N.J. Admin. Code § 11:15-6.6

Current through Register Vol. 56, No. 21, November 4, 2024

Section 11:15-6.6 - Bylaws and plan of risk management; contents

(a) The commissioners shall prepare and, after the approval by resolution of the board or owner of each participating member, shall adopt bylaws for the joint insurance fund. The bylaws shall include, but not be limited to:

1. Procedures for the organization and administration of the joint insurance fund, the insurance fund commissioners and alternates and, if appropriate, the executive committee of the fund and alternates. The procedures may include the designation of one participating member to serve as the lead agency to be responsible for the custody and maintenance of the assets of the fund and such other duties as may be assigned by the fund commissioners;

2. Procedures for the assessment of members for their contributions to the fund and for the collection of contributions in default;

3. Procedures for the establishment, maintenance and administration of appropriate reserves in accordance with sound actuarial principles;

4. Procedures for the purchase of direct insurance or reinsurance, if any;

5. Contingency plans for paying losses in the event that the fund is exhausted, including provision for supplemental assessments as provided at 11:15-6.1 6;

6. Procedures governing loss adjustment and legal fees;

7. Procedures for the joining of the fund by non-members;

8. Procedures in compliance with 11:15-6.1 0 for the withdrawal or expulsion from the fund by a member, including any requirement that a terminated or withdrawing member provide security in a form and an amount acceptable to the Commissioner and fund commissioners as applicable, as a guarantee for the continued payment of the member's obligations pursuant to 11:15-6.1 0(c);

9. Procedures for the termination and liquidation of the joint insurance fund and the payment of its outstanding obligations; and

10. Procedures governing trust fund accounts, including transfers, withdrawals and distribution of surplus therefrom and supplemental assessments.

(b) In addition, the bylaws shall:

1. Include the fund's name, location of its principal office, date of organization, and name and address of each initial member;

2. Specify the insurance coverages to be provided by the fund and the minimum participation required of any member;

3. Describe the responsibilities and obligations of the participants, the terms and conditions of continued participation and discontinuance of participation in the fund;

4. Be accompanied by a pro forma financial statement, with underlying assumptions and methodology, on a form acceptable to the Commissioner showing the financial strength and liquidity of the fund to assure that all obligations shall be met promptly;

5. Where self-insured, provide a plan for specific and aggregate excess insurance or reinsurance and for retention in accordance with sound actuarial principles and the plan of risk management;

6. Be accompanied by proof of competent personnel and ample facilities within the fund organization with respect to claims administration, underwriting matters, loss prevention and safety engineering or present a contract with a servicing organization(s) for the provision of such services;

7. Establish the claims handling procedure to be utilized by the fund which procedure shall provide for the prompt, fair and equitable settlement of claims;

8. Establish the complaint handling procedure to be utilized by the fund;

9. Be accompanied by a sample copy of the resolution and written agreement adopted by each participating member as specified at 11:15-6.3. Within 30 days of approval, the fund shall send certified copies of the resolution and written agreement from each participant to the Commissioner;

10. Be accompanied by a sample copy of its indemnity and trust agreement as defined in 11:15-6.2, and in a form satisfactory to the Commissioner.

i. The agreement shall create a trust and govern the operation thereof under which monies shall be held by the trustees as fiduciaries for the benefit of fund claimants.

ii. Where a fund shall provide for the retention on a self-insured basis of any or all of the risks or liabilities specified below, the agreement shall require and provide for the establishment of separate trust accounts from which monies shall be disbursed solely for the payment of claims, allocated claims expenses and excess insurance or reinsurance premiums for each risk or liability, and may provide for the establishment of contingency accounts, each by fund year, as follows:

(1) Workers' compensation and employers' liability;

(2) Liability, other than motor vehicle;

(3) Property damage, including automobile physical damage;

(4) Automobile liability;

(5) General contingencies, if deemed appropriate by the fund, to replenish the administrative account established pursuant to 11:15-6.1 4 for that specific fund year; and

