Minnesota has a unique option available to some businesses and government entities to be able to insure their company vehicles themselves. This is an alternative offered by the Minnesota No-Fault Automobile Insurance Act. (The “Entities” here discussed mean any associations, corporations, partnerships, sole proprietorships, trusts, or other business entities engaged in, or transacting business in the state of Minnesota.)
This isn't an option likely available to the average motorist. You will see why very quickly.
The Minnesota Department of Commerce, the Automobile Self-Insurance Unit is responsible for approving a company's request to self-insure its liabilities under the Minnesota No-Fault Automobile Insurance Act.
“Self-insurance or insurance plan” means a plan for the benefit of employees or members of an association, providing life, medical or hospital care, accident, sickness or disability insurance, pharmacy benefits, or a plan providing liability coverage for any other risk or hazard, which is not directly insured.
The only way an entity can be approved for having the ability to be self insured is if the Minnesota Commissioner of Commerce gets satisfied that the applicant has in place the administrative resources and financial where-with-all necessary to fulfill the obligations of the No-Fault Act.
Obviously, again, this isn't an option available to everyone.
There are minimum requirements for an “entity” to be considered for exemption from insuring liability under the Minnesota No-Fault Act .
The applicant must have at least 25 vehicles registered in its name.
The applicant must have, or have contracted with, a licensed vender of risk management services, to provide the administrative resources needed to: 1). Process, review and pay claims. 2). Evaluate the medical and/or rehabilitation needs of automobile accident victim. 3). Estimate current and future loss liabilities.
“Vender of risk management services” means an entity providing for compensation, actuarial, financial management, accounting, legal or other services for the purpose of designing and establishing a self-insurance or insurance plan for an employer or self-insurer. Usually, these venders are already in the insurance business themselves and negotiate their costs for the self-insurer needing their services.
The next qualification is that the applicant must have existed for at least 5 years.
The applicant also must have a current net worth, or equivalent, of at least $5,000,000.
The applicant also must have had a positive net income during the last 5 year period, in at least 3 of those years. And, must have had a positive cash flow from operating activities during the last 5 year period, and in at least 3 of those years. Neither the applicant nor its parent company, if applicable, must have sought protection under the United States Bankruptcy Code during the last 3 years.
Basically, what Minnesota requires is sufficient proof that the financial integrity of the company applying is sound enough to take care of any financial obligations necessary under the complete No-Fault Act.
The applicant must post a surety bond with a minimum limit of $100,000.
Then the ACT provides for the matter of reparation preparedness. Reparation is defined as: the act of making amends, offering atonement, or giving satisfaction for a wrong or injury.
Every owner of a motor vehicle that is required to be registered or licensed in the state of Minnesota must maintain a plan of reparation security under provisions approved by the commissioner, insuring against loss resulting from liability imposed by law for injury, and damage sustained by any one person arising out of ownership, maintenance, operation or use of the vehicle.
This plan of reparation security must provide for basic economic loss benefits, and residual liability coverage with respect to EACH vehicle for which coverage has been granted, of no less than $30,000 for bodily injury to one person in any one accident, and, no less than $60,000 for injury to two or more persons in any one accident. If an accident has caused damage or destruction of property, not less than $10,000 for any one accident.
There are “Auto Request for Exemption” forms for political or non-political subdivisions. This form must be completed when applying for exemption from liabilities under the Minnesota No-Fault Automobile Insurance Act.
The “Auto Agreement and Acknowledgment” form must be completed with the initial application, or when a new signature is required. By signing this form the self-insurer agrees to participate in the Minnesota Assigned Claims Plan. This is required for both political and non-political subdivisions.
The “Auto Tax Notice” form must be included along with the initial application. Applicant's Minnesota Tax Identification Number and Social Security Number are required.
“Parent Company Agreement”, (non-political only), this agreement by the Parent Company must be completed when it is necessary for the parent to assume the liabilities of a subsidiary. This normally occurs when a subsidiary entity is applying for self-insurance and they are using the parents financial statements as evidence of satisfactory financial strength.
“Auto Surety Bond”, (non-political only), this form is required in order to qualify as an auto self-insurer.
The cost for an Auto Request for Exemption (non-political) is $2,500 for the initial application fee, and $1,500 for renewal application fee.
The cost for an Auto Request for Exemption (political) is $2,500 for the initial application fee, and $1,200 for renewal application fee. The fees themselves are minimal compared to the financial responsibilities required to manage the risk and resources for self-insurance.
What most of the information we've covered here boils down to is this: If you plan to become self-insured as a company, be prepared to become a small insurance company in addition to your normal line of work. For some firms with a huge outlay of finances for fleets of vehicles, or companies who already self-insure in other areas of their business, the additional complexity of automobile insurance to the mix might not be too onerous. If this would be a new venture, I suggest you check with your corporate insurance consultant.
There are numerous resources online to further investigate this Minnesota State Self-Insure opportunity and to find out if it is right for your company.
