Chapter 170 Oregon Laws 2003

AN ACT

SB 233

Relating to workers’ compensation coverage for employers; creating new provisions; and amending ORS 656.054, 656.254, 656.407, 656.419, 656.423, 656.427, 656.430, 656.726, 656.735, 656.740, 656.745, 656.750, 731.475 and 746.145.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 656.054 is amended to read:

656.054. (1) A compensable injury to a subject worker while in the employ of a noncomplying employer is compensable to the same extent as if the employer had complied with this chapter. The Director of the Department of Consumer and Business Services shall refer the claim for such an injury to an assigned claims agent within 60 days of the date the director has notice of the claim. At the time of referral of the claim, the director shall notify the employer in writing regarding the referral of the claim and the employer’s right to object to the claim. A claim for compensation made by such a worker shall be processed by the assigned claims agent in the same manner as a claim made by a worker employed by a carrier-insured employer, except that the time within which the first installment of compensation is to be paid, pursuant to ORS 656.262 (4), shall not begin to run until the director has referred the claim to the assigned claims agent. At any time within which the claim may be accepted or denied as provided in ORS 656.262, the employer may request a hearing to object to the claim. If an order becomes final holding the claim to be compensable, the employer is liable for all costs imposed by this chapter, including reasonable attorney fees to be paid to the worker’s attorney for services rendered in connection with the employer’s objection to the claim.

[(2) Whenever a subject worker suffers a compensable injury while in the employ of a noncomplying employer, the director shall, after an order closing the claim has become final, serve upon the employer a notice of proposed penalty to be assessed pursuant to ORS 656.735 (3).]

[(3)] (2) In addition to, and not in lieu of, any civil penalties assessed pursuant to ORS 656.735, all costs to the Workers’ Benefit Fund incurred under subsection (1) of this section shall be a liability of the noncomplying employer. Such costs include compensation, disputed claim settlements pursuant to ORS 656.289 and claim disposition agreements pursuant to ORS 656.236, whether or not the noncomplying employer agrees and executes such documents, reasonable administrative costs and claims processing costs provided by contract, attorney fees related to compensability issues and any attorney fees awarded to the claimant, but do not include assessments for reserves in the Workers’ Benefit Fund. The director shall recover such costs from the employer. The director periodically shall pay the assigned claims agent from the Workers’ Benefit Fund for any costs the assigned claims agent incurs under this section in accordance with the terms of the contract. When the director prevails in any action brought pursuant to this subsection, the director is entitled to recover from the noncomplying employer court costs and attorney fees incurred by the director.

[(4)] (3) Periodically, or upon the request of a noncomplying employer in a particular claim, the director shall audit the files of the State Accident Insurance Fund Corporation and any assigned claims agents to validate the amount reimbursed pursuant to subsection [(3)] (2) of this section. The conditions for granting or denying of reimbursement shall be specified in the contract with the assigned claims agent. The contract at least shall provide for denial of reimbursement if, upon such audit, any of the following are found to apply:

(a) Compensation has been paid as a result of untimely, inaccurate, or improper claims processing;

(b) Compensation has been paid negligently for treatment of any condition unrelated to the compensable condition;

(c) The compensability of an accepted claim is questionable and the rationale for acceptance has not been reasonably documented in accordance with generally accepted claims management procedures;

(d) The separate payments of compensation have not been documented in accordance with generally accepted accounting procedures; or

(e) The payments were made pursuant to a disposition agreement as provided by ORS 656.236 without the prior approval of the director.

[(5)] (4) The State Accident Insurance Fund Corporation and any assigned claims agent may appeal any disapproval of reimbursement made by the director under this section pursuant to ORS 183.310 to 183.550 and such procedural rules as the director may prescribe.

[(6)] (5) Claims of injured workers of noncomplying employers may be assigned and reassigned by the director for claims processing regardless of the date of the worker’s injury.

[(7)] (6) In selecting an assigned claims agent, the director must consider the assigned claims agent’s ability to deliver timely and appropriate benefits to injured workers, the ability to control both claims cost and administrative cost and such other factors as the director considers appropriate.

[(8)] (7) If no qualified entity agrees to be an assigned claims agent, the director may require one or more of the three highest premium producing insurers to be assigned claims agents. Notwithstanding any other provision of law, the director’s selection of assigned claims agents shall be made at the sole discretion of the director. Such selections shall not be subject to review by any court or other administrative body.

[(9)] (8) Any assigned claims agent, except the State Accident Insurance Fund, may employ legal counsel of its choice for representation under this section[, provided the counsel selected is authorized by the Attorney General to act as a special assistant attorney general].

