This rulemaking will implement the changes made to section 440.381, F.S., by chapter 2022-138, L.O.F., requiring annual physical onsite audits when the workers compensation policy premium for employers with construction ....

 

DEPARTMENT OF FINANCIAL SERVICES

OIR – Insurance Regulation

RULE NO.:RULE TITLE:

69O-189.003Workers' Compensation: Application and Audit Procedures

PURPOSE AND EFFECT: This rulemaking will implement the changes made to section 440.381, F.S., by chapter 2022-138, L.O.F., requiring annual physical onsite audits when the workers compensation policy premium for employers with construction classes exceeds $10,000. In addition, the draft fixes references to the “National Council on Compensation Insurance’s (NCCI) Basic Manual, Florida State Special Audit Rules,” and adds language regarding the copyright on that document, as well as directions on how to access forms via web addresses.

SUMMARY: The proposed amendments will implement the changes made to section 440.381, F.S., by chapter 2022-138, L.O.F., requiring annual physical onsite audits when the workers compensation policy premium for employers with construction classes exceeds $10,000. The proposal also clarifies that the wording “voluntary market minimum audit requirements” to mean the “National Council on Compensation Insurance’s (NCCI) Basic Manual, Florida State Special Audit Rules,” which is the industry standard. The proposal adds references to where that manual may be found, and includes language required when referencing documents protected by federal copyright. All references to forms have been updated to include web addresses for quick access. Finally, the proposal removes wording requiring all employers and carriers to comply with the FWCJUA minimum audit requirements “as applicable” from (4)(a). These requirements are only applicable to the entities listed in (4)(c) and are more properly referenced there.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION:

The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the Agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: Agency personnel familiar with the subject matter of the rule amendment have performed an economic analysis of the rule amendment that shows that the rule amendment is unlikely to have an adverse impact on the State economy in excess of the criteria established in Section 120.541(2)(a), Florida Statutes.

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.

RULEMAKING AUTHORITY: 440.381, 624.308(1) FS.

LAW IMPLEMENTED: 440.105(4)(b)5., 440.381, 624.307, 624.424(1)(c) FS.

IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE SCHEDULED AND ANNOUNCED IN THE FAR.

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Christopher Wildermuth, Assistant General Counsel, Office of Insurance Regulation, [e-mail], [phone].

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

69O-189.003 Workers’ Compensation: Application and Audit Procedures.

(1)(a) Each employer applying to a carrier in the voluntary market for workers’ compensation coverage required by Section 440.38, F.S., shall use Form ACORD 130 FL (rev. 2019/07), “Florida Workers Compensation Application,” which is hereby adopted and incorporated by reference. The form shall be completed and submitted to the carrier with which the employer wishes to contract for coverage.

(b) A carrier wishing to use its own application form shall submit the form electronically to the Florida Office of Insurance Regulation (Office) at http://www.floir.com/iportal, and receive approval prior to its use.

1. At a minimum the form shall require the employer to provide the following information:

a. Name, address, and legal status of the employer;

b. Federal employer identification number;

c. Type of business and contractor licensing number if the employer is a contractor;

d. Rating information including past and prospective payroll;

e. Estimated revenue;

f. Locations;

g. List of officers, sole proprietors and partners including their social security numbers (disclosure of social security number is voluntary; as an alternative, attach a copy of exclusion or inclusion forms filed with the state);

h. List of all employee names, employees’ social security numbers and classifications (disclosure of social security numbers is voluntary; as an alternative, the latest RT form with class codes added can be used in lieu of a separate listing of employee names, employees’ social security numbers and classifications);

i. Previous workers’ compensation experience;

j. Former business names and predecessor companies for the last five years;

k. Former and current owners in the last five years;

l. All names under which the corporation operates; and,

m. Any other information necessary to enable the carrier to accurately underwrite the employer.

2. The application shall contain a statement that the filing of an application containing false, misleading, or incomplete information with the purpose of avoiding or reducing the amount of premiums for workers’ compensation coverage is a felony of the third degree.

3. The application shall contain a sworn statement by the employer that which complies with Section 92.525, F.S., attesting to the accuracy of the information submitted.

4. The application shall contain a sworn statement by the agent attesting that which complies with Section 92.525, F.S., that the agent explained to the employer or officer the classification codes that are used for premium calculations.

