69O-189.003: Workers' Compensation: Application and Audit Procedures
PURPOSE AND EFFECT: Allows but does not require electronic signatures in the application for workers compensation coverage. Makes explicit those audit procedures that under the old rule were incorporated by reference to NCCI publications. Adds additional audit procedures.
SUMMARY: The National Council on Compensation Insurance (NCCI) is a U.S. insurance rating and data collection bureau specializing in workers’ compensation. Operating with a not-for-profit philosophy and owned by its member insurers, NCCI annually collects data covering more than four million workers’ compensation claims and two million policies. NCCI provides data and analysis to insurance companies, state workers’ compensation insurance funds, regulatory authorities, employers needing information on workers’ compensation issues, and non-governmental workers’ compensation agencies.
Pursuant to Section 440.381, F.S., the Financial Services Commission is to promulgate rules for applications for workers’ compensation coverage, and for audits of payroll and classifications of workers. In 2008, NCCI filed with the Office, on behalf of its carriers, a proposal for a rule addressing these matters. This proposed rule is based on NCCI’s proposal.
The proposed rule allows electronic signatures in the application for workers’ compensation coverage and in the annual audit so long as the electronic signature process complies with Florida’s Uniform Electronic Transaction Act as provided in Chapter 668, F.S. The current rule incorporates NCCI publications by reference. The proposed rule explicitly provides the procedures for the audits required by the current rule.
The proposed rule also raises the threshold for an onsite audit from $5,000 to $10,000. Any audit for under $10,000 will be handled by a mail audit, to save costs both for the employer and the carrier.
SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS: No Statement of Estimated Regulatory Cost was prepared.
Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.
SPECIFIC AUTHORITY: 624.308 FS.
LAW IMPLEMENTED: 440.381 FS.
IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE,TIME AND PLACE SHOWN BELOW(IF NOT REQUESTED, THIS HEARING WILL NOT BE HELD):
DATE AND TIME: July 21, 2009, 9:30 a.m.
PLACE: 116 Larson Building, 200 East Gaines Street, Tallahassee, Florida
Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 days before the workshop/meeting by contacting: Theresa Eaton, Office of Insurance Regulation, E-mail Theresa.Eaton@floir.com. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).
THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Theresa Eaton, Office of Insurance Regulation, E-mail Theresa.Eaton@floir.com
THE FULL TEXT OF THE PROPOSED RULE IS:
69O-189.003 Workers’ Compensation: Application and Audit Procedures.
(1) No change.
(2)(a) An application complying with this rule is required for all policies having covered Florida exposure. For new business effective after the implementation of this rule, a carrier shall use an application which complies with this rule. When this new business policy is renewed, the carrier is not required to obtain another application. These requirements also apply to policies written in other states where there is covered Florida exposure other than incidental Florida exposure.
(b) The applicant’s signature on the applicant form shall be notarized. The carrier is authorized to require the producer’s signature to be notarized.
(c) It is permissible for insurers to accept electronic signatures in satisfaction of the application signature requirements to the extent that such acceptance of electronic signatures complies with Parts I and II of Chapter 668, F.S.
(d) It is permissible for insurers to accept electronic notarizations in satisfaction of the application notarization requirements to the extent that such acceptance of electronic notarizations complies with Parts I and II of Chapter 668, F.S.
(3) No change.
(4)(a)1. In order to ensure that the appropriate premium is charged for workers’ compensation coverage, each employer and carrier shall comply with:
1.a. The requirements of Section 440.381, F.S.; and
2.b. As applicable, the voluntary market minimum audit requirements and FWCJUA minimum audit requirements as set forth in paragraphs (4)(b) and (4)(c) below. “Florida State Special Audit Rules”, (rev. 7/02) and “Part Three Service Providers D. Performance Standards for Service Providers” (rev. 7/02) which are hereby adopted and incorporated by reference.
2.a. Copies of the “Florida State Special Audit Rules” (rev. 7/02) are contained in the workers’ compensation manual issued by the National Council on Compensation Insurance, Inc., 901 Peninsula Corporate Circle, Boca Raton, FL 33487.
b. Copies of Part Three – Service Providers D. Performance Standards for Service Providers” (rev. 7/02) are contained in the operations manual of the Florida Workers’ Compensation Joint Underwriting Association, Inc., P. O. Box 48957, Sarasota, FL 34230-5937.
(b) Each voluntary market carrier and each employer covered by a voluntary market carrier shall comply with the following minimum audit requirements at the expiration of each policy:
1. Final audits shall be conducted for both new and renewal policies as follows:
a. For policies with an estimated annual premium of $10,000 and over, a final physical audit shall be completed annually on all risks regardless of governing classification code;
b. For policies with an estimated annual premium of $9,999 to $1, a final mail or physical audit shall be completed annually on all risks regardless of governing classification;
c. For all new business policies having construction classifications, regardless of premium range a final physical audit shall be completed annually;
d. For all renewal business policies having construction classifications, a final physical audit shall be conducted annually if the estimated annual premium is $5,000 and over; and
e. Per capita policies shall have a final mail or physical audit not less than biennially.
2. Physical audits will be made whenever requested by the employer with reasonable grounds.
3. Mail audit reports by the employer are permitted only where a physical audit is not required.
4. Records examined during the physical audit shall include, but not be limited to, the use of the following as applicable:
a. Unemployment Compensation Tax (UCT) forms;
b. Federal reports of employee income;
c. Payroll records;
d. Cash disbursement journals;
e. Other acceptable accounting records;
f. Certificates of insurance covering subcontractors; and
g. Independent contractor documents.
