H*5053(Rat #0625, Act #0459)  General Bill, By M.O. Alexander
 A Bill to amend Section 42-7-200, as amended, Code of Laws of South Carolina,
 1976, relating to the Workers' Compensation Uninsured Employers' Fund, so as
 to, among other things, permit the Fund to file notice of lien with the Clerk
 of Court or Register of Mesne Conveyances of any county in which the employer
 has assets in the same manner as the filing of South Carolina tax liens,
 delete certain provisions and provide that when an employee makes a claim for
 benefits pursuant to Title 42 and the records of the Workers' Compensation
 Commission indicate that the employer is operating without insurance, the
 Uninsured Emloyers' Fund or any person designated by the director may subpoena
 the employer or its agents and require the production of any documents or
 records which the Fund considers relevant to its investigation of the claim;
 and to amend Section 42-5-20, relating to the requirement on employers to
 carry worker's compensation insurance or provide proof of financial ability to
 pay claims, so as to provide that in lieu of submitting audited financial
 statements when an employer makes an application toself-insure with the
 Workers' Compensation Commission, the Commission shall accept the sworn
 statement or affidavit of an independent auditor verifying the financial
 condition of the employer according to the required financial ratios and
 guidelines established by regulation of the Commission, and provide that the
 independent auditor must be a certified public accountant using generally
 acceptable accounting principles in the preparation of the financial statement
 of the employer.-amended title

   04/12/94  House  Introduced and read first time HJ-13
   04/12/94  House  Referred to Committee on Labor, Commerce and
                     Industry HJ-13
   05/04/94  House  Committee report: Favorable Labor, Commerce and
                     Industry HJ-8
   05/24/94  House  Read second time HJ-19
   05/25/94  House  Read third time and sent to Senate HJ-12
   05/25/94  Senate Introduced and read first time SJ-10
   05/25/94  Senate Referred to Committee on Judiciary SJ-10
   05/26/94  Senate Recalled from Committee on Judiciary SJ-29
   05/31/94  Senate Read second time SJ-34
   05/31/94  Senate Ordered to third reading with notice of
                     amendments SJ-34
   06/01/94  Senate Amended SJ-80
   06/01/94  Senate Read third time and returned to House with
                     amendments SJ-116
   06/01/94  House  Concurred in Senate amendment and enrolled HJ-342
   06/02/94         Ratified R 625
   06/16/94         Signed By Governor
   06/28/94         Effective date 06/16/94
   06/28/94         Copies available

AN ACT TO AMEND SECTION 42-7-200, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE WORKERS' COMPENSATION UNINSURED EMPLOYERS' FUND, SO AS TO, AMONG OTHER THINGS, PERMIT THE FUND TO FILE NOTICE OF LIEN WITH THE CLERK OF COURT OR REGISTER OF MESNE CONVEYANCES OF ANY COUNTY IN WHICH THE EMPLOYER HAS ASSETS IN THE SAME MANNER AS THE FILING OF SOUTH CAROLINA TAX LIENS, DELETE CERTAIN PROVISIONS AND PROVIDE THAT WHEN AN EMPLOYEE MAKES A CLAIM FOR BENEFITS PURSUANT TO TITLE 42 AND THE RECORDS OF THE WORKERS' COMPENSATION COMMISSION INDICATE THAT THE EMPLOYER IS OPERATING WITHOUT INSURANCE, THE UNINSURED EMPLOYERS' FUND OR ANY PERSON DESIGNATED BY THE DIRECTOR MAY SUBPOENA THE EMPLOYER OR ITS AGENTS AND REQUIRE THE PRODUCTION OF ANY DOCUMENTS OR RECORDS WHICH THE FUND CONSIDERS RELEVANT TO ITS INVESTIGATION OF THE CLAIM; AND TO AMEND SECTION 42-5-20, RELATING TO THE REQUIREMENT ON EMPLOYERS TO CARRY WORKERS' COMPENSATION INSURANCE OR PROVIDE PROOF OF FINANCIAL ABILITY TO PAY CLAIMS, SO AS TO PROVIDE THAT IN LIEU OF SUBMITTING AUDITED FINANCIAL STATEMENTS WHEN AN EMPLOYER MAKES AN APPLICATION TO SELF-INSURE WITH THE WORKERS' COMPENSATION COMMISSION, THE COMMISSION SHALL ACCEPT THE SWORN STATEMENT OR AFFIDAVIT OF AN INDEPENDENT AUDITOR VERIFYING THE FINANCIAL CONDITION OF THE EMPLOYER ACCORDING TO THE REQUIRED FINANCIAL RATIOS AND GUIDELINES ESTABLISHED BY REGULATION OF THE COMMISSION, AND PROVIDE THAT THE INDEPENDENT AUDITOR MUST BE A CERTIFIED PUBLIC ACCOUNTANT USING GENERALLY ACCEPTABLE ACCOUNTING PRINCIPLES IN THE PREPARATION OF THE FINANCIAL STATEMENT OF THE EMPLOYER.

Be it enacted by the General Assembly of the State of South Carolina:

Notice of lien can be filed with register of mesne conveyances; etc.

SECTION 1. Section 42-7-200 of the 1976 Code, as last amended by Section 994 of Act 181 of 1993, is further amended to read:

"Section 42-7-200. (A) There is established within the office of the Second Injury Fund the South Carolina Workers' Compensation Uninsured Employers' Fund to ensure payment of workers' compensation benefits to injured employees whose employers have failed to acquire necessary coverage for employees. The fund must be administered by the director of the Second Injury Fund who shall establish procedures to implement this section.

