[Applicable to injuries occurring prior to July 1, 2014.]

(a) Any governmental entity may create and maintain a reserve or special fund for the purpose of making payment of claims against it payable pursuant to this chapter or for the purpose of purchasing liability insurance to protect it from any and all risks created by this chapter.

Attorney's Note

Under the Tennessee Code, punishments for crimes depend on the classification. In the case of this section:
ClassPrisonFine
class A misdemeanorup to 11 monthsup to $2,500
For details, see Tenn. Code § 40-35-111
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Terms Used In Tennessee Code 29-20-401 v2

  • Claim: means any claim brought against a governmental entity or its employee as permitted by this chapter. See Tennessee Code 29-20-102
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Employee: means and includes any official (whether elected or appointed), officer, employee or servant, or any member of any board, agency, or commission (whether compensated or not), or any officer, employee or servant thereof, of a governmental entity, including the sheriff and the sheriff's employees and, further including regular members of voluntary or auxiliary firefighting, police, or emergency assistance organizations. See Tennessee Code 29-20-102
  • Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
  • Governmental entity: means any political subdivision of the state of Tennessee including, but not limited to, any municipality, metropolitan government, county, utility district, school district, nonprofit volunteer fire department receiving funds appropriated by a county legislative body or a legislative body of a municipality, human resource agency, community action agency or nonprofit corporation that administers the Head Start or Community Service Block Grant programs, public building authority, and development district created and existing pursuant to the constitution and laws of Tennessee, or any instrumentality of government created by any one (1) or more of the named local governmental entities or by an act of the general assembly. See Tennessee Code 29-20-102
  • Injury: means death, injury to a person, damage to or loss of property or any other injury that one may suffer to one's person, or estate, that would be actionable if inflicted by a private person or such person's agent. See Tennessee Code 29-20-102
  • 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.
  • Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
  • Person: includes a corporation, firm, company or association. See Tennessee Code 1-3-105
  • State: when applied to the different parts of the United States, includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
  • Trustee: A person or institution holding and administering property in trust.
  • written: includes printing, typewriting, engraving, lithography, and any other mode of representing words and letters. See Tennessee Code 1-3-105
  • Year: means a calendar year, unless otherwise expressed. See Tennessee Code 1-3-105
(b)

(1) Any two (2) or more governmental entities are hereby granted the power, any provision of law to the contrary notwithstanding, to enter into an agreement or agreements with one another for joint or cooperative action to pool their financial and administrative resources for the purpose of providing to the participating governmental entities risk management, insurance, reinsurance, which is defined to mean reinsurance by an entity created under this section, self-insurance, or any combination thereof for any and all of the areas of liability or insurability, or both, for such governmental entities, including, but not limited to, the liabilities created by this chapter (including general and professional liabilities), liabilities under the workers’ compensation law, liabilities under the unemployment compensation law, and motor vehicle insurance. All such agreements shall be made pursuant to title 12, chapter 9.
(2) The power to enter into agreements hereunder specifically includes the power to establish a separate legal or administrative entity or entities to effectuate such agreements or, if no separate legal or administrative entity or entities are established, to designate an administrator of the pooled financial and administrative resources. An entity so established, or an administrator so designated, shall be deemed to have been appointed by the governing body of the governmental entity for the purposes of § 29-20-309, and this appointment shall not be considered as a violation of the provision of § 12-9-104(a) dealing with the powers, privileges or authority of officers of political subdivisions.
(3) Each such agreement shall be approved by appropriate resolution or as otherwise permitted by the laws of the participating governmental entities before any such agreement shall be effective or binding.
(4) In addition to those items included in any such agreement pursuant to § 12-9-104(c), the agreement may specify: the nature and scope of insurance coverage and coverages to be provided; the method and methods by which coverage and coverages are to be extended, contributions (which term shall include all premiums or assessments) levied and paid, claims administered and defended against; the procedures by which financial reserves shall be established and maintained; and, any other provisions necessary for proper administration of the pooled resources.
(5) Such agreements may provide for the pooling of losses and any other expenses so that any or all of the funds contributed by a participating governmental entity may be used to pay claims against or with respect to any of the other participating governmental entities and any costs or expenses, or both, relative to any entity authorized by this part. The general assembly hereby finds and determines that all contributions of financial and administrative resources made pursuant to an agreement as authorized herein are made for a public and governmental purpose and that all such contributions benefit the contributing governmental entity.
(c)

(1) Any governmental entity choosing to create and maintain a special fund, or to enter into an agreement, as authorized in this section for the purpose of insuring against the liabilities created by this chapter, shall be deemed to be electing to self-insure against the liabilities established in this chapter and shall, therefore, have the same limits of liability as if the minimum limits of liability established in § 29-20-403 had been purchased.
(2) Should any governmental entity choose to enter into an agreement for the purpose of insuring for the liabilities of the Workers’ Compensation Law, as authorized in this section, it shall be deemed to have accepted the Workers’ Compensation Law pursuant to § 50-6-106(5), and it shall be deemed to have insured for such liabilities with an association, organization or corporation authorized to transact the business of workers’ compensation insurance pursuant to § 50-6-405(a)(1). Certificates of compliance issued by the legal or administrative entity created by the agreement between the governmental entities for this purpose shall be accepted by the department of labor and workforce development.
(d)

