§ 11-9-404 — Security for compensation

(a) Every employer shall secure the payment of compensation under this chapter: (1) By insuring and keeping insured the payment of the compensation with any carrier authorized to write workers' compensation insurance; (2) (A) By furnishing satisfactory proof to the Workers' Compensation Commission of the employer's financial ability to pay compensation and receiving an authorization from the commission to pay compensation directly. (B) The commission, as a condition to such authorization, may require the employer, except municipalities, counties, or the State of Arkansas or its political subdivisions, to deposit in a depository designated by the commission either an indemnity bond, irrevocable letter of credit, or securities of any kind and in an amount determined by the commission, subject to such reasonable conditions as the commission may prescribe. The conditions shall include authorization to the commission, in case of default, to sell any securities sufficient to pay compensation awards or to bring suit on the bonds or the letter of credit to procure prompt payment of compensation under this chapter. (C) Any employer securing compensation in accordance with the provisions of this subdivision (a)(2) shall be known as a self-insurer and shall be classed as a carrier of its own insurance. (D) A self-insurer may have the privilege of securing those portions of the payment of compensation under this chapter as the self-insurer shall elect by insuring the portions with a company approved by the commission. The liability of the company shall be limited to those features and liabilities of this chapter as are expressly stated, and none other; (3) (A) The commission, under such rules as it may prescribe, may permit two (2) or more employers engaged in the same type of business activity or pursuit to enter into agreements to pool their liabilities under this section for the purpose of qualifying as self-insurers, and each such approved group shall be classified as an homogeneous self-insurer. (B) (i) The commission, under such rules as it may prescribe, may permit two (2) or more employers who are members of the same trade or professional association to enter into agreements to pool their liabilities under this section for the purpose of qualifying as self-insurers, and each such approved group shall be classified as a common self-insurer. (ii) The trade or professional association shall have been in active existence for at least three (3) years; such associations shall have a constitution or bylaws; and all trustees shall be participants in the common self-insurer program, shall have members that support the association by regular payment of dues on an annual, semiannual, quarterly, or monthly basis, and shall be created in good faith for purposes other than that of creating workers' compensation common self-insurer pools. (iii) No two (2) trade or professional associations shall be allowed to combine or join each other and qualify as a common self-insurer. (C) In order to qualify as group self-insurers, these groups shall furnish to or satisfy the commission as to the following: (i) An application on a form prescribed by the commission by an elected board of trustees to establish a self-insurance fund to be administered under the direction of the trustees; (ii) The application shall be accompanied by: (a) An indemnity agreement in a form satisfactory to the commission jointly and severally binding the groups and each member of the groups to comply with the provisions of the Workers' Compensation Law, § 11-9-101 et seq.; and (b) An individual application by each member of the groups applying for coverage in the fund; (iii) A current, audited financial statement of each member of the groups showing a combined net worth of all members applying for coverage of not less than one million dollars ($1,000,000), a combined ratio of current assets to current liabilities of not less than one to one (1:1), and working capital of an amount establishing financial ability and liquidity sufficient to pay normal compensation claims promptly; (iv) (a) That the groups deposit and maintain with the commission acceptable securities or have posted a surety bond issued by a corporate surety authorized to do business in the State of Arkansas, in an amount determined by the commission, but not less than two hundred thousand dollars ($200,000). (b) However, this subdivision (a)(3)(C)(iv) shall not be applicable to municipalities, counties, or the State of Arkansas and its political subdivisions; (v) That there exist ample facilities and competent personnel of good character within the groups, or through an approved service organization, for the groups to service their own programs with respect to underwriting matters, claims and adjusting, industrial safety engineering, accounting, and financial management; (vi) (a) That the groups maintain excess insurance with an insurance company authorized to do business in this state in an amount acceptable to the commission. (b) However, this subdivision (a)(3)(C)(vi) shall not be applicable to municipalities, counties, or the State of Arkansas and its political subdivisions; and (vii) (a) That such financial statements, payroll records, accident experience, and compensation reports and such other reports and statements are filed at such time and in such manner as the commission shall require. (b) However, any fund which fails or refuses to file the reports within the time limits prescribed by the commission shall be subject to a civil penalty in such amount as the commission may prescribe not to exceed one hundred dollars ($100) per infraction per day, and the failure or refusal may be considered good cause for revocation or suspension of self-insurance privileges; (4) Each member of the groups shall file financial reports and statements at such times and in such manner as the commission may require to satisfy itself as to the continued financial stability of the member; and (5) In order to continue to qualify as a homogeneous self-insurer fund or common self-insurer fund, the groups shall continue to meet the minimum requirements as set forth in subdivision (a)(3) of this section or as prescribed by the commission. (b) (1) Except for the initial qualification of the groups, a certified audited financial statement shall not be required of any member of a group either for initial membership or as a condition for continued membership in the group. (2) However, each financial statement filed with the commission shall be duly certified by the president and treasurer of the member, in the case of a corporation, and by the owner and general partners, respectively, in the case of an individual proprietorship or partnership, to the effect that such financial statement is true and correct to the best of the knowledge and belief of the officer, individual owner, or partner and truly reflects the financial condition of the member. (c) Any person who knowingly files a false or fraudulent financial statement under the provisions of this chapter shall, upon conviction, be fined not more than ten thousand dollars ($10,000) or imprisoned not more than five (5) years, or both. (d) Jurisdiction for the enforcement of the provisions of this chapter or any appeal therefrom shall be in the Pulaski County Circuit Court. The underlying purpose of this chapter is to assure the payment of benefits due employees, and this chapter shall be liberally construed to that end. (e) (1) The commission may suspend or revoke any authorization to a self-insurer for a good cause shown after a hearing at which the self-insurer shall be entitled to be heard in person or by counsel and to present evidence. (2) No suspension or revocation shall affect the liability of any self-insurer already incurred. (f) Authorization to write compensation insurance under this chapter shall be given to a carrier only after the carrier has received a certificate of authority from the Insurance Commissioner to transact the business of workers' compensation insurance in Arkansas and the commission has been notified in writing of the issuance of the certificate of authority.

Legislative History

Amended by Act 2019, No. 315,§ 784, eff. 7/24/2019. Init. Meas. 1948, No. 4, § 36, Acts 1949, p. 1420; Acts 1979, No. 994, § 1; 1981, No. 72, § 1; A.S.A. 1947, § 81-1336; Acts 1987, No. 806, §§ 1, 2; 1987, No. 980, § 1; 1989, No. 821, § 3; 1993, No. 683, § 1; 1995, No. 825, § 1; 2003, No. 468, § 1.