NORTH CAROLINA

 

 

 

 

 

 

This Plan of Operation, is the amended restatement of the Plan of Operation adopted July 23, 2009 by the North Carolina Self-Insurance Guaranty Association.  The North Carolina Self-Insurance Guaranty Association became the North Carolina Self-Insurance Security Association on January 1, 2006 pursuant to Session Law 2005-400.  This Plan of Operation shall become effective upon adoption by the Board of Directors of the North Carolina Self-Insurance Security Association and upon written approval of the Commissioner of Insurance of the State of North Carolina.

 

 

Article 2

 

Definitions

 

            This Plan hereby incorporates the definitions set forth in N.C. Gen. Stat. § 97-130.  The definition of a Member of the Association is also affected by N.C. Gen. Stat. § 97-131(b).  References to the “Act” refer to Article 4, Chapter 97, North Carolina General Statutes.

 

 

Article 3

 

Statement of Purposes

 

The Association is formed for the purposes set forth in N.C. Gen. Stat. § 97-131(a).

 

 

Article 4

 

Amendment and Availability of Plan

 

A.        Amendments to this Plan, as necessary or suitable to assure the fair, reasonable and equitable administration of the Association, shall be adopted by the Board.  Any amendments so adopted shall become effective upon the written approval of the Commissioner.  

 

B.        A copy of this Plan shall be available for inspection by any Member at the office of the Association during normal business hours; a copy shall be provided to any Member upon request; and, the Plan will be posted, in its entirety, on the Association internet website (www.ncsisa.org).

 

                                                                             

Article 5

 

Annual Meeting of the Members

 

A.        An Annual Meeting of the Members of the Association shall be held for the election of Directors at the time, day and place designated by the Chairman of the Board in a written notice.

           

B.        Members insurers shall be notified, in writing, of the time, day and place of the Annual Meeting of the Members at least 30 days prior to such Annual Meeting.

 

C.             Directors of the Association shall be elected by the Members at the Annual Meeting. 

 

D.        At Annual Meetings of the Members, if there are more nominees than vacancies, Directors shall be elected by receiving a majority of votes cast by Members.  Each Member present and voting shall have one vote in person for each Director to be elected. 

 

 

Article

 

Board of Directors

 

A.   There shall be a Board of Directors in accordance with the provisions of N.C. Gen. Stat. § 97-132.

 

1.   The Board shall consist of eleven (11) persons who are owners, employees, or officers of Members, to be elected for staggered terms of three (3) years so that the terms of all Directors shall not expire in the same year.  Elected Directors shall serve until their successors have been duly elected and qualified to serve.

 

2.   Each year the Chairman shall appoint a Nominating Committee which shall nominate a slate of Directors for election at the Annual Meeting.  The Nominating Committee shall, by mail, electronic mail or other reasonable means of written communication annually solicit recommendations for Director candidates from the Members.  The Nominating Committee shall, by mail, notify the Members of its nominations at least thirty (30) days prior to the Annual Meeting.  Nominations may also be made by a petition signed by at least five (5) Members and filed with the Secretary of the Board not later than ten (10) days prior to the Annual Meeting.

 

3.     The nine (9) current Directors shall serve until their terms expire or until their successors are elected and qualified.  The additional two (2) Directors authorized by this Plan shall initially be elected at the 2007 Annual Meeting as follows, one (1) such Director shall by elected to serve an initial  two (2) –year term; one (1) such Director shall be elected to serve an initial three (3) –year term and thereafter successive Directors shall serve a three (3)- year term. 

 

4.   Upon the election of Directors, the Association shall notify the Commissioner and request written approval of the elected Directors.

 

5.   The Board of Directors shall:

 

a.              Elect a Chairman, Vice Chairman, Secretary and Treasurer from among its members, and such other officers as it deems necessary.  The offices of Secretary and Treasurer may be held by the same Member.  Each officer shall serve a term of one year or until a successor is elected.

 

b.              Appoint an Executive Committee from among its members.  Such Committee shall have as its members the Chairman, the Vice Chairman, Secretary and Treasurer, and other such Directors, if any, as appointed by the Board.  The Executive Committee shall have such powers as may be delegated by the Board, provided it shall not have the authority to act on matters requiring a majority vote of the full Board as provided in B.3. below.

