Security for compensation; insurance carriers and self-insurers.
F.S. 440.38
in effect(1)
Every employer shall secure the payment of compensation under this chapter:
(a)
By insuring and keeping insured the payment of such compensation with any stock company or mutual company or association or exchange, authorized to do business in the state;
(b)
By furnishing satisfactory proof to the Florida Self-Insurers Guaranty Association, Incorporated, created in s. 440.385, that it has the financial strength necessary to ensure timely payment of all current and future claims individually and on behalf of its subsidiary and affiliated companies with employees in this state and receiving an authorization from the department to pay such compensation directly. The association shall review the financial strength of applicants for membership, current members, and former members and make recommendations to the department regarding their qualifications to self-insure in accordance with this section and ss. 440.385 and 440.386. The department shall act in accordance with the recommendations unless it finds by clear and convincing evidence that the recommendations are erroneous.
1.
As a condition of authorization under paragraph (a), the association may recommend that the department require an employer to deposit with the association a qualifying security deposit. The association shall recommend the type and amount of the qualifying security deposit and shall prescribe conditions for the qualifying security deposit, which shall include authorization for the association to call the qualifying security deposit in the case of default to pay compensation awards and related expenses of the association. As a condition to authorization to self-insure, the employer shall provide proof that the employer has provided for competent personnel with whom to deliver benefits and to provide a safe working environment. The employer shall also provide evidence that it carries reinsurance at levels that will ensure the financial strength and actuarial soundness of such employer in accordance with rules adopted by the department. The department may by rule require that, in the event of an individual self-insurer’s insolvency, such qualifying security deposits and reinsurance policies are payable to the association. Any employer securing compensation in accordance with the provisions of this paragraph shall be known as a self-insurer and shall be classed as a carrier of her or his own insurance. The employer shall, if requested, provide the association an actuarial report signed by a member of the American Academy of Actuaries providing an opinion of the appropriate present value of the reserves, using a 4-percent discount rate, for current and future compensation claims. If any member or former member of the association refuses to timely provide such a report, the association may obtain an order from a circuit court requiring the member to produce such a report and ordering any other relief that the court determines is appropriate. The association may recover all reasonable costs and attorney’s fees in such proceedings.
2.
If the employer fails to maintain the foregoing requirements, the association shall recommend to the department that the department revoke the employer’s authority to self-insure, unless the employer provides to the association the certified opinion of an independent actuary who is a member of the American Academy of Actuaries as to the actuarial present value of the employer’s determined and estimated future compensation payments based on cash reserves, using a 4-percent discount rate, and a qualifying security deposit equal to 1.5 times the value so certified. The employer shall thereafter annually provide such a certified opinion until such time as the employer meets the requirements of subparagraph 1. The qualifying security deposit shall be adjusted at the time of each such annual report. Upon the failure of the employer to timely provide such opinion or to timely provide a security deposit in an amount equal to 1.5 times the value certified in the latest opinion, the association shall provide that information to the department along with a recommendation, and the department shall then revoke such employer’s authorization to self-insure. Failure to comply with this subparagraph constitutes an immediate serious danger to the public health, safety, or welfare sufficient to justify the summary suspension of the employer’s authorization to self-insure pursuant to s. 120.68.
3.
Upon the suspension or revocation of the employer’s authorization to self-insure, the employer shall provide to the association the certified opinion of an independent actuary who is a member of the American Academy of Actuaries of the actuarial present value of the determined and estimated future compensation payments of the employer for claims incurred while the member exercised the privilege of self-insurance, using a discount rate of 4 percent. The employer shall provide such an opinion at 6-month intervals thereafter until such time as the latest opinion shows no remaining value of claims. With each such opinion, the employer shall deposit with the association a qualifying security deposit in an amount equal to the value certified by the actuary. The association has a cause of action against an employer, and against any successor of the employer, who fails to timely provide such opinion or who fails to timely maintain the required security deposit with the association. The association shall recover a judgment in the amount of the actuarial present value of the determined and estimated future compensation payments of the employer for claims incurred while the employer exercised the privilege of self-insurance, together with attorney’s fees. For purposes of this section, the successor of an employer means any person, business entity, or group of persons or business entities, which holds or acquires legal or beneficial title to the majority of the assets or the majority of the shares of the employer.
4.
A qualifying security deposit shall consist, at the option of the employer, of:
a.
Surety bonds, in a form and containing such terms as prescribed by the association, issued by a corporation surety authorized to transact surety business by the office, and whose policyholders’ and financial ratings, as reported in A.M. Best’s Insurance Reports, Property-Liability, are not less than “A” and “V”, respectively.
b.
Irrevocable letters of credit in favor of the association issued by financial institutions located within this state, the deposits of which are insured through the Federal Deposit Insurance Corporation.
5.
