1993-94 Bill 540: Workers' compensation, detailed provisions

South Carolina General Assembly
110th Session, 1993-1994

Bill 540

Indicates Matter Stricken
Indicates New Matter

                    Current Status

Introducing Body:               Senate
Bill Number:                    540
Primary Sponsor:                Saleeby
Type of Legislation:            GB
Subject:                        Workers' compensation,
                                detailed provisions
Residing Body:                  House
Companion Bill Number:          3709
Computer Document Number:       BBM/10329JM.93
Introduced Date:                19930311
Date of Last Amendment:         19930421
Last History Body:              House
Last History Date:              19940224
Last History Type:              Objection withdrawn by
                                Representative
Scope of Legislation:           Statewide
All Sponsors:                   Saleeby
                                Land
                                McConnell
                                Courtney
                                Rankin
Type of Legislation:            General Bill

History

Bill Body Date Action Description CMN Leg Involved ____ ______ ____________ ______________________________ ___ ____________ 540 House 19940224 Objection withdrawn by Simrill Representative 540 House 19940210 Objection by Representative Cato Vaughn R. Smith Trotter McLeod Simrill 540 House 19940203 Debate adjourned until Thursday, February 10, 1994 540 House 19940202 Committee Report: Favorable 26 with amendment 540 House 19930427 Introduced, read first time, 26 referred to Committee 540 Senate 19930423 Read third time, sent to House 540 Senate 19930422 Read second time, unanimous consent for third reading on Friday, April 23, 1993 540 Senate 19930421 Amended, debate interrupted by adjournment 540 Senate 19930420 Debate interrupted by adjournment 540 Senate 19930415 Made special order 540 Senate 19930407 Committee Report: Favorable 11 with amendment 540 Senate 19930330 Recommitted to Committee, 11 retaining its place on the Calendar 540 Senate 19930324 Committee Report: Favorable 11 with amendment 540 Senate 19930311 Introduced, read first time, 11 referred to Committee

View additional legislative information at the LPITS web site.

(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

Indicates Matter Stricken
Indicates New Matter

COMMITTEE REPORT

February 2, 1994

S. 540

Introduced by SENATORS Saleeby, Land, McConnell, Courtney and Rankin

S. Printed 2/2/94--H.

Read the first time April 27, 1993.

THE COMMITTEE ON

LABOR, COMMERCE AND INDUSTRY

To whom was referred a Bill (S. 540), to amend Section 42-1-40, Code of Laws of South Carolina, 1976, relating to the definition of "average weekly wages", etc., respectfully

REPORT:

That they have duly and carefully considered the same, and recommend that the same do pass with amendment:

Amend the bill, as and if amended, by striking SECTION 2, and inserting the following:

/SECTION 2. The 1976 Code of Law is amended by adding:

"Section 42-9-45. (A) Mental illness resulting from work-related stress is not an accidental injury arising out of and in the course of employment unless it is established by clear and convincing evidence that:

(1) The stressful employment conditions causing the mental injury were extraordinary and unusual in comparison to the pressures and tensions experienced by individuals performing similar work;

(2) The stressful employment conditions were the predominant cause of the mental injury;

(3) The mental injury was caused by stressful employment conditions that exist in a real and objective sense.

(B) A determination of mental injury, its cause and resulting disability or need or medical treatment must be supported by clear and convincing psychiatric evidence.

(C) A mental injury is not considered compensable if it results from a verbal disagreement with an employer or a co-employee, or results from a personnel decision by the employer including, but not limited to, any disciplinary action, work evaluation, job transfer, demotion, promotion, salary review, or voluntary or involuntary termination of employment."

Amend further, by striking SECTION 3, and inserting the following:

SECTION 3. Section 42-1-310 of the 1976 Code is amended to read:

"Section 42-1-310. (A) Every employer and employee, except as stated in this chapter, shall be presumed to have accepted the provisions of this title respectively to pay and accept compensation for personal injury or death by accident arising out of and in the course of the employment and shall be bound thereby, unless he shall have given the employer gives, prior to any accident resulting in injury or death, notice to the contrary of the employer's rejection of this Title in the manner provided in Section 42-1-340.

(B) Employers who reject the provisions of this title must comply with the provisions of Section 42-1-311 or 42-1-312.

(C) When giving notice of rejection as required by this section, the employer must provide whether complying with Section 42-1-311 or 42-1-312.

(D)The following persons shall not be deemed "workers" or "employees": An owner-operator who, as an individual or partner, or shareholder of a corporate owner-operator, owns a vehicle licensed and registered as a truck, road tractor, or truck tractor by a governmental agency, is an independent contractor while performing services in the operation of the owner-operator's vehicle if all of the following conditions are substantially present:

(1) the owner-operator is responsible for the maintenance of the vehicle;

(2) the owner-operator bears the principal burden of the vehicle's operating costs, including fuel, repairs, supplies, collision insurance, and personal expenses for the operator while on the road;

(3) the owner-operator is responsible for supplying the necessary personnel to operate the vehicle, and the personnel are considered the owner-operator's employees;

(4) the owner-operator's compensation is based on factors related to the work performed, including a percentage of any schedule of rates or lawfully published tariff, and not on the basis of the hours or time expended.

(5) the owner-operator determines the details and means of performing the services, in conformance with regulatory requirements, operating procedures of the carrier, and specifications of the shipper.

(6) the owner-operator enters into a contract which specifies the relationship to be that of an independent contractor and not that of an employee. An owner-operator, as an independent contractor, may elect to participate in this state's workers' compensation act as a sole proprietor. Alternatively, an owner-operator and the motor carrier to whom the owner-operator's vehicle is leased may mutually agree that the owner-operator and the owner-operator's drivers will be covered under the motor carrier's workers' compensation insurance policy or authorized self-insurance, if the owner-operator agrees to pay the premiums requested by the motor carrier. An agreement by an owner-operator and a motor carrier to include the owner-operator under the motor carrier's workers' compensation coverage does not affect the independent contractor status of the owner-operator."/

Amend further, by striking SECTION 4, and inserting the following:

SECTION 4. The 1976 Code is amended by adding:

"Section 42-1-315. Officers of a corporation are employees under this title and may reject coverage under this title by giving notice as prescribed by the commission. An employee who has rejected coverage under this title or whose employer (1) has been exempted by proper notice from the operation of this title or (2) is a sole proprietor or a partner who has not elected to be covered may not claim to be a statutory employee of another employer as described in Sections 42-1-400, 42-1-410, 42-1-420, 42-1-430, 42-1-440, and 42-1-450 herein, but such employee is subject to the limitations of Section 42-1-540 against employers who have accepted the provisions of this title."/

Amend further, by striking SECTION 8, and inserting the following:

SECTION 8. Section 42-1-340 of the 1976 Code is amended to read:

"Section 42-1-340. The notices referred to in Sections 42-1-310, 42-1-315 and 42-1-330 shall not be effective as to any accident resulting in injury or death that occurs within thirty days after the giving of any such notice; provided, that if any such accident occurs less than thirty days after the date of employment, notice of such exemption given at the time of employment shall be effective as to such accident. Any such notice shall be in writing or print, in substantially the form prescribed by the commission. Notice of rejection of this Title by an employer pursuant to Section 42-1-310(A), and shall be given by the employer by posting it in a conspicuous place in the shop, plant, office, room or place in which the employee is employed or by serving it personally upon him and. Notice shall be given by the employee by sending it in registered letter, addressed to the employer at his last-known residence or place of business, or by giving it personally to the employer or any of his agents upon whom summons in a civil action may be served under the laws of the State.

A copy of the notice in the prescribed form shall be filed with the commission. In any suit by an employer or an employee who has exempted himself by proper notice from the application of this title a copy of such notice duly certified by the commission shall be admissible in evidence as proof of such exemption."/

Amend further, by striking SECTION 9, and inserting the following:

SECTION 9. Section 42-1-510 of the 1976 Code is amended to read:

"Section 42-1-510. An employer who elects not to operate under this title shall not, in any suit at law instituted by an employee subject to this title to recover damages for personal injury or death by accident, be permitted to defend any such suit at law upon any or all of the following grounds:

(1) that the employee was negligent or comparatively negligent;

(2) that the injury was caused by the negligence of a fellow employee; or

(3) that the employee had assumed the risk of the injury."/

Amend further, by striking SECTION 17, and inserting the following:

SECTION 17. Section 42-9-260 of the 1976 Code, as last amended by Act 410 of 1988, is further amended to read:

"Section 42-9-260. (A) When an employee has been out of work due to a reported work related injury or occupational disease for eight days, an employer may start temporary total disability payments immediately and may continue such payments for up to one hundred twenty days without waiver of any grounds for denial of a claim as may appear following a good faith investigation. Upon making the first payment, the employer shall immediately shall notify the commission, in accordance with a form prescribed by the commission, that payment of compensation has begun.

