BILL ANALYSIS Ó SENATE INSURANCE COMMITTEE Senator Ronald Calderon, Chair AB 2084 (Solorio) Hearing Date: June 27, 2012 As Amended: June 21, 2012 Fiscal: Yes Urgency: No VOTES: Asm. Floor(05/30/12)77-0/Pass Asm. Appr. (05/25/12)17-0/Pass Asm. Ins. (04/18/12)13-0/Pass SUMMARY: Would expand the types of blanket insurance that may be offered by California admitted insurers. DIGEST Existing law 1. Provides that blanket insurance is that form of insurance providing coverage for specified circumstances and insuring by describing all persons within a class of persons defined in a policy issued to a master policyholder, and not by specifically naming the persons covered; 2. Provides that the permitted types of blanket insurance are those where the blanket policy is issued to specified entities, including, but not limited to, a volunteer fire company providing benefits to members only in the event of accident incurred while performing actions incident to such membership and a proprietor or sponsor of an organized camping institution providing benefits to campers or persons responsible for their support for death or dismemberment resulting from accident, or for hospital, medical, surgical, or nursing expenses resulting from accident or sickness related to the camper's specified connection with the camping institution; AB 2084 (Solorio), Page 2 3. Prohibits a person from transacting any class of insurance business in this state without first being an admitted insurer. Under existing law, admission is secured by procuring a certificate of authority from the Insurance Commissioner; 4. Authorizes the above-described blanket policies, among others, to provide that the cost of the insurance coverage is required to be paid by either the policyholder, or the individuals insured or their parents or guardians, payable through the policyholder; 5. Prohibits a blanket policy from being issued until approved as to substance and form by the commissioner. This bill 1. Would revise and recast provision related to a volunteer fire company and an organized camping institution to instead include: a. A volunteer or governmental fire department, emergency medical services company, or similar volunteer or governmental organization providing benefits to members or participants only in the event of accident incurred while performing actions incident to an activity or operation sponsored or supervised by the department, company, or organization and b. A sports team or camp, as specified, providing benefits to participants, campers, and other specified persons responsible for their support for death or dismemberment resulting from accident, or for hospital, medical, surgical, or nursing expenses resulting from specified accident or sickness related to the participants, campers, or other specified person's connection with the sports team or camp, as specified; 2. Would additionally specify other permitted types of AB 2084 (Solorio), Page 3 blanket insurance, providing specified benefits, issued to specified entities that include, but are not limited to, a. An employer providing accident benefits to any group of workers, dependents, or guests, limited by reference to specified hazards incident to activities or operations of the employer, b. Any common carrier or any operator, owner, or lessor of a means of transportation providing accident benefits to any specified group of persons who may become lessees or passengers limited by reference to travel status, and c. An entertainment production company providing accident benefits to any group of participants, volunteers, audience members, contestants, or workers while engaged in any activity or operation of the entertainment production company; 1. Would extend existing provision to the newly established permitted types of blanket insurance described above; 2. Would require an insurer who intends to issue a policy according to these revised provisions to submit, prior to issuance, any new language in that policy to the commissioner for approval; 3. Would authorize the person insured, when the premium is paid for these types of blanket insurance, to request a copy of the policy from the insurer; 4. Would also authorize the commissioner to add to the list of entities that may be eligible to purchase blanket insurance for any risk or class of risks, relating to accident benefits, as defined, which may be properly eligible for blanket insurance; AB 2084 (Solorio), Page 4 5. Would require the commissioner to issue and post on the commission's Internet Web site a letter order, as specified, each time the commissioner exercises his or her discretion to add an entity to the list of entities eligible to purchase blanket insurance; 6. Would make additional conforming, nonsubstantive changes. COMMENTS 1. Purpose of the bill. To update the group blanket insurance statute to better reflect current needs for this type of insurance in the marketplace. It would do so by adding to the types of groups that can be covered, and by giving the Insurance Commissioner authority to add additional risks in his/her discretion. 2. Background. In California, blanket insurance is a form of group disability insurance that is provided by an authorized policy holder to cover persons as a described class (not necessarily by name) and only while engaged in specified activities covered under the policy. For example, under this bill, an entertainment organization could provide accident insurance for participants, audience members, contestants or volunteers while they are participating, watching, or assisting in the production of activities organized by the entertainment organization. These individuals all run the risk of being injured while participating, watching or assisting the production. The blanket insurance policy (either standing alone, or as a companion to a general liability policy) would keep production costs down and would provide coverage regardless of the liability of the organization producing the show. a. Distinguished form General Liability. Unlike general liability, which covers the policy holder, blanket insurance covers the insured, but only for a specific period defined in the policy. Group blanket coverage will pay for a covered accident regardless of liability insurance coverage and in addition to any AB 2084 (Solorio), Page 5 coverage under workers' compensation. It is not exclusive, but in addition to, those policies. Also, under some blanket insurance policies, the cost of the policy may be passed to the insured; in those cases, the insured may request a copy of the policy. b. AB 2084 Expands the Number of Eligible Classes. This proposal updates the statute to expand the types of legitimate businesses that could obtain a group blanket insurance policy. i. The bill would update and expand the scope of first responder organizations to include governmental fire departments and emergency service companies (the statute is currently limited to only volunteer fire companies) while performing actions incident to an activity or operation sponsored or supervised by the policyholder. ii. It would also broaden the available coverage for any religious, charitable, recreational, educational, athletic or civic organization, or branch thereof to include any activity or activities or operations on the premises of the policyholder (rather than just activities supervised or sponsored by the policyholder). This bill would add the following classes of blanket insurance defined by eligible policyholders and beneficiary classes covering costs related to death or dismemberment, or for hospital, medical, surgical, or nursing expenses ("specified costs") when engaged in defined activities: i. Sports team operators providing benefits to sports team participants and employees for specified costs resulting from an accident; ii. An employer providing benefits to any group of workers, dependents, or guests for specified costs AB 2084 (Solorio), Page 6 resulting from accidents related to specified hazards incident to activities or operations of the employer; iii. Common carriers (planes, trains, buses, etc.) providing benefits to lessees or passengers for specified costs resulting from an accident based on their travel status (for example, a policy issue to a cab company to cover passengers); and iv. Entertainment production companies providing benefits to participants, volunteers, contestants, audience members, or workers resulting from an accident while engaged in any activity or operation of the policy holder. Grants the Insurance Commissioner Discretion to Add Classes. Additionally, the bill provides the Commissioner the authority to add additional types of blanket insurance (but may not change the substance of what is authorized). The bill would also allow the Commissioner to add other entities eligible to purchase blanket insurance by issuing and posting a letter order on the CDI website. 3. Summary of Arguments in Support According to AIG: a. The statute has not been amended since 1973. Since that time, the marketplace has evolved, and additional businesses not specified in the statute have a need for this type of insurance. For example, Reality TV shows are a class of California business that would not have been envisioned when the statue was last amended. b. The additional classes of risks added in this bill are found in statues in other states, although states can vary as to which classes they allow. AB 2084 (Solorio), Page 7 c. California has one of the more restrictive blanket eligibility statutes in the country, not just because of the limited types of groups that are allowed, but also because California does not have a discretionary authority provision for its Insurance Commissioner. Most states have already granted the respective insurance commissioner the authority to add more classes. 4. Summary of Arguments in Opposition None received. POSITIONS Support American International Group (AIG)/Sponsor Opposition None received. Consultant: Hugh Slayden, (916) 651-4773