[(10)] (9) As used in this section, “assigned claims agent” means an insurer, casualty adjuster or a third party administrator with whom the director contracts to manage claims of injured workers of noncomplying employers.

SECTION 2. ORS 656.407 is amended to read:

656.407. (1) An employer shall establish proof with the Director of the Department of Consumer and Business Services that the employer is qualified either:

(a) As a carrier-insured employer by causing a guaranty contract issued by a guaranty contract insurer to be filed with the director; or

(b) As a self-insured employer by establishing proof that the employer has an adequate staff qualified to process claims promptly and has the financial ability to make certain the prompt payment of all compensation and other payments that may become due to the director under this chapter.

(2) Except as provided in subsection (3) of this section, a self-insured employer shall establish proof of financial ability by [depositing in a depository, designated by the director, money, government securities or other surety which the director may, by rule, determine acceptable] providing security that the director determines acceptable by rule. The [money, securities or other surety shall] security must be in an amount reasonably sufficient to insure payment of compensation and other payments that may become due to the director but not less than the employer’s normal expected annual claim liabilities and in no event less than $100,000. In arriving at the amount of [money, securities or other surety] security required under this subsection, the director may take into consideration the financial ability of the employer to pay compensation and other payments and probable continuity of operation. The [money, securities or other surety so deposited] security shall be held by the director to secure the payment of compensation for injuries to subject workers of the employer and to secure other payments that may become due from the employer to the director under this chapter. Moneys [so deposited] received as security under this subsection shall be deposited with the State Treasurer in an account separate and distinct from the General Fund. Interest earned by the account shall be credited to the account. The amount of security may be increased or decreased from time to time by the director.

(3)(a) A city or county that wishes to be exempt from subsection (2) of this section may make written application therefor to the director. The application shall include a copy of the city’s or county’s most recent annual audit as filed with the Secretary of State under ORS 297.405 to 297.740, information regarding the establishment of a loss reserve account for the payment of compensation to injured workers and such other information as the director may require. The director shall approve the application and the city or county shall be exempt from subsection (2) of this section if the director finds that:

(A) The city or county has been a self-insured employer in compliance with subsection (2) of this section for more than three consecutive years prior to making the application referred to in this subsection as an independently self-insured employer and not as part of a self-insured group.

(B) The city or county has in effect a loss reserve account:

(i) That is actuarially sound and that is adequately funded as determined by an annual audit under ORS 297.405 to 297.740 to pay all compensation to injured workers and amounts due the director pursuant to this chapter. A copy of the annual audit shall be filed with the director. Upon a finding that there is probable cause to believe that the loss reserve account is not actuarially sound, the director may require a city or county to obtain an independent actuarial audit of the loss reserve account. The requirements of this subsection are in addition to and not in lieu of any other audit or reporting requirement otherwise prescribed by or pursuant to law.

(ii) That is dedicated to and may be expended only for the payment of compensation and amounts due the director by the city or county under this chapter.

(b) The director shall have the first lien and priority right to the full amount of the loss reserve account required to pay the present discounted value of all present and future claims under this chapter.

(c) The city or county shall notify the director no later than 60 days prior to any action to discontinue the loss reserve account. The city or county shall advise the director of the city’s or county’s plans to submit the [surety] security deposits required in subsection (2) of this section, or obtain coverage as a carrier-insured employer prior to the date the loss reserve account ceases to exist. If the city or county elects to discontinue self-insurance, it shall submit such [surety] security as the director may require to insure payment of all compensation and amounts due the director for the period the city or county was self-insured.

(d) In order to requalify as a self-insured employer, the city or county must deposit prior to discontinuance of the loss reserve account such [surety] security as is required by the director pursuant to subsection (2) of this section.

(e) Notwithstanding ORS 656.440, if prior to the date of discontinuance of the loss reserve account the director has not received the [surety] security deposits required in subsection (2) of this section, the city’s or county’s certificate of self-insurance is automatically revoked as of that date.

SECTION 3. ORS 656.419 is amended to read:

656.419. (1) A guaranty contract issued by an insurer shall provide that the insurer agrees to assume, without monetary limit, the liability of the employer, arising during the period the guaranty contract is in effect, for prompt payment of all compensation for compensable injuries that may become due under this chapter to subject workers and their beneficiaries.

(2) A guaranty contract issued by a guaranty contract insurer shall be filed with the Director of the Department of Consumer and Business Services by the insurer within 30 days after workers’ compensation coverage of the employer is effective. The filing shall be in such form and manner as the director may prescribe. A guaranty contract shall contain:

(a) The name and address of the employer;

(b) A description of the occupation in which the employer is engaged or proposes to engage;

[(d) A specific statement that a named sole proprietor, partner, member of a limited liability company or corporate officer is covered by the contract by reason of an election to be covered, if such is the case, and, if coverage extends to any other person by reason of an election of the employer of the person, a statement of that fact; and]

(d) Notice that an employer has elected to provide coverage pursuant to ORS 656.039; and

(e) Such other information as the director may from time to time require.

