Office of Workers' Compensation Programs (OWCP)

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Division of Longshore and Harbor Workers' Compensation (DLHWC)

CHAPTER 7-300 — AUTHORIZATION OF INSURANCE CARRIERS

1. Purpose and Scope. Policies and procedures for the application, authorization, and certification of insurance carriers are contained in this chapter. Special instructions on annual reauthorization or reinstatement are also included. The functions described are performed by the Insurance Branch of the National Office, DLHWC.

2. General Policy. To receive initial authorization under the Longshore Act or one of its extensions, an insurance company should have 5 years' experience in writing workers' compensation coverage and be listed in Best's INSURANCE REPORTS, with a rating of "B+" or better. However, a company not meeting one or both of these requirements may still obtain authorization if other evidence is provided which indicates the company's ability to meet all obligations required of a carrier under the Act(s). A security deposit may be required. Unless the company is a "marine protection and indemnity association" (marine P&I club) of vessel owners, it must show authorization by a state insurance regulator to write workers' compensation insurance.

3. First Inquiry. Upon receipt by the National Office, DLHWC, of an inquiry from an insurance company concerning the requirements for becoming authorized under any of the Acts:

1. Consult the latest edition of Best's INSURANCE REPORTS.
2. If the insurance company is listed in Best's with a policy holder's rating of at least "B+", inform the inquirer how the insurance company may file application.
3. If the insurance company is:

(1) listed in Best's, but has a policy holder's rating below "B+", or

(2) has no assigned rating, or

(3) is not listed in Best's at all -- notify the inquirer of the OWCP policy.

Do not request an application or encourage the filing of an application if (1) or (2) apply.

4. If the inquirer insists, despite the company's failure to meet the general requirements of coverage, that the insurance company be considered for authorization to write coverage, suggest that the inquirer write a letter to the Director, DLHWC, explaining its position, and informing the Director of the reasons the company should be considered, so that a decision can be made upon receipt of the letter. The letter from the insurance company should contain copies of the financial statements of the company for the three most recent years, preferably the conventional form of report, together with a copy of the most recent report of examination that may have been made with respect to the company by the Insurance Department of any State, its experience in writing workers' compensation insurance, and any other evidence supporting its request for authorization. The Director may authorize a company not meeting all the requirements, if it is evident that the company is financially able to carry out all of the carrier's obligations under the Act, under which authorization is being sought.

4. Application. An application for authority to issue insurance coverage must be submitted in writing and be signed by an officer of the applicant duly authorized to make such application. A letter is sufficient for this purpose since the Office has no designated form for making application. The application should indicate the Act(s) for which authority is requested and be supported by the following documentation:

1. A copy of the applicant's charter and certificate of authority to write workers' compensation insurance issued by a State.
2. Statutory annual financial reports for the three most recent years submitted by the applicant to the Insurance Department of the State in which incorporated, together with any report of examination that may have been made with respect to the company by the Insurance Department of the State having direction over the company's affairs.
3. Specimen copy of the Card Report of Insurance (LS-570, Exhibit 52, PM 10-200) (for each Act), which the carrier proposes to use.
4. Specimen copy of the form of policy and applicable endorsement to be attached to the policy (for each Act under which authorization is requested) the company proposes to use.

5. Examination. A Workers' Compensation Claims Examiner (WCCE) in the Insurance Branch makes the initial examination of documents submitted by the applicant to determine whether they conform to OWCP's Regulations (20 C.F.R. part 703). The WCCE reviews the annual report for "loss experience" and general financial stability. Additional information may be requested by the WCCE prior to the review of the documents by the Director, DLHWC.

6. Charter. If the applicant company's charter does not clearly show authority to write workers' compensation insurance, any charter provision deemed sufficient for such purpose must be explained or supported by proper interpretation of the officer of the State of incorporation authorized to interpret powers under the State insurance law.

