2023 Tennessee Code › Title 50 - EMPLOYER AND EMPLOYEE (§§ 50-1-101 — 50-11-106) › Chapter 6 - WORKERS' COMPENSATION LAW (§§ 50-6-101 — 50-6-1016) › Part 4 - INSURANCE (§§ 50-6-401 — 50-6-421) › Section 50-6-405 - Compensation insurance or proof of financial ability required - Self insurers - Payment of premiums - Excess catastrophe reinsurance coverage - Authority and duty of administrator

(a)
Every employer under and affected by this chapter, shall:
(1)
Insure and keep insured the employer's liability under this chapter in some person or persons, association, organization or corporation authorized to transact the business of workers' compensation insurance in this state; or
(2)
Possess a valid certificate of authority from the commissioner of commerce and insurance by furnishing satisfactory proof of the employer's financial ability to pay all claims that may arise against the employer under this chapter and guarantee the payment of the claims in the amount and manner and when due as provided for in this chapter.
(b)
(1)
If the employer elects to proceed under subdivision (a)(2), the commissioner of commerce and insurance shall require the applicant to pay a nonrefundable application fee of five hundred dollars ($500) or in an amount the commissioner shall promulgate by rule.
(2)
The commissioner of commerce and insurance shall require the applicant to file and maintain with the department of commerce and insurance the following:
(A)
(i)
Security, in an amount to be determined by the commissioner of commerce and insurance, but not less than five hundred thousand dollars ($500,000), in any of the following forms, as specified herein: negotiable securities; a surety bond; a certificate of deposit; or a letter of credit;
(ii)
The security, or a contract between the self-insured employer, a depository institution and the commissioner of commerce and insurance evidencing the security held in the depository institution for purposes of compliance with this section, shall be held by the commissioner of commerce and insurance and shall be conditioned to run solely and directly for the benefit of the employees of the self-insured employer. Any legal actions to enforce the payment of the security being held for purposes of compliance with this section may be brought by the commissioner of commerce and insurance, or, with the approval of the commissioner of commerce and insurance, the Tennessee self-insurers' guaranty association, or both, for the benefit of the employees of the self-insured employer;
(iii)
The security held pursuant to this section may be used for the payment of any and all fees or costs required to administer the disbursement of the proceeds to or for the benefit of the employees;
(iv)
The venue for any suit filed by the commissioner of commerce and insurance or the Tennessee self-insurers' guaranty association under this subdivision (b)(2) must be in Davidson County.
(v)
(a)
Any security held for purposes of compliance with this section shall be held for a minimum of ten (10) years after the self-insured employer is no longer self-insured and the self-insured employer shall maintain the fair market value of security on deposit at not less than five hundred thousand dollars ($500,000), unless otherwise approved by the commissioner of commerce and insurance or the commissioner's designee;
(b)
Any employer that is no longer self-insured pursuant to this section as of December 31, 2004, shall not be subject to subdivision (b)(2)(A)(v)(
a
).
(vi)
All security, and contracts evidencing the security, filed with the commissioner of commerce and insurance shall be in a form substantively that has been previously approved by the commissioner of commerce and insurance. Any security that fails to meet any requirement under this section shall not be considered for purposes of determining a self-insurer's compliance with any of the security maintenance requirements of this section;
(vii)
As used in this subdivision (b)(2)(A), "qualified United States financial institution" shall have the meaning assigned by §
56-2-209(a)
;
(viii)
The commissioner of commerce and insurance may by rule establish requirements for securities posted pursuant to this subsection (b). These rules may also prescribe the various types and classes of securities that the commissioner of commerce and insurance will accept under this subsection (b);
(B)
(i)
Evidence of the employer's financial ability to pay all claims that may arise against the employer in the form of an annual certified financial statement, including a statement of assets and liabilities and a statement of profit and loss, to be filed no later than the last day of the ninth month after the end of the employer's immediately preceding fiscal year;
(ii)
The financial statement is to include a detailed accounting for reserves for losses outstanding incurred in connection with workers' compensation self-insurance. The employer's losses and adequacy of reserves shall be certified annually by an actuary qualified under rules established by the commissioner of commerce and insurance for the filing of statements by insurance companies.
(3)
(A)
Filings pursuant to this subsection (b) shall be kept confidential by the commissioner of commerce and insurance and shall not be construed to be a public record pursuant to title 10, chapter 7.
(B)
Notwithstanding subdivision (b)(3)(A), the commissioner of commerce and insurance may provide the filings received pursuant to this subsection (b) to the Tennessee self-insurers' guaranty association, which shall keep the filings and information in the filings confidential until made public by the commissioner.
