Kentucky Statutes 342.908 – Default or insolvency of fund member — Assumption of obligations by fund — Assessments to finance funds — Limitation on income distributions — Effect of payment on liability to fund for reimbursement
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(1) The commissioner shall notify a guaranty fund if the commissioner has knowledge that any member of the guaranty fund has failed to timely pay workers’ compensation benefits required by this chapter or if a court of competent jurisdiction has declared the member to be bankrupt or insolvent.
(2) In the event of issuance of a certificate of default, the commissioner shall call all security and transfer it to the appropriate guaranty fund created pursuant to this section. The commissioner shall also immediately notify, by certified mail, the guaranty fund and order the guaranty fund to assume the workers’ compensation obligations of the member required in this chapter. The guaranty fund shall commence payment of these obligations within fourteen (14) days of receipt of notification and order of the commissioner. Payment shall be made to claimants whose entitlement to benefits can be ascertained by the guaranty fund with or without proceedings before the Department of Workers’ Claims or a court of competent jurisdiction. Upon assumption of the obligations of a member by a guaranty fund, the guaranty fund shall have the right to immediate possession of any security, and the custodian, surety, or issuer of any irrevocable letter of credit shall turn over the security, proceeds of the surety bond, or letter of credit to the guaranty fund, together with the interest that has accrued since the date of the member’s insolvency. The guaranty fund may administer payment of benefits or it may retain a third party to do so.
(3) Notwithstanding any other provision of law, any cash, securities, irrevocable letters of credit, specific excess or aggregate excess insurance proceeds, or any other security deposited or posted in accordance with this section shall be used first, when due, to pay workers’ compensation claims. After the security has been exhausted, the payment of workers’ compensation claims from member assessments may be made. Where the guaranty fund member-assessment account is used to pay workers’ compensation claims on an emergency or an interim basis, pending receipt by the guaranty fund of security which is due but not yet received, the member-assessment account shall be reimbursed for payment from the security when it is received, and the priorities stated above shall thereafter apply.
(4) To the extent necessary to secure funds for the initial establishment of each guaranty fund member-assessment account, the board of directors of each guaranty fund created pursuant to this section shall levy assessments based on the premium of each individual self-insured employer, as defined and calculated pursuant to KRS
342.0011(28), for members of the Kentucky individual self-insurers guaranty fund and for the Kentucky coal employers self-insurance guaranty fund, and KRS
342.0011(24) for the Kentucky group self-insurance guaranty fund, but no such assessments shall ever exceed, in the aggregate, from all members of a single guaranty fund, an amount in excess of one million dollars ($1,000,000) at any given time. The assessments shall be made at a maximum annual assessment of: one-half of one percent (0.5%) of the premium for each member of the Kentucky individual
self-insurance guaranty fund as defined and calculated pursuant to KRS
342.0011(28); two percent (2%) of the premium for each member of the Kentucky coal employers guaranty fund as defined and calculated pursuant to KRS
342.0011(28); and three-fourths of one percent (0.75%) of the premium for each member of the Kentucky group self-insurance guaranty fund as defined and calculated pursuant to KRS § 342.0011(24).
(5) The initial assessment for each guaranty fund created pursuant to this section shall be for an amount equal to five hundred thousand dollars ($500,000), to be levied and collected within a one (1) year period. There shall be no reassessments against any member unless the current balance of such guaranty fund created pursuant this section is insufficient after deducting the amount paid for or reserved for outstanding claims and for administrative and other costs in managing the guaranty fund at which point the board of directors shall raise assessments sufficient to bring the minimum amount of the guaranty fund to five hundred thousand dollars ($500,000) or such other amount not to exceed, in any event, one million dollars ($1,000,000) based upon a maximum annual assessment for each guaranty fund.
(6) A guaranty fund created pursuant to this section shall pay no dividends, rebates, interest, or otherwise distribute income from the guaranty fund to any of its members, unless the guaranty fund has the assets prescribed in subsection (5) of this section and the distributions are approved by the commissioner.
(7) The commissioner shall be provided with any relevant information by the employer, any excess insurer, any third party administrator, or any issuer of any irrevocable letter of credit, issuer of any surety bond, or custodian of any security necessary for the commissioner to carry out the commissioner’s obligations under this chapter, and the commissioner shall provide this information to the guaranty fund as necessary to carry out its obligations.
(8) The payment of benefits by a guaranty fund does not release any person or entity from any liability to the individual guaranty fund for full reimbursement.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1859, effective July 15, 2010. — Created
1996 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 24, effective December 12, 1996.
(2) In the event of issuance of a certificate of default, the commissioner shall call all security and transfer it to the appropriate guaranty fund created pursuant to this section. The commissioner shall also immediately notify, by certified mail, the guaranty fund and order the guaranty fund to assume the workers’ compensation obligations of the member required in this chapter. The guaranty fund shall commence payment of these obligations within fourteen (14) days of receipt of notification and order of the commissioner. Payment shall be made to claimants whose entitlement to benefits can be ascertained by the guaranty fund with or without proceedings before the Department of Workers’ Claims or a court of competent jurisdiction. Upon assumption of the obligations of a member by a guaranty fund, the guaranty fund shall have the right to immediate possession of any security, and the custodian, surety, or issuer of any irrevocable letter of credit shall turn over the security, proceeds of the surety bond, or letter of credit to the guaranty fund, together with the interest that has accrued since the date of the member’s insolvency. The guaranty fund may administer payment of benefits or it may retain a third party to do so.