(3) Workers’ compensation coverage is effective when the application of the subject employer for coverage together with any required fees or premium are received and accepted by an authorized representative of an insurer.

(4) If the name or address of an insured employer is changed, the insurer shall, within 30 days after the date the change is received by the insurer, file a change-of-name or change-of-address notice with the director setting forth the correct name and address of the employer.

(5) Coverage of an employer under a guaranty contract continues until canceled or terminated as provided by ORS 656.423 or 656.427.

SECTION 4. ORS 656.423 is amended to read:

656.423. (1) An insured employer may cancel coverage with the insurer by giving the insurer at least 30 days’ written notice, unless a shorter period is permitted by subsection (3) of this section.

(2) Cancellation of coverage is effective at 12 midnight 30 days after the date the cancellation notice is received by an authorized representative of the insurer, unless a later date is specified.

(3) An employer may cancel coverage effective less than 30 days after written notice is received by an agent of the insurer by providing other coverage or by becoming a self-insured employer. A cancellation under this subsection is effective immediately upon the effective date of the other coverage or the effective date of certification as a self-insured employer.

[(4) The insurer shall, within 10 days after receipt of a notice of cancellation under this section, send a copy of the notice to the Director of the Department of Consumer and Business Services.]

SECTION 5. ORS 656.427 is amended to read:

656.427. (1) An insurer that issues a guaranty contract or a surety bond to an employer under this chapter may terminate liability on its contract or bond, as the case may be, by giving the employer and the Director of the Department of Consumer and Business Services [written] notice of termination in accordance with rules adopted by the director. A notice of termination shall state the effective date [and hour] of termination.

(2) An insurer may terminate liability under this section as follows:

(a) If the termination of a guaranty contract is for reasons other than those set forth in paragraph (b) of this subsection, it is effective at 12 midnight not less than 30 days after the date the notice is [received by the director] mailed to the employer.

(b) If the termination of a guaranty contract is based on the insurer’s decision not to offer insurance to employers within a specific premium category, it is effective not sooner than 90 days after the date the notice is [received by the director] mailed to the employer.

(c) The termination of a surety bond is effective at 12 midnight not less than 30 days after the date the notice is received by the director.

(3) Notice to the employer under this section shall be given by mail, addressed to the employer at the last-known address of the employer. If the employer is a partnership, notice may be given to any of the partners. If the employer is a limited liability company, notice may be given to any manager, or in a member managed limited liability company, to any of the members. If the employer is a corporation, notice may be given to any agent or officer of the corporation under whom legal process may be served.

(4) Termination shall in no way limit liability that was incurred under the guaranty contract or surety bond prior to the effective date of the termination.

(5) If, before the effective date of a termination under this section, the employer gives notice to the insurer that it has not obtained coverage from another insurer and intends to become insured under the assigned risk plan established under ORS 656.730, the insurer shall insure that continuing coverage is provided to the employer under the plan without further application by the employer, transferring the risk to the plan as of the effective date of termination. If the insurer is a servicing carrier under the plan, it shall continue to provide coverage for the employer as a servicing carrier, at least until another servicing carrier is provided for the employer in the normal course of administering the plan. If the insurer is not a servicing carrier, it shall apply to the plan for coverage on the employer’s behalf. Nothing in this section is intended to limit the authority of administrators of the plan to require the employer to provide deposits or to make payments consistent with plan requirements. However, the rules of the plan shall allow any deposit requirements imposed by the plan to be deferred for as long as one year.

SECTION 6. ORS 656.430 is amended to read:

656.430. (1) Upon determining that an employer has qualified as a self-insured employer under ORS 656.407, the Director of the Department of Consumer and Business Services shall issue a certificate to that effect to the employer.

(2) Coverage of a self-insured employer is effective on the date of certification unless a later date is specified in the certificate.

(3) Two or more entities shall not be included in the certification of one employer unless in each entity the same person, or group of persons, or corporation owns a majority interest. If an entity owns a majority interest in another entity which in turn owns the majority interest in another entity, all entities so related may be combined regardless of the number of entities in succession. If more than one entity is included in the certification of one employer, each entity included is jointly and severally liable for any compensation and other amounts due the Department of Consumer and Business Services under this chapter by any entity included in the certification.

(4) In the term “majority interest,” as used in this section, “majority” means more than 50 percent.

