Reference Title: criminal obstruction; technical correction

AN ACT
AMENDING SECTIONS 23-961 AND 23-963, ARIZONA REVISED STATUTES; AMENDING TITLE 23, CHAPTER 6, ARTICLE 4, ARIZONA REVISED STATUTES, BY ADDING SECTION 23-961.01; AMENDING SECTION 43-1201, ARIZONA REVISED STATUTES; RELATING TO WORKERS' COMPENSATION.

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 23-961, Arizona Revised Statutes, is amended to read:

23-961 . Methods of securing compensation by employers; deficit premium

A. Employers shall secure workers' compensation to their employees in one of the following ways:

1. By insuring and keeping insured the payment of such compensation with the state compensation fund or an insurance carrier authorized by the director of insurance to write workers' compensation insurance in this state.

2. By furnishing to the commission satisfactory proof of financial ability to pay the compensation directly OR THROUGH A WORKERS' COMPENSATION POOL APPROVED BY THE COMMISSION in the amount and manner and when due as provided in this chapter. THE REQUIREMENTS OF THIS PARAGRAPH MAY BE SATISFIED BY FURNISHING TO THE COMMISSION SATISFACTORY PROOF THAT THE EMPLOYER IS A MEMBER OF A WORKERS' COMPENSATION POOL APPROVED BY THE COMMISSION PURSUANT TO SECTION 23-961.01. The commission may require a deposit or any other security from the employer for the payment of compensation liabilities in an amount fixed by the commission, but not less than one hundred thousand dollars for workers' compensation liabilities. If the employer does not fully comply with the provisions of this chapter relating to the payment of compensation, the commission may revoke the authority of the employer to pay compensation directly.

B. Corporations or associations transacting the business of workers' compensation insurance in the state shall be subject to the rules of the director of insurance, including rates to be charged and policy forms to be used. Their liability shall include a reinsurance reserve which shall equal sixty-five per cent of the gross annual premiums or deposits received by the corporation or association on account of workers' compensation insurance, and fifty per cent of the gross annual premiums on all other lines of insurance and a pro rata amount of gross premiums collected for more than one year.

C. Before transacting such business, the corporation or association and the state compensation fund shall deposit with the state treasurer, through the director of insurance, cash or securities in an amount equal to the greater of the following amounts:

1. One hundred thousand dollars.

2. The sum of subdivisions (a) and (b) of this paragraph less credits for approved reinsurance computed as of the preceding December 31 for workers' compensation insurance written subject to the laws of this state:

(a) The aggregate of the present values at six per cent interest of the determined and estimated future direct reported loss and loss expense payments on compensation claims incurred more than three years immediately before the preceding December 31.

(b) The aggregate of the amounts determined for each of the three years immediately before the preceding December 31 which equals the greater of the following:

(i) Sixty-five per cent of the earned premiums for the year less all direct reported loss and loss expense payments made on compensation claims incurred in the corresponding year.

(ii) The present value at six per cent interest of the determined and estimated future direct reported loss and loss expense payments on compensation claims incurred in that year.

D. Securities deposited pursuant to subsection C of this section are subject to approval by the director of insurance at all times. In lieu of cash or securities the corporation or association may, with the annual approval of the commission, furnish a bond of a corporate surety company authorized to transact business in the state. The bond or securities shall be held by the director of insurance as security for fulfillment of the obligations of the corporation or association under this chapter.

E. Except in the event of nonpayment of premiums, each insurance carrier shall carry a risk to the conclusion of the policy period unless the policy is cancelled by the employer. The policy period shall be agreed upon by the insurance carrier and the employer.

F. At least thirty days' notice shall be given by the insurance carrier to the employer and to the commission of any cancellation or nonrenewal of a policy if the cancellation or nonrenewal is at the election of the insurance carrier. The insurance carrier shall promptly notify the commission of any cancellation by the employer or failure of the employer to renew the policy. The failure to give notice of nonrenewal if the nonrenewal is at the election of the insurance carrier shall not extend coverage beyond the policy period. The employer shall, prior to the effective date of any cancellation or nonrenewal, file a certificate with the commission designating his new insurance carrier or other satisfactory proof of compliance with the requirements of this section. An insurance carrier shall notify the commission on a form prescribed by the commission that it has insured an employer for workers' compensation promptly after undertaking to insure the employer.

