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The 2002 California legislative session came to an end recently, with a flurry of industry-related bills shuffling through the mix. Many new laws and measures were introduced this year by state lawmakers regarding workers’ compensation, construction defects, automobile insurance and other pertinent issues hovering over the industry today.
As agents, brokers and insurance companies sat on the edge of their seats and watched bills flow in and out of committees, the industry associations were hard at work making their voices heard. They lobbied endlessly for the passage of bills, while simultaneously opposing those that would present difficulties to the industry. The end result insofar has been a fair share of positive measures that will lead California’s insurance market to stability, but not, of course, without a few obstacles along the way.
The following bills have been passed and signed into law by Governor Gray Davis:
• AB 2007—Authored by Assemblyman Tom Calderon (D-Montebello); passed in the Assembly floor on Aug. 15; signed into law by Gov. Davis on Sept. 7. AB 2007 maintains the 2 percent maximum surcharge on insurance premiums payable to the California Insurance Guarantee Association (CIGA) through 2007, ensuring funds for payment of outstanding claims of insolvent workers’ compensation insurers. The bill will also increase the number of CIGA board members from nine to 13; members would include a business representative and a labor representative who would be appointed by the Insurance Commissioner. “We strongly supported AB 2007,” said Nicole Mahrt, director of Public Affairs, Western region, at the American Insurance Association (AIA). “We think it’s a very important measure and we’re very glad that the Governor signed it and that he signed it so quickly. Many other states already have a 2 percent assessment, so basically this brings California in line with other states. We think it’s very important that employers that are mandated to have workers’ compensation coverage and employees that rely on it when they’re injured’ we think it’s very important that the safety net be there, so that they continue to receive benefits if their carrier’s solvency is jeopardized.”
• AB 2984—Authored by the Committee on Insurance; passed on July 15; signed into law by Gov. Davis on July 29. AB 2894 will help the California Department of Insurance (CDI) maintain high licensing standards for insurance personnel in California from federal preemption. It will assist in the electronic filing of license applications.
• SB 688—Authored by Senator John Burton (D-San Francisco); passed in the Senate floor on Aug. 30; signed into law by Gov. Davis on Sept. 10. SB 688 extends the statute of limitations for filing a personal injury lawsuit from one to two years. It also extends the time the respondents have to react to summary judgment motions from 28 days to 75 days, a movement that the AIA feels will weaken the law for summary judgment motions by giving the plaintiffs more time to respond. “This is a bill that the trial laws jammed through in the last minute,” said Mahrt. “It got very little public input or scrutiny, which is an inappropriate use of the process.”
The following bills have been passed and were waiting for approval by Gov. Davis, who had until Sept. 30 to sign them into law:
• SB 689—Authored by Senator Don Perata (D-East Bay); passed on the Senate floor on Aug. 30; waiting for Gov. Davis’ approval. SB 689 would give the Insurance Commissioner the authority to allow an optional private passenger auto insurance rating factor of persistency, allowing consumers to receive a discount based upon continuous purchase of insurance from any insurance company.
• SB 800—Authored by Burton; passed on Aug. 31. SB 800 would give a contractor the opportunity to repair defects before the plaintiff can file a construction defect lawsuit. “We support SB 800,” said Mahrt. “We think that it’s a bill that’s a good first step in the right direction. We hope that it will reduce litigation. We… hope that we can continue the process to deal with the problems in the construction insurance market… there’s much more that needs to be one.” Despite the AIA’s support of SB 800, the Alliance of American Insurers opposed the bill, stating in a press release that the bill “will flood California’s already overburdened court system with litigation.” Peter Gorman, vice president of the Alliance’s Western region, said, “”If enacted, SB 800 will scare off what few intrepid insurance companies that are left in the California contractors liability market.”
• SB 1386—Authored by Senator Steve Peace (D-El Cajon); passed on Aug. 30. SB 1386 requires “a state agency or business that does business on the Internet to have to disclose to their customers if a security breach occurs that puts their data in jeopardy,” added Mahrt. “That’s a good bill, a bill that’s going to take care of a real problem.”