(5) If an entity other than a partnership:

(a) Has issued voting stock, “majority interest” means a majority of the issued voting stock;

(b) Has not issued voting stock, “majority interest” means a majority of the members; or

(c) Has not issued voting stock and has no members, “majority interest” means a majority of the board of directors or comparable governing body.

(6) If the entity is a partnership, majority interest shall be determined in accordance with the participation of each general partner in the profits of the partnership.

(7) Notwithstanding any other provision of this section, the director may certify five or more subject employers as a self-insured employer group, which shall be considered an employer for purposes of this chapter, if:

(a) The director finds that the employers as a group meet the requirements of ORS 656.407 (1)(b) and (2);

(b) The director determines that:

(A) If the employers as a group have insurance coverage with a retention of $100,000 or more, the employers have a combined net worth of $1 million or more; or

(B) If the employers as a group have insurance coverage with a retention of less than $100,000, the employers have a combined net worth at least equal to the proportion of $1 million that the retention bears to $100,000;

(d) Each employer executes and files with the designated entity a written agreement, in such form as the director may prescribe, in which:

(A) The employer agrees to be jointly and severally liable for the payment of any compensation and other amounts due to the Department of Consumer and Business Services under this chapter incurred by a member of the group; or

(B) The employer, if a city, county, special district described and listed in ORS 198.010 or 198.180, translator district formed under ORS 354.605 to 354.715, weed control district organized under ORS 570.505 to 570.575, intergovernmental agency created under ORS 225.050, school district as defined in ORS 255.005 (8), public housing authority created under ORS chapter 456 or regional council of governments created under ORS chapter 190, agrees to be individually liable for the payment of any compensation and other amounts due to the department under this chapter incurred by the employer during the period of group self-insurance;

(e) The director finds that the employer group is organized as a corporation or cooperative pursuant to ORS chapter 60, 62 or 65, is an intergovernmental entity created under ORS 190.003 to 190.130 and the bylaws require the governing group to obtain fidelity bonds;

(f) The director finds that the employer group has designated an entity within or for the group responsible for centralized claims processing, payroll records, safety requirements, recording and submitting assessments and contributions and making such other reports as the director may require; and

(g) The employer has presented a method approved by the director to notify the department of:

(A) The commencement or termination of membership by employers in the group, and the effect thereof on the net worth of the employers in the group; and

(B) Whether an employer who terminates membership in the group continues to be a subject employer.

(8) A self-insured employer must have excess insurance coverage appropriate for the employer’s potential liability under this chapter with an insurer authorized to do business in this state. A self-insured employer certified prior to November 1, 1981, must have excess insurance coverage appropriate for the employer’s potential liability under this chapter either with an insurer authorized to do business in this state or with any other insurer from whom such insurance can be obtained pursuant to ORS 744.305 to 744.405 (1985 Replacement Part). Evidence of such coverage must be submitted at the time application is made for self-insured certification in the form of an insurance binder providing the appropriate coverage effective the date of certification. The policy providing such coverage must be filed with the director not later than 30 days after the date the coverage is effective. Any changes in the insurer or the coverage must be filed with the department not later than 30 days after the effective date of the change. With respect to such coverage:

(a) The policy must include a provision, approved by the director, for reimbursement to the department of all expenses paid by the department on behalf of the employer pursuant to ORS 656.614 (1) and 656.443 in the same manner as if the department were the insured employer, subject to the policy limitations on amounts and limits of liability to the insured employer; and

(b) The period of coverage must be continuous and remain in effect until the certification is revoked or canceled.

(9) Notwithstanding ORS 656.440, the director may revoke the certification of any self-insured employer after giving 30 days’ written notice if the employer:

(a) Fails to comply with subsection (8) of this section; or

(b) In the case of an employer described in subsection (7) of this section, fails to comply with that subsection.

(10) A self-insured employer must have an occupational safety and health loss control program as required by ORS 654.097.

(11) The director, by rule shall:

(a) Prescribe methods for determining and approving net worth.

(b) Prescribe the types and approve the retention and limitation levels of excess insurance policies.

(d) Prescribe information to be submitted in applications for self-insured employer certifications.

(e) Prescribe the form and manner of reporting commencement or termination in a self-insured employer group.

(f) Prescribe the form, amount and manner for establishing and operating a common claims fund.

(g) Prescribe such other requirements as the director considers necessary so that employers certified as self-insured employers will meet the financial responsibilities under this chapter.

(12) For the purpose of certification as a self-insured employer group, cities, counties, special districts created under ORS 198.010, intergovernmental agencies created under ORS 225.050, school districts as defined in ORS 255.005 (8), public housing authorities created under ORS chapter 456 and regional councils of governments created under ORS chapter 190 shall be considered by the director to be of the same industry.