7. Policy and Endorsement. If the company is a member or subscriber to the National Council on Compensation Insurance, the Standard Workers' Compensation and Employers' Liability Policy promulgated by the National Council may be used. If any company proposes to use a form of policy other than the NCCI's current standard, it must prominently so state at the time of application. The policy is reviewed to determine that it is in accordance with the requirements of the Act. Policies other than the NCCI Standard Policy must be very carefully scrutinized. All companies must use the form of endorsement, appropriate to the particular Act or extension. Non-members of the National Council may also use the standard policy set forth in the Regulations governing authorization of insurance carriers. Pursuant to the Administrative Regulations and the filing program of the National Council, the name of the insurance company must be printed (not typed), and facsimile signature(s) and counter-signatures of duly authorized representatives of the company should appear on the policy to which the endorsement is to be attached.

8. Card Report. The Card Report of Insurance is examined for the proper wording, color, and weight, as set forth in the Regulations. The name of the carrier should be printed on the card, which should conform substantially to Form LS-570.

9. Agreement. Every applicant for authority to write insurance under the provisions of this Act, or for the renewal of that authority, shall be deemed to have included in its application an agreement that the acceptance by the DD of a report of the issuance of a policy of insurance, as provided for by 20 C.F.R. Section 703.116, shall bind the carrier to full liability for the obligations under this Act of the employer named in said report as well as the distinct obligations imposed on carriers, themselves, by the Act. Every certificate of authority to write insurance under this Act shall be deemed to have been issued by OWCP upon consideration of the carrier's agreement to become so bound. It shall be no defense to this agreement that the carrier failed or delayed to issue the policy to the employer covered by this report.

10. Recommendation. After carefully examining the submitted material, the examiner makes a recommendation to the Director, DLHWC, as to whether or not it appears that the applicant should be authorized. The recommendation should include the applicant's rating by BEST's INSURANCE REPORTS.

11. Issuance of Certificate of Authority.

1. When the application of an insurance company is approved, a Certificate of Authority, Form LS-571 (Exhibit __, PM 10-200) under the Act or Acts for which application is requested is issued.
2. A separate certificate is issued under each Act.
3. The certificate is signed by the Director of the Office of Workers' Compensation Programs.
4. The company is assigned a code authorization number under each Act for which application is approved.
5. Two 3x5 inch index cards are prepared for each Act indicating the name of the company, address, effective date of authorization, and code authorization number. One card is filed alphabetically under the name of the insurance carrier and one by the company's code authorization number. A separate file is maintained for each Act.
6. A memorandum is sent to all District Directors informing them of each new authorization, and furnishing all necessary information, such as name and address of the company, effective date of authorization, code authorization number, and clearly indicating any limitations on writing coverage.

12. Mergers - Change of Name.

1. When a company's name is changed, or an authorized insurance company is merged into a non-authorized one, the new company may not issue or renew any policies under the Act without obtaining a new authorization in it's new name. A new Certificate of Authority will not be issued until the following documents are submitted:

(1) Copy of the minutes or other company record accomplishing the change of name or merger.

(2) Copy of the merger agreement (if applicable).

(3) Certificate of authority to write workers' compensation insurance issued by the proper official of the Department of Insurance of the State where such change of name or merger is filed in the new name of the company.

(4) All new filings in the new name of the company must be made with the OWCP: policy, endorsement(s), agreement(s), and card report(s).

2. Any other change in a company's corporate entity requires the same procedures as a new company making application for authority.

13. Security. Each insurance carrier rated lower than "A" by the A.M. Best Company is subject to a security requirement. Security may be provided in three ways:

1. A surety bond written by a surety company authorized by the U.S. Treasury.
2. Negotiable securities deposited in an Office of Workers' Compensation Programs account in a Federal Reserve Bank. Securities must be fully guaranteed as to principal and interest by the U.S. Government.
3. Letters of Credit issued by banks meeting DLHWC'S rating requirement based on Standard & Poor's rating service. The security requirement is designed to fill in the exposure to claimants and the Special Fund created by a lack of reliability on the part of state guarantee funds or where a state fund is inapplicable. The type and amount of security is determined by National Office. The requirement is waived for insurance carriers rated "A" or higher by the A.M. Best Company, or that write Longshore insurance coverage through the National Reinsurance Pool operated by the National Council of Compensation Insurance, and for state funds, which are supported by the full faith and credit of a state government.