THIS WEEK IN
Prepared by Norwood & Mattoch
WCIRB Recommends 13-15% Premium Cuts
The Workers’ Compensation
Insurance Rating Bureau (WCIRB) presented its recommendation on the recent
overhaul of
Even with the release of the WCIRB’s projected savings, it remains unclear as to how
much premiums will decrease and whether or not this set of reforms will cut the
costs of the overall system. Obviously, a
great deal of pressure will be on the insurance companies to lower rates and
pass on savings to employers, especially since the insurance industry narrowly
escaped having any form of workers’ compensation rate regulation included in
the comprehensive reform measure.
Several Democrats in the
Legislature continue to believe that some type of regulation may be needed in
order to force insurers to bring down their rates. Assembly Speaker Fabian Nuňez
stated in an article written for the San
Jose Mercury News, published on
Irrespective of what happens
within the next six months, analysts in the industry are predicting that
greater savings will occur after
Senate Committee Holds Hearing on Workers’ Comp Fraud
The Senate Labor and
Industrial Relations Committee held a hearing to address the recent critical
state audit of Insurance Commissioner John Garamendi
and his department’s handling of workers’ compensation fraud cases. The audit, which was released in April,
stated that Commissioner Garamendi and the Fraud
Assessment Commission had not taken adequate steps to determine the extent of
fraud, develop a plan to reduce it or ensure that anti-fraud funding was being
spent.
Garamendi insisted that he had taken several steps toward
combating fraud, such as appointing a new head of the fraud division and
created a workers’ compensation fraud unit within that division. In addition, he contended that, at the time
of the audit, he and his staff were in the process of developing a “credible
approach to measure the amount of fraud in the system.” Garamendi added
that the number of fraud cases referred by his investigators to district
attorneys for prosecution is up 117% since he took office for the second
time. However, Chairman Richard Alarcón questioned why the audit found that 87% of the
potential fraud cases referred to the department never made in to a DA’s
office.
Garamendi asserted that what the state really needs to track
fraud is to build a database that lists all workers’ comp claims and the
employees, employers, lawyers, medical providers, and amount of treatment
involved in claims. He then asked the
committee to approve anti-fraud measures, including a measure that would allow
prosecutors to file felonies against employers who refuse to purchase workers’
compensation coverage for their employees.
“Homeowner’s Bill of Rights” Watered Down
The four Department of
Insurance-sponsored bills, AB 2199 (Kehoe), AB 2962 (Pavley),
SB 1474 (Escutia) and SB 1855 (Alpert), were all
amended this week.
- AB 2199 (Kehoe),
as amended, would set minimum allowable periods for rebuilding after
fires. The time limit would be 24
months after a declared state of emergency and 12 months after a normal
house fire.
Status: Assembly
Floor.
- AB 2962
(Pavley), as amended, would provide that under an open policy that requires
payment of actual cash value, the measure of the actual cash value
recovery shall be determined as follows: (1) in case of total loss to the
structure, the policy limit or the fair market value of the structure,
whichever is less, or (2) in case of a partial loss to the structure, or
the total loss to its contents, the amount it would cost the insured to
repair, rebuild, or replace the thing lost or injured less a fair and
reasonable deduction for physical depreciation.
Status: Assembly Floor.
- SB 1474
(Escutia), as amended, would prohibit an insurer from refusing to issue or
renew a homeowners' insurance policy on the basis of claims made by the
applicant or insured, unless the applicant has made 2 or more claims
within the preceding 3-year period.
Status: Senate
Floor.
- SB 1855
(Alpert), as amended, would
require insurers to disclose the additional costs of broader coverage than
the consumer's current coverage, to include additional information about
the insured property on the declaration page and requires the insurer to
pay full replacement value if the notice is not included in the disclosure
statement.
Status: Senate Floor.
In addition to the amendments
to the four “Homeowner’s Bill of Rights” measures, several other bills relating
to homeowners insurance coverage were heard and amended this week. The following homeowner’s insurance bills
were heard and/or amended this week:
AB 2444
(Dutton): Requires the
Requirements
Plan Association to provide an annual report to the Legislature on policies in
force for insuring qualified property and probable maximum losses in very high
fire hazard severity zones.