(1) No special fund established by an agreement authorized under this section and under title 12, chapter 9, shall be considered as an “insurance company” nor shall any contribution of financial or administrative resources to such a special fund be considered a “premium” or “gross premium” under title 56 for any purpose, including regulation and taxation.
(2) There shall be maintained in any special fund created pursuant to this section such an amount of reserve funds as is deemed adequate by the department in accordance with reserve standards applicable to private insurance companies pursuant to title 56. The department of commerce and insurance is authorized to charge reasonable fees to cover expenses incurred in the course of investigations and audits conducted for the purpose of making this determination, and is authorized to promulgate such rules and regulations necessary to accomplish the purposes of this subsection (d).
(e) Any special fund or legal or administrative entity created pursuant to this part shall have the power to reinsure, in whole or in part, any of the areas of liability or insurability of governmental entities or governmental employees. Notwithstanding any other law to the contrary, this power to reinsure may be exercised through the creation, operation, or ownership, in whole or in part, of reinsuring entities, or by entering into contracts or treaties of reinsurance with reinsuring entities, or by any combination thereof; provided, that the reinsuring entity is lawfully created under the laws of its jurisdiction. Any reinsuring entity created pursuant to this part may be created only by governmental entities as defined in this chapter or by an entity created by governmental entities pursuant to this part and the Interlocal Cooperation Act, compiled in title 12, chapter 9. Any such reinsuring entity may reinsure only any areas of liability or insurability of governmental entities or governmental employees.
(f)

(1) Any legal or administrative entity created by an agreement between governmental entities to pool their resources to provide workers’ compensation coverage is entitled to participate in the second injury fund established in § 50-6-208 upon the payment to the department of labor and workforce development of an annual fee. The annual fee shall be a percentage of the total financial contributions for workers’ compensation coverage received from participating governmental entities and earned during a calendar year. The percentage shall equal the percentage of insurance company premiums, as measured by the premium tax, allocated and paid out by the second injury fund pursuant to § 50-6-208(c) and (d), during the same year, subject to a maximum of two percent (2%).
(2) If any such legal or administrative entity participates in the second injury fund as provided herein and then ceases participation, either the second injury fund shall remain liable for a claim for injuries to an employee insured by the entity that occurred prior to the termination of participation and for which benefits had not been paid prior to the termination; provided, that the legal or administrative entity shall promptly reimburse the second injury fund for the actual amount of any such benefits subsequently paid by the second injury fund; or, within thirty (30) days of the cessation of such participation, the legal and administrative entity may elect to assume complete liability for such a claim. This assumption shall release the second injury fund from any duty to defend or liability, but in either case, the recovery by any employee shall not be reduced or defeated.
(g)

(1) An insurance pool, special fund, reserve fund, or legal or administrative entity administering any such pool or fund created and authorized under this section shall be audited annually in accordance with standards established by the comptroller of the treasury. A copy of the audit shall be filed with the comptroller as soon as practical, but in no event later than one hundred twenty (120) days following the end of the pool’s or reserve fund’s fiscal year. Notwithstanding this subdivision (g)(1), the operations, books and records of any pool or reserve fund shall be subject to audit and review by the comptroller or any person authorized by the comptroller. The commissioner of commerce and insurance shall assist the comptroller in the audit upon the written request by the comptroller.
(2) The comptroller of the treasury is authorized to charge reasonable fees to cover expenses incurred by the comptroller or the commissioner of commerce and insurance in the course of audits or investigations pursuant to this section.
(3) Any information obtained by or disclosed to the commissioner of commerce and insurance pursuant to an examination, audit or investigation conducted under this chapter shall be confidential and shall not be disclosed to the public. Any information obtained by or disclosed to the comptroller shall be considered working papers of the comptroller and, therefore, are confidential. Furthermore, the commissioner of commerce and insurance shall not disclose any information relating to the reserving of particular claims, if disclosure would likely prejudice the fund in settling the claim; provided, however, that this shall not apply to any examination report, audit or investigative report prepared by the commissioner of commerce and insurance or the comptroller, or to any rebuttal to such reports submitted by or on behalf of the fund examined. However, nothing contained in this subdivision (g)(3) shall be construed as prohibiting the commissioner of commerce and insurance or the comptroller from disclosing the information listed in this subdivision (g)(3), or any matters relating to that information, to state agencies of this or any other state, or to law enforcement officials of this or any other state or agency of the federal government at any time.
(4) Any person knowingly or willfully testifying falsely in reference to any matter material to the investigation, audit, examination or inquiry commits a Class A misdemeanor.
(5) Any director, trustee, officer, agent, or employee of an insurance pool or reserve fund, or any other person who knowingly or willfully makes any false certificate, entry, or memorandum upon any of the books or papers of any insurance pool or reserve fund upon any statement filed or offered to be filed in the department or used in the course of any examination, inquiry or investigation with the intent to deceive the commissioner of commerce and insurance or any person appointed by the commissioner or the comptroller to make the examination, commits a Class A misdemeanor.
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