The commission shall provide by rule the method and procedure by which benefits may be suspended or terminated for any cause, but such rule must provide for an evidentiary hearing and Commission approval prior to termination or suspension unless such prior hearing is expressly waived in writing by the recipient. Further, the Commission may not entertain any application to terminate or suspend benefits unless and until the employer or carrier is current with all payments due.

(B) Once payment of temporary disability compensation has been commenced, it may be terminated or suspended immediately if the employee:

(1) has returned to work; or

(2) agrees that he is able to return to work and executes the proper commission form indicating that he is able to return to work; or

(3) at any time within one hundred twenty days of the date that payments are commenced if a good faith investigation has revealed grounds for denial of the claim.

(C) If the employee has been released by the treating physician to work or to limited duty work and the employer provides work consistent with the terms upon which the employee has been released, compensation may be terminated or suspended if the employee refuses to return to work.

(D) If the employee refuses medical treatment under Section 42-15-60 or an examination or evaluation under Section 42-15-80, the employee is not entitled to compensation benefits during the period of the refusal. Upon the submission of documentation of the refusal of the employee of this medical treatment, examination, or evaluation to the commission and notice to the employee, compensation may be terminated unless the employee requests a hearing within ten days of receiving the notice.

(E) An employee may request a hearing to have temporary compensation reinstituted after termination.

(F) Failure to comply with such rule as to termination or suspension of benefits must this section may result in a twenty-five percent penalty of not more than twenty-five percent imposed upon the carrier or employer computed on the amount of benefits withheld without prior Commission approval in violation of this section, and the amount of the penalty must be paid to the employee in addition to the amount of benefits withheld. However, the penalty does not apply if the employer or carrier has terminated or suspended benefits when the employee has returned to any employment at the same or similar wage."

Amend further, by striking SECTION 19, and inserting the following:

SECTION 19. A. Chapter 55 of Title 38 of the 1976 Code is amended by adding:

"Article 5

Insurance Fraud and

Reporting Immunity

Section 38-55-510. This article is known and may be cited as the `Omnibus Insurance Fraud and Reporting Immunity Act'.

Section 38-55-520. The purpose of this article is to confront aggressively the problem of insurance fraud in South Carolina by facilitating the detection of insurance fraud; to allow reporting of suspected insurance fraud; to grant immunity for reporting suspected insurance fraud; to prescribe penalties for insurance fraud; to require restitution for victims of insurance fraud; to establish a division within the Office of the Attorney General to prosecute insurance fraud; and to require the investigation of alleged insurance fraud by State Law Enforcement Division.

Section 38-55-530. As used in this article:

(a) `Authorized agency' means any duly constituted criminal investigative department or agency of the United States or of this State; the Department of Insurance; the Department of Revenue and Taxation, Division of Motor Vehicles; the Workers' Compensation Commission; the Office of the Attorney General of this State; or the prosecuting attorney of any judicial circuit, county, municipality, or political subdivision of this State or of the United States, and their respective employees or personnel acting in their official capacity.

(b) `Insurer' shall have the meaning set forth in Section 38-1-20(25) and includes any authorized insurer, self-insurer, reinsurer, broker, producer, or any agent thereof.

(c) `Person' means any natural person, company, corporation, unincorporated association, partnership, professional corporation, or other legal entity and includes any applicant, policyholder, claimant, medical provider, vocational rehabilitation provider, attorney, agent, insurer, fund, or advisory organization.

(d) `False statement and misrepresentation' means a statement or representation made by a person that is false, material, made with the person's knowledge of the falsity of the statement and made for the purpose of obtaining or denying or causing another to obtain or deny any benefit or payment in connection with an insurance transaction and such shall constitute fraud.

(e) `Immune' means that neither a civil action nor a criminal prosecution may arise from any action taken pursuant to this article unless actual malice on the part of the insurer or authorized agency against the insured or gross negligence or reckless disregard for his rights is present.

Section 38-55-540. Any person or insurer who makes a false statement or misrepresentation, and any other person knowingly, with an intent to injure, defraud or deceive, who assists, abets, solicits, or conspires with such person or insurer to make a false statement or misrepresentation, is be guilty of a:

(1) misdemeanor, for a first offense violation, if the amount of the benefit received is less than one thousand dollars. Upon conviction, the person must be punished by a fine not to exceed five hundred dollars or by imprisonment not to exceed thirty days;

(2) felony, for a first offense violation, if the amount of the benefit received is one thousand dollars or more. Upon conviction, the person must be punished by a fine not to exceed fifty thousand dollars or by imprisonment for a term not to exceed five years, or by both such fine and imprisonment;

(3) felony, for a second or subsequent violation, regardless of the amount of the benefit received. Upon conviction, the person must be punished by a fine not to exceed fifty thousand dollars or by imprisonment for a term not to exceed five years, or by both such fine and imprisonment.

Any person or insurer convicted under this section must be ordered to make full restitution to the victim or victims for any economic benefit or advantage which has been obtained by the person or insurer as a result of that violation.

Section 38-55-550. (A) In addition to any criminal liability, any person who is found by a court of competent jurisdiction to have violated any provision of this act, including Section 38-55-170, must be subject to a civil penalty for each violation as follows:

(1) for a first offense, a fine not to exceed five thousand dollars;

(2) for a second offense, a fine not less than five thousand dollars but not to exceed ten thousand dollars;

(3) for a third and subsequent offense, a fine not less than ten thousand dollars but not to exceed fifteen thousand dollars.

(B) The civil penalty shall be paid to the director of the Insurance Fraud Division to be used in accordance with subsection (D) of this section. The court may also award court costs and reasonable attorneys fees to the director. When requested by the director, the Attorney General may assign one or more deputy attorney generals to assist the bureau in any civil court proceedings against the person.

(C) Nothing in subsections (A) and (B) shall be construed to prohibit the director of the Insurance Fraud Division and the person alleged to be guilty of a violation of this act from entering into a written agreement in which the person does not admit or deny the charges but consents to payment of the civil penalty. A consent agreement may not be used in a subsequent civil or criminal proceeding relating to any violation of this act.

(D) All revenues from the civil penalties imposed pursuant to this section shall be used to provide funds for the costs of enforcing and administering the provisions of this act.

Section 38-55-560. (a) There is established in the Office of the Attorney General a division to be known as the Insurance Fraud Division, which must prosecute violations of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity. Upon receipt of any claims or allegations of violations of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity, the Attorney General shall forward the information to the State Law Enforcement Division for investigation.

(b) The Attorney General, upon receipt of any claims or allegations of violations of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity, is empowered to:

(1) refer the matter for investigation to the State Law Enforcement Division;

(2) prosecute persons determined to be in violation of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity in a court of appropriate jurisdiction; and

(3) collect fines and restitution ordered by such courts. Where deemed appropriate, the Attorney General may use the Setoff Debt Collection Act to collect fines and restitution ordered as a result of actions brought pursuant to Sections 38-55-170 and 38-55-540.

(c) The State Law Enforcement Division shall investigate thoroughly all claims or allegations of violations of Sections 38-55-170 and 38-55-540 of the 1976 Code and related criminal insurance activity received from the Attorney General pursuant to this section.

(d) The Insurance Fraud Division of the Office of Attorney General and the investigative services of the State Law Enforcement Division as provided by this section must be funded by an appropriation of not less than two hundred thousand dollars annually from the general revenues of the State derived from the insurance premium taxes collected by the Department of Insurance and/or from fines assessed under Sections 38-55-170 and 38-55-540 which shall be deposited in the general revenue fund to the credit of the Office of the Attorney General and the State Law Enforcement Division to offset the costs of this program. These monies shall be shared equally on a fifty-fifty basis by the Office of the Attorney General and the State Law Enforcement Division.

Section 38-55-570. (a) Any person, insurer, or authorized agency having reason to believe that another has made a false statement or misrepresentation or has knowledge of a suspected false statement or misrepresentation shall, for purposes of reporting and investigation, notify the Insurance Fraud Division of the Office of the Attorney General of the knowledge or belief and provide any additional information within his possession relative thereto.

(b) Upon request by the Insurance Fraud Division, any person , insurer, or authorized agency shall release to Insurance Fraud Division any or all information relating to any suspected false statement or misrepresentation, including, but not limited to:

(1) insurance policy information relevant to the investigation, including any application for such a policy;

(2) policy premium payment records, audits, or other documents which are available;

(3) history of previous claims, payments, fees, commissions, service bills, or other documents which are available; and

(4) other information relating to the investigation of the suspected false statement or misrepresentation.

