January 13, 2017
The Treasury Department, Division of Risk Management and Claims Administration, processes claims filed against the State of Tennessee for the negligent operation of motor vehicles or machinery; negligent care, custody and control of persons or property; professional malpractice; workers’ compensation claims filed by State of Tennessee employees; dangerous conditions on State maintained highways and bridges; and nuisances created or maintained by the State. Pursuant to Tennessee Code Annotated, Title 9, Chapter 8, Parts 3 and 4, the Division of Claims Administration operates in conjunction with the Tennessee Attorney General’s Office and the Tennessee Claims Commission in this claims process.
The Division of Claims Administration contracts with a third party administrator for the processing of workers’ compensation claims. The Division’s staff monitors the work done by the third party administrator and acts as a liaison between State employees and the third party administrator.
During the period from July 1, 2015 through June 30, 2016, the Division of Claims Administration received approximately three thousand (3,000) workers’ compensation claims and two thousand one hundred twenty-eight (2,128) employee property damage and tort claims. As of June 30, 2016, there were approximately one hundred thousand (100,000) regular and part-time State employees (including employees employed in public institutions of higher education).
All claims falling within the above categories are paid through the Risk Management Fund. This fund is supported by premiums paid by each State department, agency and institution. The required funding is based upon an actuarial study that reflects risk assessment and estimated losses. The State’s funding for self-insurance is compiled using an occurrence based funding method. The State has limits of liability in tort of $300,000 per person in any one occurrence not to exceed a maximum of $1,000,000 per occurrence. The State’s workers’ compensation liability is governed by the existing workers’ compensation statutes in Tennessee, which are codified in Tennessee Code Annotated, Title 50, Chapter 6, with exceptions as described in Tennessee Code Annotated, Section 9-8-307(a)(1)(K)(ii). Accounting for the Risk Management Fund is in accordance with Statement Number 10 of the Governmental Accounting Standards Board (GASB).
To determine the funding required for the Risk Management Fund and the premiums required of each such department, agency and institution, the successful proposer will be expected to perform a self-insured funding study of the expected liability of the Risk Management Fund for the fiscal year ending June 30, 2019 (based on data as of June 30, 2017) and every subsequent fiscal year for the duration of the contract (as defined in Section B of RFP Attachment 6.6., Pro Forma Contract). In addition, the successful proposer will be expected to perform a self-insured funding study of the cumulative outstanding Fund liability as of the year ending June 30, 2017 and every subsequent fiscal year for the duration of the contract (as defined in Section B of RFP Attachment 6.6., Pro Forma Contract). Copies of the documents comprising the most recent study performed by the State’s current risk management actuarial firm can be found in RFP Attachments 6.7, 6.8, 6.9, and 6.13.
On an annual basis, the State will furnish to the successful proposer certain information concerning all historical claim payments and loss reserves valued as of June 30. A description of the information and the means by which it will be provided is contained in Section A.2.a(1) of RFP Attachment 6.6., Pro Forma Contract. A copy of the claim payments and loss reserves information from the current study can be found in RFP Attachments 6.8 and 6.9, titled Estimation of Outstanding Losses Workers Compensation and Estimation of Outstanding Losses Tort Reserves. The numerical codes that identify the types of claims and the numerical codes that explain the causes of claims, which are referred to in Section A.2.a(1) of RFP Attachment 6.6., Pro Forma Contract, can be found in RFP Attachments 6.10 and 6.11, respectively.
In addition, the State will annually furnish to the successful proposer certain information regarding units of claim exposure in each department, agency and institution of the State of Tennessee, and the administrative cost for administering the risk management program. A description of the information and the means by which it will be provided is contained in Sections A.2.a(2) of RFP Attachment 6.6., Pro Forma Contract. A copy of the exposure unit data provided to the State’s current contractor for the most recent study can be found in RFP Attachment 6.14.