More than 20 new insurance-related bills signed into law by Governor Brown

By Sam Sorich

September 30, 2012, was the deadline for Governor Jerry Brown to take action on bills passed by the California Legislature during the 2012 regular legislative session.

Here are summaries of noteworthy insurance-related bills that were signed into law. All of these new laws will go into effect on January 1, 2013.

Senate Bills

SB 863 increases workers’ compensation permanent disability benefits by an estimated $750 million per year, phased in over a two-year period. The new law changes several aspects of the workers’ compensation system. Among other things, SB 863 creates an independent medical review process for resolving medical care disputes, establishes an independent bill review process for resolving medical billing disagreements, adopts a statute of limitations for workers’ compensation liens, and restricts the reasons that can be used to avoid obtaining treatment within a medical provider network.

SB 1216 conforms California law to the revisions made to the NAIC Credit for Reinsurance Model Law (adopted in 2011). Among other things, SB 1216 establishes criteria that the insurance commissioner is to use in certifying reinsurers; reinsurance provided by certified reinsurers qualifies as an asset or credit against the liabilities of a ceding insurer.

SB 1234 and SB 923 create the California Secure Choice Retirement Savings Investment Board which is charged with conducting a market analysis to determine if the necessary conditions for implementation can be met and then report to the Legislature as to whether a statewide retirement savings plan for private employees, who do not participate in any other type of employer-sponsored retirement savings plan, should be created. The Board’s analysis would have to be paid for by funds made available through a non-profit or private entity, federal funding, or an annual Budget Act appropriation.

SB 1298 establishes conditions for the operation of autonomous vehicles on public roadways for testing purposes. The bill defines “autonomous vehicle” as a vehicle equipped with technology that has the capability to drive a vehicle without the active physical control or monitoring by a human operator.

SB 1448 conforms California law to the revision to the NAIC Insurance Holding Company System Regulatory Model Act (adopted in 2010). Among other things, SB 1448 requires the board of directors of an insurer, which is part of a holding company system, to file a statement affirming that the board is responsible for overseeing corporate governance and internal controls. In addition, SB 1448 authorizes the insurance commissioner to evaluate the enterprise risk related to an insurer that is part of a holding company.

SB 1449 permits the approval of life insurance and annuity products that include the waiver of premium during periods of disability and the waiver of surrender charges if the insured encounters specified medical conditions, disability, or unemployment.

SB 1513 expands the investment options available to the State Compensation Insurance Fund.

Assembly Bills

AB 53 requires each admitted insurer with written California premiums of $100 million or more to submit a report to the insurance commissioner on its minority, women, and disabled veteran-owned business procurement efforts. The first report is due July 1, 2013. An insurer is required to update its report biennially. AB 53 includes a January 1, 2019 sunset date.

AB 999 revises the standards used by the insurance commissioner to approve the rates for long-term care insurance. AB 999 prohibits an insurer from using asset investment yield changes to justify a rate increase for long-term care policies unless the insurer can demonstrate that its return on investments is lower than the maximum valuation interest rate for contract reserves for those policies; or the insurance commissioner determines that a change in interest rates is justified due to changes in laws or regulations that are retroactively applicable to long-term care insurance previously sold in California. AB 999 requires all of the experience on all similar long-term care policy forms issued by an insurer and its affiliates and retained within the affiliated group to be pooled together and used as the basis for determining whether a rate increase is reasonable.

AB 1631 removes the January 1, 2013, repeal date for the existing law which permits a person admitted to the bar of another state to represent a party in a California arbitration proceeding.

AB 1708 authorizes auto insurers to provide proof of insurance coverage in an electronic format that may be displayed on a mobile electronic device. Proof of insurance in this format is allowed to be presented to a peace officer.

AB 1747 requires every life insurance policy to include a provision for a grace period of not less than 60 days from the premium due date; the provision must state that the policy remains in force during the grace period. AB 1747 requires an insurer to provide an applicant for an individual life insurance policy an opportunity to designate at least one person, in addition to the applicant, to receive notice of lapse or termination of a policy for nonpayment of premium. AB 1747 provides that a notice of pending lapse or termination of a life insurance policy is not effective unless the notice is mailed by the insurer to the named policy owner, a designee for an individual life insurance policy, and a known assignee or other person having an interest in the individual life insurance policy, at least 30 days prior to the effective date of policy termination if termination is for nonpayment of premium.

AB 1875 limits the civil deposition of any person to one day of seven hours. The bill specifies exceptions to this limit.

AB 1888 allows a person who has a commercial driver’s license to attend a traffic violator school for a traffic offense while operating a passenger car, a light duty truck, or a motorcycle.  Attendance at the school prevents the offense from being counted as a point for determining whether the driver is presumed to be a negligent operator who is subject to license revocation. However, attendance at the school does not bar the disclosure of the offense to insurers for underwriting or rating purposes.

AB 2084 establishes new permitted types of blanket insurance policies and expands the list of eligible policyholders who can purchase blanket insurance.  

AB 2138 gives the insurance commissioner the authority to require every admitted disability insurer, and every other entity liable for any loss due to health insurance fraud, to pay an annual maximum fee of 20 cents for each insured under an individual or group insurance policy it issues in California. The fee is to be used to fund increased investigation and prosecution of fraudulent disability insurance claims. Under current law, the maximum fee is 10 cents. AB 2138 allows an insurer to recoup the fee through a surcharge on premiums or by including the fee in the insurer’s rates.

AB 2160 requires the California insurance commissioner to treat a domestic insurer’s investment in a company that has business operations in Iran as a non-admitted asset. We recently blogged on the passage of AB 2160 here.