SECTION 7. ORS 656.726 is amended to read:

656.726. (1) The Workers’ Compensation Board in its name and the Director of the Department of Consumer and Business Services in the director’s name as director may sue and be sued, and each shall have a seal.

(2) The board hereby is charged with reviewing appealed orders of Administrative Law Judges in controversies concerning a claim arising under this chapter, exercising own motion jurisdiction under this chapter and providing such policy advice as the director may request, and providing such other review functions as may be prescribed by law. To that end any of its members or assistants authorized thereto by the members shall have power to:

(a) Hold sessions at any place within the state.

(b) Administer oaths.

(c) Issue and serve by the board’s representatives, or by any sheriff, subpoenas for the attendance of witnesses and the production of papers, contracts, books, accounts, documents and testimony before any hearing under ORS 654.001 to 654.295, 654.750 to 654.780 and this chapter.

(d) Generally provide for the taking of testimony and for the recording of proceedings.

(3) The board chairperson is hereby charged with the administration of and responsibility for the Hearings Division.

(4) The director hereby is charged with duties of administration, regulation and enforcement of ORS 654.001 to 654.295, 654.750 to 654.780 and this chapter. To that end the director may:

(a) Make and declare all rules and issue orders which are reasonably required in the performance of the director’s duties. Unless otherwise specified by law, all reports, claims or other documents shall be deemed timely provided to the director or board if mailed by regular mail or delivered within the time required by law. Notwithstanding any other provision of this chapter, the director may adopt rules to allow for the electronic transmission and filing of reports, claims or other documents required to be filed under this chapter. Notwithstanding ORS 183.310 to 183.410, if a matter comes before the director that is not addressed by rule and the director finds that adoption of a rule to accommodate the matter would be inefficient, unreasonable or unnecessarily burdensome to the public, the director may resolve the matter by issuing an order, subject to review under ORS 183.310 to 183.550. Such order shall not have precedential effect as to any other situation.

(b) Hold sessions at any place within the state.

(d) Issue and serve by representatives of the director, or by any sheriff, subpoenas for the attendance of witnesses and the production of papers, contracts, books, accounts, documents and testimony in any inquiry, investigation, proceeding or rulemaking hearing conducted by the director or the director’s representatives. The director may require the attendance and testimony of employers, their officers and representatives in any inquiry under this chapter, and the production by employers of books, records, papers and documents without the payment or tender of witness fees on account of such attendance.

(e) Generally provide for the taking of testimony and for the recording of such proceedings.

(f) Provide standards for the evaluation of disabilities. The following provisions apply to the standards:

(A) The criteria for evaluation of disabilities under ORS 656.214 (5) shall be permanent impairment due to the industrial injury as modified by the factors of age, education and adaptability to perform a given job.

(B) Impairment is established by a preponderance of medical evidence based upon objective findings.

(C) When, upon reconsideration of a notice of closure pursuant to ORS 656.268, it is found that the worker’s disability is not addressed by the standards adopted pursuant to this paragraph, notwithstanding ORS 656.268, the director shall stay further proceedings on the reconsideration of the claim and shall adopt temporary rules amending the standards to accommodate the worker’s impairment. When the director adopts temporary rules amending the standards, the director shall submit those temporary rules to the Workers’ Compensation Management-Labor Advisory Committee for review at their next meeting.

(D) Notwithstanding any other provision of this section, impairment is the only factor to be considered in evaluation of the worker’s disability under ORS 656.214 (5) if:

(i) The worker returns to regular work at the job held at the time of injury;

(ii) The attending physician releases the worker to regular work at the job held at the time of injury and the job is available but the worker fails or refuses to return to that job; or

(iii) The attending physician releases the worker to regular work at the job held at the time of injury but the worker’s employment is terminated for cause unrelated to the injury.

(g) Prescribe procedural rules for and conduct hearings, investigations and other proceedings pursuant to ORS 654.001 to 654.295, 654.750 to 654.780 and this chapter regarding all matters other than those specifically allocated to the board or the Hearings Division.

(h) Participate fully in any proceeding before the Hearings Division, board or Court of Appeals in which the director determines that the proceeding involves a matter that affects or could affect the discharge of the director’s duties of administration, regulation and enforcement of ORS 654.001 to 654.295 and 654.750 to 654.780 and this chapter.

(5) The board may make and declare all rules which are reasonably required in the performance of its duties, including but not limited to rules of practice and procedure in connection with hearing and review proceedings and exercising its authority under ORS 656.278. The board shall adopt standards governing the format and timing of the evidence. The standards shall be uniformly followed by all Administrative Law Judges and practitioners. The rules may provide for informal prehearing conferences in order to expedite claim adjudication, amicably dispose of controversies, if possible, narrow issues and simplify the method of proof at hearings. The rules shall specify who may appear with parties at prehearing conferences and hearings.