 

c.              Appoint, from among it members, a Nominating Committee consisting of no more than four (4) Directors.  The Nominating Committee shall select a nominee to succeed each Board Member whose term expires at each Annual Meeting of the Members.  Prior to making its report to the Board, the Nominating Committee shall, in writing, select potential nominees from the Members.  The nominees shall be made known to the Members in the written notice of the Meeting.  Additional nominees may be submitted to the Members upon the petition of Members filed with the Association not less than ten (10) days prior to the Annual Meeting. 

 

d.              Appoint an Audit Committee, which shall consist of at least three (3) Directors.  The Audit Committee shall recommend the selection of the independent outside auditor and facilitate the annual audit of the Association by an independent outside auditor.  The Audit Committee shall also review and provide recommendations to the Board regarding any financial reporting or operational issues reported by the independent outside auditors. 

 

e.              Appoint an Investment Committee, a Claims Committee, and any

additional committees the Board determines are appropriate.

 

6.         Vacancies occurring on the Board between Annual Meetings of the Members shall be filled by a majority vote of the remaining Directors with the approval of the Commissioner.  Vacancies occurring in Board offices between the Annual Meetings shall be filled by majority vote of the Directors.

 

B.           1.         At any meeting of the Board of Directors, each Director shall have one

vote. 

 

2.              A majority of the Board shall constitute a quorum for the transaction of

business and the acts of the majority of the Board members present at a meeting at which a quorum is present shall be the acts of the Board, except as provided in Paragraph 3 below.

 

3.              An affirmative vote of a majority of the full Board is required to:

 

a.              Approve a contract with a Servicing Facility for overall claims administration, except that administration of specific claims administration functions shall not require an affirmative vote of a majority of the full Board;

 

b.              Assess Members or provide for a refund to Members;

 

c.              Borrow money or establish or change a line of credit;

 

d.              Approve reinsurance contracts, bonds, financial guarantees, or related financial instruments; or

 

e.              Adopt amendments to the Plan of Operation.

 

C.        The Board shall meet at least quarterly and may hold regular or special meetings at such times and with such frequency as it deems appropriate to conduct the business of the Association.  Board meetings may be held by telephone or by videoconference.  Any Board member not present may consent in writing to any specific action taken by the Board, but this shall not permit Board members to act through other Board members by proxy.  Any action approved by the required number of Board members, including those consenting in writing, shall be a valid Board action.

 

D.        Special meetings of the Board may be called by the Chairman and or upon the written request of any two Directors.  At a special meeting the Board may consider and decide any matter deemed necessary for the proper administration of the Association.  Not less than five (5) days written or electronic notice must be given to each Director of the time, place and purpose of any special meeting, provided that the Directors may waive notice by unanimous consent.  The Board shall make reasonable efforts to notify the Commissioner of special meetings of the Board.

 

E.         Directors may be reimbursed from the assets of the Association for reasonable expenses incurred by them as Directors pursuant to a written reimbursement policy adopted by the Board that may be amended from time to time, but Directors shall not be compensated by the Association for their services as Directors. 

 

 

Article 7

 

Statutory Powers and Duties of the Association

 

The Board exercises all of the powers and performs all of the duties of the Association. 

 

A.        Association Aggregate Security System

 

            1.         The Board will annually prepare and submit to the Commissioner, pursuant to N.C. Gen. Stat. § 97-133(2a)a., a written plan to provide an Association Aggregate Security System through a combination of cash on deposit in the Fund, securities, surety bonds, irrevocable letters of credit, insurance or other financial instruments or guarantees owned or entered into by the Association and acceptable to the Commissioner.

 

2.         The written plan will include, but not be limited to, (i) a description of the institutions that will issue or guarantee the securities, surety bonds, irrevocable letters of credit, insurance or other financial instruments or guarantees, including, but not limited to the credit rating, financial strength and AM Best rating, if applicable to the institutions (ii) applicable cash flow information and financial assumptions (iii) a description of the methodology to be used by the Association to assess and collect the Association Aggregate Security System assessments to be made pursuant to subdivision (3a) of this subsection and (iv) a proposed timetable for the release of existing individual company deposits posted pursuant to N.C. Gen. Stat. § 970-185(c), provided, however that no individual company deposits posted pursuant to N.C. Gen. Stat. § 97-185(c) shall be released without the written consent of the Commissioner. 

