§1195.  Authorization; trade or professional association; initial financial requirements

A.(1)  Any five or more Louisiana employers who are not public entities, each of whom has a positive net worth, is financially solvent, and is capable of assuming the obligations set forth under this Chapter, and who are all members of the same bona fide trade or professional association may agree to pool their liabilities to their employees on account of personal injury and occupational disease arising out of or incurred during the course and scope of the employment relationship.  This arrangement shall not be an insurer, shall not be deemed to be insurance and shall not be subject to the Louisiana Insurance Code.  The member employers of the arrangement likewise shall not be insurers or be subject to the Louisiana Insurance Code.

(2)  An agreement to pool liabilities under this Chapter shall be set forth in an indemnity agreement signed by the employer and fund representative acknowledging and agreeing to the assumption of the liabilities as set forth in this Subpart.

(3)  The arrangement shall not be a member insured of the Louisiana Insurance Guaranty Association, nor shall the Louisiana Insurance Guaranty Association be liable under any circumstances for any claims, or increments of any claims, made against the arrangement.

(4)  The arrangement may include the establishment of a trust fund by a trade or professional association for its members, and the arrangement, whether established by association members or by an association, shall be known as a group self-insurance fund for workers' compensation and shall be governed by a board of trustees.

(5)(a)  The arrangement shall be domiciled in the state of Louisiana.  All books, records, documents, accounts, and vouchers shall be kept in such a manner that the arrangement's financial condition, affairs, and operations can be ascertained and so that its financial statements filed with the commissioner of insurance can be readily verified and its compliance with the law determined.  Any or all books, records, documents, original indemnity agreements, accounts, and vouchers may be photographed or reproduced on film.  Any photographs, microphotographs, optical imaging, or film reproductions of any original books, records, documents, original indemnity agreements, accounts, and vouchers shall for all purposes, including but not limited to admission into evidence in any court or adjudicatory proceeding, be considered the same as the originals thereof, and a transcript, exemplification, or certified copy of any such photograph, microphotograph, optical imaging, or film reproduction shall for all purposes be deemed to be a transcript, exemplification, or certified original.  Any original so reproduced may thereafter be disposed of or destroyed, as provided for in Subparagraph (b) of this Paragraph, if provision is made for preserving and examining the reproduction.

(b)  Except as otherwise provided in Subparagraph (a) of this Paragraph, original books, records, documents, accounts, and vouchers, or such reproductions thereof, shall be preserved and kept in this state for the purpose of examination and until the authority to destroy or otherwise dispose of the records is secured from the commissioner of insurance.  All original records, or certified reproductions thereof, shall be maintained for the period commencing on the first day following the last period examined by the commissioner of insurance through the subsequent examination period, or three years, whichever is greater, except that any original, or certified reproduction thereof, whereby the member agrees to or acknowledges such member's in solido liability for liabilities of fund shall be permanently maintained.

(6)  At all times throughout the existence of the fund, two or more members of the arrangement shall maintain a minimum combined net worth of one million dollars and a ratio of current assets to current liabilities of at least one-to-one.

(7)  Notwithstanding the provisions of this Subsection, employers who have pooled their liabilities under Subparagraph (1)(a) of this Subsection may also pool their liabilities under the United States Longshore and Harbor Worker's Compensation Act, when the liability is clearly identified with the course and scope of employment of the employee of the member employer under this Chapter and their fund has been authorized by the United States Department of Labor to insure payment of such compensation.

B.  For the purposes of this Subpart, a "bona fide trade or professional association" means an active trade or professional association which:

(1)  Meets either of the following criteria:

(a)  Is a tax exempt organization approved by the Internal Revenue Service under the provisions of 26 United States Code Section 501.

(b)  Is a nonprofit corporation organized under Chapter 2 of Title 12 of the Louisiana Revised Statutes.

(2)  Provides services to its membership so that the primary function of the trade or professional association is not the sponsorship, operation, or management of a fund, or related employee safety program, or other related activities.  The association shall for a period of five years prior to the date of application do all of the following:

(a)  Hold regular meetings of the board on no less than an annual basis.

(b)  Produce a newsletter, on no less than an annual basis, which is mailed, via United States mail or sent by electronic mail, to each member.

(3)  Is either:

(a)  Chartered and domiciled in the state of Louisiana and has been in existence for a period of five years or more.