(c) Any authorized agency provided with or obtaining information relating to a suspected false statement or misrepresentation as provided for above may release or provide the information to any other authorized agency. The Department of Insurance, the Department of Revenue and Taxation, Division of Motor Vehicles, and the Workers' Compensation Commission shall refer, but not adjudicate, all cases of suspected or reported false statement or misrepresentation to the Insurance Fraud Division of the Office of Attorney General for appropriate investigation or prosecution, or both.

(d) Except as otherwise provided by law, any information furnished pursuant to this section shall be privileged and shall not be part of any public record. Any information or evidence furnished to an authorized agency pursuant to this section shall not be subject to subpoena or subpoena duces tecum in any civil or criminal proceeding unless, after reasonable notice to any person, insurer, or authorized agency which has an interest in the information and after a subsequent hearing, a court of competent jurisdiction determines that the public interest and any ongoing investigation will not be jeopardized by obeyance of the subpoena or subpoena duces tecum.

Section 38-55-580. (a) A person, insurer, or authorized agency, when acting without malice or in good faith, is immune from any liability arising out of filing reports, cooperating with investigations by any authorized agency, or furnishing other information, whether written or oral, and whether in response to a request by an authorized agency or upon their own initiative, concerning any suspected, anticipated, or completed insurance fraud, when such reports or information are provided to or received by any authorized agency.

(b) Nothing herein abrogates or modifies in any way common law or statutory privilege or immunity heretofore enjoyed by any person, insurer, or authorized agency.

(c) Nothing herein limits the liability of any person or insurer who, with malice or in bad faith, makes a report of suspected fraud under the provisions of this article.

Section 38-55-590. The director of the Insurance Fraud Division in the Office of the Attorney General shall annually report to the General Assembly regarding (a) the status of matters reported to the division, if not privileged information by law; (b) the number of allegations or reports received; (c) the number of matters referred to SLED for investigation; (d) the outcome of all investigations and prosecutions under this act, if not privileged by law; (e) the total amount of fines levied by the court and paid to or deposited by the division; and (f) patterns and practices of fraudulent insurance transactions identified in the course of performing its duties. The director shall also periodically report this information to insurers transacting business in this State, health maintenance organizations transacting business in this State, and other persons, including the State of South Carolina, which provide benefits for health care in this State, whether these benefits are administered directly or through a third person."

B. The 1976 Code is amended by adding:

"Section 42-9-440. The commission shall refer all cases of suspected false statement or misrepresentation to the Insurance Fraud Division of the Office of the Attorney General for investigation and prosecution, if warranted, pursuant to the Omnibus Insurance Fraud and Reporting Immunity Act.

For the purposes of this section, `false statement and misrepresentation' means a statement or representation made by a person that is false, material, made with the person's knowledge of the falsity of the statement and made for the purpose of obtaining or denying or causing another to obtain or deny any benefit or payment in connection with an insurance transaction and such shall constitute fraud."

Amend further, by striking SECTION 20.

Amend further, by striking SECTION 21, and inserting the following:

SECTION 21. Section 42-1-380 of the 1976 Code is repealed./

Amend further, by adding an appropriately numbered SECTION to read as follows:

SECTION ___. Section 38-55-170 of the 1976 Code, as last amended by Section 121 of Act 184 of 1993, is amended to read:

"Section 38-55-170. (A) A person who knowingly causes to be presented a false claim for payment to an insurer transacting business in this State, to a health maintenance organization transacting business in this State, or to any person, including the State of South Carolina, providing benefits for health care in this State, whether these benefits are administered directly or through a third person, or who knowingly assists, solicits, or conspires with another to present a false claim for payment as described above, is guilty of a:

(1) felony if the amount of the claim is five thousand dollars or more. Upon conviction, the person must be imprisoned not more than ten years or fined not more than five thousand dollars, or both.misdemeanor, for a first offense violation, if the amount of the benefit received is less than one thousand dollars. Upon conviction, the person must be punished by a fine not to exceed five hundred dollars or by imprisonment not to exceed thirty days;

(2) felony if the amount of the claim is more than one thousand dollars but less than five thousand dollars. Upon conviction, the person must be fined in the discretion of the court or imprisoned not more than five years, or both., for a first offense violation, if the amount of the benefit received is one thousand dollars or more. Upon conviction, the person must be punished by a fine not to exceed fifty thousand dollars or by imprisonment for a term not to exceed five years, or by both such fine and imprisonment;

(3) misdemeanor triable in magistrate's court if the amount of the claim is one thousand dollars or less. Upon conviction, the person must be fined or imprisoned not more than is permitted by law without presentment or indictment by the grand jury.felony, for a second or subsequent violation, regardless of the amount of the benefit received. Upon conviction, the person must be punished by a fine not to exceed fifty thousand dollars or by imprisonment for a term not to exceed five years, or by both such fine and imprisonment.

(B) A person convicted for a violation of the law concerning a false claim under subsection (A) of this section must be ordered to make restitution to the victim or victims of such criminal act for any financial loss sustained as a result of that violation.

(C) The fines imposed pursuant to subsection (A) shall, upon collection, be used to fund "

Amend further, by adding an appropriately numbered SECTION to read as follows:

SECTION ___. Section 41-1-80 of the 1976 Code is amended to read:

"Section 41-1-80. No employer may discharge or demote any an employee because the employee has instituted or caused to be instituted, in good faith, any proceeding under the South Carolina Workers' Compensation Law (Title 42 of the 1976 Code), or has testified or is about to testify in any such proceeding, or has filed a claim for benefits under an insurance plan maintained by the employer pursuant to Section 42-1-330(B).

Any An employer who violates any a provision of this section is liable in a civil action for lost wages suffered by an employee as a result of the violation, and an employee discharged or demoted in violation of this section is entitled to be reinstated to his former position. The burden of proof is upon the employee.

Any An employer shall have as an affirmative defense to this section the following: wilful or habitual tardiness or absence from work; being disorderly or intoxicated under the influence of intoxicating alcohol or drugs while at work; destruction of any of the employer's property; failure to meet established employer work standards; malingering; embezzlement or larceny of the employer's property; violating specific written company policy for which the action is a stated remedy of the violation.

The failure of an employer to continue to employ, either in employment or at the employee's previous level of employment, an employee who receives compensation for total permanent disability, is in no manner to be considered a violation of this section.

The statute of limitations for actions under this section is one year.

For purposes of this section `drugs' mean an illicit or licit drug, a combination of licit or illicit drugs, a combination of alcohol and illicit drugs, or a combination of alcohol and a licit drug."/

Amend further, by adding an appropriately numbered SECTION to read as follows:

SECTION ___. Section 42-1-150 of the 1976 Code is amended to read:

"Section 42-1-150. (A) `Employment' subject to the provisions of this title means any service performed by an employee for the person employing him.

(1) Employment includes all employments in which four or more employees are employed by the same employer or, with respect to improvement or modification of real property, all employment in which one or more direct or indirect employees are employed by the same employer.

(2) `Improvement or modification of real property' means for-profit activities involved in the carrying out of any construction, building, renovation, alteration, moving, clearing, filling, excavation, or substantial improvement in the size or use of any structure or the appearance of any land. When appropriate to the context, `improvement or modification of real property' refers to the act of construction or the result of construction. However `improvement or modification of real property' shall not mean a landowner's act of construction or the result of construction upon his own premises, provided that he or she is not an owner as provided in Section 42-1-400.

(3) With respect to employment as referenced in subsection (B)(2), the employer shall maintain proof of workers' compensation coverage for its direct and indirect employees. Proof of coverage is a contract of workers' compensation insurance issued to the employer for coverage for the employer's direct and indirect employees.

(B) The term "employment" includes employment by the State, all political subdivisions thereof, all public and quasi-public corporations therein and all public employments in which four or more employees are regularly employed in the same business or establishment."

Amend further, by adding an appropriately numbered SECTION to read as follows:

SECTION . The 1976 Code is amended by adding:

"Section 42-1-311. (A) When an employer rejects this title pursuant to Section 42-1-310, the employer must provide evidence that the employer has, at a minimum, the insurance coverages required by this subsection for the benefit of the employer's employees. The employer must provide proof of minimum insurance coverage to the Chief Insurance Commissioner within thirty days of the notice of rejection; thereafter, the employer must annually provide proof of insurance to the Chief Insurance Commissioner. The employer's insurance company must be (i) a licensed and admitted carrier participating in the Guarantee Association Fund; or (ii) a carrier authorized to do business in the state by the South Carolina Department of Insurance. The employer's rejection of this Title continues only so long as the minimum level of insurance coverages required by this section are maintained and if the minimum coverages are not maintained, then the employer is subject to this Title. An employer who rejects the provisions of this Title and who maintains the minimal insurance coverage pursuant to this section may at any time adopt the provisions of this Title by procuring worker's compensation insurance or operating under an approved workers' compensation self-insurance plan as provided in this Title.