G. Every insurance carrier, including the state compensation fund, shall on or before March 1 of each year pay to the state treasurer for the credit of the administrative fund, in lieu of all other taxes on workers' compensation insurance, a tax of not more than three per cent on all premiums collected or contracted for during the year ending December 31 next preceding, less the deductions from such total direct premiums for applicable cancellations, returned premiums and all policy dividends or refunds paid or credited to policyholders within this state and not reapplied as premiums for new, additional or extended insurance. Every self-insured employer , INCLUDING WORKERS' COMPENSATION POOLS, shall on or before March 31 of each year pay a tax of not more than three per cent of the premiums which would have been paid by the employer if he had been fully insured under a plan available from the state compensation fund during the preceding calendar year. The commission shall adopt rules which shall specify those methods to be used for the calculation of rates and premiums and which shall be the basis for the taxes assessed to self-insured employers. The tax shall be not less than two hundred fifty dollars per annum and shall be computed and collected by the commission and paid to the state treasurer for the credit of the administrative fund at a rate not exceeding three per cent to be fixed annually by the industrial commission. The rate shall be no more than is necessary to cover the actual expenses of the industrial commission in carrying out its powers and duties under this title. Any quarterly payments of tax pursuant to subsection H of this section shall be deducted from the tax payable pursuant to this subsection.

H. Any insurer which, pursuant to this section, paid or is required to pay a tax of two thousand dollars or more for the preceding calendar year shall file a quarterly report, in a form prescribed by the commission, accompanied by a payment in an amount equal to the tax due at the rates prescribed in subsection G of this section for premiums determined pursuant to subsection G of this section or an amount equal to twenty-five per cent of the tax paid or required to be paid pursuant to subsection G of this section for the preceding calendar year. The quarterly payments shall be due and payable on or before the last day of the month following the close of the quarter and shall be made to the state treasurer.

I. Beginning February 1, 1986, if an overpayment of taxes results from the method prescribed in subsection H of this section the industrial commission may refund the overpayment without interest.

J. An insurer who fails to pay the tax prescribed by subsection G or H of this section or the amount prescribed by section 23-1065, subsection A is subject to a civil penalty equal to the greater of twenty-five dollars or five per cent of the tax or amount due plus interest at the rate of one per cent per month from the date the tax or amount was due.

K. Neither the state compensation fund nor an insurance carrier authorized to write workers' compensation insurance may assess an employer premiums for services provided by a contractor alleged to be an employee under the provisions of section 23-902, subsection B or C, unless the fund or carrier has done both of the following:

1. Prepared written audit or field investigation findings establishing that all applicable factors for determining employment status under section 23-902 have been met.

2. Provided a copy of such findings to the employer in advance of assessing a premium.

L. Notwithstanding section 23-901, paragraph 5, subdivision (i), a sole proprietor may waive his rights to workers' compensation coverage and benefits if both the sole proprietor and the insurance carrier of the employer subject to this chapter for which the sole proprietor performs services sign and date a waiver which is substantially in the following form:

"I am a sole proprietor, and I am doing business as name of sole proprietor . I am performing work as an independent contractor for name of employer. I am not the employee of name of employer for workers' compensation purposes, and, therefore, I am not entitled to workers' compensation benefits from name of employer. I understand that if I have any employees working for me, I must maintain workers' compensation insurance on them.

_________________________ _________________________

Sole proprietor Date

_________________________ _________________________

Insurance carrier Date"

Sec. 2. Title 23, chapter 6, article 4, Arizona Revised Statutes, is amended by adding section 23-961.01, to read:

23-961.01 . Self-insurance pools

A. TWO OR MORE EMPLOYERS, EACH OF WHOM ARE ENGAGED IN SIMILAR INDUSTRIES, MAY ENTER INTO CONTRACTS TO ESTABLISH A WORKERS' COMPENSATION POOL TO PROVIDE FOR THE PAYMENT AND ADMINISTRATION OF WORKERS' COMPENSATION CLAIMS PURSUANT TO THIS CHAPTER. THE MEMBERS OF EACH WORKERS' COMPENSATION POOL SHALL ELECT A BOARD OF TRUSTEES TO MANAGE THE WORKERS' COMPENSATION POOL ESTABLISHED PURSUANT TO THIS SECTION. EACH MEMBER EMPLOYER SHALL HAVE BEEN IN BUSINESS FOR AT LEAST FIVE CONSECUTIVE YEARS BEFORE ENTERING INTO A CONTRACT TO ESTABLISH A WORKERS' COMPENSATION POOL. THE TOTAL AMOUNT OF GROSS WORKERS' COMPENSATION INSURANCE PREMIUMS PAID BY THE MEMBERS OF THE POOL IN THE YEAR PRECEDING THE EXECUTION OF THE CONTRACT MUST EQUAL AT LEAST SEVEN HUNDRED FIFTY THOUSAND DOLLARS. THE GROUP OF EMPLOYERS THAT MAKES UP A WORKERS' COMPENSATION POOL SHALL HAVE BEEN FORMED FOR A SPECIFIC PURPOSE, OTHER THAN TO ENGAGE IN SELF-INSURANCE, BEFORE THE FORMATION OF A WORKERS' COMPENSATION POOL. EMPLOYERS MAY ESTABLISH WORKERS' COMPENSATION POOLS PURSUANT TO THIS SECTION BY ONE OF THE FOLLOWING MEANS:

