NAII Comments on Veto of Calif. Workers’ Comp Bill, Other Enacted Legislation

October 18, 2001

The National Association of Independent Insurers (NAII) expressed satisfaction that for the third time in as many years, California Gov. Gray Davis vetoed a workers’ compensation reform bill that failed to adequately balance increased benefits with cost-saving reforms.

The NAII, whose member companies write more than 30 percent of the state’s property/casualty insurance market, stated that it is pleased the governor is holding out for a comprehensive bill to make significant improvements to the California’s troubled workers’ compensation system and eliminate expensive inefficiencies.

NAII also hopes Gov. Davis’ plea to the Legislature and other interested parties to cohesively devise a reform bill before the 2002 session begins in January comes to fruition.

“We don’t dispute that injured workers need higher benefit levels,” said Sam Sorich, vice president and western regional manager. “However, California must balance any benefit adjustments with substantive reforms that address the major problems that are escalating workers’ compensation costs. NAII is ready to take up the governor’s invitation to craft a balanced reform bill.”

Sorich said rising medical expenses, higher loss costs, inappropriate medical treatment and lack of objectivity in the disability evaluation process are the threats to the solvency of some of the state’s workers’ compensation insurers.

In a memo to the members of the California State Senate, Gov. Davis said he vetoed Senate Bill 71 because it does not contain some the goals he deems necessary to improve the workers’ compensation system. They include promoting early and sustained return to work within the person’s medical and work restrictions, implementing effective medical cost containment measures while assuring the quality of care provided and targeting benefit dollars to achieve the best outcome for injured workers.

SB 71 increased workers’ comp costs by an estimated $3 to $5 billion per year.

Toxic Mold Protection Act
Last week, Gov. Davis signed SB 732, which is aimed at setting exposure standards and establishing guidelines for treating mold in indoor environments. The Toxic Mold Protection Act of 2001 directs the Department of Health Services to create and work with a task force, including insurers, to determine the feasibility of developing standards and guidelines for permissible exposure limits to mold in dwelling units and commercial buildings. If the standards are deemed feasible, then the Department will determine the costs to comply with exposure standards.

Under the act, the Department must also adopt standards to assess the health threat posed by mold, adopt mold identification guidelines for recognition of mold in indoor environments and develop methods to combat mold. The new law requires the Department to report to the Legislature on its progress for mold standards and guidelines by July 1, 2003.

The law also mandates that landlords of both commercial and residential property inform current tenants of the existence of mold, and require homeowners to disclose the presence of mold above specified levels to prospective buyers. Disclosure requirements will not apply until six months after the Department adopt exposure limit standards, standards for assessing health threats and remediation standards.

Other Enacted Legislation
Gov. Davis also signed SB 658 last week, which restricts homeowner insurers’ ability to conduct examinations under oath. Lawmakers revamped the bill with NAII-supported amendments by removing a provision that would have required homeowners insurers to pay the fees of the attorney who accompanies the policyholder to an examination-which would have hampered insurers ability to fight fraud, Sorich said.

Davis also approved SB 771, which creates a “do-not-call” list. The law allows consumers to add their names to a list of phone numbers that solicitors are banned from calling. However, businesses can call existing customers to offer them new products and services — an amendment that NAII backed, Sorich said.

SB 708 was signed last week, which authorizes the insurance commissioner to establish a mediation program for insurance claims involving automobile insurance, homeowners insurance, or any other insurance coverage.

Since the legislative session ended Sept. 13, Gov. Davis also has signed SB 1178, which requires the Department of Consumer Affairs to conduct a study to determine the best process for certifying competitive auto parts.

Toward the end of the legislative session, Davis approved:

— AB 1183, which permits the state guarantee fund to assess insurers at least at the 2 percent level and assures that workers’ compensation claimants will be paid the insurance benefits that they are entitled to receive.

— AB 1193, which prohibits insurers from canceling the policies of organizations that file claims for losses resulting from hate crimes.

— AB 1180, which requires commercial insurers and workers’ compensation insurers to provide their policyholders with a premium and loss history report for the past three years.

— SB 81, which allows an injured, insured vehicle owner to recover damages under the uninsured motorist coverage under his or her policy if struck by the vehicle while it is being operated without the person’s permission in the course of criminal activity.

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