(6) Loss fund contingencies, if deemed appropriate by the fund, to replenish a trust account established pursuant to (b)10ii(1) through (4) above for that specific fund year; and where the total amount of monies assessed and allocated to the accounts established pursuant to (b)10ii(1) through (4) and this sub-subparagraph are utilized to satisfy the amounts estimated by the fund's actuary to be necessary to pay claims, allocated claims expenses and excess insurance or reinsurance premiums for each risk or liability set forth in (b)10ii(1) through (4) for that fund year.

iii. A fund shall not be otherwise required to establish separate trust accounts as required by (b)10ii above for each fund year, or for each risk or liability as specified in (b)10ii above, provided the fund provides a plan in its bylaws which provides for the recording and accounting of all transactions by fund year for each risk or liability as specified in (b)10ii, as applicable.

iv. Within 30 days of approval, the fund shall send certified copies of the indemnity and trust agreement from each participant to the Commissioner;

11. Provide procedures for the establishment, maintenance and administration of reserves for unearned assessments, loss reserves and loss expense reserves and for the determination and distribution of assessment and/or investment refunds, in accordance with sound actuarial principles, including the assumptions and methodology used;

12. With respect to funds providing for self-insurance of workers' compensation liabilities; the bylaws of each fund shall:

i. Guarantee benefit levels equal to those required by the workers' compensation law and other applicable statutes and provide a plan for the prompt payment of such benefits. Information documenting an individual member's financial strength and liquidity shall be made available to the Department upon the Department's written request and in a form specified by the Department;

ii. Mandate a loss fund in an amount at least $ 250,000 for the fund's first year of operation and at least $ 500,000 for each subsequent year of operation unless otherwise approved by the Commissioner;

iii. Unless otherwise approved by the Commissioner, provide for assessments based upon the Experience Rating Plan provided for in the New Jersey Workers' Compensation and Employers' Liability Insurance Manual on file with the Commissioner; and

13. Be accompanied by a nonrefundable filing fee in the amount of $ 1,500.

(c) The bylaws shall be accompanied by the following information and documentation and any amendments thereto:

1. Designation of the fund commissioners, administrator and custodian of the fund's assets, as well as the chairman and secretary, if any;

2. Copies of the fund's prospective and executed agreements or contracts and any renewal or new agreements or contracts with any administrator, servicing organization or custodian of the fund's assets. Such agreements or contracts shall specify the duties of, and compensation to be paid to, each such entity. Copies of the above shall be accompanied by a list of all parties having or deriving any interest, right or benefit in the servicing organization or administrator;

i. To the extent the terms and conditions of any renewal agreement or contract and the parties thereto remain unchanged from the prior year, a copy of the renewal agreement or contract shall not be required. In lieu of filing a copy of the renewal agreement or contract, the fund shall file a notice with the Department in the format of Exhibit A in the chapter Appendix incorporated herein by reference, that the agreement or contract and parties thereto remain unchanged from the prior year.

ii. Copies of any changes to the agreements or contracts shall be filed with the Department within 10 days after such changes are approved by the fund;

3. Where the fund retains risk on a self-insured basis, a surety bond for the fund with a minimum penal sum of $ 250,000, or a deposit in the amount of $ 250,000. The funds for the deposit shall be obtained through an assessment solely for that purpose;

4. A fidelity bond for all persons handling fund assets in a form and amount acceptable to the Commissioner;

5. A surety bond for the claims administrator, or any other servicing organization deemed necessary by the Commissioner in a form and amount acceptable to the Commissioner, and a surety bond for any other servicing organization as deemed appropriate by the fund commissioners in a form and amount acceptable to them;

6. Evidence of errors and omissions insurance coverage for the servicing organization(s), administrator and producer, if employed by the fund, who negotiates excess insurance or reinsurance on behalf of the fund;

7. A designation and appointment of an agent in New Jersey to receive service of process on behalf of the fund as well as the address in this State where the books and records of the fund will be maintained at all times;

