Section R20-5-1112. Letter of Credit or Local Government Invest- ment Pool Funds (LGIP)

A.      Letter of Credit:

1.        A self-insurer may satisfy the provision of R20-5-1110 by filing a letter of credit.

2.        The self-insurer shall ensure that the letter of credit is reg- istered to: “The Industrial Commission of Arizona, in trust for the fulfillment by -------- of its obligations under the Arizona Workers’ Compensation Laws.”

3.        The self-insurer shall ensure that the letter of credit is issued by a federal or Arizona chartered bank with an Arizona branch office or correspondent bank in Arizona upon which demand may be made and from which funds will be immediately payable on demand.

4.        The letter of credit is acceptable only if:

a.        The letter includes the name and address of the self- insurer, including all Arizona subsidiaries;

b.        Is for a period of one year from the effective date;

c.        Includes a provision that the letter of credit automat- ically extends for consecutive periods of one year, unless the issuing bank provides written notice to the Division 30 days before the expiration of any one- year term that the issuing bank will not renew the letter of credit for the additional period;

d.        Includes a provision that the written notice required in subsection (A)(4)(d) may be delivered to the Divi- sion or sent to the Division by United States Mail, certified mail return receipt requested;

e.        The letter of credit states the amount available under the letter of credit; and

f.         The self-insurer ensures that the letter of credit includes a statement that the sum available under the letter of credit shall be paid to the Industrial Com- mission of Arizona upon receipt by the issuing bank of a signed statement by an official of the Commis- sion stating the following:

i.         The self-insurer has failed to comply with its workers’ compensation obligations; or

ii.        The self-insurer has failed to renew or substi- tute acceptable security for its workers’ com- pensation liability 15 days before the expiration of the letter of credit.

B.       Local Government Investment Pool Funds (LGIP):

1.        Instead of posting a guaranty bond, letter of credit, or United States of America bonds or Treasury Notes, a self- insured public agency may post a local government investment pool (LGIP) fund only if:

a.        The self-insurer ensures that the funds are deposited through the Arizona State Treasurer as custodian subject to the order of, and in trust for, the Industrial Commission of Arizona, registered and assigned to: “The Industrial Commission of Arizona, in trust for the fulfillment by -------- of its obligations under the Arizona Workers’ Compensation Laws;”

b.        The LGIP funds posted as security in compliance with this Section are in an amount not less than the security deposit amount required under R20-5-1109;

c.        The Commission has the ability to:

i.         Collect or order collection of the funds; and

ii.        Apply or order the application of the funds to the payment of any award rendered against the self-insurer, as determined by the Commission, if the self-insurer defaults in any of its obliga- tions;

d.        The self-insurer submits an assignment for the bene- fit of the Industrial Commission of Arizona, and an Endorsement-Receipt for Notice of Assignment, signed by the State of Arizona Treasurer and nota- rized. The Endorsement-Receipt shall contain the following language: Receipt is hereby acknowl- edged by the Treasurer of the State of Arizona of written notice of the assignment to the Industrial Commission (“Commission”) of the above-identi- fied account. We have noted our records to show the interest of the Commission in said account as shown in and by the above assignment. We have retained a copy of this document. We hereby certify that we have not received any notice of lien, encumbrance, hold, claim, or other obligation against the above- identified account prior to its assignment to the Commission. We further hereby waive any current or future right of set-off against such account. We agree to make payment as required by the Rules and Regulations of the Commission adopted in accor- dance with applicable laws and the law applicable to this institution.

2.        Interest on the funds deposited under this Section may be remitted by the State of Arizona Treasurer directly to the self-insurer.

Historical Note

New Section made by final rulemaking at 11 A.A.R.

1008, effective April 4, 2005 (Supp. 05-1).