the director. No government entity shall be
required to post security.
(9) A
self-insurer shall maintain compliance with the requirements of Workers’
Compensation Act, WCA rules and the conditions set forth in its certificate of
self-insurance.
I. Audits
and examinations:
(1) An
applicant or self-insured employer is subject to initial or periodic
examination or audit by the administration to determine initial or continued
eligibility for self-insurance. The applicant or self-insured agrees to bear
the costs of any reviews or evaluations and to provide a reasonably private
space to conduct the audit and all records required for such audits and
examinations.
(2) Audits
or examinations under these rules may include, but are not limited to:
(a) audits
or reviews of the applicant’s or self-insured’s records regarding any
representation made on its financial statement or application for
self-insurance;
(b) audits
or reviews of the applicant’s or self-insured’s records pertaining to its loss
history, claims administration, reserves and claimant files;
(c) audits
or reviews of safety programs;
(d) interviewing
or taking the testimony of the applicant or self-insured, or any of its agents
or employees, regarding any matter pertaining to the obligations of the
applicant or self-insured under the act or the director’s rules; and
(e) audits
or examinations the director deems necessary to ensure a self-insured’s
continued compliance with these rules.
(3) An
applicant or self-insured employer shall cooperate fully with administration
representatives in any examination or audit and to attempt in good faith to
resolve any issues raised in those examinations or audits.
(4) A
self-insured employer shall provide its annual audited financial statements to
the administration within 90 days of the end of each fiscal year.
J. Denials,
revocation and probationary certificates:
(1) The
denial, revocation, or probation of a certificate of self-insurance shall be
made by an order signed by the director.
Every such order shall state its effective date and shall concisely
state what is ordered, the grounds on which the order is based, and the
provisions of the act or rules pursuant to which the action is taken.
(2) The
director shall deny an application for self-insurance if the employer has
failed to demonstrate to the director’s satisfaction that the employer meets
all requirements of the Act and these rules or has failed to demonstrate its
ability to meet all its obligations under the act.
(3) A
certificate of self-insurance may be revoked or placed on probationary status
if the director, with good cause, ceases to be satisfied that the employer is
able to meet all its obligations under the act and these rules. The occurrence of any of the following events
shall constitute good cause to revoke or place on probationary status a
certificate of self-insurance:
(a) failure
of the employer to comply with any provisions or requirements of the act, these
rules, or any lawful order or communication of the director;
(b) failure
of the approved surety to remain financially solvent, or any other impairment
of any aspect of the employer’s financial responsibility requirements;
(c) failure
to comply with any other statutes, laws, rules, or regulations of the state of
New Mexico;
(d) failure
to cooperate with the administration to mitigate adverse consequences for
injured workers caused by the employer filing for protection under the federal
bankruptcy laws; or
(e) failure
to maintain membership in the New Mexico self-insurers’ guarantee fund
commission in good standing.
(4) An
employer that has been decertified or placed on probation must still comply
with the financial responsibilities set forth in these rules and the following
additional requirements:
(a) The security
amount set after decertification shall account for both known claims and
associated expenses, as well as claims incurred but not reported (IBNR) and
associated expenses.
(b) If
the employer is subject to Section 52-1-6 NMSA 1978, proof of coverage must be
provided.
(c) No
adjustments to the security will be allowed for three years from the date of
the decertification. If after three
years, the director has determined that adequate time has passed to reasonably
determine the expected long-term liabilities and that there is no risk to
benefits of injured workers or the guarantee fund, reduction in security may be
approved. At that time, the director
may, in his discretion, reduce or return some or all of the security.
(5) Probationary
certifications:
(a) A
probationary certificate means the temporary revocation of the self-insured’s
existing self-insurance certificate.
(b) Failure
to comply with the Act or these rules may result in the issuance of a
probationary certificate of individual self-insurance.
(c) During
a probationary period, the employer must comply with all terms specified as
conditions of probation within the probationary certificate or in any other
lawful order of the director.
(d) The
duration of the probationary period shall be within the director’s discretion,
but shall not extend for a period greater than one year.
(e) The
probationary certificate may be withdrawn and the original certificate of
self-insurance reinstated, if the self-insured comes into full compliance with
the Act, these rules, and all probationary conditions. The reinstatement of the original certificate
is subject to the sole discretion of the director.
