R 408.43k Aggregate excess liability insurance; specific excess liability insurance; individual self-insurer; group self-insurer.

Rule 13k. The agency shall not recognize a policy of aggregate or specific excess liability insurance in considering the ability of a self-insurer to fulfill its financial obligations under the act, unless the policy is issued by a casualty insurance company authorized, as defined in section 108 of the insurance code of 1956, 1956 PA 218, MCL 500.108, to transact such business in this state. The policy must comply with all of the following provisions unless specifically waived by the agency. Policies issued that do not comply with all provisions of this rule may be considered grounds for termination of the employer's self-insured authority. (a) The policy may not be cancelable or nonrenewable unless written notice, sent by courier, registered mail or certified mail, is given to the other party to the policy and to the agency not less than 60 days before termination by the party desiring to cancel or not renew the policy. (b) The policy may not contain endorsements, provisions, or terms that increase the named insured or insureds retentions or increase the amount that must be paid by the named insured or insureds beyond the retentions reported on the declarations page of the policy and the Michigan certificate of specific/aggregate excess liability insurance. This provision does not apply to customary policy language that may call for increased payments by the insured or insureds for failure to act or abide by a policy provision. (c) A policy that has any type of commutation clause must provide that any commutation effected under the policy may not relieve the casualty insurance company of further liability with respect to claims and expenses unknown at the time of the commutation or in regard to any claim apparently closed at the time of initial commutation that is subsequently reopened by or through a competent authority. If the casualty insurance company proposes to settle its liability for future payments payable as compensation for accidents occurring during the term of the policy by the payment of a lump sum to the employer, to be fixed as provided in the commutation clause of the policy, then the casualty insurance company or the company's agent shall give the agency not less than 30 days' prior notice of the commutation. Notice must be by courier, registered mail, or certified mail. If any commutation is affected, then the agency has the right to direct that the sum be placed in trust for the benefit of the injured employee or employees entitled to future payments of compensation. (d) The policy must state that if a private self-insured employer becomes insolvent and is unable to make compensation payments and the self-insurers' security fund may have responsibility for making payment under section 537 of the act, MCL 418.537, then the excess insurance carrier shall make, directly to the claimants or their authorized representatives, payments as would have been made by the excess insurance carrier to the employer after it has been determined that the retention level has been reached on the excess liability insurance policy. (e) The policy must state that 100% of the following payments must be applied toward reaching the retention level in the specific and aggregate excess liability policy: (i) Benefit payments made by the employer as required in the act. (ii) Benefit payments, as required in the act, that are due and owing to claimants of the employer. (iii) Benefit payments made on behalf of the employer, as required in the act, by a surety under a bond or through the use of other security required by the director. (iv) Payments made by the self-insurers' security fund. (v) Usual and customary claims allocated loss adjustment expenses. (vi) Payments made, as specified in paragraphs (i), (iii), (iv) and (v) of this subdivision, that are reimbursable by the specific excess liability policy may not be considered in reaching the aggregate excess liability retention. (f) The policy must provide for 100% reimbursement of the following payments that exceed the retention levels as defined in the specific or aggregate excess liability policy: (i) Benefit payments made by the employer as required in the act. (ii) Benefit payments made on behalf of the employer as required in the act by a surety under a bond or through the use of other security required by the agency. (iii) Payments made by the self-insurers' security fund. (iv) Usual and customary claims allocated loss adjustment expenses. (g) Reimbursement is pro rata if multiple excess insurers insure the same self- insured for the same period. A request to waive a provision of this rule must be in writing and approved by the agency before a policy is issued. The carrier shall confirm issuance of an aggregate or specific excess liability policy on a form prescribed by the agency. R 408.43m Servicing self-insured employers or groups; application; requirements; noncompliance. Rule 13m. (1) An individual, partnership, limited liability company, or corporation that desires to engage in the business of providing 1 or more services for an individual self-insurer or a self-insurers' group shall apply to the agency before entering into a contract with the individual or group self-insurer and shall satisfy the agency that it has adequate facilities and competent staff with Michigan workers' compensation adjusting experience within the state to service a self-insured program in a manner that fulfills the employers' obligations under the act and the rules of the agency. Workers' compensation claims of Michigan individual or group self-insured employers shall be handled within the state of Michigan by its staff, except that the director, at his or her discretion, may permit an approved service company to handle the claims of a Michigan individual self-insurer outside of this state upon specific written request by the individual self-insurer and the service company. The request for permission must set forth documentation