GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

H	2 

HOUSE BILL 184*
Committee Substitute Favorable 3/6/95

Short Title:  St. Employee Liab. Trust Fund.	(Public)

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Sponsors:

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Referred to:  

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February 15, 1995

A BILL TO BE ENTITLED
AN ACT TO AUTHORIZE THE CREATION OF SELF-INSURANCE TRUST FUNDS TO PROVIDE PROFESSIONAL LIABILITY INSURANCE COVERAGE FOR STATE EMPLOYEES AND TO APPROPRIATE FUNDS TO A RESERVE FUND TO PROVIDE THE INITIAL FUNDING IF THE TRUST IS CREATED.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 58-32-15 reads as rewritten:
"§ 58-32-15.  Professional liability insurance for State officials and employees.
(a)	The Commission may provide professional liability insurance covering the officers and employees, or any group thereof, of any State department, institution or agency or any community college or technical college, through the purchase of contracts of insurance or the creation of self-insurance trusts, or through a combination of insurance and self-insurance trusts, as coverage in excess of the protection provided for in Article 31 and Article 31A of Chapter 143 of the General Statutes.  Subject to the other provisions of this Article, the coverage to be provided through insurance or self-insurance trusts, or both, may include provisions for the payment of litigation expenses, attorneys' fees, civil judgments, or settlement amounts for claims or actions to which this Article applies.  Premiums for insurance or amounts necessary to fund self-insurance trusts shall be paid by the covered department, institution, agency, or community college or technical college at rates established by the Commission, from funds made available to that department, institution, agency, or community college or technical college for the purpose, as provided in G.S. 58-32-17.
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Sec. 2.  Article 32 of Chapter 58 of the General Statutes is amended by adding the following new sections to read:
"§  58-32-16.  Establishment and administration of self-insurance trust funds; defense of actions against covered persons.
(a)	In the event the Commission elects to act as self-insurer of a program of liability insurance, it may establish one or more insurance trust accounts to be used only for the purposes authorized by this Article.  Any insurance trust account established by the Commission shall be interest bearing, with interest accrued returned to the account. Such a program of liability insurance is not subject to regulation by the Commissioner of Insurance, but shall be subject to audit as provided in Article 5A of Chapter 147  of the General Statutes.  The Commission may receive and appropriate or transfer funds made for the purposes of this section and deposit these funds in the insurance trust accounts.  All expenses incurred in collecting, receiving, and maintaining these funds and in otherwise administering the self-insured program of liability insurance shall be paid from the insurance trust accounts.
(b)	Subject to this Article, the Commission may adopt rules for the establishment and administration of the self-insured program of liability insurance, including, but not limited to, rules concerning the eligibility for and terms and conditions of participation in the program, the assessment of charges against participants, the management of the insurance trust accounts, and the payment of claims.  The Attorney General shall negotiate, settle, and litigate claims under this section as provided in Article 31A of Chapter 143 of the General Statutes.
(c)	The Commission may create a Liability Insurance Trust Fund Council composed of five members.  One member each shall be appointed by the Attorney General, State Auditor, Commissioner of Insurance, the State Treasurer, and the State Budget Officer.  Subject to this Article and the rules adopted by the Commission pursuant to this section, the Commission may delegate to this Council the responsibility and authority for the administration of the self-insured liability insurance program and of the insurance trust accounts established pursuant to this Article.  Council members shall receive no compensation, but may receive reimbursement as provided in G.S. 58-32-5.
(d)	Defenses of all suits or actions against an individual who is covered by a self-insured program of liability insurance established by the Commission under this Article shall be provided by the Attorney General in accordance with G.S. 143-300.3 or other counsel in accordance with G.S. 143-300.4A.  The cost of other counsel shall be paid from the self-insured fund.
(e)	The coverage provided State employees by any self-insured program of liability insurance established by the Commission pursuant to the provisions of this Article is not commercial liability insurance coverage within the meaning of G.S. 143-300.6(c).
"§ 58-32-17.  Funding of self-insurance programs.
(a)	If the Commission establishes a self-insurance trust fund, the initial contribution to the fund shall be determined by an independent actuary but shall be no less than an amount necessary to fully fund current and unreported claims, to ensure compliance with Governmental Accounting Board requirements.  Annual contributions to the fund shall be made in an amount to be determined each year by the Liability Insurance Trust Fund Council upon the advice of an independent actuary and shall include amounts necessary to pay all costs of administration of the self-insurance program and claims adjustment including litigation in addition to amounts necessary to pay claims.  Contributions from State agencies shall be five dollars ($5.00) per employee until such time as the Liability Insurance Trust Fund Council, with the advice of an independent actuary and the approval of the Commission, determines that an annual contribution in a lesser amount will not impair the adequacy of the fund to satisfy existing and potential claims for  a period of three years.  In the event that the Council determines the amounts contributed to the fund are inadequate, the Council shall recommend to the General Assembly whether the per employee cap should be raised or whether a lump-sum appropriation is needed to assure the adequacy of the fund.
(b)	Claims certified to be paid from the fund shall be paid in the order of award or settlement.  In the event that the fund has at any time insufficient funds to assure that both existing and future claims will be paid, the Commission may borrow necessary amounts from the State Treasurer to replenish the fund.
(c)	Funds borrowed by the Commission to replenish the trust fund account shall be repaid from revenues collected from the members.  Members are those entities, agencies, departments, or divisions of the State that directly contribute funds to the self-insurance trust.  In no event shall individuals be members for the purposes of this section.
"§ 58-32-18.  Termination of fund.
Any fund created under this Article may be terminated by the Commission upon determination by the Commission that other satisfactory and adequate arrangements have been made to assure that both existing and future claims or judgments against the participants in the self-insurance program will be paid and satisfied.  Upon the termination of any fund pursuant to this section, the full amount remaining in the fund upon termination less any outstanding indebtedness shall be credited to the General Fund."
Sec. 3.  Article 32 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58-32-35.  Sovereign immunity.
Nothing in this Article waives the sovereign immunity of the State."
Sec. 4.  There is appropriated from the General Fund to a Self-Insurance Trust Fund Reserve in the Office of State Budget and Management the sum of three million dollars ($3,000,000) for the 1995-96 fiscal year and the sum of two million dollars ($2,000,000) for the 1996-97 fiscal year.  Funds from the reserve shall be used to provide the initial funding for a self-insurance trust fund if the Public Officers and Employees Liability Insurance Commission elects to establish such a fund to provide State employee excess liability coverage in accordance with Article 32 of Chapter 58 of the General Statutes.  Funds in the Reserve shall not revert.
Sec. 5.  This act becomes effective July 1, 1995.