When an employee makes a claim for benefits pursuant to Title 42 and the State Workers' Compensation Commission determines that the employer is subject to Title 42 and is operating without insurance or as an unqualified self-insurer, the commission shall notify the fund of the claim. The fund shall pay or defend the claim as it considers necessary in accordance with the provisions of Title 42.

When the fund is notified of a claim, the fund may place a lien on the assets of the employer by way of lis pendens or otherwise so as to protect the fund from payments of costs and benefits. If the fund is required to incur costs or expenses or to pay benefits, the fund has a lien against the assets of the employer to the full extent of all costs, expenses, and benefits paid and may file notice of the lien with the clerk of court or register of mesne conveyances of any county in which the employer has assets in the same manner as the filing of South Carolina tax liens and with the Secretary of State in the same manner as utilized under Title 36 (Uniform Commercial Code). Any of the employer's assets sold or conveyed during the litigation of the claim must be sold or conveyed subject to the lien.

The fund has all rights of attachment set forth in Section 15-19-10 and has the right to proceed otherwise in the collection of its lien in the same manner as the Department of Revenue and Taxation is allowed to enforce a collection of taxes generally pursuant to Section 12-49-10, et seq. When all benefits due the claimant, as well as all expenses and costs of litigation, have been paid, the fund shall file notice of the total of all monies paid with the clerk of court in any county in which the employer has assets and with the Secretary of State. This notice constitutes a judgment against the employer and has priority as a first lien in the same manner as liens of the Department of Revenue and Taxation, subject only to the lien of the Department of Revenue and Taxation pursuant to Section 12-49-10, et seq. If the employer files for bankruptcy or otherwise is placed into receivership, the fund becomes a secured creditor to the assets of the employer in the same manner as the Department of Revenue and Taxation has priority for unpaid taxes, subject only to the lien of the Department of Revenue and Taxation. The fund otherwise has all rights and remedies afforded the Department of Revenue and Taxation as set forth in Section 12-54-10, et seq.

(B) Nothing in this section precludes the South Carolina Workers' Compensation Uninsured Employers' Fund from entering into an agreement for the reimbursement of expenses, costs, or benefits paid by the fund. If an agreement is entered into subsequent to the filing of a lien, the lien may be canceled by the fund. Provided, however, an agreement between the fund and an employer under this section may provide that in the event the employer breaches the terms or conditions of the agreement, the fund may file or reinstate a lien, as the case may be. For purposes of this section, the term `costs' includes reasonable administrative costs which must be set by the director of the Second Injury Fund, subject to the approval of the Workers' Compensation Commission.

(C) To establish and maintain the South Carolina Workers' Compensation Uninsured Employers' Fund, there must be earmarked from the collections of the tax on insurance carriers and self-insured persons provided for in Sections 38-7-50 and 42-5-190 an amount sufficient to establish and annually maintain the fund at a level of not less than two hundred thousand dollars.

(D) When an employee makes a claim for benefits pursuant to Title 42 and the records of the South Carolina Workers' Compensation Commission indicate that the employer is operating without insurance, the South Carolina Workers' Compensation Uninsured Employers' Fund or any person designated by the director may subpoena the employer or its agents and require the production of any documents or records which the fund considers relevant to its investigation of the claim. The subpoena shall be returnable at the office of the fund or any place designated by it. In the case of refusal to obey a subpoena issued to any person or agent of any employer, a court of common pleas upon application of the fund may issue an order requiring the person or agent of an employer to appear at the fund and produce documentary evidence or give other evidence concerning the matter under inquiry."

Alternative to submitting audited financial statements; etc

SECTION 2. Section 42-5-20 of the 1976 Code is amended to read:

"Section 42-5-20. Every employer who accepts the provisions of this title relative to the payment of compensation shall insure and keep insured his liability thereunder in any authorized corporation, association, organization, or mutual insurance association formed by a group of employers so authorized or shall furnish to the commission satisfactory proof of his financial ability to pay directly the compensation in the amount and manner and when due as provided for in this title. The commission may, under such rules and regulations as it may prescribe, permit two or more employers in businesses of a similar nature to enter into agreements to pool their liabilities under the Workers' Compensation Law for the purpose of qualifying as self-insurers. In the case of self-insurers the commission shall require the deposit of an acceptable security, indemnity, or bond to secure the payment of the compensation liabilities as they are incurred. The Industrial Commission shall have exclusive jurisdiction of group self-insurers under this section, and such group self-insurers shall not be deemed to be insurance companies and shall not be regulated by the Department of Insurance. Provided, further, that if any provision is made for the recognition of reinsurance of the self-insured fund, such provision shall expressly provide that the reinsurance agreement or treaty must recognize the right of the claimant to recover directly from the reinsurer and that such agreement shall provide for privity between the reinsurer and the workers' compensation claimant.

In lieu of submitting audited financial statements when an employer makes an application to self-insure with the commission, the commission shall accept the sworn statement or affidavit of an independent auditor verifying the financial condition of the employer according to the required financial ratios and guidelines established by regulation of the commission. The independent auditor must be a certified public accountant using generally acceptable accounting principles in the preparation of the financial statements of the employer."

Time effective

SECTION 3. This act takes effect upon approval by the Governor.

Approved the 16th day of June, 1994.