§ 22:2013.1 — Administration of large deductible policies and insured collateral

Louisiana § 22:2013.1

• Jurisdiction: Louisiana
• Title 22: Insurance

Text

§2013.1. Administration of large deductible policies and insured collateral
A. This Section shall apply to workers' compensation large deductible policies issued
by an insurer subject to delinquency proceedings pursuant to this Chapter; however, this
Section shall not apply to first-party claims or to claims funded by a guaranty association net
of the deductible unless Subsection C of this Section applies. Large deductible policies shall
be administered in accordance with their terms, except to the extent the terms conflict with
this Section.
B. For purposes of this Section, the following terms have the following meanings:
(1) "Collateral" means any cash, letters of credit, surety bond, or any other form of
security posted by the insured, or by a captive insurer or reinsurer, to secure the insured's
obligation under a large deductible policy to pay deductible claims or to reimburse the
insurer for deductible claim payments. Collateral may also secure an insured's obligation to
reimburse or pay to the insurer as may be required for other secured obligations.
(2) "Commercially reasonable" means to act in good faith using prevailing industry
practices and making all reasonable efforts considering the facts and circumstances of the
matter.
(3) "Deductible claim" means any claim, including a claim for loss and defense and
cost containment expense, unless the expenses are excluded, under a large deductible policy
that is within the deductible.
(4)(a) "Large deductible policy" means any of the following:
(i) Any combination of one or more workers' compensation policies and
endorsements issued to an insured, and contracts or security agreements entered into between
an insured and the insurer in which the insured has agreed with the insurer to do either of the
following:
(aa) Pay directly the initial portion of any claim under the policy up to a specified
dollar amount, or the expenses related to any claim.
(bb) Reimburse the insurer for its payment of any claim or related expenses under
the policy up to the specified dollar amount of the deductible.
(ii) Any policy that contains an aggregate limit on the insured's liability for all
deductible claims in addition to a per claim deductible limit.
(iii) Any policy that shifts a portion of the ultimate financial responsibility to pay
claims from the insurer to the insured, even though the obligation to initially pay claims may
remain with the insurer.
(iv) Any policy with a deductible of one hundred thousand dollars or greater.
(b) "Large deductible policy" shall not include any of the following:
(i) Policies, endorsements, or agreements that provide for the initial portion of any
covered claim to be self-insured and further that the insurer shall have no payment obligation
within the self-insured retention.
(ii) Policies that provide for retrospectively rated premium payments by the insured
or reinsurance arrangements or agreements, except to the extent the arrangements or
agreements assume, secure, or pay the policyholder's large deductible obligations.
(5) "Other secured obligations" means obligations of an insured to an insurer other
than those under a large deductible policy, including but not limited to those under a
reinsurance agreement or other agreement involving retrospective premium obligations, the
performance of which is secured by collateral that also secures an insured's obligations under
a large deductible policy.
C. Unless otherwise agreed by the responsible guaranty association, all large
deductible claims, which are also covered claims as defined by the applicable guaranty
association law, including those that may have been funded by an insured before liquidation,
shall be turned over to the guaranty association for handling. To the extent the insured funds
or pays the deductible claim, pursuant to an agreement by the guaranty fund or otherwise, the
insured's funding or payment of a deductible claim will extinguish the obligations, if any, of
the receiver or any guaranty association to pay the claim. No charge of any kind shall be
made against the receiver or a guaranty association on the basis of an insured's funding or
payment of a deductible claim.
D.(1) To the extent a guaranty association pays any deductible claim for which the
insurer would have been entitled to reimbursement from the insured, a guaranty association
shall be entitled to the full amount of the reimbursement, and available collateral as provided
for in this Section to the extent necessary to reimburse the guaranty association.
Reimbursements paid to the guaranty association pursuant to this Subsection shall not be
treated as distributions pursuant to R.S. 22:2025 or as early access payments pursuant to R.S.
22:2008(C), 2034, and 2037.
(2) To the extent that a guaranty association pays a deductible claim that is not
reimbursed either from collateral or by insured payments, or incurs expenses in connection
