Department of Labor and Industries MEMORANDUM OF UNDERSTANDING Self Insurance Section PO Box 44891 IRREVOCABLE STANDBY LETTER OF CREDIT Olympia WA 98504-4891 This is a memorandum of understanding between ___________________________________________________________ __ and the Department of Labor and Industries regarding the use oan irref vocable standby letter of credit (hereafter referred to as letter of credit) by the self-insurer as surety for its self-insurance obligations. WHEREAS, ________________________________________________________________has been certified to self-insure its workers compensation liabilities under the Industrial Insurance Act of the state of Washington; and WHEREAS, the self-insurer wishes to meet all or part of its surety requirement by providing a letter of credit. Therefore: The self-insurer and the Department agree as follows: (a) The letter of credit providing surety for the self-insurers workers compensation claims liability will cover all past, esepnr t and future liability of the self-insurer regardless of any date of injury. (b) Unless the Department is notified otherwise by registered mail at least 60 days prior to its expiration date, the letter o credit willf be automatically extended without amendment for an additional one year period. (c) The self-insurer may substitute a bond and/or cash or securities deposited into an escrow account, in an amount designatebyd the Department, as replacement for the letter of credit. (d) If the Department is notified that the letter of credit wilnot be rel newed and no acceptable replacement surety is provided within 30 days of receipt of such notice, the Department will draw the full value the of letter of credit. ll proceeds of Athe letter of credit will be deposited with the Accident Fund under a subsidiary ledger account. Accrued interest in excess of the self-insure rs surety requirement will be returned semi-annually. If the self-insurer provides acceptable replacemensut rety at a later date, the poceerds will be returned. (e) If, in addition to not proving rediplacement surety for a nonrenewed letter of credit, the self-insurer then defaults on payment of its workers compensation liabilities, the proceeds of the lett creder ofit previously deposited with the Accident Fund and the accrued interest will be used to provide for paymentht oe self f-insurers workers compensation liabilities. (f) If the self-insurers letter of credit remains in force ane seld th f-insurer defaults on the payment of its workers comsatiopenn liabilities, the Department will draw the full value of the letter of credit. The proceeds will be deposited and accounted fo as rindicated in paragraph (d) and, with the accrued interest, useto prd ovide for payment of the self-insurers workers compensation liabilities. (g) The financial condition of a bank issuing a letter of credit will be assessed by periodic review of its financial statemen or referetnce to its rating by a recognized rating agency. If the financial condition of the issuing bank changes so that its letters odit are no f crelonger deemed acceptable as security, the Department will require, in writing, that a confirming letter of credit or acceptabl e replacement security be provided by the self-insurer. If none is provided, the Dertpament will draw thefull value of the letter of credit. The proceeds will be deposited and accounted for as indicated in paraph (d). If the Self-insuregra r provides acceptable replacement security at a later date, the proceeds will be returned. (h) Legal proceedings initiated by any party with respect to thletter ois f credit shall be subject to the courts and laws ohe state of f tWashington. This agreement is effective on / / Date Self-Insurer authorizing signature Department of Labor and Industries Date Assistant Direcor oft Self-Insurance American LegalNet, Inc.F207-113-000 memorandum of understanding irrecable standvo by letter of credit 8-94 www.USCourtForms.com