(6) The director and the board chairperson may incur such expenses as they respectively determine are reasonably necessary to perform their authorized functions.

(7) The director, the board chairperson and the State Accident Insurance Fund Corporation shall have the right, not subject to review, to contract for the exchange of, or payment for, such services between them as will reduce the overall cost of administering this chapter.

(8) The director shall have lien and enforcement powers regarding assessments to be paid by subject employers in the same manner and to the same extent as is provided for lien and enforcement of collection of premiums and assessments by the corporation under ORS 656.552 to 656.566.

(9) The director shall have the same powers regarding inspection of books, records and payrolls of employers as are granted the corporation under ORS 656.758. The director may disclose information obtained from such inspections to the Director of the Department of Revenue to the extent the Director of the Department of Revenue requires such information to determine that a person complies with the revenue and tax laws of this state and to the Director of the Employment Department to the extent the Director of the Employment Department requires such information to determine that a person complies with ORS chapter 657.

(10) The director shall collect hours-worked data information in addition to total payroll for workers engaged in various jobs in the construction industry classifications described in the job classification portion of the Workers’ Compensation and Employers Liability Manual and the Oregon Special Rules Section published by the National Council on Compensation Insurance. The information shall be collected in the form and format necessary for the National Council on Compensation Insurance to analyze premium equity.

SECTION 8. ORS 656.735 is amended to read:

656.735. (1) The Director of the Department of Consumer and Business Services shall assess any person who violates ORS 656.052 (1) a civil penalty of not more than $1,000 or twice the premium that would have been due for the period of noncompliance, whichever is the greater.

(2) The director shall assess any person who continues to violate ORS 656.052 (1), after an order issued pursuant to ORS 656.052 (2) has become final, a civil penalty, in addition to any penalty assessed under subsection (1) of this section, of not more than $250 for each day such violation continues.

[(3) In addition to any other penalties assessed under this section, where a subject worker receives a compensable injury while in the employ of a noncomplying employer, the director shall assess such employer a civil penalty of not less than $100 and not more than:]

[(a) $500 if the worker suffers no disability;]

[(b) $1,000 if the worker suffers a temporary disability;]

[(c) $2,500 if the worker suffers a permanent partial disability; or]

[(d) $5,000 if the worker dies or suffers permanent total disability.]

[(4)(a)] (3)(a) When a noncomplying employer is a corporation, such corporation and the officers and directors thereof shall be jointly and severally liable for any civil penalties assessed under this section and any claim costs incurred under ORS 656.054.

(b) When a noncomplying employer is a limited liability company, the company and its members and managers shall be jointly and severally liable for any civil penalties assessed by the director under this section and any claim costs incurred under ORS 656.054. As used in this paragraph, ”limited liability company,” “manager” and “member” have the meanings for those terms provided in ORS 63.001.

(c) When a noncomplying employer is a limited liability partnership or foreign limited liability partnership, the partnership and its limited liability partners shall be jointly and severally liable for any civil penalties assessed by the director under this section and any claim costs incurred under ORS 656.054. As used in this paragraph, “ limited liability partnership” and “foreign limited liability partnership” have the meanings for those terms provided in ORS 67.005.

(d) When a noncomplying employer is a partnership, the partnership and its partners shall be jointly and severally liable for any civil penalties assessed by the director under this section and any claim costs incurred under ORS 656.054. As used in this paragraph, “partnership” has the meaning for that term provided in ORS 67.005.

[(5)] (4) When an order assessing a civil penalty becomes final by operation of law or on appeal, unless the amount of penalty is paid within 10 days after the order becomes final, it constitutes a judgment and may be recorded with the county clerk in any county of this state. The clerk shall thereupon record the name of the person incurring the penalty and the amount of the penalty in the County Clerk Lien Record. The penalty provided in the order so recorded shall become a lien upon the title to any interest in property owned by the person against whom the order is entered, and execution may be issued upon the order in the same manner as execution upon a judgment of a court of record.

[(6)] (5) Civil penalties, and judgments entered thereon, due to the director under this section from any person shall be deemed preferred to all general claims in all bankruptcy proceedings, trustee proceedings, and proceedings for the administration of estates and receiverships involving the person liable therefor or the property of such person.

[(7)] (6) All moneys collected under this section shall be paid into the Workers’ Benefit Fund.

