GROUP SELF-INSURANCE BY EMPLOYERS

OFFICES AND OFFICERS ‑- STATE ‑- DEPARTMENT OF LABOR AND INDUSTRIES ‑- WORKMEN'S COMPENSATION ‑- INSURANCE ‑- GROUP SELF-INSURANCE BY EMPLOYERS

The state industrial insurance laws, as presently written, do not permit the State Department of Labor and Industries to issue a certification to two or more employers to self-insure as members of a group, rather than individually.

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                                                                   May 13, 1980

Honorable James T. Hughes
Director
Department of Labor and Industries
General Administration Bldg.
Olympia, Washington 98504                                                                                                               Cite as:  AGLO 1980 No. 20

Dear Sir:

            By letter previously acknowledged you requested our opinion on a question relating to the manner in which the Department of Labor and Industries may allow employers to self-insure under our State Industrial Insurance Act.  We paraphrase your question as follows:

            May the Department of Labor and Industries issue a certification to two or more employers to self-insure as members of a group, rather than individually, under the authority found in Title 51 RCW?

            We answer this question in the negative for the reasons set forth in our analysis.

                                                                     ANALYSIS

            Our State Industrial Insurance Act, Title 51 RCW, now sanctions two methods whereby an employer may insure its workers' compensation liability under the law.  See, RCW 51.14.010 which provides that:

            "Every employer under this title shall secure the payment of compensation under this title by:

            "(1) Insuring and keeping insured the payment of such benefits with the state fund; or

            "(2) Qualifying as a self-insurer under this title."

            Your question relates to the manner of securing the payment of benefits as a self-insurer under subdivision (2) of this statute and asks, specifically, whether or not two or more employers may jointly qualify for self-insurance as members of a group.

            Prior to 1971 an employer could only insure with the state fund.  In that year, however, while rejecting a "three way" proposal which would have allowed an employer to insure with the state fund, with a private carrier, or to self-insure, the legislature adopted the present "two way" system which allows a choice between insuring with the state fund or self-insuring.  See, §§ 26-35, chapter 289, Laws of 1971, 1st Ex. Sess.  But in doing so, the legislature wrote into the law numerous qualifications and conditions for self-insuring.1/   See, chapter 51.14 RCW.

            A "self-insurer" is defined by RCW 51.08.173 as follows:

            "'Self-insurer' means an employer who has been authorized under this title to carry its own liability to its employees covered by this title."

            [[Orig. Op. Page 3]]

The law then specifically provides for the method by which an employer may qualify as a self-insurer and is replete with provisions which refer only to individual employers who seek to qualify or who have qualified as self-insurers.  For example, RCW 51.14.020 provides, in part:

            "(1)An employer may qualify as a self-insurer by establishing to the director's satisfaction that he or she has sufficient financial ability to make certain the prompt payment of all compensation . . . Each application for certification as a self-insurer submitted by an employer shall be accompanied by payment of a fee . . ."  (Emphasis supplied)

            Likewise, RCW 51.14.030 provides, in part:

            "The director may issue a certification that an employer is qualified as a self-insurer whensuch employer meets the following requirements . . ."  (Emphasis supplied)

The law further provides for the termination of self-insurer status by "an employer" (see, RCW 51.14.050) and for the withdrawal of certification where "the employer" no longer meets the requirements of a self-insurer (RCW 51.14.080).  Also, a self-insurer is allowed to reinsure not more than eighty percent of its liability with any reinsurer authorized to transact reinsurance in the state, provided that the reinsurer cannot participate in the administration of the self-insurer's responsibilities.  RCW 51.14.010(5).  Nowhere in the law, however, is there any provision purporting to allow several employers to join together as a group for purposes of self-insurance.

            Words and phrases used in a statute are to be given their usual and ordinary meaning in the absence of a contrary statutory definition of terms.  Garrison v. Washington State Nursing Board, 87 Wn.2d 195, 550 P.2d 7 (1976).  Within the context and language of the statutes here involved, we cannot read the words "an employer" as including a group of two or more employers.  Moreover, the department, as a state agency, has only those powers specifically granted by statute or necessarily implied therefrom.  Taylor v. Morris, 88 Wn.2d 586, 564 P.2d 795 (1977).  And the authority to certify agroup of [[Orig. Op. Page 4]]employers is not, in our opinion, necessarily to be implied from the language authorizing the department to certify "an employer" as a self-insurer.

            A group self-insurance program, it should further be noted, involves considerations quite apart from those involved in simply allowing "an employer" to self-insure.2/   Pertinent considerations include the composition of the group, the nature of the liability of the members (e.g., whether joint and several), how benefits are paid, whether there is a joint fund, how the fund is maintained, procedures for withdrawal and termination of membership, etc.  Thus, had the legislature intended to authorize group self-insurance, it seems most likely that such intent would have been expressed in specific statutory language which would have included some criteria regarding the permissible composition and functioning of such groups.3/

            Nor do we find anything in legislative history to indicate that the legislature intended to authorize group self-insurance.  To the contrary, a number of bills which would have allowed various forms of employer group self-insurance have been introduced but have failed.4/   In addition, an attempted floor amendment to another bill in 1977 resulted in the following comment which is supportive of our opinion:

[[Orig. Op. Page 5]]

                                                              "POINT OF ORDER

            "Senator Ridder:  'I would indeed like to raise the question of scope and object on this amendment.  It would make a major change in industrial insurance law . . .  Presently, only individual employers can qualify for self-insurance if they are large enough to meet the financial requirements.  This amendment would allow any group of employers to qualify for self-insurance and such a major change was not intended when the bill was introduced.  Because of the nature of this major change in industrial insurance law, I ask that you rule the amendment outside the scope and object of the bill.'

            "Debate ensued.

                                                    "RULING BY THE PRESIDENT

            "The President:  'The President believes, in replying to the point of order presented by Senator Ridder, that the amendment proposed by Senator Morrison to page 7, line 5, is also a substantive amendment in that it deals with the ability of a group of employers whose combined assets exceed one million dollars to self-insure.  The President therefore believes that the amendment does expand the scope and object of the bill and the point of order raised by Senator Ridder is well taken.'

            "The amendment by Senator Morrison was ruled out of order."  (Emphasis supplied)  Senate Journal, 1977, at page 2842.

            Finally, we note that provision has recently been made to allow the Department of Labor and Industries to insure the workers' compensation obligations of employers as a group under certain conditions, and for the purpose of dividends or premium discounts.  See, § 4, chapter 129, Laws of 1980, amending RCW 51.16.035.  This specific authority, however, relates only to employers who insure with thestate fund.  It does not purport to allow employers to form groups for the purpose of self-insurance.