(4)
The commissioner of commerce and insurance may assess a civil penalty of one hundred dollars ($100) per day for each day any self-insured employer has failed to comply with any financial record filing requirement. The civil penalty assessed under this subdivision (b)(4) shall be cumulative and in addition to any other civil penalty or remedy available to the commissioner. No civil penalty shall be assessed against any political subdivision of the state.
(5)
For employers electing to self-insure pursuant to subdivision (a)(2), the commissioner of commerce and insurance shall consider all available information when making the determination as to both the adequacy of all security deposits, letters of credit, negotiable securities, or bonds held by the commissioner and whether an employer has the ability to pay all claims that may arise.
(6)
No employer shall self-insure its workers' compensation liabilities without a certificate of authority issued by the commissioner of commerce and insurance. It shall be unlawful for any employer to self-insure its liabilities for workers' compensation without first obtaining a duly issued certificate of authority from the commissioner of commerce and insurance. Whenever an employer has complied with subdivisions (a)(2) and (b)(2)(A) and (B), the commissioner of commerce and insurance, or the commissioner's designee, may issue to the employer a certificate of authority allowing the employer to self-insure under this section. Notice of this authorization shall be sent to the administrator of the bureau of workers' compensation.
(7)
If an authorized self-insured employer fails to furnish the commissioner of commerce and insurance the requirements delineated in subdivisions (a)(2) and (b)(2)(A) and (B), or if the Tennessee self-insurers' guaranty association recommends revocation or suspension of an authorized self-insured employer's certificate of authority, then the commissioner may, after giving written notice and an opportunity for a hearing to the affected party or parties within thirty (30) days, suspend or revoke the certificate authorizing the employer to self-insure granted under this section. The commissioner may, without prior notice and if it appears in the commissioner's discretion that the continuation of the certificate would be clearly hazardous to the employees of the self-insurer or to the public generally, summarily suspend an authorized self-insurer's certificate before a hearing is commenced and in that event shall immediately notify the self-insurer, and the notice shall include a statement to the effect that the commissioner's action is subject to review. All hearings conducted under this section shall comply with the contested case provisions of the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
(8)
Any hearing under this section shall be requested in writing by the self-insured employer within fifteen (15) days of receiving written notification from the commissioner of commerce and insurance or the commissioner's designee. In any proceeding in which the self-insured employer's certificate of authority is suspended or revoked, the self-insured employer shall pay all costs associated with the proceeding. The commissioner may serve a notice, order, petition or complaint in any action arising under this section by certified mail to the self-insured employer at the address of record in the files of the department. Notwithstanding any law to the contrary, service in the manner set forth in this subdivision (b)(8), shall be deemed to constitute actual service on the self-insured employer.
(9)
The commissioner of commerce and insurance or the commissioner's designee shall immediately notify the administrator of the bureau of workers' compensation of any decision to suspend or revoke a certificate authorizing an employer to self-insure.
(10)
The commissioner of commerce and insurance or the commissioner's designee has the authority to examine and investigate any self-insured employer whenever the commissioner deems it prudent to do so. The purposes and scope of the examinations and the commissioner's powers shall be set forth in title 56, chapter 1, part 4, pertaining to examinations of insurance companies.
(11)
The commissioner of commerce and insurance may promulgate rules and regulations, including emergency rules and regulations, necessary for the administration of this section and shall conduct all rulemaking in accordance with the Uniform Administrative Procedures Act.
(c)
(1)
With the permission of a trade or professional association board of directors, ten (10) or more employers of the same group may enter into agreements to pool their liabilities under this chapter for the purpose of qualifying as self-insurers. The trade or professional association shall have been in active existence in Tennessee for at least five (5) years and the association shall:
(A)
Have a constitution or bylaws;
(B)
Have members that support the association by regular payment of dues on an annual, semiannual, quarterly or monthly basis; and
(C)
Be created in good faith for purposes other than that of creating workers' compensation self-insurer pools. The commissioner of commerce and insurance has the authority to promulgate rules and regulations deemed necessary to provide for the solvency, administration and enforcement of the pooling agreements. To the extent deemed necessary by the commissioner of commerce and insurance, each employer member of the approved group shall be classified as a self-insurer as otherwise provided in this chapter.
(2)
Notwithstanding any other law or rule to the contrary, funds not needed for current obligations may be invested by the board of trustees in Tennessee securities as defined in §
56-4-210(a)
. The board of trustees of each workers' compensation pool shall adopt an investment policy. The policy shall address credit, quality of investments, maximum maturity of investments and other matters the board deems appropriate. Real estate investments must be undertaken with the approval of the commissioner of commerce and insurance.
