Current through Register Vol. 35, No. 18, September 24, 2024
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.