New Insurance Laws and Pending Legislation in California

By Samuel Sorich

The California Legislature ended its 2013 session on September 13, 2013. The Legislature passed a number of insurance-related bills during this year’s session. Some of the bills passed this year have already been signed into law; other passed bills are waiting action by Governor Jerry Brown.

Here are summaries of noteworthy new laws and bills being considered by Governor Brown.

New Laws

AB 584 requires admitted and nonadmitted insurance companies to regularly conduct an Own Risk and Solvency Assessment (ORSA) consistent with the NAIC’s ORSA Guidance Manual. Upon the request of the Insurance Commissioner, an insurer must submit an ORSA Summary Report to the Insurance Commissioner. AB 584 provides that the Report is not subject to public disclosure. An insurer that has an annual direct written premium of less than $500 million is exempt from the bill’s requirements however the Insurance Commissioner has the authority to require an exempt insurer to conduct an ORSA based on specified criteria. AB 584 becomes operative on January 1, 2015.

AB 1236 authorizes a licensed contractor organized as a limited liability company to obtain statutorily required liability insurance coverage from an eligible surplus line insurer. AB 1236 goes into effect on January 1, 2014. 

SB 146 has three elements. First, the bill provides that a copy of a prescription for workers’ compensation pharmaceutical services is not necessary unless the provider of services has entered into a written agreement that requires a copy of the prescription for a pharmacy service. Second, an employer, pharmacy benefit manager, insurer, or third-party claims administrator may request a copy of the prescription during a review of any records of prescription drugs dispensed by a pharmacy. Third, any entity that submits a pharmacy bill for payment, on or after January 1, 2013, and is denied payment for not including a copy of the prescription from the treating physician, has until March 31, 2014 to resubmit the bill for payment. SB 146 went into effect on August 19, 2013. 

Bills Being Considered by the Governor

Governor Brown has until October 13, 2013 to act on these bills.

AB 32 would increase the annual aggregate amount of qualified investments eligible for the existing Community Development Financial Institution tax credit from $10 million to $50 million. AB 32 would authorize the Insurance Commissioner to adopt emergency regulations to implement this credit against the insurance gross premium tax. AB 32 would require the Legislative Analyst’s Office, on or before June 30, 2016, to submit a report to the Legislature on the effectiveness of the tax credits allowed.  

AB 1113 would make changes to the provisional driver’s license program which applies to individuals between 16 and 18 years old. AB 1113 would require a person to hold an instructional driver’s permit for a minimum of nine months prior to applying for a provisional driver’s license (current law sets a minimum of six months), would prohibit a provisional licensee from driving between the hours of 10 p.m. and 5 a.m., with exceptions (current law sets the hours at 11 p.m. and 5 a.m.), and would prohibit a provisional licensee from transporting passengers who are under 21 years of age, with exceptions (current law applies the prohibition to passengers under 20 years of age).       

AB 1309 would limit access to the occupational disease and cumulative injury provisions of California’s workers’ compensation laws for professional athletes who are employed by out-of-state teams. 

AB 1371 would require the driver of a vehicle to provide a three-feet distance between the vehicle and a bicycle when passing.   

AB 1391 is the Department of Insurance’s omnibus bill which addresses a number of issues. Among other things, AB 1391 would repeal Insurance Code provisions which exempt risk retention groups from the Business Transacted with Producer Controlled Insurer Act, would modify statutory provisions relating to insurer risk-based capital reports to conform to NAIC model language, would amend statutory provisions relating to the exam waiver for licensees moving to California to conform to the NAIC Producer Licensing Model Act, and would specify in statute a three-hour ethics component for inclusion in the 24 hours of continuing education which agents and brokers must complete every two years. 

SB 36 would require the Department of Insurance to include on its website a dedicated web page that includes workers’ compensation data, statistics, and reports relating to insurers, including, but not limited to, claims loss data, expenses and financial reports. The Department would only use data already collected by both the Department and the Department of Industrial Relations.

SB 161 would establish required attachment points and exclusion prohibitions for stop-loss health insurance for small employers.