(b)  Chartered and domiciled in the state of Louisiana and whose members, prior to April 15, 1991, organized and placed in operation a fund.

C.  Each fund shall submit to the Department of Insurance an application for authority to act as a group self-insurance fund for workers' compensation, including evidence of the fund's inception, which establishes financial strength and liquidity of the members to pay compensation claims promptly and support the financial ability of the fund to satisfy its obligations upon the establishment of the fund, including:

(1)  Financial statements, dated not less than one year prior to the application, audited by an independent certified public accountant, of at least two members, showing at the inception of the fund a combined worth of those members of not less than the amount required by Subsection A of this Section.

(2)  Current financial statements of all other members dated not less than one year prior to the application.

(3)  Schedules of the entire membership showing:

(a)  The ratio of current assets to current liabilities of all members combined to be greater than one-to-one.

(b)  The working capital of all members combined to be of an amount establishing financial strength and liquidity of the members to pay compensation claims promptly.

(c)  The net worth of all members combined to be not less than the amount required by Subsection A of this Section.

(4)  Other financial information and documents as required by the department.

(5)  Such application shall be in writing on a form provided by the department, and shall contain the following information:

(a)  Applications shall be submitted to the department at least ninety days prior to the effective date of the establishment of a fund.  Any application submitted with less than ninety days remaining before the desired effective date, or which does not contain answers to all questions, or which is not sworn to and subscribed before a notary public, or which does not contain all required documents, statements, reports, and required information, may be returned without review by the department.

(b)  All applications shall be accompanied by the following items:

(i)  The properly completed indemnity agreement in a form acceptable to the department pursuant to Paragraph (A)(2) of this Section.

(ii)  Security as required by this Subpart.

(iii)  Copies of acceptable excess insurance or reinsurance, as required by this Subpart.  All excess insurance or reinsurance must be approved by the department prior to use.

(iv)  A bond covering each third party administrator as provided by this Subpart. Funds which employ their own administrator shall be required to purchase a bond, errors and omission insurance, directors and officers insurance, or other security approved by the department for the administration of the fund.

(v)  A certification from a designated depository attesting to the amount of monies on hand.

(vi)  Copies of fund bylaws and trust agreement or other governance documents.

(vii)  Individual application of each member of the fund applying for membership in the fund on the effective date of the fund, and copies of their executed indemnity agreements.

(viii)  Evidence of financial strength and liquidity of the members dated as of the date of the filing of the application to satisfy the financial strength and liquidity requirements of this Chapter.

(ix)  Proof that the fund shall have the minimum annual earned normal premium required by this Subpart.

(x)  The current annual report or financial statement of any casualty insurance company providing excess or reinsurance coverage for the fund meeting the requirements of this Subpart if such statement is not already on file with the department.

(xi)  The name, address, and telephone number of the attorney representing the fund; the name, address, and telephone number of the qualified actuary for the fund; and the name, address, and telephone number of the certified public accountant who will be auditing the annual financial statements of the fund, as well as evidence of appointment of each by the fund.

(xii)  The domicile address in this state where the books and records of the fund will be maintained, and the state from which the fund will be administered.

(xiii)  Proof of advance payment to the fund by each initial member of the fund of not less than twenty-five percent of that member's first year estimated annual earned normal premium.

(xiv)  A feasibility study, or other analysis, prepared by a qualified actuary utilizing actual loss history of the initial members of the fund.

(xv)  Pro forma financial statements projecting the first three years of operations of the fund based upon a feasibility study or other analysis prepared by a qualified actuary.  Such pro forma financial statements shall include a pro forma balance sheet, income statement, and statement of cash flow.  Each shall be prepared in accordance with generally accepted accounting principles.

(xvi)  A copy of the fund's premium billing policy indicating whether the premium payments to the fund will be paid by members annually, monthly, quarterly, or any combination thereof.

D.  Repealed by Acts 2007, No. 384, §2.

Acts 1995, No. 703, §1, eff. June 21, 1995; Acts 1997, No. 445, §1, eff. June 22, 1997; Acts 2006, No. 634, §1, eff. June 23, 2006; Acts 2007, No. 384, §§1 and 2; Acts 2008, No. 220, §8, eff. June 14, 2008; Acts 2010, No. 794, §2.