1. ON A COOPERATIVE OR CONTRACT BASIS.

2. THROUGH THE JOINT FORMATION OF A NONPROFIT CORPORATION.

3. BY THE EXECUTION OF A TRUST AGREEMENT TO CARRY OUT THE PROVISIONS OF THIS CHAPTER DIRECTLY BY THE EMPLOYERS OR BY CONTRACTING WITH A THIRD PARTY.

B. A WORKERS' COMPENSATION POOL ESTABLISHED PURSUANT TO THIS SECTION IS SUBJECT TO APPROVAL AS A SELF-INSURER BY THE INDUSTRIAL COMMISSION PURSUANT TO SECTION 23-961, SUBSECTION A, PARAGRAPH 2. THE COMMISSION SHALL ADOPT RULES AS NECESSARY TO CARRY OUT THE PURPOSES OF THIS SECTION.

C. SECTION 10-2305, SUBSECTION B DOES NOT APPLY TO NONPROFIT CORPORATIONS FORMED PURSUANT TO THIS SECTION.

D. WORKERS' COMPENSATION POOLS ESTABLISHED PURSUANT TO THIS SECTION ARE EXEMPT FROM TAXATION UNDER TITLE 43.

E. EACH AGREEMENT OR CONTRACT SHALL PROVIDE THAT THE MEMBERS OF A WORKERS' COMPENSATION POOL ARE JOINTLY AND SEVERALLY LIABLE FOR THE LIABILITIES OF THE POOL. IF A MEMBER OF A POOL DISCONTINUES ITS MEMBERSHIP IN THE POOL, THAT PARTY SHALL BE LIABLE ONLY FOR LIABILITIES ACCRUING PRIOR TO THE DISCONTINUATION OF ITS MEMBERSHIP IN THE POOL.

F. AS TO SELF-INSURANCE POOLS ESTABLISHED UNDER THIS SECTION, NO POOL, EMPLOYER WITHIN A POOL, OR AGENT OF ANY POOL OR EMPLOYER WITHIN A POOL MAY REQUIRE AN EMPLOYEE TO BE TREATED BY OR DIRECTED TO ANY SPECIFIC MEDICAL PROVIDER SUBSEQUENT TO THE EMPLOYEE'S INITIAL VISIT TO TREAT AN INDUSTRIAL INJURY OR ILLNESS, EXCEPT AS MAY BE REQUIRED AS PART OF AN INDEPENDENT MEDICAL EXAMINATION FOR AN EMPLOYEE MAKING A WORKERS' COMPENSATION CLAIM.

G. THE INDUSTRIAL COMMISSION SHALL PROMULGATE RULES NECESSARY FOR SAFEGUARDING THE SOLVENCY OF GROUPS AND GUARANTEEING THAT INJURED WORKERS RECEIVE BENEFITS AS REQUIRED UNDER THE WORKERS' COMPENSATION ACT. THESE RULES SHALL INCLUDE, AT A MINIMUM, MATTERS PERTAINING TO CLASSIFICATION AND RATING, LOSS RESERVES, INVESTMENTS, FINANCIAL SECURITY INCLUDING MINIMUM AND COMBINED PREMIUMS, COMBINED NET WORTH AND OTHER INDICIA NECESSARY FOR PROTECTION FROM INSOLVENCY, SPECIFIC AND AGGREGATE EXCESS INSURANCE, GROUP HOMOGENEITY AND ASSESSMENTS NECESSARY FOR PARTICIPATION IN AND ADMINISTRATION OF THE WORKERS' COMPENSATION SYSTEM.