(c) Each employer applying for workers’ compensation coverage in the Florida Workers’ Compensation Joint Underwriting Association (FWCJUA) shall use Form ACORD 130 FL (2019/07) unless the FWCJUA files and receives approval by the Office of Insurance Regulation to use a different application form in accordance with paragraph (1)(b). The FWCJUA shall submit any addendum to the application to the Office and receive approval prior to using. The completed application and all addenda shall be submitted to the FWCJUA at the address on the form.

(d) The Office has determined that posting the incorporated materials would be a violation of federal copyright law. Form ACORD 130 FL (rev. 2019/07), “Florida Workers Compensation Application,” is available:

1. from From ACORD at https://www.acord.org/home.; and,

2.For Form ACORD 130 FL is available for inspection during regular business hours at the Office of Insurance Regulation, Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399-0300, and for inspection during regular business hours at the Department of State, R.A. Gray Building, 500 South Bronough Street, Tallahassee, FL 32399-0250.

(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 that 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 employer shall sign the application.

(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.

(3)(a) Each employer in the voluntary market or the FWCJUA may be required by their carrier to submit Form ACORD 175-FL (rev. 3/97), “Florida Workers’ Compensation Monthly Change Sheet,” which is hereby adopted and incorporated by reference. Carriers may use their own monthly change sheet containing the same information shown on the adopted form. This form is used to reflect any change in the required application. The monthly change sheet is applicable to new and renewal policies that which have been issued with an application that complies with this rule. It is not necessary for an employer to submit a monthly change sheet if there are no changes to report.

(b) The Office has determined that posting the incorporated materials would be a violation of federal copyright law. Form ACORD 175-FL (rev. 3/97), “Florida Workers’ Compensation Monthly Change Sheet,” is available: from the Association for Cooperative Operations Research and Development (ACORD), 150 Clove Road, Little Falls, New Jersey 07424, at https://www.acord.org/home.  Form ACORD 175-FL is available for inspection during regular business hours at the Office of Insurance Regulation, Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399-0300, and for inspection during regular business hours at the Department of State, R.A. Gray Building, 500 South Bronough Street, Tallahassee, FL 32399-0250.

(4)(a) In order to ensure that the appropriate premium is charged for workers’ compensation coverage, each employer and carrier shall comply with:

1. The requirements of Section 440.381, F.S.; and,

2. The current As applicable, the voluntary market minimum audit requirements and FWCJUA minimum audit requirements as set forth in the National Council on Compensation Insurance’s (NCCI) Basic Manual, Florida State Special Audit Rules, approved for use by the Office, and hereby incorporated by reference paragraphs (4)(b) and (4)(c), below.

(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 $1 to $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 onsite audit shall be conducted annually if the estimated annual premium is $10,000 $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 unless such request is unnecessarily repetitive.

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 the use of the following as applicable:

a. Reemployment Tax (RT) 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.

h. Any other employer records necessary to establish premium or assign classifications.

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, regardless of premium range, subject to the FWCJUA’s or its service provider’s determination whether such audit is unnecessarily repetitive;

g. Whenever requested by the employer, unless such request is unnecessarily repetitive; and,

h. Whenever otherwise warranted by the FWCJUA’s or its service provider’s evaluation of the type of business, 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 the use of the following as applicable:

a. Reemployment Tax (RT) 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.

h. Any other records necessary to establish premium or assign classifications.

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)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) 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) Telephone audits are not permitted in lieu of mail or physical audits.

(g) 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,” hereby incorporated by reference and available at https://www.flrules.org/Gateway/reference.asp?No=Ref-16780. The form may be obtained from https://www.floir.com/iportal;

(II) Form OIR-B1-1561 (rev. 7/03), “Statement of Individual Providing Audit Information (other than Partner, Sole Proprietor or Corporate Officer)” hereby incorporated by reference and available at https://www.flrules.org/Gateway/reference.asp?No=Ref-16781. The form may be obtained from https://www.floir.com/iportal; and,

(III) Form OIR-B1-1560 (rev. 7/03), “Auditor’s Statement,.” hereby incorporated by reference and available at https://www.flrules.org/Gateway/reference.asp?No=Ref-16782. The form may be obtained from https://www.floir.com/iportal.

b. The forms in this subsection (4) are hereby adopted and incorporated by reference and may be obtained from the Office’s website at http://www.floir.com/iportal.

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” The form may be obtained from https://www.floir.com/iportal.;

(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 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.

Rulemaking 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, 3-10-10, 12-26-19, ___________.

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Christopher Wildermuth, Assistant General Counsel

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: Financial Services Commission

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: June 12, 2024

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: May 15, 2024