(1) The required minimum insurance coverages are:

Benefit CategoryMinimum Benefit Amounts

(a) accidental medical expense (per person) -- $750,000

(b) policy aggregate limit (per accident) -- $1,500,000

(c) accidental death other than death caused by or associated with an occupational disease as defined by Section 42-11-10 -- $200,000

(d) Dismemberment Benefits:

(i) Loss of both hands or both feet or sight of both eyes$200,000

(ii) Loss of one hand $100,000

(iii) Loss of one foot $100,000

(iv) Loss of one eye $100,000

(v) Loss of thumb and index finger of same hand$50,000

(e) Disability Income:

(i) Permanent partial disability benefits payable to employees act rejecting employers shall be in an amount commensurate with or greater than that provided by Section 42-9-30 for employers in the Workers' Compensation system.

(ii) Temporary total disability benefits payable as follows:

a. Temporary total disability means a non-permanent physical impairment resulting from a work-related injury and substantiated by a diagnosis from a physician which prevents an employee of the insured from performing the duties for which he is employed by the insured.

b. The weekly temporary total disability benefit under this item shall be paid at the rate of not less than seventy percent of the employee's gross average weekly earnings. The temporary total disability benefit period shall not exceed one hundred and four weeks or the period of total incapacity from work, whichever is less. For purposes of this subsection and the insurance policy, Section 42-1-40 will govern the determination of average weekly wage and Section 42-9-10 will determine the compensation rate notwithstanding the five hundred week limitation expressed therein.

(iii) Continuous total disability benefits payable as follows:

a. For the purposes of subitem (iii) regarding continuous total disability benefits, the disability must be due to a work-related injury and may result from but is not limited to:

i. Brain damage (severe neurological damage due to external trauma resulting in complete and irrecoverable loss of brain function);

ii. Coma (a profound state of unconsciousness from which the employee cannot be aroused even by powerful stimulation);

iii. Paralysis (the complete and total inability of the employee to move an entire extremity as the result of neurological damage, as determined by a licensed physician);

b. Continuous total disability means the complete, permanent, and absolute inability of the employee to:

i. perform all duties of his or her regular occupation until the weekly benefit has been paid for 104 weeks during the same period of continuous total disability, and thereafter;

ii. engage in any gainful occupation for which he or she is or can be reasonably fitted by training, education or experience.

c. The weekly total disability benefit under subitem (iii) shall be paid at a rate of no less than seventy percent of the employee's gross average weekly earnings. The weekly total disability benefit amount shall not exceed five hundred dollars for a benefit period not to exceed five hundred twenty weeks.

(B) The insurance policy required by this section must include coverage for risk pursuant to Section 42-1-440. The policy must contain provisions for indemnification of a third party when a principal contractor is liable to pay compensation under any of the Sections 42-1-400 to 42-1-450 of the 1976 Code as provided by Section 42-1-440.

(C) A declaratory judgment action in circuit court for benefits under an insurance policy maintained by an employer pursuant to this section has priority on the circuit court non-jury calendar in the same manner as condemnation cases are given priority in circuit court."/

Amend further, by adding an appropriately numbered SECTION to read as follows:

SECTION . The 1976 Code is amended by adding:

"Section 42-1-312. (A) When an employer rejects the provisions of this title pursuant to Section 42-1-310 and the employer has chosen to operate under the provisions of this section, the employer must file and maintain with the Chief Insurance Commissioner a surety bond in favor of the State executed by a surety company authorized to transact business in this state. In lieu of a bond, the employer may file with the Commissioner letters of credit; certificates of deposit held by (i) building and loan associations chartered by South Carolina, or federal savings and loan associations located within the state, in which deposits are guaranteed by the Federal Deposit Insurance Corporation, or (ii) national banks located within the state, or banks chartered by South Carolina, in which deposits are guaranteed by the Federal Deposit Insurance Corporation; or other securities which qualify as legal investments under the laws of this state for public funds and are not in default as to principal or interest.

The Commissioner may, in his sole discretion, accept a corporate guaranty in lieu of a bond, letter of credit, certificate of deposit, or other security. The corporate guaranty must meet any requirements the Commissioner imposes.

The surety bond, letter of credit, certificate of deposit, corporate guaranty, or other security must be in the amount of $500,000.

The surety bond, letter of credit, certificate of deposit, corporate guaranty, or other security must be held as security for the payment of any liability against the employer arising our of the failure of the employer to meet any liability incurred by the employer for work-related injuries sustained by an employee of the employer.

(B) The surety bond, letter of credit, certificate of deposit, corporate guaranty, or other security must be filed with the Chief Insurance Commissioner within thirty days of the notice of the employer's rejection of this title pursuant to Section 42-1-310.

(C) Any aggrieved person may institute an action in the county of the person's residence against the employer or the employer's surety, or both, to recover on the bond or to recover from the certificate of deposit, corporate guaranty, letter of credit, or other security held as security under Section 42-1-312(A)."/

Amend further, by adding an appropriately numbered SECTION to read as follows:

SECTION . 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."

Amend further, by adding an appropriately numbered SECTION to read as follows:

SECTION ____. Section 42-9-10 of the 1976 Code, as last amended by Act 389 of 1986, is amended to read:

"Section 42-9-10. When the incapacity for work resulting from an injury is total, the employer shall pay, or cause to be paid, as provided in this chapter, to the injured employee during the total disability a weekly compensation equal to sixty-six and two-thirds percent of his average weekly wages, but not less than seventy-five dollars a week so long as this amount does not exceed his average weekly salary; if this amount does exceed his average weekly salary, the injured employee may not be paid, each week, less than his average weekly salary. The injured employee may not be paid more each week than the average weekly wage in this State for the preceding fiscal year. In no case may the period covered by the compensation exceed five hundred weeks except as hereinafter provided.

The loss of both hands, arms, feet, legs, or vision in both eyes, or any two thereof, constitutes total and permanent disability to be compensated according to the provisions of this section.

In no case shall the total compensation received by an employee for successive injuries to the same body part exceed five hundred weeks. For the purpose of this section, `successive' means an injury following after a previous injury to the same body part sustained in the same employment or in another employment other than that in which he receives a subsequent injury.

Notwithstanding the five hundred week limitation prescribed in this section or elsewhere in this title, any person determined to be totally and permanently disabled who as a result of a compensable injury is a paraplegic, a quadriplegic, or who has suffered physical brain damage is not subject to the five hundred week limitation and shall receive the benefits for life.

Notwithstanding the provisions of Section42-9-301, no total lump sum payment may be ordered by the commission in any case under this section where the injured person is entitled to lifetime benefits."

Amend further, by adding an appropriately numbered SECTION to read as follows:

SECTION ____. Section 42-9-150 of the 1976 Code is amended to read:

"Section 42-9-150. If an employee has a permanent disability or has sustained a permanent injury in service in the Army or Navy of the United States or in another employment other than that in which he receives a subsequent permanent injury by accident, such as specified in Section42-9-30 or the second paragraph of Section42-9-10, he shall be entitled to compensation only for the degree of disability which would have resulted from the later accident if the earlier disability or injury had not existed, except that such employee may receive further benefits as provided by Sections42-7-310, 42-9-400 and 42-9-410 Title if his subsequent injury qualifies for additional benefits provided therein. However, in no case shall the total compensation received by an employee for successive injuries to the same body part exceed five hundred weeks. For the purpose of this section, `successive' means an injury following after a previous injury to the same body part sustained in the same employment or in another employment other than that in which he receives a subsequent injury."/

Amend further, by adding an appropriately numbered SECTION to read as follows:

SECTION ____. Section 42-9-170 of the 1976 Code is amended to read:

"Section 42-9-170. If an employee receives a permanent injury as specified in Section42-9-30 or the second paragraph of Section42-9-10 after having sustained another permanent injury in the same employment or in another employment other than that in which he receives a subsequent injury, he shall be entitled to compensation for both injuries, but the total compensation shall be paid by extending the period and not by increasing the amount of weekly compensation, and in no case exceeding five hundred weeks.

