Current through September 24, 2024
(1) Each Employer
shall provide security for incurred liabilities for compensation through a
deposit with the Commissioner in the following forms:
(a) Negotiable securities;
(b) Surety bonds;
(c) Certificates of deposit; or
(d) Letters of credit.
(2) The sum of the securities on deposit with
the Commissioner shall be at least equal to the greater of the following:
(a) $500,000;
(b) One hundred and twenty-five percent
(125%) of the Employer's incurred liabilities for compensation; or
(c) Such other amount determined by the
Commissioner to be necessary to provide sufficient security.
(3) The security, or a contract
between the Employer, a depository institution and the Commissioner evidencing
the security held in said depository institution for purposes of compliance
with this Rule, shall be held by the Commissioner and shall be conditioned to
run solely and directly for the benefit of the Employees of the
Employer.
(4) Any legal actions to
enforce the payment of the security being held for purposes of compliance with
this section shall be brought by the Commissioner for the benefit of the
Employees of the Employer.
(5) The
security held pursuant to this Rule may be used for the payment of any and all
fees or costs required to administer the disbursement of the proceeds to or for
the benefit of the Employees.
(6)
The venue for any suit filed by the Commissioner under this provision is in
Davidson County, Tennessee.
(7)
Negotiable securities.
(a) All negotiable
securities filed under this Rule shall be the classes of securities listed
below and shall be subject to the following requirements:
1. Obligations issued, assumed or guaranteed
by any business entity created or existing under the laws of the United States
or any state thereof; provided, that the obligation is or the issuing, assuming
or guaranteeing business entities' long term obligations are rated one (1) of
the four (4) highest grades by any of the nationally recognized statistical
rating organizations recognized by the securities valuation office of the
National Association of Insurance Commissioners or one (1), two (2) or three
(3) by the securities valuation office of the National Association of Insurance
Commissioners.
2. Obligations, not
in default as to principal or interest, which are valid and legally authorized
obligations issued, assumed or guaranteed by the United States, or by any state
thereof, or by any county, city, town, village, municipality or district
therein, or by any political subdivision thereof, or by any civil division or
public instrumentality of one (1) or more of the foregoing, if, by statutory or
other legal requirements applicable thereto, such obligations are payable, as
to both principal and interest, from taxes levied, or by such law required to
be levied, upon all taxable property or all taxable income within the
jurisdiction of such governmental unit or from adequate special revenues
pledged or otherwise appropriated or by such law required to be provided for
the purpose of such payment, but not including any obligations payable solely
out of special assessments on properties benefited by local
improvements.
(b) Before
accepting any negotiable security for purposes of this Rule, the Commissioner
shall determine whether such negotiable security is suitable for such use. The
Commissioner shall consider, as appropriate, the interest rate, credit,
liquidity, price, transaction, and other risks associated with such negotiable
security.
(8) Bonds.
(a) All bonds filed under this Rule shall be
issued by an insurer authorized to do business in the state of Tennessee and
the insurer shall maintain at least an A rating as determined by the A.M. Best
Company.
(b) Any bond issued by an
insurer for purposes of this Rule shall contain a provision requiring the
insurer to give the Commissioner ninety (90) days' written notice of its
intention to cancel such bond. The insurer shall not cancel such bond until
written notice is given to the Commissioner and a copy of such notice is given
to the Employer.
(c) An insurer
that cancels a bond issued pursuant to this Rule before the date specified in
the written notice as set forth above shall be liable to the Employees of the
Employer for any lawful workers' compensation claims that were incurred on or
before the date the bond was cancelled in amounts up to the maximum penal sum
of the bond.
(9)
Certificates of deposit.
(a) All certificates
of deposit filed under this Rule must be held in a depository institution that
is located in the state of Tennessee and is either federally chartered or state
chartered.
(b) If a certificate of
deposit is filed with the Commissioner, an agreement shall be entered into
between the Commissioner, the depository institution and the Employer pledging
the certificate of deposit for the benefit of the Employer's Employees. The
agreement shall contain a provision executed between the depository institution
and the Employer requiring the Employer and the depository institution to give
at least ninety (90) days' written notice of their intention not to renew the
certificate of deposit and a provision that, unless written notice not to renew
is given to the Commissioner by the Employer and depository institution within
ninety (90) days, the certificate of deposit shall be automatically renewed.
The Employer shall submit to the Commissioner, on an annual basis, the status
of such certificate of deposit, including evidence of its renewal.
(c) If the Employer and depository
institution fail to comply with T.C.A. §
50-6-405(b)(1)(G)(i)
or this Rule, the certificate of deposit
shall be automatically renewed.
(d)
Any interest accruing on the certificate of deposit while held in the
depository institution shall be returned to the Employer at the termination of
the certificate of deposit, with the prior written approval of the
Commissioner, provided that no claim is due or asserted against the certificate
of deposit by the Commissioner.
(10) Letters of credit.
(a) Any letter of credit filed under this
Rule must be issued or guaranteed by a Qualified United States Financial
Institution that is located in the State of Tennessee.
(b) If an Employer elects to secure payment
of its workers' compensation claims by way of a letter of credit, an agreement
shall be entered into between the Commissioner, the Employer and the depository
institution pledging the letter of credit for the benefit of the Employer's
Employees and naming the Commissioner as beneficiary under such letter of
credit.
(c) Such letter of credit
shall be clean, irrevocable and unconditional and shall contain a provision
which requires the issuer to automatically renew such letter of credit unless
the issuer shall provide at least ninety (90) days' prior written notice to the
Commissioner of an intention to revoke or not renew such letter of credit. The
Employer shall annually submit to the Commissioner information regarding the
status of such letter of credit, including evidence of its renewal.
(d) Letters of credit meeting applicable
standards of issuer acceptability as of the dates of their issuance or
configuration shall, notwithstanding the issuing or confirming institution's
subsequent failure to meet applicable standards of issuer acceptability,
continue to be acceptable as security until their expiration, extension,
renewal, modification or amendment, whichever occurs first.
(11) An Employer shall notify the
Commissioner if the security no longer meets the requirements of this Rule.
Such notice shall be given no later than fifteen (15) days from the time the
Employer determines or should have determined that the security no longer meets
such requirements.
(12) Any
security held for purposes of compliance with this Rule shall be held for a
minimum of ten (10) years after the Employer is no longer self-insured and the
Employer shall maintain the fair market value of security on deposit at not
less than five hundred thousand dollars ($500,000), unless otherwise approved
by the Commissioner.
(13) Any
security held for purposes of compliance with this Rule shall be in a form
substantively that has been previously approved by the Commissioner. Any
security that fails to meet any requirement under this section shall not be
considered for purposes of determining an Employer's compliance with any of the
security maintenance requirements of this Rule.
Authority: T.C.A. §§
50-6-405(b)(1),
50-6-405(b)(8),
50-6-405(e), and 50-6-405(h).
