62-5-1      Methods of securing payment of compensation.
62-5-2      Obtaining workers' compensation insurance.
62-5-3      Reciprocal or interinsurance contracts providing indemnity for loss under workers' compensation law.
62-5-4      Repealed.
62-5-5      Self-insurance by employer--Annual proof of solvency and financial ability--Application fee--Deposit of fees--Certificate of exemption.
62-5-6      Exemption of political subdivisions from security provisions.
62-5-7      Failure to secure payment as election not to operate under title.
62-5-8      Commission for placing insurance limited.
62-5-9      Issuance of policy to employer--Certification to department.
62-5-10      Surety for performance required for self-insurers--Irrevocable trust.
62-5-11      Requirements for acceptance of irrevocable letter of credit--Definitions.
62-5-12      Deposit of surety bonds, letters of credit, etc.
62-5-13      Deposit of certificate of deposit or government securities.
62-5-14      Deposit and withdrawal of cash.
62-5-15      Perfected security interest in deposit--Release of security interest.
62-5-16      Claims administration contracts.
62-5-17      Repealed.
62-5-18      Reduction of premium where employer selects a policy with a deductible.
62-5-19      Deductible does not affect reporting requirements.
62-5-20      Insurer to pay entire loss--Employer to reimburse deductible amount.
62-5-21      Provision of medical services and health care.

62-5-1. Methods of securing payment of compensation.

Except as otherwise provided in §§ 62-5-5 and 62-5-6, any employer, coming within the compensation provisions of this title, shall secure the payment of compensation to the employer's employees in one of the ways provided by § 62-5-2 or 62-5-3. If the payment of compensation is so secured, the employer is liable to any employee for injury or death arising out of and in the course of the employment only as specified by this title.

Source: SDC 1939, § 64.0106; SL 1996, ch 306, § 1.

62-5-2. Obtaining workers' compensation insurance.

An employer may secure the payment of compensation to any employee by insuring and keeping insured the payment of the compensation with any stock corporation writing workers' compensation insurance or any mutual employer's liability association authorized to transact the business of workers' compensation insurance in this state or in an association authorized to exchange reciprocal or interinsurance contracts by individuals, partnerships, or corporations.

Source: SL 1931, ch 271, § 1; SDC 1939, § 64.0106 (1); SL 2008, ch 278, § 35.

62-5-3. Reciprocal or interinsurance contracts providing indemnity for loss under workers' compensation law.

An employer may secure the payment of compensation to any employee by insuring and keeping insured the payment of the compensation in some association organized for the exchange of reciprocal or interinsurance contracts with each other by individuals, partnerships, or corporations of this state for the purpose of providing indemnity among themselves from any loss under the workers' compensation law, if the association is authorized to do the business of entering into reciprocal or interinsurance contracts by the director of the Division of Insurance. Nothing in this section applies to reciprocal or interinsurance exchanges authorized to do business under the provisions of chapter 58-34.

Source: SL 1931, ch 271, § 1; SDC 1939, § 64.0106 (2); SL 2008, ch 278, § 36.

62-5-4. Repealed by SL 1996, ch 306, § 2.

62-5-5. Self-insurance by employer--Annual proof of solvency and financial ability--Application fee--Deposit of fees--Certificate of exemption.

If an employer coming under the provisions of this title annually furnishes satisfactory proof to the Department of Labor and Regulation of the employer's solvency and financial ability to pay the compensation required by this title, the employer is relieved from the provisions of § 62-5-1. Each employer shall submit an application fee not to exceed two thousand five hundred dollars to the Department of Labor and Regulation at the time proof of solvency is submitted. The Department of Labor and Regulation shall set, by rules promulgated pursuant to chapter 1-26, the amount of the application fee.

All fees paid to the department pursuant to this section shall be deposited with the state treasurer and shall be credited to the Department of Labor and Regulation special revenue fund which is hereby created. The money deposited shall be dedicated and continuously appropriated to the department for purposes of conducting an actuarial review of the applicant's financial condition and automating the administration of the workers' compensation law.

Upon receiving satisfactory proof of financial solvency and surety for performance required by § 62-5-10, the department shall issue a certificate of exemption relieving the employer of the obligation to purchase worker's compensation insurance provided in §§ 62-5-2 and 62-5-3. The department may revoke this certificate if the employer fails to comply with the provisions of titles 58 and 62, or with any rules promulgated by the Department of Labor and Regulation.

Source: SDC 1939, § 64.0106(4); SL 1941, ch 371; SL 1986, ch 428; SL 1990, ch 417; SL 1994, ch 93, § 2; SL 1996, ch 306, § 3; SL 2011, ch 1 (Ex. Ord. 11-1), § 33, eff. Apr. 12, 2011; SL 2018, ch 285, § 1.

62-5-6. Exemption of political subdivisions from security provisions.

This state or any municipality or other political subdivision of the state need not furnish any insurance or security as provided by §§ 62-5-1 to 62-5-5, inclusive, or §§ 62-5-10 to 62-5-12, inclusive, but may do so if it desires.

Source: SL 1923, ch 311; SDC 1939, § 64.0106 (5); SL 1989, ch 453, § 8.

62-5-7. Failure to secure payment as election not to operate under title.

Any employer other than the state, a municipality, or other political subdivision of this state, who has failed to comply with the provisions of §§ 62-5-1 to 62-5-5, inclusive, shall be deemed to have elected not to operate under the provisions of this title.

Source: SDC 1939, § 64.0106.

62-5-8. Commission for placing insurance limited.

No insurer of any obligation under this title may by himself, herself, or through another, either directly or indirectly, charge, accept, or pay as a commission or compensation for placing or renewing any insurance under this title more than fifteen percent of the premium charged.

