The 2001 California Legislature delivered favorable results to the insurance industry by defeating unreasonable privacy mandates, lifting restrictions on anti-fraud efforts, and approving the collection of more funds from insurers to pay injured workers who file claims with troubled companies, according to the National Association of Independent Insurers (NAII). The session ended Sept. 14.
Gov. Gray Davis has until Oct. 14 to act on bills passed by the Legislature. They include legislation that would increase annual workers’ compensation benefits by $3.6 billion, create a consumer “do not call” list that solicitors would be forced to honor, and form a toxic mold task force that would establish guidelines for a safe level of mold in buildings, among other legislation.
California lawmakers defeated what was largely considered the most onerous consumer privacy legislation in the country, Senate Bill 773, sponsored by Senator Jackie Speier (D-Hillsborough). SB 773 would have created a California-only system of controlling consumers’ financial information. The bill would have modified the privacy safeguards provided by the federal Gramm-Leach-Bliley Act (GLBA). The GLBA allows companies to share information among affiliates and requires companies to give consumers an opportunity to “opt-out” of the disclosure of information to non-affiliates. SB 773 would have created an “opt-out” system for the sharing of information with affiliates and an “opt-in” system for disclosure of information to non-affiliates.
“SB 773 would have led to more unwanted consumer solicitations and higher costs since the bill would have blocked information sharing that assists in targeted marketing, said Sam Sorich, NAII vice president and western regional manager. “The legislature was wise to give the federal system a chance to work before it created an entirely new scheme for managing the disclosure of information.”
The legislature did approve a measure to create a “do-not-call” list in California, SB 771, which would allow consumers to add their names to a list of phone numbers that solicitors would be banned from calling.
SB 71, which does not adequately balance the annual $3.6 billion in benefit increases with cost-saving system reforms, is now on the governor’s desk. The NAII is urging Gov. Davis to veto SB 71.
“Injured workers do need more benefits, but the 27 percent hike in benefit awards is unbalanced because the bill falls short of solving major problems driving up workers’ compensation costs,” Sorich said.
Gov. Davis offered a workable alternative to SB 71, which would have increased benefits by about $1.2 billion annually and included the needed reforms not part of SB 71. However, SB 71 supporters rejected the governor’s plan. Davis has vetoed bills similar to SB 71 in each of the past two sessions.
David has already signed into law AB 1183, which permits the state guarantee fund to assess insurers at least at the 2 percent level. Changing the fund’s assessment level assures that claimants will be paid the insurance benefits to which they are entitled, Sorich said.
“The assessment increase from 1 to at least 2 percent is a reasonable, much-needed change in California as the solvency of many of the workers’ compensation carriers in the state is being threatened by rising medical costs, reduced investment income and higher loss costs,” Sorich added.
Other Legislative Developments
Throughout the legislative session, NAII opposed SB 658 because it would have imposed restrictions on homeowner insurers’ ability to conduct examinations under oath-an important tool in combating fraud. On Sept. 12, a requirement that a homeowners insurers would pay the fees of the attorney who accompanies the policyholder to the examination was stricken from the bill.
“We’re pleased that the bill was modified, preventing fraud and other abuse that would have occurred because of the demand for attorney fees,” Sorich said.
The bill still imposes some notice requirements on insurers who conduct examinations under oath but the most troublesome language was eliminated, he said.
Lawmakers also rejected or failed to vote on three other NAII-opposed bills:
-SB 11: would have limited a court’s power to keep confidential settlements agreements and pretrial discovery information in lawsuits regarding allegedly defective products, environmental hazards and unfair insurance claims practices.
-SB 476: would have made it more difficult for a defendant to prevail on a motion for summary judgment.
-SB 834: would have put into statue existing regulations requiring insurers to submit annual reports relating to “underserved communities.”
Beside SB 71, SB 658 and SB 771, Gov. Davis will be considering the following insurance bills:
-SB 732: requires the Department of Health Services to consider the feasibility of adopting exposure limits to mold in buildings and to assess the health threat posed by mold.
-SB 708: authorizes the insurance commissioner to establish a mediation program for insurance claims involving automobile insurance, homeowners insurance, or any other insurance coverage which the commissioner determines would be best served by the mediation process.
-SB 1178: requires the Department of Consumer Affairs to conduct a study to determine the best process for certifying competitive auto parts.
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