SB 251 would allow an insurer to offer its automobile, homeowners, earthquake, commercial and workers’ compensation insurance policyholders the option to receive renewal notices electronically. 

SB 353 would require health care service plans and insurers that advertise or market health insurance products in the individual or small group markets in a non-English language that is not a threshold language described in the Health and Safety Code or the Insurance Code to provide specified documents and communications in that non-English language. 

SB 476 would eliminate the sunset dates for the Auto Consumer Assessment, the Organized Automobile Fraud Activity Interdiction Assessment, and the Life and Annuity Consumer Protection Fund. The bill also would lower the maximum assessment for the Auto Consumer Assessment from $0.30 per vehicle to $0.25 per vehicle and would expand the application of Life and Annuity Consumer Protection Fund to include life insurance and annuity products valued at less than $15,000.  

SB 639 would codify certain provisions of the federal Affordable Care Act (ACA) and would allow a carrier, no more frequently than each calendar quarter, to establish an index rate for the small employer health insurance market based on the total combined claims cost for providing essential health benefits within the single risk pool required by the ACA.

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

Podcast: Impact of Recent California Legislation

Sam Sorich recently participated on an A.M. Best podcast where he addressed recent legislation passed by the State of California, and the potential impact of these bills on insureds and the upcoming election.

You can listen to the podcast here.

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

Concerns Growing Over Additional Health Care Mandates

The California Legislature is looking to impose additional health coverage mandates on Californians, forcing insurers to cover such things as acupuncture and tobacco cessation drugs. Insurers are concerned over the costs of these mandates, especially in light of federal reforms.  

A recent article, Health insurers to fight Calif. coverage mandates, by , discusses why these new mandates might do more harm than good:

The state Legislature is considering a bumper crop of 15 bills that would increase what health insurers have to cover - everything from acupuncture to maternity care to autism treatments.

California has a long history of mandating or trying to impose coverage requirements on health insurers. But what's different this year is that insurers are gearing up for a fight based on the year-old federal health care law, which will establish a minimum level of benefits that insurers would have to provide for their products to be sold in the new marketplace.

If California forces its health insurers to cover more than the federal government requires, the state will be on the hook for the extra costs in subsidized policies. And with a budget deficit of $26 billion, that's probably not something the state can afford.

Barger & Wolen will continue to track these bills as they move their way through the legislature. For a list of health care bills introduced in California, please see the California Association of Health Plan's Legislative Update.

Legislation to Cap Punitive Damages in California Defeated; Plaintiff's Lawyers Rejoice

by James C. Castle

Efforts in Sacramento to put a cap on the recovery of punitive damages were stomped out on May 4, 2010, as a party-line vote killed pending tort reform legislation in the Assembly’s Judiciary Committee.

As reported previously, Assembly Bill 2740, authored by Assemblyman Roger Niello (R-Fair Oaks) sought to limit punitive damages to three times the amount of compensatory damages. Because plaintiff’s attorneys routinely work on a contingency basis, this legislation was strongly opposed by plaintiff’s attorneys – arguing it was unnecessary. The bill would have also capped “pain and suffering” awards to $250,000.

Kim Stone, Vice President of the Civil Justice Association of California, testified that these “common-sense reforms would go a really long way towards making California more friendly to business while at the same time protecting the truly injured to make sure they receive their just compensation.”

Niello, a strong-backer of business interests in California, argued that tort reform is necessary to reinvigorate the state as a place for businesses to make their home.

“It's been stated by (the trial lawyers) that there’s no need, there isn’t a problem. There is a need, there is a problem. The problem is the reputation of California as a place to do business in is in the tank, and part of the reason for that is our civil justice system,” Niello told the committee.

Unfortunately, these justifications were not persuasive – or perhaps more pessimistically, not considered – as the bill was defeated on a party-line vote. Democrats unanimously voted against the reform, Republicans unanimously voted for reform. Given the toxicity and divisiveness of California state politics, perhaps little less should have been expected.

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