sufficient to the agency that claims will be handled pursuant to Michigan law, administrative rules, and agency policy. The director will respond to the request in writing, giving the reasons for denial, or if approved, the conditions of approval. The approval may be withdrawn by the director at any time based upon the failure of the service company or employer, or both, to comply with the conditions of the approval. Service may include claims adjusting, loss control services, underwriting, and the capacity to provide required reporting. Any individual, partnership, limited liability company, or corporation that provides claims adjusting or loss control services to an approved self-insured employer, where the self-insured employer has designated within its own organization an individual to be responsible to the agency for its claims program or loss control services, or both, shall not be considered a service company for purposes of this rule. (2) An applicant shall apply to the agency for approval to act as a servicing company for self-insured employers or group funds on a form prescribed by the agency. The application must contain answers to all questions. An applicant shall give the answers under oath. The agency shall approve the application prior to the service company entering into a contract with an approved self- insurer. Approval to act as a service company for self-insurers is granted for a period of 1 year and is subject to renewal annually. (3) If a service company seeks approval to service claims for self-insurers, then it shall submit proof that it has, within its organization at least 1 person who has the knowledge and Michigan workers' compensation adjusting experience necessary to handle claims involving the act. The service company shall attach a resume covering the principal person's background to the application of the service company. The principal individuals adjusting workers' compensation claims shall hold a current workers' disability compensation adjuster's license under chapter 12 of the insurance code of 1956, 1956 PA 218, MCL 500.1200 to 500.1247. (4) If a service company seeks approval to provide underwriting service to self- insurers, then it shall submit proof that it has, within its organization or under contract on a full-time basis, at least 1 person who has the knowledge and experience necessary to provide underwriting services for workers' compensation excess liability insurance coverage. The service company shall attach a resume detailing the principal person's background to the application of the service company. (5) If a service company seeks approval to furnish loss control services to self- insurers, then it shall submit proof that it has, within its organization or under contract on a full-time basis, at least 1 person who has the knowledge and background necessary to adequately provide loss control and health services. (6) A service company shall maintain adequate staff in the state. The service company shall authorize staff to act for the service company on all matters covered by the act and the rules of the agency. (7) A service company shall attach to the application a copy of its standard service agreement that it will enter into with self-insured employers or group funds. The service company shall certify, in writing, that the service agreement complies with the act and these rules. The service company shall certify, and include a provision in its standard service contract, which states that the contract provides for the handling of all claims with dates of injury or disease within the contract until conclusion of the claims, unless the service company is relieved by the agency, in writing, of the responsibility for handling claims. If the service contract calls for additional fees for any reason, then the service company shall clearly define the additional fees in the contract. For a service company to be relieved of the responsibility of handling claims to conclusion, the client, the previous service company, and the new service company shall sign a claims transfer agreement. The claims transfer agreement shall be completed on a form prescribed by the agency and shall include a written request made by the previous service company to be relieved of its claims handling responsibilities to the agency. A requesting company is relieved of its claims handling responsibility only after receiving a written response from the agency approving a request. The service company shall certify that it will report to the specific excess insurance carrier or aggregate excess insurance carrier, or both, and put the specific excess insurance carrier or aggregate excess insurance carrier, or both, on notice of all claims as required by the self-insurers' or group self-insurers' insurance policies. The standard service contract filed with the agency for approval and renewal of the service company authority must include language specifically stating that the service company is responsible for reporting to the excess insurance carrier. The agency may waive the reporting requirement upon written request to the agency. Any dispute involving late reporting of excess liability insurance claims and potential penalties must be reported to the agency immediately. (8) A service company shall certify, and provide for in all service contracts, that all documents generated or prepared by the service company for the group or the individual self-insurer or any materials relating to an individual or group self-insurer held by a service company are the property of the individual or group self-insurer and must be surrendered to the individual or group self-insurer within 10 days of termination of the service contract, subject to written request by the individual or group self-insurer. (9) Failure to comply with the provisions of the act constitutes good cause for withdrawal of the approval to act as a service company for self-insurers. The agency shall give 30 days' notice of withdrawal. The agency shall give the notice by certified or registered mail, served upon all interested parties.