Section 031-440-II-10 - Servicing CarriersA. Performance standard. In order to ensure that residual market policies are serviced in a quality manner and that adequate resources are available to provide the necessary services to insured employers, the servicing performance standards contained in this chapter shall apply regardless of whether servicing is provided by insurers, their affiliate service corporations or independent servicing contractors. For purposes of this chapter, the term "servicing carrier'' shall include any insurer, insurer-affiliate service corporation or independent servicing contractor which is providing service for assigned risk policies.B. Selection of service carriers. Servicing of residual market policies shall be provided through one of the following methods, which are described in order of priority. Any contractual arrangement entered into by the manager or insurers for the provision of service functions shall require the servicing carrier to provide the same quality of service as is provided to insured employers in the voluntary market and to comply with the minimum performance standards of subchapter IV of this chapter. The Board shall have responsibility and authority for enforcement of these standards. (1) The Plan manager may contract with a number of insurers to serve voluntarily as Maine servicing carriers.(2) If adequate servicing cannot be provided under paragraph (1), the Plan manager may contract with service companies which are affiliates of insurers, or with a combination of such service companies and licensed insurers. For purposes of this provision, "affiliate" means a corporation which is under common ownership, management or control with an insurer licensed to write workers' compensation insurance in Maine. Alternatively, a licensed insurer may elect to contract with a servicing contractor which is not an affiliate, subject to the same servicing fee it would be paid if utilizing au affiliate for this purpose, provided the insurer remains responsible for the servicing. In order to be eligible to enter into servicing contracts under this paragraph, any non-insurer service company must have a written agreement with a licensed insurer for issuance of policies which has been approved by both the Plan manager and the Superintendent.(3) If adequate servicing cannot be procured through the methods described in paragraphs (1) and (2), the Plan manager may, with the advice of the Board. award service contracts on the basis of acceptable price and performance standards. Bid specifications shall be established by the Board, but shall be no less stringent than servicing standards applicable in this chapter. Under this method, policies shall be issued by one or more licensed insurers procured on a voluntary basis by the Plan manager for this purpose.(4) If adequate servicing cannot be procured through the methods prescribed in paragraphs (1) through (3), the Superintendent may either (a) award service contracts through a bidding process or(b) order the Plan manager to make servicing assignments to all insurers licensed to write workers' compensation and employer's liability insurance in this State. In ordering the Plan manager to make servicing assignments, the Superintendent shall specify an equitable basis for assignments, taking into consideration each carrier's present residual and voluntary writings.(5) If the Superintendent notifies the Plan manager that efforts to award service contracts through a bidding process under paragraph 4 have been unsuccessful, the Board may approve servicing contracts with insurers, service companies which are affiliates of insurers, independent service companies not affiliated with insurers, or a combination or such service companies and insurers under terms which exclude any servicing premium written under these contracts from the premium base of the servicing insurer or the insurer affiliate of a service company for purposes of ally residual market deficit assessment for that policy year if the Board fields that entering into servicing contracts on these terms is in the best interests of the residual market pool. If the Board declines to approve servicing contracts on a basis which excludes the servicing premium from the assessment base and adequate servicing cannot be procured, in whole or in part, through ally method other than involuntary assignments under paragraph 4, the Superintendent may award service contracts through a bidding process under terms which exclude the servicing premium from the assessment base of the servicing insurer or insurer affiliate of a service company.C. Service allowance. Service carriers shall receive a servicing allowance or fee as compensation for all expenses of servicing. (1) Except as provided in paragraph (2), a servicing carrier shall receive as its fee an amount equal to 30% of the total written premium plus producer fees paid on policies serviced. The amount of the servicing fee shall be subject to annual review by the Superintendent and modified as appropriate. The review shall consider the actual expenses of servicing carriers including, but not limited to, state premium tax, general and other state expenses, unallocated loss adjustment expenses, allocated loss adjustment expenses for workers' compensation claims, and state assessments (e.g. second injury fund). Expenses for commissions shall be separately reimbursed. Allocated loss adjustment expenses for employer liability claims are reportable as losses and are not included within the servicing fee. Any guarantee fund assessments shall be an expense of the Plan and reimbursable to the servicing carriers. For purposes of determining whether a surcharge shall be imposed, the Superintendent shall make findings on an aggregate basis as to the amount of the actual expenses covered by the servicing fee and the portion of the servicing fee which is profit, and shall take any profit into account in determining the return on residual market policies.(2) Where servicing is provided by servicing contractors which are not insurers or insurer-affiliates and which are selected in a bidding procedure under subsections B( 3) or (4) , the servicing fee shall be determined in the bidding process. Neither that portion of premium corresponding to servicing contractor fees nor the actual fees charged by any servicing contractor to administer responsibilities in the residual market shall be considered in any calculation to determine the amount of any surcharge or any determination of profit of members of the Pool or the imposition, if applicable, of any surcharge.D. Servicing carrier duties. The servicing carrier shall process, adjust, settle, compromise, defend, litigate and pay covered compensable loss claims arising out of or in connection with all claims reinsured by the Pool. The servicing carrier may hire and discharge attorneys and independent adjusters. The servicing carrier shall establish and maintain such reported claim reserves as are reasonable and proper. It shall also maintain complete, orderly, and accurate claim files, records and accounts in accordance with generally accepted insurance principles and as directed by the Board. Servicing carrier actions shall at a minimum be in accordance with the performance standards established by this Rule. Any loss adjustment expense shall be paid from the servicing carrier allowance unless authorization to incur such expense and to receive reimbursement for such expense is received from the Board.E. Term of assignment . Each servicing carrier to which a risk has been assigned shall continue as the servicing carrier until the policy covering such risk terminates, whether by cancellation or nonrenewal, and thereafter until all policy obligations are satisfied.F. Incidental exposure; other states. The servicing carrier shall, to the extent of its license authority, provide incidental coverage, as described in Part Three of the Workers' Compensation and Employers' Liability Insurance Policy. Premiums and losses that develop for such coverage shall be reported to the Maine Pool.G. Other states coverage. Any insured or applicant desiring insurance for known exposures not covered in Maine may request that the servicing carrier furnish insurance for that exposure. The servicing carrier may provide coverage in any state where coverage is reinsurable in any Pool administered or managed by the Plan manager. The premiums, losses, allowances and producer fees shall be those applicable in such states and all transactions shall be reported to the applicable Pool in accordance with the applicable Pool rules.
H. Nonpayment of surcharge. The failure of any employer to pay a premium surcharge determined to be required pursuant to 24-A M.R.S.A. §2392(2) or former 24-A M.R.S.A. §§2367 or 2386-A shall be considered a nonpayment of premium for purposes of determining the right of a workers' compensation insurer to cancel a policy.02-031 C.M.R. ch. 440, § II-10