 

3.              Following the determination by the Commissioner of the total undiscounted claims liability of each individual self-insurer that will participate in the Association Aggregate Security System as well as the aggregate total undiscounted outstanding claims liabilities of all the individual self-insurers that are to participate in the Association Aggregate Security System and upon approval by the Commissioner of the Association’s plan to provide for the Association Aggregate Security System, the Association will implement the Plan and will assess the individual self-insurers that participate in the Association Aggregate Security System, pursuant to Paragraph B.1. below, to pay for the Association Aggregate Security System.

 

4.              Group self-insurers shall not participate in the Association Aggregate Security System.

 

5.              Pursuant to N.C. Gen. Stat. § 97-133(a)(2a)e, for any year that the Commissioner disapproves the Association Aggregate Security System, the Association will notify the Individual Member Self-Insurers that they must deposit or continue to deposit security with the Commissioner in the amount required by N.C. Gen. Stat. § 97-185(b3) in the manner prescribed by N.C. Gen. Stat. § 97-185(a).

 

B.        Assessments

 

            1.         Association Aggregate Security System Assessments

                       

The Association shall assess each individual self-insurer participating in the Association Aggregate Security System a Security System Assessment in accordance with the written Plan approved by the Commissioner.

 

2.              Special Post-Insolvency Assessments

 

a.         In, at any time, the Board determines that the Fund is not sufficient to pay the anticipated obligations of the Association during a reasonable period of time, the Board may authorize a special post-insolvency assessment pursuant to N.C. Gen. Stat. § 97-133(a)(3a)b.

 

b.              In making its determination pursuant to Paragraph 2.a. above, the Board will consider the analysis and reports of any or all of its actuaries, attorneys, accountants, consultants and the Department establishing and forecasting the funds necessary to pay Covered Claims for insolvent Members, the Association’s expense, and forecasting the assets and anticipated investment income of the Fund available to pay claims and expenses.

 

c.              The amount of the special post-insolvency assessment for each Member will be the product of each Member’s individual undiscounted claims liability determined by the Commission, divided by the aggregate undiscounted claims liability of all Members multiplied by the total assessment.

 

d.               The Association will issue written special post insolvency assessment invoices to Members and Members will be allowed thirty (30) days following the date of the invoice to remit payment to the Association. 

 

e.              In accordance with N.C. Gen. Stat. § 97-133(a)(3a)e., the Board will assess and collect interest on delinquent unpaid special post-insolvency assessments at an interest rate established by the Board. 

 

f.               If a Member fails to pay any assessment made by the Association when due, the Association will recommend that the Commissioner revoke the delinquent Member’s self-insurance license.

 

3.         Initial Assessment of New Members –

 

a.         Pursuant to N.C. Gen. Stat. § 97-133(a)(3a)c., the Board assesses and collects an initial assessment from new Members that are individual self-insurers that do not participate in the Association Aggregate Security System or are group self-insurers.  Initial Assessments will be determined by the Board and will be based on the considerations set forth in N.C. Gen. Stat. § 97-133(a)(3a)a.1,2 and 3. 

 

b.         The Board will periodically adopt a resolution or resolutions establishing the initial assessment rate for new members. 

 

a.     In addition to the payment of Initial Assessments, new Members are also subject to special post-insolvency assessments pursuant to N.C. Gen. Stat. § 97-133(a)(3a)b.

 

C.        Administration of the Fund

 

1.         The Board will invest the Fund a prudent manner and will engage an investment advisor to advise the Board.  The Board may invest the fund in interest-bearing accounts, financial investment instruments, equities or a combination of these investments.  The Board will establish a written investment policy and will submit the policy to the State Treasurer for review and approval annually.  The Investment Committee of the Board will meet periodically to review the investment policy for possible revision and the Board will receive reports on the performance of Fund investments during its regular meetings.  A copy of the written investment policy approved by the Treasurer and any amendments will be forwarded to the Commissioner.  The investment policy adopted by the Board will take into account liquidity requirements for the payment of claims.  All earnings derived from Fund assets will be credited to or placed in the Fund.  The costs of administration of the Association will be paid from the Fund.

 

2.         The Board may open one or more bank accounts for use in Association business.  Reasonable delegation of deposit and withdrawal authority to such accounts for Association business may be made consistent with prudent fiscal policy.  The Board may borrow money from or establish a line of credit with any banking or lending institution as the Board may deem appropriate. The Board may pledge all or a portion of the Fund to secure loans or lines of credit.