Source: SL 1917, ch 376, § 51; RC 1919, § 9487; SDC 1939, § 64.0305; SL 2008, ch 278, § 37.

62-5-9. Issuance of policy to employer--Certification to department.

If any insurance company operating under this chapter issues a policy of workers' compensation insurance to any employer, the company writing the insurance shall file a certificate thereof with the department.

Source: SDC 1939, § 64.0506; SL 2008, ch 278, § 38.

62-5-10. Surety for performance required for self-insurers--Irrevocable trust.

An employer seeking permission to be a self-insurer, or seeking renewal of its permission to be a self-insurer, shall furnish to the department, on a form required by the department, a bond, written by a surety company authorized by the division of insurance to write surety bonds, or cash, or a certificate of deposit, or approved government securities, or an irrevocable letter of credit, or an irrevocable trust, alone or in any combination, in a total amount equal to the greater of:

(1)    Two hundred fifty thousand dollars; or

(2)    Twice the amount of compensation and medical claims paid by the employer during the preceding calendar year; or

(3)    The amount designated by the employer as a reserve for workers' compensation and medical claims.

The irrevocable trust as used in this section must be with a bank or trust company authorized to exercise trust powers under the laws of this state or the United States. The trust shall authorize distribution solely to the department if the employer defaults on its obligations under Title 62, or to the employer if the employer is no longer self-insured under the provisions of Title 62 to the extent the department determines that the security is not necessary, or to the employer if the employer complies with another method authorized by this section.

Source: SL 1989, ch 453, § 1; SL 1994, ch 400.

62-5-11. Requirements for acceptance of irrevocable letter of credit--Definitions.

As used in §§ 62-5-10 to 62-5-16, inclusive, an irrevocable letter of credit shall be accepted only if it is clean, irrevocable, and contains an evergreen clause.

Terms used in §§ 62-5-10 to 62-5-16, inclusive, mean:

(1)    "Clean," a letter of credit that is not conditioned on the delivery of any other documents or materials;

(2)    "Irrevocable," a letter of credit that cannot be modified or revoked without the consent of the beneficiary, once the beneficiary is established;

(3)    "Evergreen clause," a clause specifically stating that the expiration of a letter of credit will not take place without a sixty-day notice by the issuer. If prior notice of expiration is not given by the issuer, the letter of credit is automatically extended for one year.

A clean irrevocable letter of credit shall be accepted only if it is in the form prescribed by §§ 62-5-10 to 62-5-16, inclusive, and is issued by a financial institution that is authorized to engage in banking in any of the fifty states or under the laws of the United States and whose business is substantially confined to banking, and that has a long-term debt rating by a recognized national rating agency of investment grade or better. If no long-term debt rating is available, the financial institution shall have the equivalent investment grade financial characteristics.

Source: SL 1989, ch 453, § 3; SL 2017, ch 219, § 1.

62-5-12. Deposit of surety bonds, letters of credit, etc..

Surety bonds, irrevocable letters of credit, and documents showing issuance of any irrevocable letter of credit shall be deposited with, and, unless specified by statute, in a form approved by the department.

Source: SL 1989, ch 453, § 4.

62-5-13. Deposit of certificate of deposit or government securities.

Certificates of deposit or approved government securities shall be deposited on behalf of the department by the self-insured employer with the state treasurer or a financial institution approved by the department. Certificates of deposit or approved government securities shall be accepted by the state treasurer for deposit and shall be withdrawn only upon written order of the secretary of the Department of Labor and Regulation. Interest or gains earned on any certificate security, or deposit shall be paid to the self-insurer at least annually.

Source: SL 1989, ch 453, § 5; SL 2011, ch 1 (Ex. Ord. 11-1), § 33, eff. Apr. 12, 2011.

62-5-14. Deposit and withdrawal of cash.

Cash shall be deposited in a financial institution approved by the department, and in the account assigned to the state treasurer. Cash shall be withdrawn only upon written order of the secretary of the Department of Labor and Regulation.

Source: SL 1989, ch 453, § 6; SL 2011, ch 1 (Ex. Ord. 11-1), § 33, eff. Apr. 12, 2011.

62-5-15. Perfected security interest in deposit--Release of security interest.

Upon the secretary sending a request to renew, request to post, or request to increase a security deposit to the maximum amount permitted by §§ 62-5-10 to 62-5-16, inclusive, a perfected security interest is created in the private self-insured's assets in favor of the secretary to the extent of any then unsecured portion of the self-insured's incurred liabilities for workers' compensation claims. That perfected security interest is transferred to any cash or securities thereafter posted by the private self-insured with the state treasurer or other financial institution and is released only upon:

(1)    The acceptance by the secretary of a surety bond, certificate of deposit, or irrevocable letter of credit for the full amount of the incurred liabilities for the payment of compensation; or

(2)    The return of cash or securities by the secretary.

The private self-insured employer loses all right and title in and any right to control all assets or obligations posted or placed on deposit as security. In the event of a declaration of bankruptcy or insolvency by a court of competent jurisdiction the secretary may liquidate the deposit for application to the self-insured employer's incurred liability.

Source: SL 1989, ch 453, § 7; SL 2017, ch 219, § 2.

62-5-16. Claims administration contracts.

The secretary of the Department of Labor and Regulation may contract with any person, firm, or corporation qualified to administer claims of self-insured employers with respect to adjustment, administration, and management of workers' compensation claims for any self-insured employer. Costs of such claims administration shall be paid from the security deposit.

Source: SL 1989, ch 453, § 9; SL 2011, ch 1 (Ex. Ord. 11-1), § 33, eff. Apr. 12, 2011.