• SB 1427—Authored by Senator Martha Escutia (D-Montebello); passed on Aug. 30. SB 1427 would loosen the eligibility criteria for an applicant in the low-cost automobile insurance in Los Angeles and San Francisco. It also would consent to a reduction in the annual premium of a low-cost policy from $450 to $347 in Los Angeles and from $410 to $314 in San Francisco. “The bill is expanding the program, making more people eligible for it, but in the meantime, reducing the cost for the product,” said Mahrt. “It’s just not logical. It’s setting up completely different underwriting standards for this low-cost pilot program than normal carriers have to meet. The program has not been well utilized up until now. While we do not oppose the continuation of the program, we do oppose the expansion of the program, and the arbitrary lowering of the cost of the product.”
• SB 1590—Authored by Senator Betty Karnette (D-Long Beach); passed on Aug. 30. SB 1590 would increase the limit of reporting accidents to the California Department of Motor Vehicles from $500 to $750 of property damage.
• AB 1985—Authored by Calderon; passed in the Assembly on Aug. 20. AB 1985 would revise the existing workers’ comp insurance rating law. Under AB 1985, rates could be rejected if they are deemed insufficient to cover an insurer’s losses and expenses or would jeopardize the solvency of the insurer. The bill “will require the State Fund to comply risk-based capital standards,” said Mahrt. “It solidifies the authority the Insurance Commissioner needs to deny inadequate workers’ compensation insurance rates.”
• AB 2297—Authored by Assemblyman Joe Simitian (D-Palo Alto); passed on Aug. 30. AB 2297, in regards to online commerce, requires privacy policies to be posted to Web site.
• AB 2996—Authored by the Committee on Budget; passed on Sept. 1. Section 1810 of AB 2996 would allow the DMV to assess a fee for providing vehicle and driver records that “at least” covers the DMV’s costs. The budget trailer bill could enable the DMV’s attempt to increase the fees it imposes on insurance companies and other companies that access driving records. “Bottom line, with the [potential] passage of 2996, we’re very concerned of the DMV’s ability to increase the fees to access driving records,” Michael Gunning, senior legislative advocate at the Personal Insurance Federation of California, told Insurance Journal. “We think with the new language [those fees] could be an amount in excess of actual cost. Because other government entities get the information for free, such as the California Highway Patrol, we’re concerned that the costs will be passed on to the insurance industry. We think this could lead to an illegal tax on the industry.”
The following bills were introduced in the 2002 session, but have either been dropped or vetoed.
• SB 773—Authored by Senator Jackie Speier (D-San Francisco/San Mateo); failed on Senate floor on Aug. 30; will most likely be reintroduced next year. SB 773 would have required insurers and other financial institutions to give an “opt-out” option before sharing nonpublic financial information with affiliated companies and an “opt-in” option before sharing information with nonaffiliated companies. “We were glad that the moderate Democrats and the Republicans recognized the fundamental flaws in the bill,” said Mahrt. “The Senator refused to look at the ongoing issues and problems of the bill. We fully expect the issue to come back again next year.”
• SB 1648—Authored by Speier; failed on Assembly floor on Aug. 28; may or may not be reintroduced next year. SB 1648 would have prohibited an insurance company from having an ownership interest in an auto body repair shop.
• SB 1763—Authored by Senator Deborah Ortiz (D-Sacramento); dropped by author on June 20; will most likely revisit next year. SB 1763 would have mandated that any property or liability insurance policy issued, amended, or renewed on or after Jan. 1 must cover mold as an ensuing loss. “We think that the measure was very premature and unnecessary,” added Mahrt. “We need to study the issue of mold before we mandate coverage for it. It would have taken away any tools that insurers have to manage their exposure and their risks.”
• AB 5—Authored by Calderon; dropped on Feb. 28. AB 5 would have prohibited the use of credit-based insurance scoring in underwriting auto or homeowners insurance or rating policies.
Editors note: Gov. Gray Davis signed SB 800 into law Sept. 23.