Section R20-5-206. Posting of Guaranty Bond; Effective Date; Exe- cution; Subsidiary Company Guaranty Bond; Parent Company Guaranty; Bond Amounts

A.      Any guaranty bond filed with the Commission shall bear the same effective date as the effective date of the Resolution of Authorization to Self-insure and shall be for a minimum of one year, subject to annual renewal.

B.       A guaranty bond shall be made by a company authorized and licensed to transact the business of fidelity and surety insur- ance in Arizona. The guaranty bond shall be executed by a duly authorized agent of the surety and be countersigned by a licensed resident agent. A bond form can be obtained from the Commission and contains the following information:

1.        Applicant identification;

2.        Amount of the bond;

3.        Conditions of the bond obligations; and

4.        Statement regarding responsibility for fees and costs associated with collection of the bond and responsibility for payment of any award or judgment against the surety.

C.      For the Commission to issue a Resolution of Authorization to Self-insure to a subsidiary company, the parent company shall first execute a guaranty for the subsidiary on a form that can be obtained from the Commission. The parent company shall submit its most recent audited financial statement to the Com- mission for analysis to determine the ability of the parent com- pany to meet its obligations under the guaranty and under

A.R.S. § 23-961(A)(2). The guaranty shall state that the parent company agrees and guarantees on behalf of the subsidiary that any and all liabilities against the subsidiary, under or by virtue of the Workers’ Compensation Laws of Arizona, shall be promptly and fully paid, and the subsidiary company has on deposit a guaranty bond or securities. The guaranty for a sub- sidiary company, and the Resolution of Authorization to Self- insure issued to such subsidiary company, shall be valid and effective only as long as the parent company has on file with the Commission a valid guaranty to satisfy compensation claims of the subsidiary. A parent company is one which owns sufficient stock in the subsidiary company to control the sub- sidiary and does not mean a company in which all or a major- ity of the stockholders are the same as in the subsidiary. The guaranty shall be accompanied by a verified certificate as to stock ownership of the subsidiary, a certified copy of the char- ter or articles of incorporation of the parent company and a certified copy of the resolution of the directors of the parent company authorizing a designated officer to execute the guar- anty.

D.      In compliance with this Article and the Workers’ Compensa- tion Laws of Arizona, an individual self-insurer that is not a member of a workers’ compensation pool shall post either:

1.        A  minimum  $250,000  guaranty   bond  and  a  specific excess reinsurance policy with a self-insured retention of

$250,000 and a policy limit of liability of not less than

$10,000,000.

2.        A guaranty bond equal to 125% of the total outstanding accrued liability as reflected in the Option Election form from the self-insurer to the Commission or a minimum guaranty bond in the amount of $100,000, whichever is greater. The total outstanding accrued liabilities shall be determined by certification from the self-insurer for the Commission’s approval.

E.       In compliance with this Article and the Workers’ Compensa- tion Laws of Arizona, a workers’ compensation pool shall post a guaranty bond equal to 125% of the total outstanding accrued liability as reflected in the Option Election form from the self-insured pool to the Commission or a minimum guar- anty bond in the amount of $100,000, whichever is greater. The total outstanding accrued liabilities shall be determined by certification from the self-insured pool for the Commission’s approval.

Historical Note

Former Rule VI; Amended effective February 27, 1975 (Supp. 75-1). Section repealed, new Section adopted effective July 6, 1993 (Supp. 93-3). R20-5-206 recodified from R4-13-206 (Supp. 95-1).