with large deductible policies that are not reimbursed pursuant to this Section, the guaranty
association shall be entitled to assert a claim for those amounts in the delinquency
proceeding.
(3) Nothing in this Subsection shall limit any rights of the receiver or a guaranty
association that may otherwise exist pursuant to applicable law to obtain reimbursement from
insureds for claims payments made by the guaranty association under policies of the insurer
or for the guaranty association's related expenses, including but not limited to those provided
for in R.S. 22:2061.1, or existing under similar laws of other states.
E.(1) The receiver shall collect reimbursements owed for deductible claims as
provided for in this Section, and shall take all commercially reasonable actions to collect the
reimbursements. The receiver shall promptly bill insureds for reimbursement of deductible
claims that are any of the following:
(a) Paid by the insurer prior to the commencement of delinquency proceedings.
(b) Paid by a guaranty association upon receipt by the receiver of notice from a
guaranty association of reimbursable payments.
(c) Paid or allowed by the receiver.
(2) If the insured does not make payment within the time specified in the large
deductible policy, or within sixty days after the date of billing if no time is specified, the
receiver shall take all commercially reasonable actions to collect any reimbursements owed.
(3) Neither the insolvency of the insurer, nor its inability to perform any of its
obligations under the large deductible policy, shall be a defense to the insured's
reimbursement obligation under the large deductible policy.
(4) Any contract, counter letter, or other agreement between the insurer and the
insured that in any manner seeks to reduce or eliminate the insured's obligation to reimburse
the insurer for the deductible shall be null and void as against public policy and shall not be
eligible to be used by the insured as a defense to the efforts by the receiver or guaranty
association to collect any unpaid deductible.
(5) Except for gross negligence, an allegation of improper handling or payment of
a deductible claim by the insurer, the receiver, or any guaranty association shall not be a
defense to the insured's reimbursement obligations under the large deductible policy.
F.(1) Subject to the provisions of this Subsection, the receiver shall use collateral,
when available, to secure the insured's obligation to fund or reimburse deductible claims or
other secured obligations or other payment obligations. A guaranty association shall be
entitled to collateral as provided for in this Subsection to the extent needed to reimburse a
guaranty association for the payment of a deductible claim. Any distributions made to a
guaranty association pursuant to this Subsection shall not be treated as distributions pursuant
to R.S. 22:2025 or as early access payments pursuant to R.S. 22:2008(C), 2034, and 2037.
(2) All claims against the collateral shall be paid in the order received and no claim
of the receiver, including those described in this Subsection, shall supersede any other claim
against the collateral as provided for in Paragraph (4) of this Subsection.
(3) The receiver shall draw down collateral to the extent necessary in the event that
the insured fails to do any of the following:
(a) Perform its funding or payment obligations under any large deductible policy.
(b) Pay deductible claim reimbursements within the time specified in the large
deductible policy or within sixty days after the date of the billing if no time is specified.
(c) Pay amounts due to the estate for preliquidation obligations.
(d) Timely fund any other secured obligation.
(e) Timely pay expenses.
(4) Claims that are validly asserted against the collateral shall be satisfied in the
order in which the claims are received by the receiver. However, if more than one creditor
has a valid claim against the same collateral and the available collateral, along with billing
collection efforts and to the extent that the collateral is subject to other known secured
obligations, are together insufficient to pay each creditor in full, the receiver may prorate
payments based on the ratio of the amount of claims each creditor has to the total claims paid
by all the creditors.
(5) Excess collateral may be returned to the insured as determined by the receiver
after a periodic review of claims paid, outstanding case reserves, and a factor for incurred but
not reported claims.
G. The receiver may deduct from the collateral or from the deductible
reimbursements reasonable and actual expenses incurred in connection with the collection
of the collateral and deductible reimbursements.
H. This Section shall not limit or adversely affect any rights or powers a guaranty
association may have pursuant to applicable state law to obtain reimbursement from certain
classes of policyholders for claims payments made by the guaranty association under policies
of the insolvent insurer, or for related expenses the guaranty association incurs.

Legislative History

Acts 2019, No. 109, §1, eff. Jan. 1, 2020.