Sec. 3. Section 23-963, Arizona Revised Statutes, is amended to read:

23-963 . Provisions of compensation insurance policy

Every policy of insurance covering the liability of the employer for workers' compensation, whether issued by the state compensation fund or by another, shall cover the entire liability of the employer to his employees covered by the policy or contract, and be deemed to contain the following provisions:

1. That as between the employee and the insurance carrier the notice to or knowledge of the occurrence of the injury on the part of the employer shall be deemed notice or knowledge of the insurance carrier.

2. That jurisdiction of the employer shall be jurisdiction of the insurance carrier.

3. That the insurance carrier shall be bound by and subject to the orders, findings, decisions and awards rendered against the employer for payment of compensation.

4. That the insolvency or bankruptcy of the employer and his discharge therein shall not relieve the insurance carrier OR WORKERS' COMPENSATION POOL from payment of compensation for injuries or death sustained by an employee during the life of the policy or contract.

Sec. 4. Section 43-1201, Arizona Revised Statutes, is amended to read:

43-1201 . Organizations exempt from tax

Organizations that are exempt from federal income tax under section 501 of the internal revenue code are exempt from the tax imposed under this title. In addition, the following organizations are exempt from the taxes imposed under this title, except as otherwise provided in this chapter:

1. Labor, agricultural or horticultural organizations, other than cooperative organizations.

2. Fraternal beneficiary societies, orders or organizations both:

(a) Operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system.

(b) Providing for the payment of life, sick, accident or other benefits to the members of such society, order or organization or their dependents.

3. Cemetery companies owned and operated exclusively for the benefit of their members or which are not operated for profit or any corporation chartered for burial purposes and not permitted by its charter to engage in any business not necessarily related to that purpose, no part of the net earnings of which inures to the benefit of any private shareholder or individual member thereof.

4. Corporations organized and operated exclusively for religious, charitable, scientific, literary or educational purposes or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation.

5. Business leagues, chambers of commerce, real estate boards or boards of trade, not organized for profit, no part of the net earnings of which inures to the benefit of any private shareholder or individual.

6. Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare or local organizations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, the net earnings of which are devoted exclusively to charitable, educational or recreational purposes.

7. Clubs organized and operated exclusively for pleasure, recreation and other non-profitable purposes, no part of the net earnings of which inures to the benefit of any private shareholder.

8. Corporations organized for the exclusive purpose of holding title to property, collecting income therefrom and turning over the entire amount of such income, less expenses, to an organization which itself is exempt from the tax imposed by this title.

9. Voluntary employees' beneficiary organizations providing for the payment of life, sick, accident or other benefits to the members of such organizations or their dependents, if both of the following apply:

(a) No part of their net earnings inures, other than through such payments, to the benefit of any private shareholder or individual.

(b) Eighty-five per cent or more of the income consists of amounts collected from members and amounts contributed to the organization by the employer of the members for the sole purpose of making such payments and meeting expenses.

10. Teachers' or public employees' retirement fund organizations of a purely local character, if both of the following apply:

(a) No part of their net earnings inures to the benefit of any private shareholder or individual, other than through payment of retirement benefits.

(b) The income consists solely of amounts received from public taxation, amounts received from assessments upon the salaries of members and income in respect of investments. For the purposes of this paragraph, "public employees" means employees of the state and its political subdivisions.

11. Religious or apostolic organizations or corporations, if such organizations or corporations have a common treasury or community treasury, even if such corporations or organizations engage in business for the common benefit of the members, but only if the members thereof include, at the time of filing their returns, in their Arizona gross income their pro rata shares, whether distributed or not, of the net income of the organizations or corporations for such year. Any amount so included in the Arizona gross income of a member shall be treated as a dividend received.

12. Voluntary employees' beneficiary organizations providing for the payment of life, sick, accident or other benefits to the members of such organization, their dependents or their designated beneficiaries, if both of the following apply:

(a) Admission to membership in such organization is limited to individuals who are officers or employees of the United States government.

(b) No part of the net earnings of such organization inures, other than through such payments, to the benefit of any private shareholder or individual.

13. Corporations classified as diversified management companies under section 5 of the federal investment company act of 1940 and registered as provided in that act.

14. Insurance companies paying to the state tax upon premium income derived from sources within this state.

15. Mutual ditch, irrigation or water companies or similar nonprofit organizations if eighty-five per cent or more of the income consists of amounts collected from members for the sole purpose of meeting losses and expenses.

16. WORKERS' COMPENSATION POOLS ESTABLISHED PURSUANT TO SECTION 23-961.01.

APPROVED BY THE GOVERNOR APRIL 25, 1997.

FILED IN THE OFFICE OF THE SECRETARY OF STATE APRIL 28, 1997.