(f) If
the self-insured fails to come into compliance with the Act and the rules by
the end of the probationary period, the self-insured’s status as a self-insured
will be revoked.
K. Recertification:
(1) Any
employer formerly certified as a self-insurer who ceases to be certified may
not apply for recertification until three years after revocation.
(2) An
employer who seeks to reinstate its certificate of self-insurance shall reapply
to the director on the form prescribed pursuant to these rules. A non-refundable filing fee of one hundred
fifty dollars ($150) must accompany the application for recertification.
(3) If
there is a change of ownership whereby the controlling interest of a
self-insured changes, the new ownership shall submit a new application to the
director for a certificate of self-insurance.
A non-refundable filing fee of one hundred fifty dollars ($150) must
accompany the new application.
L. Hearings: Any person aggrieved by a decision of the
director under these rules may request in writing a hearing before the
director. The request shall briefly
state the respects in which the party is aggrieved, the relief sought, and the
grounds relied upon as the basis of relief.
M. Penalty:
In addition to any other sanctions provided herein, failure to comply with any
of the provisions of the Act or these rules renders the applicant or
self-insured employer subject to penalties as provided in Section 52-1-61 NMSA
1978.
N. Waiver: Any requirement contained in these rules may
be waived by specific written authorization of the director. Any interested person may request such a
variance or waiver in writing.
[11.4.8.8 NMAC - Rp, 11.4.8.8 NMAC,
10/1/15; A, 9/30/16]
11.4.8.9 SELF-INSURERS’ GUARANTEE FUND:
A. Commission
membership is composed of all self-insurers as defined in Paragraph (J) of Section
52-8-3 NMSA 1978, as a condition of their authority to individually self-insure
in the state of New Mexico.
B. Withdrawal
of membership:
(1) A
member shall be automatically withdrawn from the commission upon the
termination of its self-insurance certificate and payment of all assessments
due to the date of such termination.
(2) Notwithstanding
the termination of membership of a self-insured for whatever reason, that
self-insured shall remain liable to the commission for any assessments imposed
and based upon insolvencies occurring while the terminated self-insured was a
member of the commission.
C. Board
of directors:
(1) A
board of directors shall be appointed pursuant to Section 52-8-5 NMSA
1978. Every member of the board of
directors shall currently be a representative of a commission member in good
standing. The board may adopt by-laws
governing the functioning of the commission including the filling of vacancies
on the board, removal of board members and conflicts of interest. The board of directors shall elect a
chairperson, who shall also be president of the corporation, and a
vice-chairman, who shall also be vice president of the corporation. The director shall be the secretary/treasurer
of the corporation.
(2) The
commission shall maintain such financial records as are necessary to properly
reflect assessments, receipts and disbursements (including paid claims) of all
funds of the commission. Such records
shall also reflect the financial condition of the commission at all times. The commission shall make available its
financial records to the administration when so requested.
(3) The
commission shall make all necessary records available to an independent auditor
to facilitate audits of the commission.
(4) All
board members, and such other personnel as may be employed by the board, shall
be bonded in an amount determined by the board to be adequate to protect the
interests of the commission.
(5) The
board may open one or more insured accounts in any number of state or federally
chartered financial institutions located in the state of New Mexico, in order
to conduct commission business.
Reasonable delegation of deposit and withdrawal authority in such
accounts may be made, consistent with prudent fiscal policy, but, except as is
expressly provided herein, the withdrawal of commission funds shall require the
signatures of any two members of the board.
D. Powers
and duties of the commission:
(1) The
commission, through its board of directors, shall have the power to:
(a) sue
and be sued and appear and defend in all actions and proceedings in its
corporate name to the same extent as a natural person;
(b) adopt
and use a common corporate seal and alter the same; provided, however, that
such seal shall always contain the words “not for profit corporation”;
(c) elect
or appoint such officers and agents as its officers shall require and allow
them reasonable compensation;
(d) make
contracts and incur liabilities, borrow money at such rates of interest as the
corporation may determine, issue its notes, bonds, other obligations and secure
any of its obligations by mortgage and pledge of any or all of its property,
franchises or income;
(e) purchase,
take, receive, lease, take by gift, devise or bequest, or otherwise acquire,
own, hold, improve, use or otherwise deal in and with real and personal
property, or any interest therein, wherever situated;
(f) have
and exercise all powers necessary or convenient to effect any or all of the
purposes for which the corporation is organized;
(g) purchase
reinsurance or excess insurance as is determined by the board of directors to
be necessary to effectuate the purposes and intent of Paragraph (A) of Section 52-8-6
NMSA 1978;
(h) review
all applicants for membership in the commission and make recommendations to the
director concerning the appropriateness of inclusion in, or termination from,
membership in the commission with respect to any applicant or member;
(i) provide
for imposition of assessments upon members to insure the financial stability of
the fund as provided in Paragraph (A) of Section 52-8-6 NMSA 1978; and
(j) request,
upon a majority vote of the board, that the administration determine the
condition of any member of the commission which the board in good faith
believes may no longer be qualified to be a member of the commission; within 30
days of receipt of such request or for good cause shown, the administration
shall make such determination and shall advise the board of its findings; each
request for a determination shall be kept on file by the administration and it
shall not be open to public inspection pursuant to Section 52-5-21 NMSA 1978.