SECTION 9. ORS 656.740 is amended to read:

656.740. (1) A person may contest a proposed order of the Director of the Department of Consumer and Business Services declaring that person to be a noncomplying employer, or a proposed assessment of civil penalty, by filing with the Department of Consumer and Business Services, within 60 days [of receipt of notice thereof] after the mailing of the order, a written request for a hearing. Such a request need not be in any particular form, but shall specify the grounds upon which the person contests the proposed order or assessment. An order by the director under this subsection is prima facie correct and the burden is upon the employer to prove that the order is incorrect.

(2) A person may contest a nonsubjectivity determination of the director by filing a written request for hearing with the department within [30] 60 days after the mailing of the determination [ or within 60 days after the mailing of the determination if the person establishes at a hearing before the Hearings Division of the Workers’ Compensation Board that there was good cause for failure to file the hearing request by the 30th day after the mailing of the determination].

(3) When any insurance carrier, including the State Accident Insurance Fund Corporation, is alleged by an employer to have contracted to provide the employer with workers’ compensation coverage for the period in question, the Workers’ Compensation Board shall join such insurance carrier as a necessary party to any hearing relating to such employer’s alleged noncompliance or to any hearing relating to a nonsubjectivity determination and shall serve the carrier, at least 30 days prior to such hearing, with notice thereof.

(4) A hearing relating to a nonsubjectivity determination, to a proposed order declaring a person to be a noncomplying employer, or to a proposed assessment of civil penalty under ORS 656.735, shall be held by an Administrative Law Judge of the board’s Hearings Division. However, a hearing shall not be granted unless a request for hearing is filed within the period specified in subsection (1) or (2) of this section, and if a request for hearing is not so filed, the nonsubjectivity determination, order or penalty, as proposed, shall be a final order of the department and shall not be subject to review by any agency or court.

(5) Notwithstanding ORS 183.315 (1), the issuance of nonsubjectivity determinations, orders declaring a person to be a noncomplying employer or the assessment of civil penalties pursuant to this chapter, the conduct of hearings and the judicial review thereof shall be as provided in ORS 183.310 to 183.550, except that:

(a) The order of an Administrative Law Judge in a contested case shall be deemed to be a final order of the director.

(b) The director shall have the same right to judicial review of the order of an Administrative Law Judge as any person who is adversely affected or aggrieved by such final order.

(c) When a nonsubjectivity determination or an order declaring a person to be a noncomplying employer is contested at the same hearing as a matter concerning a claim pursuant to ORS 656.283 and 656.704, the review thereof shall be as provided for a matter concerning a claim.

(6)(a) If a person against whom an order is issued pursuant to this section prevails at hearing or on appeal, the person is entitled to reasonable attorney fees to be paid by the director from the Workers’ Benefit Fund.

(b) If a person against whom an order is issued is found to be a noncomplying employer by the director, but the person proves coverage pursuant to subsection (3) of this section and the insurer failed to file timely a guaranty contract as required by ORS 656.419 or improperly canceled the person’s coverage, the [noncomplying] employer is entitled to reasonable attorney fees paid by the insurer.

(c) If a worker prevails at hearing or on appeal from a nonsubjectivity determination, the worker is entitled to reasonable attorney fees to be paid by the director from the Workers’ Benefit Fund and reimbursed by the employer.

SECTION 10. ORS 731.475 is amended to read:

731.475. (1) Every insurer authorized to issue workers’ compensation coverage to subject employers as required by ORS chapter 656 shall maintain a place of business in this state where the insurer shall:

(a) Process, and keep complete records of, claims for compensation made to the insurer under ORS chapter 656.

(b) [Keep] Make available upon request complete records, including all records submitted electronically, of all guaranty contracts issued as required by ORS chapter 656.

(c) Keep records identifying the specific persons covered by an employer electing coverage pursuant to ORS 656.039.

(2) [The] Claims records [shall] must be retained in, and may be removed from, this state or disposed of, in accordance with the rules of the Director of the Department of Consumer and Business Services. The records [shall] must be available to the Department of Consumer and Business Services for examination and audit at all reasonable times upon notice by the department to the insurer.

(3) In lieu of establishing a place of business in this state for the purpose required by this section, an insurer may keep such records in this state at places of business operated by service companies, if:

(a) Each service company is incorporated in or authorized to do business in this state;

(b) The agreement entered into between the insurer and the service company grants each service company a power of attorney to act for the insurer in workers’ compensation coverage and claims proceedings under ORS chapter 656; and

(4) Notwithstanding subsection (3) of this section, an insurer may not:

(a) Enter into a service agreement contract with one of its insureds unless the insured has service contracts with other insurers; or

(b) Have more than eight locations at any one time where claims are processed or records are maintained.