Terms Used In Kentucky Statutes 342.908
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Board: means the Workers' Compensation Board. See Kentucky Statutes 342.0011
- Certified mail: means any method of governmental, commercial, or electronic delivery that allows a document or package to have proof of:
(a) Sending the document or package. See Kentucky Statutes 446.010 - Commissioner: means the commissioner of the Department of Workers' Claims under the direction and supervision of the secretary of the Education and Labor Cabinet. See Kentucky Statutes 342.0011
- Compensation: means all payments made under the provisions of this chapter representing the sum of income benefits and medical and related benefits. See Kentucky Statutes 342.0011
- Department: means the Department of Workers' Claims in the Education and
Labor Cabinet. See Kentucky Statutes 342.0011 - Directors: when applied to corporations, includes managers or trustees. See Kentucky Statutes 446.010
- Entitlement: A Federal program or provision of law that requires payments to any person or unit of government that meets the eligibility criteria established by law. Entitlements constitute a binding obligation on the part of the Federal Government, and eligible recipients have legal recourse if the obligation is not fulfilled. Social Security and veterans' compensation and pensions are examples of entitlement programs.
- Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Person: means any individual, partnership, limited partnership, limited liability company, firm, association, trust, joint venture, corporation, or legal representative thereof. See Kentucky Statutes 342.0011
- premium: includes the initial consideration plus any reimbursements invoiced for losses, expenses, or fees charged under the deductibles. See Kentucky Statutes 342.0011
- Year: means calendar year. See Kentucky Statutes 446.010
(3) Notwithstanding any other provision of law, any cash, securities, irrevocable letters of credit, specific excess or aggregate excess insurance proceeds, or any other security deposited or posted in accordance with this section shall be used first, when due, to pay workers’ compensation claims. After the security has been exhausted, the payment of workers’ compensation claims from member assessments may be made. Where the guaranty fund member-assessment account is used to pay workers’ compensation claims on an emergency or an interim basis, pending receipt by the guaranty fund of security which is due but not yet received, the member-assessment account shall be reimbursed for payment from the security when it is received, and the priorities stated above shall thereafter apply.
(4) To the extent necessary to secure funds for the initial establishment of each guaranty fund member-assessment account, the board of directors of each guaranty fund created pursuant to this section shall levy assessments based on the premium of each individual self-insured employer, as defined and calculated pursuant to KRS
342.0011(28), for members of the Kentucky individual self-insurers guaranty fund and for the Kentucky coal employers self-insurance guaranty fund, and KRS
342.0011(24) for the Kentucky group self-insurance guaranty fund, but no such assessments shall ever exceed, in the aggregate, from all members of a single guaranty fund, an amount in excess of one million dollars ($1,000,000) at any given time. The assessments shall be made at a maximum annual assessment of: one-half of one percent (0.5%) of the premium for each member of the Kentucky individual
self-insurance guaranty fund as defined and calculated pursuant to KRS
342.0011(28); two percent (2%) of the premium for each member of the Kentucky coal employers guaranty fund as defined and calculated pursuant to KRS
342.0011(28); and three-fourths of one percent (0.75%) of the premium for each member of the Kentucky group self-insurance guaranty fund as defined and calculated pursuant to KRS § 342.0011(24).
(5) The initial assessment for each guaranty fund created pursuant to this section shall be for an amount equal to five hundred thousand dollars ($500,000), to be levied and collected within a one (1) year period. There shall be no reassessments against any member unless the current balance of such guaranty fund created pursuant this section is insufficient after deducting the amount paid for or reserved for outstanding claims and for administrative and other costs in managing the guaranty fund at which point the board of directors shall raise assessments sufficient to bring the minimum amount of the guaranty fund to five hundred thousand dollars ($500,000) or such other amount not to exceed, in any event, one million dollars ($1,000,000) based upon a maximum annual assessment for each guaranty fund.
(6) A guaranty fund created pursuant to this section shall pay no dividends, rebates, interest, or otherwise distribute income from the guaranty fund to any of its members, unless the guaranty fund has the assets prescribed in subsection (5) of this section and the distributions are approved by the commissioner.
(7) The commissioner shall be provided with any relevant information by the employer, any excess insurer, any third party administrator, or any issuer of any irrevocable letter of credit, issuer of any surety bond, or custodian of any security necessary for the commissioner to carry out the commissioner’s obligations under this chapter, and the commissioner shall provide this information to the guaranty fund as necessary to carry out its obligations.
(8) The payment of benefits by a guaranty fund does not release any person or entity from any liability to the individual guaranty fund for full reimbursement.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1859, effective July 15, 2010. — Created
1996 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 24, effective December 12, 1996.