KRS § 342.908 — KY Code / Title XXVII / Chapter 342 / Section 342.908
342.908 Default or insolvency of fund member -- Assumption of obligations by fund -- Assessments to finance funds -- Limitation on income distributions -- Effect of payment on liability to fund for reimbursement
Status: reserved

342.908 Default or insolvency of fund member -- Assumption of obligations by

fund -- Assessments to finance funds -- Limitation on income distributions --

Effect of payment on liability to fund for reimbursement.

(1) The commissioner shall notify a guaranty fund if the commissioner has knowledge

that any member of the guaranty fund has failed to timely pay workers'

compensation benefits required by this chapter or if a court of competent

jurisdiction has declared the member to be bankrupt or insolvent.

(2) In the event of issuance of a certificate of default, the commissioner shall call all

security and transfer it to the appropriate guaranty fund created pursuant to this

section. The commissioner shall also immediately notify, by certified mail, the

guaranty fund and order the guaranty fund to assume the workers' compensation

obligations of the member required in this chapter. The guaranty fund shall

commence payment of these obligations within fourteen (14) days of receipt of

notification and order of the commissioner. Payment shall be made to claimants

whose entitlement to benefits can be ascertained by the guaranty fund with or

without proceedings before the Department of Workers' Claims or a court of

competent jurisdiction. Upon assumption of the obligations of a member by a

guaranty fund, the guaranty fund shall have the right to immediate possession of any

security, and the custodian, surety, or issuer of any irrevocable letter of credit shall

turn over the security, proceeds of the surety bond, or letter of credit to the guaranty

fund, together with the interest that has accrued since the date of the member's

insolvency. The guaranty fund may administer payment of benefits or it may retain

a third party to do so.

(3) Notwithstanding any other provision of law, any cash, securities, irrevocable letters

of credit, specific excess or aggregate excess insurance proceeds, or any other

security deposited or posted in accordance with this section shall be used first, when

due, to pay workers' compensation claims. After the security has been exhausted,

the payment of workers' compensation claims from member assessments may be

made. Where the guaranty fund member-assessment account is used to pay workers'

compensation claims on an emergency or an interim basis, pending receipt by the

guaranty fund of security which is due but not yet received, the member-assessment

account shall be reimbursed for payment from the security when it is received, and

the priorities stated above shall thereafter apply.

(4) To the extent necessary to secure funds for the initial establishment of each

guaranty fund member-assessment account, the board of directors of each guaranty

fund created pursuant to this section shall levy assessments based on the premium

of each individual self-insured employer, as defined and calculated pursuant to KRS

342.0011(28), for members of the Kentucky individual self-insurers guaranty fund

and for the Kentucky coal employers self-insurance guaranty fund, and KRS

342.0011(24) for the Kentucky group self-insurance guaranty fund, but no such

assessments shall ever exceed, in the aggregate, from all members of a single

guaranty fund, an amount in excess of one million dollars ($1,000,000) at any given

time. The assessments shall be made at a maximum annual assessment of: one-half

of one percent (0.5%) of the premium for each member of the Kentucky individual

self-insurance guaranty fund as defined and calculated pursuant to KRS

342.0011(28); two percent (2%) of the premium for each member of the Kentucky

coal employers guaranty fund as defined and calculated pursuant to KRS

342.0011(28); and three-fourths of one percent (0.75%) of the premium for each

member of the Kentucky group self-insurance guaranty fund as defined and

calculated pursuant to KRS 342.0011(24).

(5) The initial assessment for each guaranty fund created pursuant to this section shall

be for an amount equal to five hundred thousand dollars ($500,000), to be levied

and collected within a one (1) year period. There shall be no reassessments against

any member unless the current balance of such guaranty fund created pursuant this

section is insufficient after deducting the amount paid for or reserved for

outstanding claims and for administrative and other costs in managing the guaranty

fund at which point the board of directors shall raise assessments sufficient to bring

the minimum amount of the guaranty fund to five hundred thousand dollars

($500,000) or such other amount not to exceed, in any event, one million dollars

($1,000,000) based upon a maximum annual assessment for each guaranty fund.

(6) A guaranty fund created pursuant to this section shall pay no dividends, rebates,

interest, or otherwise distribute income from the guaranty fund to any of its

members, unless the guaranty fund has the assets prescribed in subsection (5) of this

section and the distributions are approved by the commissioner.

(7) The commissioner shall be provided with any relevant information by the employer,

any excess insurer, any third party administrator, or any issuer of any irrevocable

letter of credit, issuer of any surety bond, or custodian of any security necessary for

the commissioner to carry out the commissioner's obligations under this chapter,

and the commissioner shall provide this information to the guaranty fund as

necessary to carry out its obligations.

(8) The payment of benefits by a guaranty fund does not release any person or entity

from any liability to the individual guaranty fund for full reimbursement.