SECTION 11. ORS 746.145 is amended to read:

746.145. (1) Notwithstanding ORS 737.600, but subject to all other rate filing requirements of ORS chapter 737, an insurer may combine for dividend purposes the experience of a group of employers covered for workers’ compensation insurance by the insurer, subject to applicable rules adopted by the Director of the Department of Consumer and Business Services, if:

(a) All the employers in the group are members of an organization.

(b) The employers in the group constitute at least 50 percent of the employers in the organization, unless the number of covered workers in the group exceeds 500, in which case the employers in the group must constitute at least 25 percent of the employers in the organization.

(c) The grouping of employers is likely to substantially improve accident prevention, claims handling for the employers and reduce expenses.

(2) This section does not apply to an organization of employers for which organization a workers’ compensation policy was lawfully issued before October 4, 1977. The guaranty contract required by ORS 656.419 shall contain for each employer covered thereby the information required by ORS 656.419 (2). When an employer becomes an insured member of the organization the insurer shall, within 30 days after the date insured membership commenced, file a notice thereof with the [Workers’ Compensation Board] director.

SECTION 12. ORS 656.254 is amended to read:

656.254. (1) The Director of the Department of Consumer and Business Services shall establish medical report forms, in duplicate snap-outs where applicable, to be used by insurers, self-insured employers and physicians, including in such forms information necessary to establish facts required in the determination of the claim.

(2) The director shall establish sanctions for the enforcement of medical reporting requirements. Such sanctions may include, but are not limited to, forfeiture of fees and penalty not to exceed $1,000 for each occurrence.

(3) In accordance with the provisions of ORS 183.310 to 183.550, if the director finds that a health care practitioner has:

(a) Been found, pursuant to ORS 656.327, to have failed to comply with rules adopted pursuant to this chapter regarding the performance of medical services for injured workers or to have provided medical treatment that is excessive, inappropriate or ineffectual, the director may impose a sanction that includes forfeiture of fees and a penalty not to exceed $1,000 for each occurrence. If the failure to comply or perform is repeated and willful, the director may declare the health care practitioner ineligible for reimbursement for treating workers’ compensation claimants for a period not to exceed three years.

(b) Had the health care practitioner’s license revoked or suspended by the practitioner’s professional licensing board for a violation of that profession’s ethical standards, the director may declare the health care practitioner ineligible for reimbursement for treating workers’ compensation claimants for a period not to exceed three years or the period the practitioner’s license is suspended or revoked, whichever period is the longer.

(c) Engaged in any course of conduct demonstrated to be dangerous to the health or safety of a workers’ compensation claimant, the director may impose a sanction that includes forfeiture of fees and a penalty not to exceed $1,000 for each occurrence. If the conduct is repeated and willful, the director may declare the health care practitioner ineligible for reimbursement for treating workers’ compensation claimants for a period not to exceed three years.

(4) Any declaration that a health care practitioner is ineligible to receive reimbursement under this chapter shall not otherwise interfere with or impair treatment of any person by the health care practitioner.

(5) ORS 656.735 [(5) to (7)] (4) to (6) and 656.740 also apply to orders and penalties assessed under this section.

SECTION 13. ORS 656.745 is amended to read:

656.745. (1) The Director of the Department of Consumer and Business Services shall assess a civil penalty against an employer or insurer who intentionally or repeatedly induces claimants for compensation to fail to report accidental injuries, causes employees to collect accidental injury claims as off-the-job injury claims, persuades claimants to accept less than the compensation due or makes it necessary for claimants to resort to proceedings against the employer to secure compensation due.

(2) The director may assess a civil penalty against an employer or insurer who:

(a) Fails to pay assessments or other payments due to the director under this chapter and is in default; or

(b) Fails to comply with rules and orders of the director regarding reports or other requirements necessary to carry out the purposes of this chapter.

(3) A civil penalty shall be not more than $2,000 for each violation or $10,000 in the aggregate for all violations within any three-month period. Each violation, or each day a violation continues, shall be considered a separate violation.

(4) ORS 656.735 [(5) to (7)] (4) to (6) and 656.740 also apply to orders and penalties assessed under this section.

SECTION 14. ORS 656.750 is amended to read:

656.750. (1) The Director of the Department of Consumer and Business Services shall assess against a self-insured employer who fails to comply with ORS 656.455, a civil penalty of $250 a day for each day such failure continues.

(2) ORS 656.735 [(5) to (7)] (4) to (6) and 656.740 also apply to orders and penalties assessed under this section.

SECTION 15. The amendments to ORS 656.407 by section 2 of this 2003 Act apply to securities provided on or after the effective date of this 2003 Act.

Approved by the Governor May 30, 2003

Filed in the office of Secretary of State June 2, 2003

Effective date January 1, 2004

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