BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 228
Author: Fuentes (D)
Amended: 8/17/11 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE : 9-0, 06/28/11
AYES: Calderon, Gaines, Anderson, Corbett, Correa, Lieu,
Lowenthal, Price, Wyland
SENATE LABOR & INDUSTRIAL RELATIONS COMM : 5-0, 07/06/11
AYES: Lieu, DeSaulnier, Leno, Padilla, Yee
NO VOTE RECORDED: Wyland, Runner
SENATE APPROPRIATIONS COMMITTEE : 6-3, 08/25/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Emmerson, Runner
ASSEMBLY FLOOR : 75-0, 05/09/11 - See last page for vote
SUBJECT : State Compensation Insurance Fund:
out-of-state risks
SOURCE : State Compensation Insurance Fund
DIGEST : This bill confers limited authority to the State
Compensation Insurance Fund (SCIF) to provide specified
California employers workers' compensation coverage for
their non-California employees as an accommodation
alongside their California-based employees via a
contractual arrangement between SCIF and a qualified
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admitted insurer in another state.
ANALYSIS : Existing law:
1.Provides that liability for an injured worker covered
under the workers' compensation system is determined
"irrespective of the fault of any party" and specifies
that coverage is based on defined employment
relationships so every employer in California must either
carry workers' compensation insurance or obtain a
certificate of self-insurance.
2.Authorizes insurance to be obtained privately, through
private insurance carriers licensed and admitted to
provide workers' compensation insurance in California or
through the state's own insurance fund, SCIF, a
quasi-governmental entity.
3.Establishes SCIF as a non-profit, public enterprise fund
that operates like a mutual insurance carrier. Its
primary product is workers' compensation insurance but
the company also offers claims management, coordinated
care plans, and loss control services to policyholders.
Employers can purchase coverage directly from the insurer
or through independent brokers. Unused premium, in excess
of operating expenses, claims costs and expenses, and
necessary surplus are returned in the form of dividends
to policyholders.
4.Provides that as an insurance provider, SCIF is
administered by an independent board of directors for the
primary purpose of providing workers compensation
insurance to California businesses.
5.Confers on SCIF the power to transact workers'
compensation insurance required or authorized by law of
this state to the same extent as any other insurer and
provides that the fund shall be subject to the powers and
authority of the Insurance Commissioner to the same
extent as any other insurer transacting workers'
compensation insurance, except where specifically
exempted by reference.
6.Authorizes SCIF to insure a California employer against
the employer's liability for workers' compensation
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benefits, under the law of any other state, for
California employees temporarily working outside of
California on a specific assignment if the fund insures
the employer's other employees who work within
California.
This bill:
1.Provides a restricted grant of authority authorizing SCIF
to provide specified California employers the ability to
acquire workers' compensation coverage for their
non-California employees as an accommodation alongside
their California-based employees by contract with an
insurer in the other state.
2.Authorizes SCIF to insure an employer's out of state
employees for workers compensation under the laws of
another state if:
The employer's principal place of business is in
California;
The majority of the employer's operations and
employees are located within California; and
SCIF insures the employer's employees who work
within California.
1.Authorizes SCIF to contract as a reinsurer with a ceding
insurer that has responded to a request for proposal from
the fund and is admitted to transact workers'
compensation insurance in California and also in the
out-of-state jurisdiction where the non-California
employees are located.
2.Requires SCIF only contract if the ceding insurer meets
all of the following criteria:
The insurer has an A minus (A-) rating or better
from A.M. Best Company.
The insurer has substantial prior experience in
transacting workers' compensation business on another
insurer's behalf.
The insurer has a minimum surplus of one hundred
million dollars ($100,000,000).
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1.Requires that on or before March 1, 2015, DOI shall
provide to the Secretary of the Senate and the Chief
Clerk of the Assembly a report assessing the experience
of SCIF in exercising the authority provided by this Act,
and post a copy on the DOI web site.
2.The report is required to make recommendations concerning
its continuation, limitation, or expansion with special
attention to the extent of advantages this practice
offers California employers, the California workers'
compensation marketplace, and the impact of this class of
insurance, whether pro or con, on SCIF, its management,
and the California marketplace.
