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Compliance Corner: Iowa Relief from Insurance Related to Employer’s Insolvency

18 Jan, 2024 Frank Ferreri

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Des Moines, IA ( -- In Iowa, when an employer furnishes satisfactory proof to the insurance commissioner of the employer’s solvency and financial ability to pay the compensation and benefits as by law provided and to make such payments to the parties when entitled to them, or when the employer deposits with the insurance commissioner security satisfactory to the insurance commissioner as guaranty for the payment of such compensation, the employer will be relieved of the provisions of state workers' compensation law that require insurance. However, the employer must, from time to time, furnish additional proof of solvency and financial ability to pay as may be required by the insurance commissioner.

The security will be held in trust for the sole purpose of paying compensation and benefits and is not subject to attachment, levy, execution, garnishment, liens, or any other form of encumbrance. However, the insurance commissioner must be reimbursed from the security for all costs and fees incurred by the insurance commissioner in resolving disputes involving the security.

A political subdivision, including a city, county, community college, or school corporation, that is self-insured for workers’ compensation is not required to submit a plan or program to the insurance commissioner for review and approval.

If an approved self-insured employer discontinues its self-insured status or enters bankruptcy proceedings, the self-insured employer or its successor in interest may petition the commissioner of insurance for release of its security. The commissioner will release the security upon a finding of both of the following:

(1) The employer has not been self-insured pursuant to this chapter for at least four years.
(2) 10 years have elapsed from the date of the last open claim, claim activity, or claim payment involving the self-insured employer or its successor in interest, whichever is later.

The commissioner will release the security upon a finding that a self-insured employer presents acceptable replacement security.

An employer seeking relief from insurance requirements must pay to the insurance division of the department of insurance and financial services the following fees:

(1) A fee of $100, to be submitted annually along with an application for relief.
(2) A fee of $100 for issuance of the certificate relieving the employer from the insurance requirements of this chapter.
(3) A fee of $50, to be submitted with each filing required by the commissioner of insurance, including but not limited to the annual and quarterly financial statements, and material change statements.

If an employer becomes insolvent and a debtor under 11 U.S.C., on or after January 1, 1990, the commissioner of insurance may request of the workers’ compensation commissioner that all future payments of workers’ compensation weekly benefits, medical expenses, or other payments be commuted to a present lump sum. The workers’ compensation commissioner will fix the lump sum of probable future medical expenses and weekly compensation benefits, or other benefits, capitalized at their present value upon the basis of interest at the rate provided for court judgments and decrees. The commissioner of insurance will be discharged from all further liability for the commuted workers’ compensation claim upon payment of the present lump sum to either the claimant, or a licensed insurer for purchase of an annuity or other periodic payment plan for the benefit of the claimant.

The commissioner of insurance will not be required to pay more for all claims of an insolvent self-insured employer than is available for payment of such claims from the security given.

Any future payment of medical expenses, weekly compensation benefits, or other payments by the commissioner of insurance from the security given will be deemed an undue expense, hardship, or inconvenience upon the employer for purposes of a full commutation.

Financial statements provided to the commissioner of insurance may be held as confidential, proprietary trade secrets, subject to rules adopted by the commissioner of insurance, and are not subject to disclosure or examination.

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    About The Author

    • Frank Ferreri

      Frank Ferreri, M.A., J.D. covers workers' compensation legal issues. He has published books, articles, and other material on multiple areas of employment, insurance, and disability law. Frank received his master's degree from the University of South Florida and juris doctor from the University of Florida Levin College of Law. Frank encourages everyone to consider helping out the Kind Souls Foundation and Kids' Chance of America.

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