(3)
(A)
Each group of employers qualifying as self-insurers pursuant to this subsection (c) shall submit to the commissioner of commerce and insurance a statement of financial condition audited by an independent certified public accountant on or before the last day of the sixth month following the end of the group's fiscal year. A thirty-day extension of the financial statement filing requirement shall be granted by the commissioner upon receipt of a request, via certified mail, by a group. The request shall be submitted to the commissioner not less than thirty (30) days prior to the date the financial statement is due to be filed.
(B)
Notwithstanding subdivision (c)(3)(A), a qualified self-insured trust that has entered into a self-insurance loss portfolio transfer agreement approved by the commissioner of commerce and insurance with an insurer licensed in this state pursuant to which all of the liabilities and obligations pooled by the group of employers of the self-insured trust for their workers' compensation and employers' liability losses, including all existing and incurred but not reported claims, is not required to annually submit a statement of financial condition audited by an independent certified public accountant; provided, that the commissioner of commerce and insurance has granted a request filed by the self-insured trust for exemption from the annual submission of an audited statement of financial condition.
(4)
(A)
At the request of a group of employers qualifying as self-insurers pursuant to this subsection (c), the commissioner of commerce and insurance, in the commissioner's sole discretion, may grant additional thirty-day extensions to the financial statement filing requirements for acts of God, public enemies, fire, flood, storms or similar events constituting force majeure that cause the group to require more time to meet the filing requirements.
(B)
The commissioner of commerce and insurance, after notice and an opportunity for a hearing, may revoke the certificate of approval of a group of employers qualifying as self-insurers pursuant to this subsection (c) if the group fails to comply with this subsection (c) or any rules promulgated under this subsection (c). In addition to or in lieu of revoking a certificate of approval, the commissioner may assess a civil penalty of one hundred dollars ($100) per day for failure to timely meet the filing requirements set forth in this subsection (c). All hearings under this subsection (c) shall be conducted pursuant to the Uniform Administrative Procedures Act.
(C)
Financial statements filed pursuant to this subsection (c), individual member financial statements, work papers, notes, internal documents generated by the department of commerce and insurance or any other information obtained by or disclosed to the commissioner of commerce and insurance pursuant to this chapter or any regulations promulgated under this chapter, shall be confidential and shall not be disclosed to the public. This provision, however, shall not apply to the examination report prepared by the commissioner of commerce and insurance, nor to any rebuttal to the examination reports submitted by or on behalf of the group examined. However, nothing contained in this subdivision (c)(4)(C) shall be construed as prohibiting the commissioner of commerce and insurance from disclosing the information listed in this subdivision (c)(4)(C), or any matters relating to that information, to state agencies of this or any other state, or to law enforcement officials of this or any other state or agency of the federal government at any time.
(D)
Upon receipt of a request from any approved authorized agent of a group of employers qualifying as self-insurers pursuant to this subsection (c), the group shall provide a copy of the annual statement of financial condition. The agent, however, shall not further disseminate the information except for purposes of obtaining errors and omission insurance or in the exercise of due diligence of the agent on behalf of the agent's client seeking admission to the group. Further, any individual or entity obtaining a copy of the statement shall hold the information confidential and shall not share or disclose the information to any other individual or entity.
(5)
All groups pooling their liabilities pursuant to this subsection (c) shall pay premium tax and surcharges at the rates set forth in §
56-4-206
. Each group's premium tax and surcharge payments shall be due on or before the last day of the sixth month following the end of the group's fiscal year. Any group failing to timely pay the taxes and surcharges shall be subject to the penalties and sanctions set forth in §
56-4-216
.
(6)
The sponsoring trade association may determine whether or not the pool shall remain in existence, subject to the approval of the commissioner.
(7)
The pool shall provide to the sponsoring trade association all information requested by the association, other than a member's financial information.
(8)
The sponsoring association shall not be liable or responsible for any act or omission of the pool.
(9)
The commissioner of commerce and insurance has the authority to promulgate rules and regulations that would provide for civil penalties for violations of this subsection (c) or rules promulgated under this subsection (c).
(d)
(1)
It is an offense for any employer whose employee is entitled to the benefits of this chapter:
(A)
To require such employee to pay any portion of the insurance premium paid by the employer; or
(B)
To deduct any portion of such premium from the wages or salary of such employee.
(2)
A violation of subdivision (d)(1) is a Class C misdemeanor.