If an employee has previously incurred permanent partial disability through the loss of a hand, arm, foot, leg or eye and by subsequent accident incurs total permanent disability through the loss of another member, the employer's liability is for the subsequent injury only, except that such employee may receive further benefits as provided by Sections 42-7-310, 42-9-400 and 42-9-410 if his subsequent injury qualifies for additional benefits provided therein."/

Amend further, by adding an appropriately numbered SECTION to read as follows:

SECTION ____. Section 42-15-40 of the 1976 Code, as last amended by Act 612 of 1990, is amended to read:

"Section 42-15-40. The right to compensation under this title is barred unless a claim is filed with the commission (1) within two years after from the date of an accident, not the date the employee discovered the injury except as otherwise specified by this section; or (2) if death resulted from accident, within two years of the date of death. However, for occupational disease claims the two-year period does not begin to run until the employee concerned has been diagnosed definitively as having an occupational disease and has been notified of the diagnosis. For the death or injury of a member of the South Carolina National Guard, as provided for in Section 42-7-67, the time for filing a claim is two years after the accident or one year after the federal claim is finalized, whichever is later. For a medical misdiagnosis, the two-year period does not begin to run until the date the employee concerned has been notified of a misdiagnosis regarding the injury resulting from an accident. The filing required by this section may be made by registered mail, and the registry within the time periods set forth in this section constitutes timely filing."/

Amend further, by striking SECTION 22, and inserting the following:

SECTION 22. Except as may otherwise be provided in this act, this act takes effect upon approval by the Governor. Employers who have filed with the Workers' Compensation Commission a notice to reject the provisions of Title 42 before the effective date of this act will have until six months after the effective date of this act to comply with the provisions of this act relating to the rejection of Title 42. Any employer who has rejected the terms of this title prior to approval of this act and has procured another form of employee benefits insurance shall comply, not later than six months after the effective date of this act, with the provisions of this act relating to the rejection of Title 42./

Renumber sections to conform.

Amend title to conform.

THOMAS C. ALEXANDER, for Committee.

STATEMENT OF ESTIMATED FISCAL IMPACT

1. Estimated Cost to State-First Year$see below

2. Estimated Cost to State-Annually

Thereafter$see below

Senate Bill 540, as amended by the House Labor and Commerce Subcommittee, amends Title 42 of the South Carolina Code of Laws, 1976, by changing and adding several sections to the Workers Compensation Law; amends Chapter 55 of Title 38 of the Code by adding Article 5, Insurance Fraud and Reporting Immunity Act; amends Section 42-1-311 and 42-1-312 by providing stipulations for those who want to opt-out of the Workers' Compensation System.

Senate Bill 540, as amended, would not affect the collection of revenues from the workers' compensation premium or self-insurance taxes. The Workers' Compensation Commission states that passage of this bill would have a positive impact on the administration and operation of the Workers' Compensation System.

Adding Article 5 to Chapter 55 of Title 38 will create the "Insurance Fraud and Reporting Immunity Act" thereby establishing an insurance fraud unit within the Attorney General's Office to prosecute insurance fraud in South Carolina. Section 38-55-560 requires investigations of alleged insurance fraud to be handled by the State Law Enforcement Division (SLED). Funding for the insurance fraud unit within the Attorney General's Office and the investigative unit at SLED will come from: (1) $200,000 appropriated from general revenues, derived from insurance premium taxes; and, (2) fines assessed and collected in successful prosecution of insurance fraud cases.

Sections 38-55-540 and 38-55-550 establish fines and civil penalties for violating this Act. Fines are not to exceed $50,000 upon conviction of insurance fraud.

The Attorney General's Office estimates a cost of $373,210 with 7 positions will be required to establish the Insurance Fraud Division with $326,000 in recurring costs. Revenue estimates generated by convictions cannot be determined by the Attorney General's Office since authority regarding penalties does not reside with them.

ATTORNEY GENERAL'S COST

Personal Service $196,000

(3 attorneys; 3 clerical;

1 paralegal)

Employer Contributions (25%) 49,000

Operating - Recurring 81,000

TOTAL RECURRING $326,000

Operating - Non-Recurring 47,210

TOTAL COST - ATTY. GEN. OFFC. $373,210

Section 38-55-560 requires SLED to investigate all claims or allegations of violations of Sections 38-55-170 and 38-55-540 of the Code of Laws, 1976, and related criminal insurance activity received from the Attorney General pursuant to this section. Funding for investigative services by SLED must be provided by appropriated funds derived from the insurance premium taxes and/or fines assessed under Sections 38-55-170 and 38-55-540 and shared equally on a fifty-fifty basis with the Office of Attorney General.

SLED estimates the proposed legislation will cost between $400,000-$500,000 which includes 5 positions. Identified below are SLED's approximate costs required to implement Senate Bill 540. First year costs are estimated at $469,716 with recurring costs of $276,337.

STATE LAW ENFORCEMENT DIVISION'S COST

Personal Service $155,163

(4 special agents III;

1 adm asst II)

Employer Contributions 45,059

Operating - Recurring 76,115

TOTAL RECURRING $276,337

Operating - Non-Recurring 193,379

TOTAL COST - SLED $469,716

Sections 42-1-311 and 42-1-312 require the Department of Insurance to assume new functions and responsibilities. The Department of Insurance would assume oversight and regulatory responsibility for the operation of the workers' compensation opt-out program. This bill provides that each employer who opts out of the protection of the workers' compensation system must provide notification of this decision to the Chief Insurance Commissioner. The employer is required to purchase and maintain specified statutory insurance coverage in lieu of workers' compensation coverage and must annually provide proof of such insurance to the Chief Insurance Commissioner. Any employer who rejects workers' compensation coverage must additionally file and maintain with the Chief Insurance Commissioner some form of financial guaranty to be held as security for the payment of any liability incurred by the employer for work-related injuries sustained by an employee.

The Department of Insurance estimates that to effectively administer this program would require the creation of a new division with first year costs of $209,394 and 4 positions with recurring costs of $169,704.

DEPARTMENT OF INSURANCE'S COST

Personal Service $125,762

(1 supv; 2 policy analysts;

1 clerical)

Employer Contributions (25%) 31,442

Operating - Recurring 12,500

TOTAL RECURRING $169,704

Operating - Non-Recurring 39,690

TOTAL COST - DEPART. OF INSUR. $209,394

Undeterminable variables affecting ultimate costs to the General Fund are: (1) estimate of actual fraud fines collected; (2) estimate of actual costs incurred by the Attorney General, SLED, and Department of Insurance in the operation of these new duties; and, (3) the current use of insurance premium taxes directed to the General Fund.

Senate Bill 540, as amended by subcommittee, designates $200,000 currently utilized by the General Fund and redirects it to the Insurance Fraud Division in the Attorney General's Office and to investigative services of the State Law Enforcement Division.

Prepared By: Approved By:

Cheryl H. Morris George N. Dorn, Jr.