AB 2219 removes the January 1, 2013, repeal date for the existing law which requires a contractor with a C-39 roofing classification to obtain and maintain workers’ compensation insurance even if he or she has no employees. AB 2219 also removes the January 1, 2013, repeal date for the existing law which requires an insurer that issues a workers’ compensation insurance policy to a roofing contractor, who holds a C-39 license, to perform an annual payroll audit for the contractor. AB 2219 adds the requirement that the insurer’s audit must include an in-person visit to the place of business of the roofing contractor to verify whether the number of employees reported by the contractor is accurate.     

AB 2298 prohibits an insurer that issues or renews a private passenger auto insurance policy to a peace officer or a firefighter from increasing the premium for the policy because the peace officer or firefighter was involved in an accident while operating his or her private passenger auto in the performance of his or her duty at the request or direction of his or her employer. AB 2298 provides that in the event of a loss or injury that occurs as a result of an accident during any time period when the private passenger auto is operated by the peace officer or firefighter and is used by him or her at the request or direction of the employer in the performance of the employee’s duty, the auto’s owner shall have no liability.

AB 2301 modifies the definition of “covered claims” in the Insurance Code article relating to the California Insurance Guarantee Association (CIGA) to make clear that a covered claim is one which is presented to the liquidator in the state of domicile of the insolvent insurer or to CIGA.  

AB 2303 is the Department of Insurance’s omnibus bill which addresses a variety of matters, including applications for non-resident surplus lines broker licenses, pre-licensing requirements for bail agents, the creation of a limited lines license for crop insurance adjusters, and changes to the conservation and liquidation process. AB 2303 abolishes the advisory committee on automobile insurance fraud within the Fraud Division of the Department of Insurance. AB 2303 also repeals the provision that excludes policies that have been effect less than 60 days from the statute which governs the cancellation of private passenger auto insurance policies.

AB 2354 revises the licensing requirements for travel insurance agents.

AB 2406 requires the Department of Insurance to publish on the Department’s website all requests by a person or group representing the interests of consumers for compensation relating to intervention in a proceeding on an insurer rate filing or participation in other proceedings. Findings on such requests also must be published on the website.

Originally posted to Barger & Wolen's Insurance Litigation & Regulatory Law Blog.

Significant Insurance Bills Being Considered by California Legislature

by Samuel J. Sorich

California legislators will consider a variety of insurance-related issues before the 2012 legislative session ends on August 31, 2012.

Hundreds of bills were introduced prior to last month’s deadline for bill introduction. Many of the newly introduced bills would affect insurers doing business in California. 

Most bills propose specific statutory changes. However, as is typical at this point in the legislative process, a number of  bills merely contain general language. These so-called “spot bills” will be amended to include specific statutory changes later during the legislative session. 

Here are seven newly introduced bills that merit insurers’ attention. These bills are not yet scheduled for hearings.

SB 1172 is a spot bill. It is expected that the bill will be amended to include provisions which would give the insurance commissioner the power to order an insurer or agent to pay restitution for Insurance Code violations and would grant the insurance commissioner authority to force the insurer or agent to pay the Department of Insurance’s attorney’s fees and costs related to the restitution order. These provisions were contained in SB 631, which failed to pass last year.

SB 1448 would make numerous changes to California’s insurance holding company statutes. Among other things, SB 1448 would require an insurer that is a member of a holding company to file with the insurance commissioner statements affirming the maintenance of corporate governance and internal control procedures. SB 1448 also would require an insurer’s ultimate controlling person to file an annual enterprise risk report that identifies material risks within the holding company that could pose risk for the insurer.

SB 1449 would enact the Interstate Insurance Product Regulation Compact. Enactment of the Compact would result in California’s membership in the commission that establishes uniform standards for the review and approval of products relating to life insurance, annuities, disability insurance and long-term care insurance. 

SB 1460 would enact new statutes relating to the use of replacement crash parts that are not manufactured by the original equipment manufacturer (non-OEM crash parts). The bill would give statutory recognition to certified new non-OEM crash parts.

SB 1528 would allow a plaintiff in a liability lawsuit to recover the reasonable cost of the medical services provided to the plaintiff without regard to the amount that was actually paid for the services. The bill would nullify the California Supreme Court’s 2011 decision in Howell v. Hamilton Meats & Provisions, Inc., which held that a plaintiff’s recovery for medical damages is limited to the amount the medical care provider accepted for medical services. See Barger & Wolen’s recent discussion of the Howell decision here.

AB 1687 would authorize the Workers’ Compensation Appeals Board to award attorney’s fees to a workers’ compensation applicant who is involved in a dispute over the appropriateness of medical treatment.

AB 2160 would require the insurance commissioner to treat a domestic insurer’s indirect investments in Iran as non-admitted assets on the financial statements the insurer files with the commissioner. See Barger & Wolen's recent update here.

Many bills introduced last year are still pending before the Legislature. Two measures are especially noteworthy for insurers. 

AB 52 would require health service plans and health insurers to obtain the insurance commissioner’s prior approval of rate changes. AB 52 was passed by the Assembly. The bill is now in the Senate Inactive File.

AB 53 would require each admitted insurer with premiums of $100,000,000 or more to file with the insurance commissioner a report on its minority, women and disabled veteran-owned business procurement efforts. AB 53 was passed by the Assembly. The bill is now pending before the Senate Rules Committee.

Originally posted in Barger & Wolen's Insurance Litigation & Regulatory Law blog.