(2) The
commission through its board of directors shall have the following duties:
(a) The
commission shall incorporate as a not-for-profit corporation under the laws of
New Mexico and shall maintain its corporate status in good standing.
(b) The
commission shall be deemed to stand in the place of an insolvent employer to
the extent of its obligations on covered claims and, to such extent, shall have
all rights, duties and obligations of the insolvent employer as if the employer
had not become insolvent.
(c) As
to any insolvency proceeding, the commission shall periodically file with the
receiver or liquidator of the insolvent member statements of the covered claims
paid by the commission and estimates of anticipated claims on the
commission. Such filing shall preserve
the rights of the commission against the assets of the insolvent member.
(d) To
maintain an insolvency fund to meet the obligations of insolvent members,
pursuant to Section 52-8-7 NMSA 1978.
(e) At
the conclusion of any member insolvency in which the commission was obligated
to pay covered claims, prepare a report on the history and cause of such
insolvency, based on information available to the commission and submit such
report to the administration.
(f) Not
later than May 31st each year, submit a financial report for the preceding
calendar year in a form approved by the director.
E. Procedure
for handling claims:
(1) The
commission shall accept for processing all claims against insolvent members
which are made by the injured party or their representative.
(2) The
commission shall be obligated to pay benefits to injured workers to the same
extent as the insolvent member and shall be added as a party in any complaint
for benefits or complaints for reduction or termination of benefits filed with
respect to the insolvent employer.
(3) The
commission may employ persons to process covered claims, giving them reasonable
authority to process claims. Any
processing of claims in excess of that authority shall be subject to prior
approval by the board, or a claims committee established by the board for that
purpose.
(4) The
commission shall use every reasonable means to expedite the handling of covered
claims submitted by the injured worker or representative, and may adopt a
protocol for the handling of those claims.
F. Assessments: Determination and payment of assessment:
(1) Each
member shall be given not less than 30 days’ notice of the date that an
assessment is due and payable.
(2) The
assessment notice shall advise the member to remit the assessment payable to
the commission. Upon receipt of the
assessments, the commission shall deposit said funds in the commission’s
accounts and shall use them for the purposes stated in the Self-Insurers’
Guarantee Fund Act.
(3) The
commission shall immediately notify the director if a member fails to pay an
assessment when due. The director may penalize the member or revoke its
authority to self-insure pursuant to Section 52-1-61 NMSA 1978, and these
rules.
(4) The
board shall enforce its right to collect any assessment remaining unpaid 60
days after it shall have become due by appropriate action at law or in equity
against the non-paying member.
(5) For
purposes of calculating assessments, the self-insured may deduct any
subrogation recovery in such amounts as are recovered in the same assessment
year as they are paid.
(6) If
two or more self-insureds combine certificates, the fund balance for the
combined entity shall be combined.
(7) Assessments
paid by a parent on behalf of a subsidiary which has its own certificate shall
be allocated to the subsidiary.
[11.4.8.9 NMAC - Rp, 11.4.8.9 NMAC,
10/1/15; A, 9/30/16]
HISTORY OF
11.4.8 NMAC:
Pre-NMAC
History: [RESERVED]
History of
Repealed Material:
11 NMAC 4.8.9.5, Establishment of Fund -
Repealed effective 10/1/98.
11 NMAC 4.8.9.7.1.A - Repealed effective
10/1/98.
11.4.8 NMAC Individual Self-Insurance,
filed 1/3/05 - Repealed effective 10/1/15.