State Budget Analyst State Budget Division

Kenneth Brown

State Budget Analyst

A BILL

TO AMEND SECTION 42-1-40, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE DEFINITION OF "AVERAGE WEEKLY WAGES" UNDER THE WORKERS' COMPENSATION LAW, SO AS TO DELETE CERTAIN LANGUAGE AND PROVISIONS AND PROVIDE THAT AVERAGE WEEKLY WAGE IS CALCULATED BY TAKING THE TOTAL WAGES PAID FOR THE LAST FOUR QUARTERS IMMEDIATELY PRECEDING THE QUARTER IN WHICH THE INJURY OCCURRED DIVIDED BY FIFTY-TWO OR BY THE ACTUAL NUMBER OF WEEKS FOR WHICH WAGES WERE PAID, WHICHEVER IS LESS; TO AMEND SECTION 42-1-160, RELATING TO THE DEFINITIONS OF "INJURY" AND "PERSONAL INJURY" FOR PURPOSES OF THE WORKERS' COMPENSATION LAW, SO AS TO ADD PROVISIONS RELATING TO WORK-RELATED STRESS; TO AMEND SECTION 42-1-310, RELATING TO THE PRESUMPTION OF ACCEPTANCE OF THE PROVISIONS OF TITLE 42 (WORKERS' COMPENSATION), SO AS TO DELETE CERTAIN LANGUAGE AND TO DEFINE "EMPLOYMENT" AND "IMPROVEMENT OR MODIFICATION OF REAL PROPERTY"; TO AMEND THE 1976 CODE BY ADDING SECTION 42-1-315 SO AS TO PROVIDE THAT OFFICERS OF A CORPORATION ARE EMPLOYEES UNDER TITLE 42 AND MAY REJECT COVERAGE BY GIVING CERTAIN NOTICE; TO AMEND SECTION 42-1-320, RELATING TO THE PROVISION THAT PUBLIC ENTITIES AND THEIR EMPLOYEES CANNOT EXEMPT THEMSELVES FROM TITLE 42 (WORKERS' COMPENSATION), SO AS TO DELETE PROVISIONS AND PROVIDE THAT THE STATE, ITS MUNICIPAL CORPORATIONS AND POLITICAL SUBDIVISIONS THEREOF, AND SUCH EMPLOYEES, ARE SUBJECT TO TITLE 42; TO AMEND SECTION 42-1-330, RELATING TO WAIVER OF EXEMPTION UNDER THE WORKERS' COMPENSATION LAW, SO AS TO, AMONG OTHER THINGS, INCLUDE OFFICER OF A CORPORATION UNDER THE PROVISIONS OF THIS SECTION; TO AMEND THE 1976 CODE BY ADDING SECTION 42-1-335 SO AS TO PROVIDE, AMONG OTHER THINGS, THAT AN EMPLOYER WHO IS EXEMPT FROM TITLE 42 ELECTS TO ADOPT THE TITLE BY OBTAINING WORKERS' COMPENSATION INSURANCE OR BY OPERATING UNDER AN APPROVED SELF-INSURANCE PROGRAM; TO AMEND SECTION 42-1-340, RELATING TO THE EFFECTIVE DATE OF AND THE MANNER OF GIVING NOTICE OF NONACCEPTANCE OR WAIVER WITH RESPECT TO TITLE 42 (WORKERS' COMPENSATION), SO AS TO DELETE CERTAIN LANGUAGE AND TO REFERENCE SECTION 42-1-315; TO AMEND SECTION 42-1-510, RELATING TO DEFENSES WHICH ARE NOT AVAILABLE TO AN EMPLOYER WHO IS NOT UNDER TITLE 42 (WORKERS' COMPENSATION), SO AS TO PROVIDE THAT COMPARATIVE NEGLIGENCE DOES NOT APPLY, AND FURTHER DEFINE "EMPLOYER" FOR PURPOSES OF DEFENDING AN ACTION AT LAW; TO AMEND SECTION 42-1-520, RELATING TO DEFENSES WHICH ARE AVAILABLE TO AN EMPLOYER OPERATING UNDER TITLE 42 (WORKERS' COMPENSATION) WHEN THE EMPLOYEE IS NOT SO OPERATING, SO AS TO DELETE REFERENCES TO "EMPLOYEE" AND SUBSTITUTE THEREFOR "OFFICER OF A CORPORATION"; TO AMEND THE 1976 CODE BY ADDING SECTION 42-3-195 SO AS TO PROVIDE, AMONG OTHER THINGS, THAT THE WORKERS' COMPENSATION COMMISSION SHALL COOPERATE WITH AND PROVIDE INFORMATION AND STATISTICS TO ANY AGENCY OF THE STATE OR OF THE UNITED STATES CHARGED WITH THE DUTY OF ENFORCING ANY LAW SECURING SAFETY AGAINST INJURY IN ANY EMPLOYMENT COVERED BY TITLE 42 OR WITH ANY STATE OR FEDERAL AGENCY ENGAGED IN ENFORCING ANY LAWS TO ASSURE SAFETY FOR EMPLOYEES; TO AMEND SECTION 42-5-40, RELATING TO THE PENALTY FOR FAILURE TO SECURE PAYMENT OF WORKERS' COMPENSATION, SO AS TO DELETE CERTAIN LANGUAGE AND PROVIDE A SEPARATE PENALTY FOR WILFUL OR REPEATED VIOLATIONS; TO AMEND SECTION 42-7-200, AS AMENDED, RELATING TO THE WORKERS' COMPENSATION UNINSURED EMPLOYERS' FUND, SO AS TO PROVIDE THAT THE REMEDY PROVIDED IN THIS SECTION SHALL NOT APPLY UNTIL ALL AVAILABLE ADMINISTRATIVE REMEDIES UNDER TITLE 42 AGAINST ANY INSURED STATUTORY EMPLOYER HAVE BEEN EXHAUSTED; TO AMEND SECTION 42-9-220, RELATING TO THE MANNER IN WHICH WORKERS' COMPENSATION SHALL BE PAID, SO AS TO PROVIDE THAT COMPENSATION MUST BE PAID BY A CHECK AND NOT A DRAFT; TO AMEND SECTION 42-9-360, RELATING TO ASSIGNMENTS OF WORKERS' COMPENSATION AND EXEMPTIONS FROM CLAIMS OF CREDITORS AND TAXES, SO AS TO ADD CERTAIN PROVISIONS, INCLUDING A PROVISION THAT IT SHALL BE UNLAWFUL FOR AN AUTHORIZED HEALTH CARE PROVIDER TO DEMAND OF OR CAUSE A DEMAND TO BE MADE ON A WORKERS' COMPENSATION CLAIMANT PRIOR TO THE FINAL ADJUDICATION OF HIS CLAIM, AND PROVIDE FOR CERTAIN MONETARY PENALTIES TO BE PAID TO THE WORKERS' COMPENSATION CLAIMANT; TO AMEND THE 1976 CODE BY ADDING SECTION 42-9-395 SO AS TO ADD PROVISIONS RELATING TO SETTLEMENT AGREEMENTS PROVIDING FOR STRUCTURED SETTLEMENTS IN WORKERS' COMPENSATION CASES; TO AMEND SECTION 42-17-90, RELATING TO REVIEW OF A WORKERS' COMPENSATION AWARD ON A CHANGE OF CONDITION, SO AS TO PROVIDE FOR THE ENTERING OF AN ORDER RATHER THAN THE MAKING OF AN AWARD, AND ADD CERTAIN PROVISIONS, INCLUDING A PROVISION THAT THE WORKERS' COMPENSATION COMMISSION SHALL PROVIDE BY REGULATION THE METHOD AND PROCEDURE BY WHICH AN AWARD OR ORDER COMMENCING TEMPORARY COMPENSATION AND ENTERED WITHOUT AN EVIDENTIARY HEARING MAY BE SET ASIDE FOR FRAUD; TO AMEND SECTION 42-19-10, AS AMENDED, RELATING TO EMPLOYERS' RECORDS AND REPORTS OF INJURIES UNDER THE WORKERS' COMPENSATION LAW, SO AS TO DELETE THE PROVISIONS OF THE SECTION AND ADD PROVISIONS, INCLUDING A PROVISION DETAILING THE CIRCUMSTANCES UNDER WHICH AN EMPLOYER IS NOT REQUIRED TO MAKE A WRITTEN REPORT; TO AMEND CHAPTER 55 OF TITLE 38, RELATING TO CONDUCT OF INSURANCE BUSINESS, BY ADDING ARTICLE 5 SO AS TO ENACT THE "OMNIBUS INSURANCE FRAUD AND REPORTING IMMUNITY ACT", INCLUDING PROVISIONS FOR, AMONG OTHER THINGS, THE ESTABLISHMENT IN THE OFFICE OF THE ATTORNEY GENERAL OF AN INSURANCE FRAUD DIVISION AND THE CREATION OF A FELONY OFFENSE AND THE PROVISION OF PENALTIES THEREFOR; TO AMEND THE 1976 CODE BY ADDING SECTION 42-9-440 SO AS TO PROVIDE THAT THE WORKERS' COMPENSATION COMMISSION MAY REFER ALL CASES OF SUSPECTED FRAUD TO THE INSURANCE FRAUD DIVISION OF THE OFFICE OF THE ATTORNEY GENERAL FOR INVESTIGATION AND PROSECUTION, IF WARRANTED, PURSUANT TO THE OMNIBUS INSURANCE FRAUD AND REPORTING IMMUNITY ACT; TO AMEND SECTION 16-1-10, AS AMENDED, RELATING TO CRIMES CLASSIFIED AS FELONIES, SO AS TO INCLUDE THE OFFENSE IN SECTION 38-55-540; AND TO REPEAL SECTION 42-1-380, RELATING TO THE WAIVER OF EXEMPTION BY EMPLOYER WITH RESPECT TO THE MANDATORY PROVISIONS OF TITLE 42 (WORKERS' COMPENSATION) AND SECTION 42-1-530, RELATING TO DEFENSES WHICH ARE NOT AVAILABLE TO AN EMPLOYER WHEN NEITHER HE NOR THE EMPLOYEE IS UNDER TITLE 42.