8. A list of the fund commissioners and executive officers, updated annually;

9. Data forms, in the format set forth in Exhibit B in the chapter Appendix incorporated herein by reference, incorporating the appropriate and necessary professional qualifications for senior officers and directors of the administrator and servicing organizations providing services to the fund updated and submitted to the Commissioner annually. An entity providing services to more than one fund may submit one data form for all funds formed pursuant to this subchapter that the entity services;

i. To the extent the information contained in the data forms remains unchanged from the prior year, the fund need not file updated forms, provided that the fund files a notice with the Department, in the format of Exhibit C in the chapter Appendix incorporated herein by reference, that the same individuals are utilized and that the information in the data forms remains unchanged from the prior year;

10. Copies of each insurance policy or excess insurance contract purchased by the fund, including a copy of the cover note or binder; and

11. A description of any producer arrangement plan by which producers, who shall be licensed pursuant to N.J.S.A. 17:22A-1 et seq., represent members in their dealings with the fund. The description shall include, but not be limited to, copies of all producer contracts, which shall include a description of the producer's obligations, responsibilities and compensation; the duration of such contracts; and an indication whether the contracts are subject to renewal. Copies of renewal contracts or a notice of renewal shall also be provided consistent with the requirements set forth in (c)2 above.

i. The compensation paid to producers shall be reasonable;

12. A cash management plan, which shall include the designation of depository institution(s) for the holding of fund monies and the fund's investment policy;

13. A copy of the application form to be utilized by the fund for prospective new members applying for membership in the fund; and

14. Where the fund retains risk on a self-insured basis, copies of audited financial statements of each prospective member for each of the three years immediately preceding the date of application for approval.

(d) Each joint insurance fund shall, concurrently with the filing of its bylaws as provided at 11:15-6.6(a), file its risk management program and any amendments thereto with the Department as specified in (e) below.

(e) The commissioners shall prepare, or cause to be prepared, a plan of risk management for the joint insurance fund. The program description shall include, but not be limited to:

1. The perils or liabilities to be insured against;

2. The limits of coverages, whether self-insurance, direct insurance purchased from a commercial carrier, or reinsurance;

3. The amount of risk to be retained by the fund;

4. The amount of unpaid claims to be established;

5. The proposed method of assessing contributions to be paid by each member of the fund;

6. Procedures governing loss adjustment and legal fees;

7. Coverage to be purchased from a commercial insurer, if any;

8. Reinsurance to be purchased, if any, and the amount of premium therefor;

9. Procedures for the closure of fund years including the maintenance of all relevant accounting records;

10. The assumptions and methodology used for the calculation of appropriate reserves required to be established, maintained and administered in accordance with sound actuarial principles pursuant to (a)10 above; and

11. The maximum amount a certifying and approving officer may approve for payment pursuant to 11:15-6.2 1.

(f) The Commissioner may, at the time of filing of the bylaws and plan of risk management and whenever thereafter he or she deems it expedient, but at a minimum not less frequently than once every five years, make or cause to be made, an examination of the assets and liabilities, financial condition, method of conducting business and all other affairs of any fund. For the purpose of the examination, the Commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants or other professionals or specialists as examiners, or may request the fund commissioners to authorize and employ such person or persons to conduct the same or to assist therein as he deems advisable. The reasonable expenses of the examination shall be fixed and determined by the Commissioner, and such expenses shall be paid by the fund examined to the appropriate entity or person upon presentation of a detailed account.

1. For purposes of completing an examination of any fund pursuant to 17:49A-14 and this subchapter, the Commissioner may examine or investigate any person, or the business of any person, insofar as such examination or investigation is, in the sole discretion of the Commissioner, necessary or material to the examination of the fund.

2. Every fund or person from whom information is sought, including its officers, directors and agents, shall provide the Commissioner or other person appointed as an examiner pursuant to this subsection, timely, convenient, and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents and any or all computer or other recordings relating to the property, assets, business and affairs of the fund being examined.

3. The administrator and servicing organization(s), and their officers, directors, employees and agents, or other person, shall facilitate the examination and aid in the examination so far as it is in their power to do so. The Commissioner may, in accordance with the procedures set forth in 11:15-6.8, suspend or terminate the authority of any fund, if the fund, by its administrator, servicing organizations, or officers, directors, employees, or agents thereof, refuses to submit to an examination or to comply with any reasonable request of the examiners.

N.J. Admin. Code § 11:15-6.6