BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair AB 234 (Gatto) - Claims against the state: payment. Amended: August 5, 2013 Policy Vote: N/A Urgency: Yes Mandate: No Hearing Date: August 26, 2013 Consultant: Brendan McCarthy Pursuant to the committee's rules, the Suspense File rule does not apply to the provisions of this bill as claims are considered valid obligations of the state. Additionally, claims may have time sensitivity. Bill Summary: AB 234 would appropriate $20.75 million from the General Fund to pay two settlements against the state. Any funds appropriated in excess of the amounts required for payment of these claims would revert to the General Fund. Fiscal Impact: One-time appropriation of $20.75 million to the Department of Justice from the General Fund. Background: This bill is one of several annual bills carried by the chairs of the Appropriations Committees to provide appropriation authority for legal settlements approved by Department of Justice and the Department of Finance. These settlements were entered into lawfully by the state upon advice of the Department of Justice. They are binding state obligations. The Motor Vehicle Insurance Account is essentially a state insurance fund into which state departments pay a premium, based on a five-year rolling average of the department's costs, to cover the costs of vehicle accident liability and settlements. Over the past three years, the Motor Vehicle Insurance Account averaged $38 million per year in expenditures and $45 million in revenue. Generally accident settlements involving a state vehicle would be paid from the Motor Vehicle Insurance Account. Due to the size of the two claims in this bill, and a $15.6 million claim passed and chaptered in SB 371 (De Leon, Statutes of 2013) earlier this year, however, the Department of Finance AB 234 (Gatto) Page 1 recommended these claims be paid from the General Fund. The Motor Vehicle Insurance Account cannot bear the cost of these large settlements in one year and the impact of the claims on the premiums of the affected departments - the Department of Public Health and CalFire - would require a General Fund increase to its budget to cover the drain on the Motor Vehicle Insurance Account. Proposed Law: AB 234 would appropriate $20.75 million from the General Fund to pay two settlements against the state. Any funds appropriated in excess of the amounts required for payment of these claims would revert to the General Fund. This bill is an urgency measure. The settlements to be funded by the bill are: Thomas v. State of California (Department of Public Health), Alameda Superior Court. This personal injury settlement arises from a December 9, 2011 motorcycle/automobile collision. Plaintiff Eric Thomas was riding his motorcycle on Doolittle Drive in San Leandro, when he collided with a car driven by Department of Public Health Inspector, Peter Yattaw. Mr. Yattaw was in the course and scope of his employment for the Department of Public Health at the time of the collision. Mr. Thomas is paralyzed from the chest down as a result of the accident. Mr. Thomas initiated suit against the state. The parties entered mediation with the agreement that Mr. Thomas and Mr. Yattaw were equally at fault for the collision. The agreement was based on accident reconstruction analyses. The report of the San Leandro Police Department concluded Mr. Thomas was speeding and Mr. Yattaw failed to yield to an oncoming driver. At mediation, the parties presented reports from medical experts, life care planners and economists. After negotiations, the state, represented by the Office of the Attorney General, agreed to settle the lawsuit for $5,750,000 with 40% ($2,300,000) to be used to purchase an annuity to provide monthly payments for the medical care of the plaintiff. Amethyst Kirwin, et al. v. Timothy McClelland, et al., San AB 234 (Gatto) Page 2 Bernardino Superior Court. On August 1, 2012, a three-car traffic accident occurred on the I-210 freeway in San Bernardino. CalFire Chief Timothy McClelland, who was driving a state vehicle within the course and scope of his employment, rear-ended Gregory Kirwin at 70 mph. Mr. Gregory Kirwin was fatally injured. Plaintiffs Amethyst and Belle Kirwin, Mr. Kirwin's children (ages four and seven at time of the accident), sued for wrongful death negligence. The state, on its own behalf and on behalf of Chief McClelland, settled this case for $15 million, most of which will be placed into a structured settlement and special needs trusts for the support of Mr. Kirwin's children. Related Legislation: SB 371 (de León, Statutes of 2013) appropriated $15.6 million to pay for one settlement. SB 369 (de León) would appropriate $414,054.01 from the General Fund and various special funds to pay state claims. The claims are for 155 stale dated warrants. That bill is on the Senate Floor.