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

SECTION 1. The first paragraph of Section 42-1-40 of the 1976 Code is amended to read:

"`Average weekly wages' means the earnings of the injured employee in the employment in which he was working at the time of the injury during the period of fifty-two weeks immediately preceding the date of the injury, including the subsistence allowance paid to veteran trainees by the United States Government if the amount of such allowance is reported monthly by such trainee to his employer, divided by fifty-two Average weekly wage is calculated by taking the total wages paid for the last four quarters immediately preceding the quarter in which the injury occurred as reported on the Employment Security Commission's Employer Contribution Reports divided by fifty-two or by the actual number of weeks for which wages were paid, whichever is less. If the injured employee lost more than seven consecutive calendar days at one or more times during such period, although not in the same week, then the earnings for the remainder of such fifty-two weeks shall be divided by the number of weeks remaining after the time so lost has been deducted. When the employment prior to the injury extended over a period of less than fifty-two weeks, the method of dividing the earnings during that period by the number of weeks and parts thereof during which the employee earned wages shall be followed, so long as results fair and just to both parties will be obtained. Where, by reason of a shortness of time during which the employee has been in the employment of his employer or the casual nature or terms of his employment, it is impracticable to compute the average weekly wages as defined in this section, regard is to be had to the average weekly amount which during the fifty-two weeks previous to the injury was being earned by a person of the same grade and character employed in the same class of employment in the same locality or community."

SECTION 2. Section 42-1-160 of the 1976 Code is amended by adding:

"Work-related stress unaccompanied by physical injury and resulting in mental illness or injury is not a personal injury unless it is established that the stressful employment conditions causing the mental injury were extraordinary and unusual in comparison to the normal conditions of the employment.

Work-related stress unaccompanied by physical injury is not considered compensable if it results from any event which is incidental to normal employer/employee relations, including, but not limited to, personnel actions by the employer such as disciplinary actions, work evaluations, transfers, promotions, demotions, salary reviews, or terminations, except when such actions are taken in an extraordinary and unusual manner."

SECTION 3. Section 42-1-310 of the 1976 Code is amended to read:

"Section 42-1-310. (A) Every employer and employee, except as stated in this chapter, shall be presumed to have accepted the provisions of this title respectively to pay and accept compensation for personal injury or death by accident arising out of and in the course of the employment and shall be bound thereby, unless he shall have given, prior to any accident resulting in injury or death, notice to the contrary in the manner provided in S 42-1-340.

(B) `Employment' subject to the provisions of this title means any service performed by an employee for the person employing him.

SECTION 4. The 1976 Code is amended by adding:

SECTION 5. Section 42-1-320 of the 1976 Code is amended to read:

"Section 42-1-320. Neither the State nor any municipal corporation, nor any political subdivision thereof, nor any employee of the State or of any such corporation or subdivision may reject the provisions of this Title relative to payment and acceptance of compensation and the provisions of SS 42-1-330, 42-1-340, 42-1-380, 42-1-390 and 42-1-460 to 42-1-530 shall not apply to them. The State, its municipal corporations and political subdivisions thereof, and the employees of the State or its municipal corporations and political subdivisions are subject to this title."

SECTION 6. Section 42-1-330 of the 1976 Code is amended to read:

"Section 42-1-330. Either an An employer or employee officer of a corporation who has exempted himself by proper notice from the operation of this title may at any time waive such exemption and thereby accept the provisions of this title by giving notice as provided in Section 42-1-340 prescribed by the commission."

SECTION 7. The 1976 Code is amended by adding:

"Section 42-1-335. An employer who is exempt from this title elects to adopt the title by obtaining workers' compensation insurance or by operating under an approved self-insurance program. If an employer exempt from this title adopts this title, the employer is deemed to continue to operate under this title until a notice to the contrary is filed in accordance with Section 42-1-390."

SECTION 8. Section 42-1-340 of the 1976 Code is amended to read:

"Section 42-1-340. The notices referred to in Sections 42-1-310 42-1-315 and 42-1-330 shall not be effective as to any accident resulting in injury or death that occurs within thirty days after the giving of any such notice; provided, that if any such accident occurs less than thirty days after the date of employment, notice of such exemption given at the time of employment shall be effective as to such accident. Any such notice shall be in writing or print, in substantially the form prescribed by the commission, and shall be given by the employer by posting it in a conspicuous place in the shop, plant, office, room or place in which the employee is employed or by serving it personally upon him and shall be given by the employee by sending it in registered letter, addressed to the employer at his last-known residence or place of business, or by giving it personally to the employer or any of his agents upon whom summons in a civil action may be served under the laws of the State.

A copy of the notice in the prescribed form shall be filed with the commission. In any suit by an employer or an employee who has exempted himself by proper notice from the application of this title a copy of such notice duly certified by the commission shall be admissible in evidence as proof of such exemption."

SECTION 9. Section 42-1-510 of the 1976 Code is amended to read:

"Section 42-1-510. An employer who elects not to operate under is not exempt from this title and who fails to insure his workers' compensation liabilities shall not, in any suit at law instituted by an employee subject to this title to recover damages for personal injury or death by accident, be permitted to defend any such suit at law upon any or all of the following grounds:

(1) that the employee was negligent; nor shall comparative negligence apply;

(2) that the injury was caused by the negligence of a fellow employee; or

(3) that the employee had assumed the risk of the injury."

SECTION 10. Section 42-1-520 of the 1976 Code is amended to read:

"Section 42-1-520. An officer of a corporation employee who elects not to operate under this title, shall, in any action to recover damages for personal injury or death brought against an employer accepting the compensation provisions of this title, proceed at common law and the employer may avail himself of the defenses of contributory comparative negligence, negligence of a fellow servant, and assumption of risk, as such defenses exist at common law."

SECTION 11. The 1976 Code is amended by adding:

"Section 42-3-195. (A) The commission shall cooperate with and provide information and statistics to any agency of this State or of the United States charged with the duty of enforcing any law securing safety against injury in any employment covered by this title or with any state or federal agency engaged in enforcing any laws to assure safety for employees.

(B) Upon trial of any action other than a workers' compensation claim, such information shall not be placed in evidence or be permitted to be argued to the court or the jury."

SECTION 12. The first paragraph of Section 42-5-40 of the 1976 code is amended to read:

"Any employer required to secure the payment of compensation under this title who refuses or neglects to secure such compensation shall be punished by a fine of ten cents for each employee at the time of the insurance becoming due, but not less than one dollar nor more than fifty dollars for each day of such refusal or neglect, or, in cases of wilful or repeated violations, one hundred dollars for each day the employer fails to secure the necessary coverage, and until the same ceases, and he shall be liable during continuance of such refusal or neglect to an employee either for compensation under this title or at law in an action instituted by the employee or his personal representative against such employer to recover damages for personal injury or death by accident and in any such action such employer shall not be permitted to defend upon any of the grounds mentioned in Section 42-1-510."

SECTION 13. The second paragraph of Section 42-7-200(A) of the 1976 Code, as last amended by Act 589 of 1990, is further amended to read:

"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. The remedy provided in this section shall not apply until all available administrative remedies under this title against any insured statutory employer have been exhausted."

SECTION 14. Section 42-9-220 of the 1976 Code is amended to read:

"Section 42-9-220. (A) Compensation under this title shall be paid periodically, promptly, and directly to the person entitled thereto, unless otherwise specifically provided.

(B) Compensation must be paid by a check and not a draft."

SECTION 15. Section 42-9-360 of the 1976 Code is amended to read:

"Section 42-9-360. (A) No claim for compensation under this title shall be assignable and all compensation and claims therefor shall be exempt from all claims of creditors and from taxes.

(B) It shall be unlawful for an authorized health care provider to actively pursue collection procedures against a workers' compensation claimant prior to the final adjudication of the claimant's claim. Nothing in this section shall be construed to prohibit the collection from and demand for collection from a workers' compensation insurance carrier or self-insured employer. Violation of this section, after written notice to the provider from the claimant or his representative that adjudication is ongoing, shall result in a penalty of five hundred dollars payable to the workers' compensation claimant.

(C) It shall be unlawful for an authorized health care provider to actively pursue collection procedures against a workers' compensation claimant for charges in excess of the fee or charge provided by the commission's applicable fee or charge schedule, or to charge any fee or charge in excess of the fee or charge provided by such schedule. Violation of this section after written notice to the provider from the claimant or his representative that adjudication is ongoing shall result in a penalty of five hundred dollars payable to the workers' compensation claimant.

(D) Payment to an authorized health care provider for services shall be made timely but no later than thirty days from the date the authorized health care provider tenders request for payment to the employer's representative, unless the commission has received a request to review the medical bill."

SECTION 16. The 1976 Code is amended by adding:

"Section 42-9-395. If a settlement agreement provides for a structured settlement to be paid by a party other than the self-insured employer or the insurer, then the agreement shall contain a provision that the self-insured employer or insurer will be liable for the agreement in the event of the default or failure of that third party to pay."

