BILL ANALYSIS Ó AB 878 Page 1 Date of Hearing: May 18, 2011 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 878 (Bill Berryhill) - As Amended: April 25, 2011 Policy Committee: Business and Professions Vote: 9 - 0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill requires a workers' compensation insurer to report to the Contractors' State License Board (CSLB) when the insurer cancels the insurance policy of a licensee. Specifically, this bill: 1)Requires that a workers' compensation insurer report to the CSLB when a licensee's insurance is cancelled due to failure to pay the premium, failure to report payroll, material misrepresentation by the policy holder, or failure to cooperate with the insurer in a claim investigation. 2)States that willful or deliberate disregard and violations of workers' compensation insurance laws constitutes a cause for disciplinary action. FISCAL EFFECT Costs associated with this legislation would be minor and absorbable within existing resources. COMMENTS 1)Rationale . This legislation, sponsored by CSLB, is intended to reduce premium insurance fraud and address construction employers engaged in fraudulent activity, but not to the level that warrants a felony prosecution. According to the author, under current law many violators are sanctioned by the cancellation of their insurance policy but they are not subject to any disciplinary action by the CSLB. The author AB 878 Page 2 hopes this bill will allow CSLB to take disciplinary action in cases where licensees have their insurance policies cancelled due to willful activity on their part. 2)Related Legislation . AB 2305 (Knight; Chapter 423, Statutes of 2010) extended the sunset date, from January 1, 2011 to January 1, 2013, on existing law requiring a roofing contractor to obtain and maintain workers' compensation insurance, even if he or she has no employees. This bill also extended the parallel sunset date requiring DOI to report on this effect and required automatic license suspension for licensees without proof of insurance, as specified. AB 2390 (Buchanan) of 2010 would have required contractors to include the license number and proof of current valid workers' compensation insurance of their subcontractors in a public works bid. This bill was held on the Senate Floor. SB 1254 (Leno; Chapter 643, Statutes of 2010) authorized CSLB to issue a stop order to any licensed or unlicensed contractor who has failed to secure workers' compensation insurance coverage for his or her employees. Analysis Prepared by : Julie Salley-Gray / APPR. / (916) 319-2081