3.Requires that costs incurred by DOI in the assessment,
writing, and publication of this report shall be borne by
the SCIF.
4.Prohibits SCIF from initiating paid advertising or
soliciting sponsorship of advertising campaigns to market
or promote the ability to insure qualified employees
under the law of any other state.
5.Sunsets the bill on December 31, 2016.
Background
California's SCIF is a non-profit, public enterprise fund
that operates like a mutual insurance carrier on the basis
of an express Constitutional authorization and statutory
guidance. Its primary product is workers' compensation
insurance but the company also offers claims management,
coordinated care plans, and loss control services to
policyholders. Employers can purchase coverage directly
from the insurer or through independent brokers. Unused
premium, in excess of operating expenses, claims costs and
expenses, and necessary surplus are returned in the form of
dividends to policyholders.
Under its statutory authority, SCIF may transact workers'
compensation insurance required or authorized by law of
this state to the same extent as any other insurer.
SCIF's current statutory authority gives it permissive
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authority (may) to insure a California employer's employees
who are engaged in traveling temporarily outside of the
state. This constitutes a limited grant of authority to
insure certain employees of California employers who are
temporarily out of the state. This statute, adopted in
1978, can be seen as a grant of authority which is limited,
but serves nonetheless to confer a valuable accommodation
to California businesses.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13
2013-14 Fund
Revision of SCIF Any new
costs covered by existing
Special*
authority to insureauthority to insure for workers'
compensation
insurance coverage
Report Up to $300 one
timeSpecial*
* State Compensation Insurance Fund
SUPPORT : (Verified 8/26/11)
State Compensation Insurance Fund (source)
Allen Lawrence & Associates, Inc.
Arroyo Insurance Services
BB & T Tanner Insurance Services
Bowermaster and Associates
B & B Premier Insurance Solutions
California Farm Bureau Federation
Cal Insurance & Associates, Inc.
Haggerty Insurance Services, Inc.
Hoffman Brown Company
Insurance Brokers and Agents of the West
Interwest Insurance Services
Invensure Insurance Brokers
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Leavitt Barlocker Insurance
McGee & Thielen Insurance Brokers, Inc.
Northridge Insurance Agency, LLC
Thoits Insurance
USI Insurance Services of Northern California, Inc.
OPPOSITION : (Verified 8/26/11)
Association of California Insurance Companies
ARGUMENTS IN SUPPORT : According to the author, "The
State Compensation Insurance Fund considers that as
currently written, "Insurance Codes §11780.5 and §11784 (d)
are ambiguous. Existing law says the fund can cover
employees who are temporarily working out of state.
However, nowhere is the fund prohibited from covering
employees who are permanently working out of state.
Existing law is unclear on this point. Existing law is also
unclear as to what type of reinsurance the fund president
is authorized to purchase. We want to ensure that the
authority of State Compensation Insurance Fund to provide
out of state coverage is clearly articulated."
ARGUMENTS IN OPPOSITION : The Association of California
Insurance Companies states in opposition:
"Allowing SCIF to expand its jurisdiction is a sharp
departure from its original mission, unfair to private
carriers because of the Fund's tax exempt status, and would
subject the Fund, and ultimately its California policy
holders, to assessments and regulations of other states.
SCIF was created as a public enterprise to assure that
California had an "insurer of last resort" for California
employers. In exchange, it was given a federal tax exempt
status, an advantage not enjoyed by any other private
workers' compensation carrier. Allowing SCIF to use its
beneficial tax status that is derived from its mandate in
California is unfair to private carriers and to other state
funds."
ASSEMBLY FLOOR : 75-0, 05/09/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
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Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Charles Calderon, Campos, Carter,
Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Galgiani, Gatto, Gordon, Grove, Hagman, Halderman, Hall,
Harkey, Hayashi, Roger Hernández, Hill, Huber, Hueso,
Huffman, Jeffries, Jones, Knight, Lara, Logue, Bonnie
Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell,
Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan,
Perea, V. Manuel Pérez, Portantino, Silva, Skinner,
Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski,
Williams, Yamada, John A. Pérez
NO VOTE RECORDED: Butler, Garrick, Gorell, Smyth, Vacancy
JJA:nl 8/29/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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