Michigan Administrative Code › Department - Labor and Economic Opportunity › Workers Compensation Agency › Workers' Compensation Agency - General Rules › Part 3 - HEARINGS › Section R. 408.43q - Irrevocable letter of credit; acceptance; requirements; payment of surety bond or letter of credit

Current through Vol. 24-12, July 15, 2024
Rule 13q.
(1) An
				  irrevocable letter of credit may be accepted by the agency as other security
				  for a self-insured program as provided by section 611(1)(a) of the act, MCL
				  418.611. The agency will retain discretion in each particular case to determine
				  if the letter of credit is acceptable and if its language and format are
				  satisfactory.
(2) Irrevocable
				  letters of credit must be issued by a state-chartered bank, a federally
				  chartered bank or foreign bank. Funds must be immediately payable on demand.
				  The director may require confirmation of acceptable letters of credit from any
				  state, federally or foreign chartered bank without state operations or branch
				  services within this state. If a confirmation is required, it shall be by a
				  State of Michigan chartered bank or federally chartered bank with Michigan
				  branch operations and state that the confirming bank is primarily obligated on
				  the letter of credit.
(3) An
				  employer who elects an irrevocable letter of credit as other security for a
				  selfinsured program shall furnish a memorandum of understanding with the letter
				  of credit, on a form provided by the agency, which affirms the employer's
				  acceptance of all of the following requirements:
(a) A letter of credit is furnished to the
				  agency instead of a surety bond as one of the requirements for approval of a
				  self-insured program.
(b) The
				  employer understands that the letter of credit is deemed automatically extended
				  without amendment for 1 year from the expiry date or any future expiry date
				  unless, 60 days before any expiry date, the agency is notified, by courier, or
				  certified or registered mail, that the letter of credit shall not be renewed
				  for any additional period.
(c) A
				  policy of insurance or a surety bond of equal amount may be furnished at a
				  later date as a substitute for the letter of credit if the policy of insurance
				  or surety bond covers all claims that would have been covered by the letter of
				  credit. All policies of insurance and surety bonds furnished as substitutes for
				  letters of credit are subject to prior agency approval.
(d) The employer shall affirm that the
				  irrevocable letter of credit in the amount requested by the agency is being
				  offered with the understanding that if the agency receives notice that the
				  letter of credit will not be renewed, then the agency, in its discretion, may,
				  after 30 days from the date of receipt of the notice, call the proceeds of the
				  letter of credit and deposit the proceeds in the state treasury. And further,
				  if, in the judgment of the agency, the letter of credit is needed to cover any
				  worker's disability compensation claims, then the proceeds of the letter of
				  credit shall be called immediately and deposited in the state treasury for such
				  purpose.
(e) If legal proceedings
				  are initiated by any party with respect to payment of any letter of credit,
				  then the proceedings shall be subject to Michigan courts and law.