SECTION 17. Section 42-17-90 of the 1976 Code is amended to read:

"Section 42-17-90. (A) Upon its own motion or upon the application of any party in interest on the ground of a change in condition, the commission may review any award and on such review may enter an order make an award ending, diminishing, or increasing the compensation previously awarded, subject to the maximum or minimum provided in this title, and shall immediately send to the parties a copy of the order changing the award. No such review shall affect such award as regards any monies paid and no such review shall be made after twelve months from the date of the last payment of compensation pursuant to an award under this title.

(B) The commission shall provide by regulation the method and procedure by which an award or order commencing temporary compensation and entered without an evidentiary hearing may be set aside for fraud but such regulation must provide for an evidentiary hearing. Further, the commission may not entertain any application to set aside for fraud an award or order commencing temporary compensation and entered without an evidentiary hearing unless and until the employer or carrier is current with all payments due.

(C) The filing required by this section may be made by certified mail, return receipt requested, in which case the date of filing is the date of mailing as shown by the return receipt and the same shall constitute filing within the time period set forth in this section."

SECTION 18. Section 42-19-10 of the 1976 Code, as last amended by Section 15, Part II, of Act 612 of 1990, is further amended to read:

"Section 42-19-10. Every employer shall keep a record of all injuries, fatal or otherwise, received by his employees in the course of their employment on blanks approved by the commission. Within ten days after the occurrence and knowledge of it, as provided in Section 42-15-20, of an injury to an employee requiring medical or surgical attention, a report of the injury must be made in writing and mailed to the commission on blanks approved by it for this purpose. However, for the injury of a South Carolina National Guard member as provided for in Section 42-7-67, the ten days must be counted from the date the employer, the South Carolina National Guard, has knowledge that the federal government has denied benefits to the injured guard member or that benefits or additional benefits may be due under the provisions for South Carolina Workers' Compensation.

Such report shall contain the name, nature and location of the business of the employer and the name, age, sex, wages and occupation of the injured employee and shall state the date and hour of the accident causing injury, the nature and cause of the injury and such other information as may be required by the Commission.

An injury for which there is no compensable lost time or permanency and the medical treatment does not exceed an amount specified by regulation of the Workers' Compensation Commission may be filed in summary on a form and at a time prescribed by the commission. Provided, however, this form may not be used to report an injury to the back.

Every employer shall keep a record of all injuries, fatal or otherwise, received by his employees in the course of their employment on forms approved by the commission.

If the injury requires minimal medical attention at a cost not to exceed an amount specified by regulation of the Workers' Compensation Commission, does not cause more than one lost workday or permanency, the employer is not required to make a written report to the commission or their insurance carrier, provided the employer maintains a record as prescribed by the commission and pays directly the incurred cost of the resulting medical attention.

All other injuries must be reported in writing to the commission according to the following guidelines:

(1) An injury for which there is no compensable lost time or permanency and the medical treatment does not exceed an amount specified by regulation of the Workers' Compensation Commission must be reported annually on a form and at a time prescribed by the commission.

(2) An injury involving compensable lost time, medical attention in excess of the limit established by commission regulation in (1) above, or the possibility of permanency must be reported within ten business days after the occurrence and knowledge of it, as provided in Section 42-15-20, on a form or in an electronic format prescribed by the commission.

However, for the injury of a South Carolina National Guard member as provided for in Section 42-7-67, the reporting periods must be counted from the date the employer, the South Carolina National Guard, has knowledge that the federal government has denied benefits to the injured guard member or that benefits or additional benefits may be due under the provisions of Title 42."

SECTION 19. A. Chapter 55 of Title 38 of the 1976 Code is amended by adding:

"Article 5

Insurance Fraud and

Reporting Immunity

Section 38-55-510. This article is known and may be cited as the `Omnibus Insurance Fraud and Reporting Immunity Act'.

Section 38-55-520. The purpose of this article is to define what constitutes insurance fraud; to facilitate the detection of insurance fraud; to allow reporting of suspected insurance fraud; to grant immunity for reporting suspected insurance fraud; to prescribe penalties for insurance fraud; to require restitution for victims of insurance fraud; and to establish a division within the Office of the Attorney General to prosecute insurance fraud.

Section 38-55-530. As used in this article:

(a) `Authorized agency' means any duly constituted criminal investigative department or agency of the United States or of this State; the Department of Insurance; the Department of Highways and Public Transportation; the Workers' Compensation Commission; the Office of the Attorney General of this State; or the prosecuting attorney of any judicial circuit, county, municipality, or political subdivision of this State or of the United States, and their respective employees or personnel acting in their official capacity.

(b) `Insurer' shall have the meaning set forth in Section 38-1-20(25) and includes any authorized insurer, self-insurer, reinsurer, broker, producer, or any agent thereof.

(d) `Insurance fraud' means any fraudulent conduct, act, or omission committed by any person in connection with an insurance transaction which is designed or intended to obtain an undeserved economic advantage or benefit if such conduct, act, or omission is done knowingly or with an intent to injure, defraud, or deceive.

Section 38-55-540. Any person or insurer who commits an insurance fraud, and any other person knowingly, with an intent to injure, defraud or deceive, who assists, abets, solicits, or conspires with such person or insurer to commit an insurance fraud, shall be guilty of a felony and, upon conviction thereof, shall be punished by a fine not to exceed fifty thousand dollars or by imprisonment for a term not to exceed five years, or by both such fine and imprisonment. When appropriate, any person or insurer convicted of an insurance fraud may be required to make full restitution of any economic benefit or advantage which has been obtained through insurance fraud.

Section 38-55-550. (a) The Attorney General, upon receipt of any allegation of insurance fraud, is empowered to:

(1) perform investigations;

(2) prosecute persons determined to be in violation of Section 38-55-540 in a court of appropriate jurisdiction; and

(3) collect fines and restitution ordered by such courts.

(b) There is established in the Office of the Attorney General a division to be known as the Insurance Fraud Division, which shall prosecute insurance fraud. The Insurance Fraud Division of the Office of Attorney General must be funded by an appropriation of not less than two hundred thousand dollars annually from the general revenues of the State derived from the insurance premium taxes collected by the Department of Insurance and/or from fines assessed under Section 38-55-540 which shall be deposited in the general revenue fund to the credit of the Office of the Attorney General to offset the costs of this program.

(c) Where deemed appropriate, the Attorney General may use the Setoff Debt Collection Act to collect fines and restitution ordered as a result of actions brought pursuant to Section 38-55-540.

Section 38-55-560. (a) Any person or insurer having reason to believe that another has committed an insurance fraud or has knowledge of a suspected insurance fraud shall, for purposes of reporting and investigation, notify an authorized agency of the knowledge or belief and provide any additional information within his possession relative thereto.

(b) Upon request by an authorized agency, any person or insurer may release to such authorized agency any or all information relating to any suspected insurance fraud, including, but not limited to:

(1) insurance policy information relevant to the investigation, including any application for such a policy;

(2) policy premium payment records, audits, or other documents which are available;

(3) history of previous claims, payments, fees, commissions, service bills, or other documents which are available; and

(4) other information relating to the investigation of the suspected insurance fraud.

(c) Any authorized agency provided with or obtaining information relating to a suspected insurance fraud as provided for above may release or provide the information to any other authorized agency. The Department of Insurance, the Department of Highways and Public Transportation, and the Workers' Compensation Commission shall refer, but not adjudicate, all cases of suspected or reported insurance fraud to the Insurance Fraud Division of the Office of Attorney General for appropriate investigation or prosecution, or both.

Section 38-55-570. (a) No person, insurer, or authorized agency, when acting without malice or in good faith, shall be subject to any civil or criminal liability by virtue of filing reports, cooperating with investigations by any authorized agency, or furnishing other information, whether written or oral, and whether in response to a request by an authorized agency or upon their own initiative, concerning any suspected, anticipated, or completed insurance fraud, when such reports or information are provided to or received by any authorized agency.

(b) Nothing herein abrogates or modifies in any way common law or statutory privilege or immunity heretofore enjoyed by any person, insurer, or authorized agency.

(c) Nothing herein limits the liability of any person or insurer who, with malice or in bad faith, makes a report of suspected fraud under the provisions of this article."

B. The 1976 Code is amended by adding:

"Section 42-9-440. The commission may refer all cases of suspected fraud to the Insurance Fraud Division of the Office of the Attorney General for investigation and prosecution, if warranted, pursuant to the Omnibus Insurance Fraud and Reporting Immunity Act."

SECTION 20. The felony created by Section 38-55-540 of the 1976 Code, as contained in Section 19 of this act, is added to the list of crimes classified as felonies pursuant to Section 16-1-10 of the 1976 Code.

SECTION 21. Section 42-1-380 and 42-1-530 of the 1976 Code are repealed.

SECTION 22. Except as may otherwise be provided in this act, this act takes effect upon approval by the Governor.

-----XX-----