(3)
(A)
In addition to any criminal penalty assessed for a violation of subdivision (d)(1), the administrator of the bureau of workers' compensation is authorized to impose a civil penalty of up to an amount equal to the amount of premiums deducted from such employee's wages or salary.
(B)
If a civil penalty is assessed pursuant to subdivision (d)(3)(A), the administrator of the bureau of workers' compensation shall assess the penalty in a specific dollar amount to be paid directly to the employee.
(e)
If at any time the commissioner of commerce and insurance deems the security or bond inadequate or unsafe, the commissioner shall require adequate bond or security.
(f)
The commissioner of commerce and insurance may require the employer to secure excess catastrophe reinsurance coverage.
(g)
This part shall not apply to policies of insurance against loss from explosions of boilers or flywheels or other similar single catastrophe hazards.
(h)
The commissioner of commerce and insurance may issue rules, regulations and orders necessary to properly administer the deposits, bonds and financial evidence as required in this part.
(i)
It is the duty of the commissioner of commerce and insurance and the administrator of the bureau of workers' compensation to interchange information as to matters of mutual interest under this chapter.
(j)
Any employer of a construction services provider, as defined in §
50-6-901
, shall, upon request by the bureau, provide proof of valid workers' compensation insurance coverage at the employer's place of business and at job sites where the employer is providing construction services. Failure to provide proof of valid workers' compensation insurance coverage within one (1) business day of the request may result in a penalty of not less than fifty dollars ($50.00) nor more than five hundred dollars ($500) per violation for any initial violation at the discretion of the administrator or administrator's designee, and not less than fifty dollars ($50.00) nor more than five thousand dollars ($5,000) per violation for subsequent violations. The administrator has discretion in determining acceptable proof of coverage, including electronic proof of coverage, taking into account standard insurance industry practices. Insurers shall advise policy holders who are construction services providers regarding the availability of electronic downloads of policy information to facilitate field inspection of proof of workers' compensation coverage.
(k)
(1)
An employer who elects to self-insure under subdivision (a)(2) and is deemed eligible by the Tennessee self-insurers' guaranty association for participation in the risk-based security program:
(A)
Must satisfy the employer's security requirements through the program; and
(B)
Is only subject to the requirements of subdivisions (b)(1) and (2) as outlined in the association's plan of operation.
(2)
Subdivision (k)(1) does not apply to:
(A)
Self-insured groups organized pursuant to subsection (c); or
(B)
Governmental entities that have not elected to be a member of the Tennessee self-insurers' guaranty association pursuant to § 50-6-1004(e).
Amended by 2024 Tenn. Acts, ch. 666,s 7, eff. 4/9/2024.
Amended by 2024 Tenn. Acts, ch. 666,s 6, eff. 4/9/2024.
Amended by 2024 Tenn. Acts, ch. 666,s 5, eff. 4/9/2024.
Amended by 2024 Tenn. Acts, ch. 666,s 4, eff. 4/9/2024.
Amended by 2024 Tenn. Acts, ch. 666,s 3, eff. 4/9/2024.
Amended by 2024 Tenn. Acts, ch. 666,s 2, eff. 4/9/2024.
Acts 1919, ch. 123, § 41; impl. am. Acts 1923, ch. 7, §§ 2, 50; Shan. Supp., § 3608a191; mod. Code 1932, § 6895; Acts 1941, ch. 90, § 11; mod. C. Supp. 1950, § 6895; impl. am. Acts 1971, ch. 137, § 1; Acts 1973, ch. 379, § 11; 1978, ch. 759, § 1; impl. am. Acts 1980, ch. 534, § 1; Acts 1980, ch. 457, §§ 1, 2; T.C.A. (orig. ed.), § 50-1205; Acts 1985, ch. 381, § 1; 1989, ch. 591, § 113; 1993, ch. 224, § 1; 1995, ch. 142, § 1; 1997 , ch. 533, § 50; 1999 , ch. 520, § 41; 2000 , ch. 852, § 15; 2002 , ch. 544, §§ 1, 2; 2003 , ch. 359, §§ 7 - 9, 13; 2004 , ch. 962, §§ 34 - 37, 47; 2005 , ch. 390, §§ 9 - 12; 2006 , ch. 954, §§ 1, 2; 2008 , ch. 841, § 1; 2009 , ch. 217, § 1; 2009 , ch. 373, §§ 1, 2; 2009 , ch. 566, § 12; 2010 , ch. 1149, § 7; 2013 , ch. 282, § 1; 2015 , ch. 341, § 15; 2017 , ch. 344, § 10; 2022 , ch. 742, § 1.