Amended in Assembly April 28, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 1922

Introduced by Assembly Member Daly

February 11, 2016

An act to amend Section 11658 of the Insurance Code, relating to workers’ compensation insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 1922, as amended, Daly. Workers’ compensation policies.

Existing law requires that a workers’ compensation insurance policy or endorsement not be issued by an insurer unless the insurer files a copy of the form or endorsement with a rating organization and 30 days have expired from the date the form or endorsement is received by the Insurance Commissioner from the rating organization without notice from the commissioner, unless the commissioner gives written approval of the form or the endorsement prior to that time.

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This bill would exempt policies or endorsements offering deductibles to policyholders for all or part of benefits payable under the policy if the estimated nationwide standard premium is $250,000 or more, and documents that do not alter, amend, or otherwise provide for the payment of compensation or benefits, coverage, or rating under the policy, from filing under the above provisions.

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This bill would prohibit, except as provided, an ancillary agreement to a workers’ compensation insurance policy from being issued or renewed by an insurer to a California employer, as defined, on or after January 1, 2017, unless the insurer files a copy of the ancillary agreement with a rating organization and 30 days have expired from the date the ancillary agreement is received by the commissioner from the rating organization without notice from the commissioner unless the commissioner gives written approval of the ancillary agreement prior to that time. The bill would define “ancillary agreement” to mean an agreement that is a supplementary writing or contract relating to a policy or endorsement form that adds to, subtracts from, or revises the obligations of either the insured or the insurer regarding any terms of an insurance policy, including, but not limited to, dispute resolution agreements, policy premium amounts or rates, expense or tax reimbursement or allocation, deductible amounts, policy duration, cancellation, or claims administration. The bill would also make conforming changes.

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Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

end insert

begin insert Section 11658 of the end insert begin insert Insurance Code end insert begin insert is amended
to read: end insert

11658.  

(a) A workers’ compensation insurance policy or
endorsement shall not be issued by an insurer to any person in this
state unless the insurer files a copy of the form or endorsement
with the rating organization pursuant to subdivision (e) of Section
11750.3 and 30 days have expired from the date the form or
endorsement is received by the commissioner from the rating
organization without notice from the commissioner, unless the
commissioner gives written approval of the form or endorsement
prior to that time.

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(b) (1) An ancillary agreement shall not be issued by an insurer
to a California employer unless the insurer files a copy of the
ancillary agreement with the rating organization pursuant to
subdivision (e) of Section 11750.3 and 30 days have expired from
the date the ancillary agreement is received by the commissioner
from the rating organization without notice from the commissioner
unless the commissioner gives written approval of the ancillary
agreement prior to that time.

end insert begin insert

(2) For the purposes of this section, a “California employer”
means an employer whose principal place of business is in
California and whose California payroll constitutes the majority
of the employer’s payroll for purposes of determining premium
under the policy.

end insert begin insert

(3) This section shall not apply to an ancillary agreement
between an insurer and a California employer issued in
conjunction with a workers’ compensation policy or endorsement
that contains a deductible obligation or retention obligation equal
to or greater than two hundred fifty thousand dollars ($250,000)
and the California employer meets three or more of the following
criteria: (A) has a full-time risk manager; (B) is represented by
counsel during negotiations; (C) has 500 or more employees; (D)
has annual gross revenue in excess of twenty million dollars
($20,000,000); or (E) has a workers’ compensation manual
standard premium on a countrywide basis in excess of seven
hundred fifty thousand dollars ($750,000).

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(4) Under no circumstances, however, may an ancillary
agreement amend or revise the coverage provided, or the benefits
payable, under a workers’ compensation policy unless it is filed
and approved in accordance with this section.

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(5) This subdivision shall apply to ancillary agreements issued
or renewed on or after January 1, 2017.

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(b)

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begin insert (c) end insert  If the commissioner notifies the insurer that the filed begin delete form
or endorsement end delete begin insert policy form, endorsement, or ancillary agreement end insert
does not comply with the requirements of law, specifying the
reasons for his or her opinion, it is unlawful for the insurer to issue
any policy begin delete or endorsement end delete begin insert form, end insert begin insert endorsement, or ancillary
agreement end insert in that form.