 

3.         In accordance with N.C. Gen. Stat. § 97-133(a)(1a), the Association may purchase reinsurance, bonds and financial guarantees and may purchase primary excess insurance from an insurer licensed in North Carolina.

 

4.         The financial statements of the Association will be maintained on an accrual basis, or any other basis that is acceptable to the Commissioner, will be audited annually, and an audit report will be rendered annually by a certified public accountant chosen by the Board.  The audit report will be provided to the Commissioner of Insurance by March 30 of each year after it is received and approved by the Board of Directors.  The Association is subject to examination and regulation by the Commissioner pursuant to N.C. Gen. Stat. § 97-137.

 

D.        Claims

 

1.     Processing Covered Claims

 

a.   Initial Action Plan

 

Upon the determination of a Member’s insolvency pursuant to N.C. Gen. Stat. § 97-135, the Board will make such investigation of the affairs of the insolvent Member as it deems necessary and will adopt a written action plan for processing such workers’ compensation claims as may be determined to be Covered Claims pursuant to its investigation.  The written action plan includes:

 

1.  For the purposes of determining whether incurred claims are Covered Claims, the period of time that the insolvent Member was self-insured and the date of the Member’s insolvency.

 

2.  The Board’s determination of the consultants or service providers, if any, to be used to assist the Association in processing and adjudicating the claims.  The Association will enter into written contracts with all retained consultants and service providers.

 

3.  The initial strategy for action to be taken, if any, in federal bankruptcy court to preserve any claims or defenses of the Association.

 

4. The procedures to be used to obtain and store the insolvent self-   insurer’s claims and/or personnel records.

 

            The Board will provide a copy of the initial action plan to the Commissioner.

 

 

b.   Claims Administration

 

Upon receiving the insolvent Member’s claims files and records, the Association will notify the North Carolina Industrial Commission of the Association’s role, if any, in any pending workers’ compensation cases before the Commission; and, for Covered Claims, make an appearance in each case through its designated legal counsel.

 

For Covered Claims involving the payment of indemnity to Claimants, the Association will verify the correct payment amount, the Claimant’s correct address and will begin bi-weekly indemnity payments, in the appropriate amount for the required amount of time.

 

The Board is empowered to investigate, adjust, compromise and settle claims as it deems appropriate.  The Board has delegated the administration of all Association claims to its Claims Committee.  The Claims Committee makes claims payment and settlement decisions and grants specific settlement authority limits in litigated and other appropriate cases to its legal counsel.  Periodic indemnity payments and medical expenses are authorized by the Claims Committee and are paid by the Association, directly from the Association claims account. 

 

In every Member insolvency, the Association’s objective is to liquidate all Covered Claims against the insolvent Member as quickly as is reasonably possible through settlement or expedited mediation or litigation.  The Claims Committee negotiates and settles claims for medical and claims–related services in a timely manner.  In administering claims, the Association pays Covered Claims in a fair and fiscally responsible manner in order to minimize the assessment of solvent Members to pay Covered Claims and related costs resulting from Member insolvencies.

 

c.   Pre-Association Claims

 

            Pre-Association Claims means any claims against an insolvent Member that relates to a compensable event that occurred prior to October 1986.  Pre-Association Claims are not Covered Claims and the Association does not pay Pre-Association Claims.

 

 

 

2.     Proofs of Claim

 

The proof of claim process involves the filing of a proof of claim with the Association for a claim against the insolvent Member that is subject to statement as a sum certain.  The Board has determined that a post-insolvency proof of process for Claimants’ workers’ compensation indemnity payments is unworkable since indemnity payments are not generally subject to statement as a sum certain and that processing proofs of claim for indemnity payments leads to excessive delay in payment of indemnity benefits and potential financial loss to Claimants.  For that reason, the Association does not utilize a proof of claim process for Claimant’s indemnity payments and instead pays indemnity benefits for Claimants with Covered Claims on a bi-weekly basis. 

 

The Association also processes claims for medical expenses and other claim related expenses for Covered Claims on an as-billed basis.  However, if the Association and a medical or claims services provider that provided services for the insolvent Member prior to the determination of the Member’s insolvency cannot agree on the amount of payment, the medical or claims services provider may file a proof of claim with the Association and the Board will determine the amount of payment to be made to the service provider.  Proof of claim forms have been promulgated by the Association, are posted on the Association’s internet website and require, at a minimum, the following information:

 

a.              The name and address of the insolvent self-insurer;

 

b.              If known by Claimant, the date on which insolvency was judicially determined or bankruptcy proceedings instituted together with the name and address of the Court in which determination was made or proceedings begun;

 

c.              A description of the alleged compensable injury and the circumstances surrounding the occurrence of the injury;

 

d.              Any medical records relating to the injury and any statement or invoice for medical treatment received as the result of injury.

