BILL ANALYSIS AB 1117 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1117 (Fuentes) As Amended June 28, 2009 2/3 vote. Urgency ----------------------------------------------------------------- |ASSEMBLY: |73-0 |(May 14, 2009) |SENATE: |34-0 |(July 9, 2009) | ----------------------------------------------------------------- Original Committee Reference: INS. SUMMARY : Clarifies that a board member of the State Compensation Insurance Fund (SCIF) is not disqualified by virtue of a conflict of interest from considering issues before the board due to the fact that the board member is a policyholder or employee of a policyholder of SCIF. The Senate amendments recast the clarifying language contained in the Assembly-passed version to more precisely limit application of the bill to SCIF Board consideration of ratemaking matters. EXISTING LAW : 1)Establishes SCIF as a public enterprise fund for the purpose of transacting workers' compensation insurance. SCIF is required to be fairly competitive with other insurers and is directed to be self-supporting. SCIF is administered by an 11-member board of directors, 9 of whom are appointed by the Governor. 2)Requires that one of the board members be a SCIF policyholder, or officer or employee of a SCIF policyholder, and does not prohibit other board members from being policyholders. 3)Provides that no person who has an interest in any transaction with SCIF is eligible to be a board member, and makes specified conflict of interest laws applicable to board members. 4)Provides that SCIF board members must have experience in positions involving workers' compensation, legal, investment, financial, corporate governance and management, accounting or auditing responsibilities with entities of sufficient size as to make their qualifications relevant to an enterprise of the AB 1117 Page 2 financial and operational size of SCIF. FISCAL EFFECT : None COMMENTS : The author introduced this bill at the suggestion of SCIF to clarify a confusion in the law that could hamper the ability of the newly expanded board of directors to effectively run the company. Specifically, counsel for SCIF opined that policyholder board members had "an interest" in a "transaction" with SCIF - the insurance policy itself - that triggered the disqualifying conflict provisions. Since this is clearly not what the Legislature intended last year when it expanded the board and required at least one policyholder member, legislation is required to clarify the issue. Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086 FN: 0001672