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(c)

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begin insert (d) end insert  The withdrawal of a policy begin delete form or endorsement end delete begin insert form, end insert
begin insert endorsement, or ancillary agreement end insert by the commissioner pursuant
to this section shall not affect the status of the policyholder as
having secured payment for compensation or affect the substitution
of the insurer for the policyholder in workers’ compensation
proceedings as set forth in the provisions of Chapter 4
(commencing with Section 3700) of Part 1 of Division 4 of the
Labor Code during the period of time in which the policy begin delete form or
endorsement end delete begin insert form, end insert begin insert endorsement, or ancillary agreement end insert was in
effect.

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(e) “Ancillary agreement” means an agreement that is a
supplementary writing or contract relating to a policy or
endorsement form that adds to, subtracts from, or revises the
obligations of either the insured or the insurer regarding any terms
of an insurance policy, including, but not limited to, dispute
resolution agreements, policy premium amounts or rates, expense
or tax reimbursement or allocation, deductible amounts, policy
duration, cancellation, or claims administration. “Ancillary
agreements” do not include: (1) limiting and restricting
endorsements as defined in subdivision (g) of this section; (2)
customized limiting and restricting endorsements as defined in
subdivision (h) of this section; or (3) agreements specifying only
terms described in subparagraphs (A) to (F), inclusive, following,
but only if those terms are disclosed and negotiated
contemporaneously with the inception or renewal of the underlying
policy and any revisions or additions to those terms subsequent
to the inception or renewal of the policy are mutually agreed upon
by the parties: (A) the method for making payments; (B) the method
for funding deductible amounts or other policy-related charges
due under a policy; (C) the amounts of collateral or security the
insured is required to maintain for claims that do not exceed the
deductible; (D) payment due dates; (E) payment transmittal
information; or (F) the method of selecting a claims administrator,
provided that the claims administrator may only administer claims
that do not exceed the deductible.

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(d)

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begin insert (f) end insert  This section shall not apply to limited policies submitted for
approval to the commissioner pursuant to Section 11657.

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(g) “Limiting and restricting endorsement” means an
endorsement that excludes from coverage some portion of workers’
compensation liability for which the employer is required to secure
payment pursuant to the Labor Code that, after approval of the
endorsement by the Insurance Commissioner, may be endorsed to
a workers’ compensation policy.

end insert begin insert

(h) “Customized limiting and restricting endorsement” means
an endorsement unique to a specific policy used (1) when the
employer’s business is conducted in such a manner that it is
impossible or impracticable to determine the nature, scope, and
extent of employment covered by the insurer; or (2) to prevent the
performance of work in such an extremely hazardous manner or
under such hazardous conditions as would reflect a reckless
disregard by the employer for the welfare of its employees; or (3)
to prevent the issuance of an unrestricted policy if it would
encourage an operation that is contrary to law or to the rules of
a regulatory agency.

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SECTION 1.  

Section 11658 of the Insurance Code is amended
to read:

11658.  

(a) A workers’ compensation insurance policy or
endorsement shall not be issued by an insurer to any person in this
state unless the insurer files a copy of the form or endorsement
with the rating organization pursuant to subdivision (e) of Section
11750.3 and 30 days have expired from the date the form or
endorsement is received by the commissioner from the rating
organization without notice from the commissioner, unless the
commissioner gives written approval of the form or endorsement
prior to that time.

(b) If the commissioner notifies the insurer that the filed form
or endorsement does not comply with the requirements of law,
specifying the reasons for his or her opinion, it is unlawful for the
insurer to issue any policy or endorsement in that form.

(c) The withdrawal of a policy form or endorsement by the
commissioner pursuant to this section shall not affect the status of
the policyholder as having secured payment for compensation or
affect the substitution of the insurer for the policyholder in workers’
compensation proceedings as set forth in the provisions of Chapter
4 (commencing with Section 3700) of Part 1 of Division 4 of the
Labor Code during the period of time in which the policy form or
endorsement was in effect.

(d) This section does not apply to limited policies submitted for
approval to the commissioner pursuant to Section 11657.

(e) This section does not apply to policies or endorsements
offering deductibles to policyholders for all or part of benefits
payable under the policy if the estimated nationwide standard
premium is two hundred fifty thousand dollars ($250,000) or more.

(f) This section does not apply to documents that do not alter,
amend, or otherwise provide for the payment of compensation or
benefits, coverage, or rating under the policy.

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