 

E.         Member Asset and Security Recoveries

 

1.         Member Security Deposits and Surety Bonds

 

In accordance with N.C. Gen. Stat. § 97-143, upon the determination of a Member’s insolvency, the Association accepts assignment of the Member’s deposit from the Department.  The deposit may be in the form of cash, securities, surety bond(s) or letter of credit.  The deposit, or bond, or letter of credit proceeds are deposited in the Fund by the Association and are designated as restricted funds, available only for payment of Covered Claims against and Association expenses attributable to that Member.  An accounting of the use of the restricted fund is prepared quarterly and provided to the Department.

 

2.         Recovery of Member Assets, Reinsurance Recoveries and other Causes of Action

 

The Association files proofs of claim, when appropriate, in the insolvent Member’s bankruptcy proceeding.  The Association pursues Member subrogation claims against third parties, if applicable and appropriate.  The Association pursues reimbursement for payment of Covered Claims from the Member’s reinsurance and excess insurance providers when appropriate.  The Association pursues the reimbursement of attorneys’ fees when appropriate.

 

F.         Operations

 

1.         The Association’s mailing address is P.O. Box 12442, Raleigh, NC 27605-2442.  The Board maintains an internet website at www.ncsisa.org that includes communication links.

 

2.         The Board may employ an Executive Director or additional persons to serve as staff for the Association.  If an Executive Director is employed, the Board may delegate, by resolution, any of its authority under the Act other than matters specifically requiring Board approval, to the Executive Director. 

 

3.              The Board may employ legal counsel, public accountants, actuaries or any other persons, firms or corporations to perform such administrative services and functions as are necessary for the Board’s performance of the duties imposed on the Association and may negotiate and execute contracts for these purposes.  The functions of administering and adjusting of claims shall not be performed by the same entity that provides legal representation to the Association for claims.

 

a.     The Board may authorize the filing of an action or actions on behalf of and in the name of the Association in any court, administrative agency or other tribunal to effectuate any of its statutory powers.

 

b.     The Board may contract, subject to the approval of the Commissioner, with one or more persons, firms, or corporations to act as Servicing Facilities.  The terms of such contract will include a provision that the Commissioner may revoke the contract pursuant to N.C. Gen. Stat. § 97-136(b)(2) if the Commissioner finds that the claims are being handled unsatisfactorily.

 

G.        Exercise of Other Statutory Powers and Duties

 

Pursuant to the Act, the Board will exercise any and all of its statutory powers and duties under the Act that are not specifically enumerated in this Plan of Operation.

 

 

Article 8

 

Indemnification

 

A.        The Board and its individual Directors, any Member self-insurers acting on behalf of the Association, agents and employees of the Association, the Commissioner and his representatives, will be indemnified by the Association against all expenses incurred in the defense of any action taken or not taken by a Director in the performance of his powers and duties under the Act, unless such person will be finally adjudged to have committed a breach of duty involving gross negligence, bad faith, dishonesty, willful malfeasance or reckless disregard of responsibilities of his office.  In the event of settlement before final adjudication, such indemnity will be provided only if the Association is advised by independent counsel that such person did not, in the opinion of the independent counsel, commit such a breach of duty.

 

B.        The expense of such indemnification will be prorated and paid for by the Members and, where applicable, by former Members, in proportionate shares determined by the Board.

 

C.        This indemnification is intended to operate as a supplement and additional safeguard to, and not in place of, the immunity granted by N.C. Gen. Stat. § 97-139.

 

 

Article 9

 

Conformity to Statute

 

The Act and any subsequent amendments thereto, is incorporated herein and made a part of this Plan; and, any portion of this Plan which may be found to be in violation of or inconsistent with that Article will not render the remainder of the Plan invalid or unenforceable.

 

 

Article 10

 

Appeal to Commissioner

 

In accordance with N.C. Gen. Stat. § 97-134(3)h., any Member self-insurer that is aggrieved by any final action or decision of the Board may appeal such action or decision to the Commissioner within thirty (30) days after the action or decision by the Board.