Status: Assembly Floor.
SB 1323 (Ortiz): As amended, prohibits insurers from using credit ratings, credit
reports, credit scoring models, or credit information to underwrite, classify,
or rate homeowners' insurance policies. Prohibits an insurer from refusing to issue, or non-renewing or
canceling, a homeowners' policy based upon these types of credit information. Prohibits an insurer from
reporting the fact that an insured has inquired about the nature or scope of
coverage under a homeowners' policy to a database or other record maintained by
any of these insurance-support organizations if the inquiry did not result in
the filing of a claim.
Status: Senate Floor.
Senate Insurance Committee to Hold Hearings on CDI
& State Fund
Th
Bill Actions:
SB 1451 (Figueroa) was amended this week in the Senate Banking, Commerce and International
Trade Committee. As amended, the bill
requires a person who has access to information protected under specified
privacy laws and who is not subject to any of those laws to treat the
information with the same care that would be required of a person who is
subject to any of those provisions. The
bill also provides that the person would be civilly liable for any violation of
a person’s information. The bill is
currently awaiting a vote on the Senate Floor.
The following bills passed
off the Assembly Floor this week:
AB 2384 (Nakano): Requires that all life insurance and annuity contract forms be filed
with the CDI prior to issuance. Conforms the payment
of credit life and accidental death insurance benefits to the laws regarding
payment of life insurance benefits. Vote: 77-0
AB 2557 (Koretz): Increases civil penalties from $1,000 to $50,000 and
criminal
penalties from six months in
a county jail to one year for selling insurance without a license
Requires licensees to notify the IC
within 30 days when certain applicant background information changes. Vote:
77-0
AB 2684 (Lieber): Requires insurers to pay beneficiaries of disability
insurance policy that provides for death benefits, the proceeds of the policy
within 30 days after the death of the insured. Specifies that if the policy is
not paid within the 30 days, an insurer must pay interest. Vote:
72-2
The following bills passed
off the Senate Floor this week:
SB 1273 (Scott): Provides that a knowing misrepresentation of an insurance policy by an
insurer or agent is punishable by a fine of up to $25,000, or if the loss of
the victim exceeds $10,000, by a fine of up to 3 times that loss, by
imprisonment in a county jail for up to one year or by both fine and
imprisonment. Vote: 36-0
SB 1344 (Margett): This bill includes the State Department of Corrections
among the agencies authorized to request and receive insurance and medical
information regarding workers' compensation fraud. Vote: 36-0
The following bills were heard in the Senate Appropriations Committee this week:
SB 1349 (Ortiz): Transfers regulatory oversight of the financial solvency of health care service plans and specialized health care service plans from the DMHC to the DOI, directs that no plan rates be approved or remain in effect that are excessive, inadequate or unfairly discriminatory, and would require plans seeking to change any rate to file an application with the Insurance Commissioner (IC), as specified.
Vote: 5-2
SB 1452 (Figueroa): Prohibits California from contracting with any
individual or entity employing persons subcontractors outside of the United States
to perform and complete such a contract. Vote:
7-4
SB 1453 (Figueroa): Requires employers that outsource jobs that would result in the
replacement of 20 or more workers in the state to give notice not less than 60
days before outsourcing the job
functions, give written notice of the
contract to the Employment Development
Department and the employees based in California whose jobs would be affected
by the outsourcing. Vote: Placed on suspense file.
SB 1496 (Romero): Expands the types of corporations required to file disclosure
statements with the Secretary of State to include insurers and financial
institutions and also expands the information that must be included on
disclosure statements to include information related to a corporation's tax return. Vote:
Placed on suspense file.
SB 1500 (Speier): Requires
all applicants for an original registration or the transfer of registration of
an automobile to, within 15 days of the application, to submit certain
financial responsibility documents, including proof of automobile insurance
coverage. In addition, the bill would
require automobile insurers in
SB 1582 (Bowen): Prohibits provisional
licensees under age 18 from driving while using a cell phone. Vote: Placed on suspense file.
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