5. Each voluntary market carrier or the National Council on Compensation Insurance shall conduct audits to ensure the accurate classification assignments for duties of employees.
(c) The FWCJUA or its service provider and each employer covered by the FWCJUA shall comply with the following minimum audit requirements at the expiration of each policy:
1. Final physical audits shall be conducted as follows:
a. For all policies producing an estimated annual premium of $4,000 and over regardless of governing classification code;
b. For all policies producing an estimated annual premium of $3,999 to $3,000, at least once every three years;
c. For all policies with a governing classification code of 2702, 2710, 5022, 5403, 5437, 5445, 5474, 5551, 5606, 5645, 6217, 7219, 8829, 8835, 8861 and 9110, regardless of premium range;
d. For all policies for employers engaged in leasing employees to others or in providing temporary help to others, regardless of premium range;
e. For all new business policies having construction classification codes, regardless of premium range;
f. For all policies with a loss ratio of 120% or greater the first year the employer qualifies and thereafter, subject to the FWCJUA’s or its service provider’s underwriting judgement, regardless of premium range;
g. Whenever requested by the employer on reasonable grounds; and
h. Whenever otherwise warranted in the FWCJUA’s or its service provider’s judgement by the type of business, or by questions concerning the amount of exposure, the accuracy of classifications, or the reliability of previous mail or physical audits.
2. Mail audit reports by the employer are permitted only where a physical audit is not required.
3. Records examined during the physical audit shall include, but not be limited to, the use of the following as applicable:
a. Unemployment Compensation Tax (UCT) forms;
b. Federal reports of employee income;
c. Payroll records;
d. Cash disbursement journals;
e. Other acceptable accounting records;
f. Certificates of insurance covering subcontractors; and
g. Independent contractor documents.
4. The FWCJUA, its service provider or the National Council on Compensation Insurance shall conduct audits to ensure the accurate classification assignment for duties of employees.
(d)(b)1. In addition, each employer shall submit a copy of the quarterly earning report required by Chapter 443, F.S., to the carrier at the end of each quarter.
2. Each carrier shall develop its own procedures for terminating coverage when the quarterly earning report forms are not received. However, such forms shall be considered timely if received within 45 days of the end of the quarter reported.
(e)(c) The carrier shall retain new or renewal applications, monthly change sheets, and the quarterly earning reports for a minimum of three years from the date the applications, sheets, or reports were received.
(f)(d) Telephone audits are not permitted in lieu of mail or physical audits.
(e) An initial application is required only at the inception of a three-year fixed rate policy or at renewal, if the inception date was prior to the effective date of this rule. Audit procedures are required at the expiration of each policy.
(g)(f) Signatures.
1.a. A carrier, in order to comply with the signature requirements as provided in Section 440.381(3), F.S., shall use, as applicable:
(I) Form OIR-B1-1562 (rev. 7/03), “Partner’s, Sole Proprietor’s or Corporate Officer’s Statement”;
(II) Form OIR-B1-1561 (rev. 7/03), “Statement of Individual Providing Audit Information (other than Partner, Sole Proprietor or Corporate Officer)”; and
(III) Form OIR-B1-1560 (rev. 7/03), “Auditor’s Statement”.
b. The forms in this subsection (4) are hereby adopted and incorporated by reference and may be obtained from the Office’s web site at www.floirfldfs.com/pcfr/forms_list.aspx.
c. These forms shall be signed by the appropriate party and submitted to the carrier at the completion of an audit.
2.a. A carrier wishing to use its own signature forms shall submit the forms electronically to Property and Casualty Product Review at https://iportal.fldfs.com, and receive approval prior to use.
b. At a minimum the forms shall contain all text as it appears on:
(I) Form OIR-B1-1562 (rev. 7/03), “Partner’s, Sole Proprietor’s or Corporate Officer’s Statement”;
(II) Form OIR-B1-1561 (rev. 7/03), “Statement of Individual Providing Audit Information (other than Partner, Sole Proprietor or Corporate Officer)”; and
(III) Form OIR-B1-1560 (rev. 7/03), “Auditor’s Statement”.
3. It is permissible for insurers to accept electronic signatures in Electronic signature(s) shall be accepted in satisfaction of the signature requirements of Section 440.381(3), F.S. to the extent that such acceptance of electronic signatures complies with Parts I and II of Chapter 668, F.S. For purposes of this section, “electronic signature(s)” shall mean an electronic identifier, including a digital signature, which is:
a. Unique to the person using it;
b. Capable of verification;
c. Under the sole control of the person using it;
d. Attached to or associated with data contained within the audit document in such a manner that authenticates the attachment of the signature to particular data and integrity of the data transmitted;
e. Intended by the party using it to have the same force and effect as the use of a signature affixed by hand; and
f. Compliant with all applicable state and federal laws governing electronic signatures.
Rulemaking Specific Authority 440.381, 624.308(1) FS. Law Implemented 440.105(4)(b)5., 440.381, 624.307, 624.424(1)(c) FS. History–New 8-1-91, Formerly 4-28.007, Amended 10-3-95, 10-10-96, 1-15-98, 11-21-00, 11-5-02, 9-22-03, Formerly 4-189.003, Amended 3-29-05,________.