The qualifying security deposit shall be held by the association exclusively for the benefit of workers’ compensation claimants. The security shall not be subject to assignment, execution, attachment, or any legal process whatsoever, except as necessary to guarantee the payment of compensation under this chapter. No surety bond may be terminated, and no letter of credit may be allowed to expire, without 90 days’ prior written notice to the association and deposit by the self-insuring employer of some other qualifying security deposit of equal value within 10 business days after such notice. Failure to provide such written notice or failure to timely provide qualifying replacement security after such notice shall constitute grounds for the association to call or sue upon the surety bond or to exercise its rights under a letter of credit. Current self-insured employers must comply with this section on or before December 31, 2001, or upon the maturity of existing security deposits, whichever occurs later. The department may specify by rule the amount of the qualifying security deposit required prior to authorizing an employer to self-insure and the amount of net worth required for an employer to qualify for authorization to self-insure;
(c)
By entering into a contract with a public utility under an approved utility-provided self-insurance program as set forth in s. 624.46225 in effect as of July 1, 1983. The department shall adopt rules to implement this paragraph;
(d)
By entering into an interlocal agreement with other local governmental entities to create a local government pool pursuant to s. 624.4622; or
(e)
By entering into a contract with an individual self-insurer under an approved individual self-insurer-provided self-insurance program as set forth in s. 624.46225. The department may adopt rules to administer this subsection.
(2)(a)
The department shall adopt rules by which businesses may become qualified to provide underwriting claims-adjusting, loss control, and safety engineering services to self-insurers.
(b)
The department shall adopt rules requiring self-insurers to file any reports necessary to fulfill the requirements of this chapter. Any self-insurer who fails to file any report as prescribed by the rules adopted by the department shall be subject to a civil penalty.
(3)(a)
The license of any stock company or mutual company or association or exchange authorized to do insurance business in the state shall for good cause, upon recommendation of the department, be suspended or revoked by the office. No suspension or revocation shall affect the liability of any carrier already incurred.
(b)
The department shall suspend or revoke any authorization to a self-insurer for failure to comply with this section or for good cause, as defined by rule of the department. No suspension or revocation shall affect the liability of any self-insurer already incurred.
(c)
Violation of s. 440.381 by a self-insurance fund shall result in the imposition of a fine not to exceed $1,000 per audit if the self-insurance fund fails to act on said audits by correcting errors in employee classification or accepted applications for coverage where it knew employee classifications were incorrect. Such fines shall be levied by the department and deposited into the Workers’ Compensation Administration Trust Fund.
(4)(a)
A carrier of insurance, including the parties to any mutual, reciprocal, or other association, may not write any compensation insurance under this chapter without a certificate of authority from the office. Such certificate of authority shall be given, upon application therefor, to any insurance or mutual or reciprocal insurance association upon the office’s being satisfied of the solvency of such corporation or association and its ability to perform all its undertakings. The office may revoke any certificate of authority so issued for violation of any provision of this chapter.
(b)
A carrier of insurance, including the parties to any mutual, reciprocal, or other association, may not write any compensation insurance under this chapter unless such carrier has a claims adjuster, either in-house or under contract, situated within this state. Self-insurers whose compensation payments are administered through a third party and carriers of insurance shall maintain a claims adjuster within this state during any period for which there are any open claims against such self-insurer or carrier arising under the compensation insurance written by the self-insurer or carrier. Individual self-insurers whose compensation payments are administered by employees of the self-insurer shall not be required to have their claims adjuster situated within this state. Individual self-insurers shall not be required to have their claims adjusters situated within this state.
(5)
All insurance carriers authorized to write workers’ compensation insurance in this state shall make available, at the written request of the employer, an insurance policy containing deductibles in the amount of $500, $1,000, $1,500, $2,000, and $2,500 per claim and a coinsurance provision per claim. Any amount of coinsurance shall bind the carrier to pay 80 percent, and the employer to pay 20 percent, of the benefits due to an employee for an injury compensable under this chapter of the amount of benefits above the deductible, up to the limit of $21,000. One hundred percent of the benefits above the amount of any deductible and coinsurance, as the case may be, due to an employee for one injury shall be paid solely by the carrier. Regardless of any coinsurance or deductible amount, the claim shall be paid by the applicable carrier, which shall then be reimbursed by the employer for any coinsurance or deductible amounts paid by the carrier. No insurance carrier shall be required to offer a deductible or coinsurance to any employer if, as a result of a credit investigation, the carrier determines that the employer is not sufficiently financially stable to be responsible for payment of such deductible or coinsurance amounts.
(6)
The state and its boards, bureaus, departments, and agencies and all of its political subdivisions which employ labor, and the state universities, shall be deemed self-insurers under the terms of this chapter, unless they elect to procure and maintain insurance to secure the benefits of this chapter to their employees; and they are hereby authorized to pay the premiums for such insurance.
(7)
Any employer who meets the requirements of subsection (1) through a policy of insurance issued outside of this state must at all times, with respect to all employees working in this state, maintain the required coverage under a Florida endorsement using Florida rates and rules pursuant to payroll reporting that accurately reflects the work performed in this state by such employees.
Source: FL Statutes (Official Site)URL: https://www.flsenate.gov/Laws/Statutes/2025/Chapter440/AllFetched: 7/8/2026