BILL NUMBER: AB 1922	AMENDED
	BILL TEXT

	AMENDED IN SENATE  JUNE 13, 2016
	AMENDED IN ASSEMBLY  APRIL 28, 2016

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.   policies: ancillary agreements. 
   Existing law  requires that   prohibits 
a workers' compensation insurance policy or endorsement  not
be   from being  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.
   This bill would prohibit, except as provided, an ancillary
 agreement   agreement, as defined,  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
provide that the terms and conditions of a workers' compensation
policy and any endorsements take precedence over the provisions
contained in an ancillary agreement in the case of an inconsistency
or conflict between the policy or endorsement and the ancillary
agreement. The changes made by the bill would apply to ancillary
agreements issued or renewed on or after January 1, 2017.  The
bill would also make conforming changes.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  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) (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.
   (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.
   (3)  (A)    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)   (i)  has a
full-time risk  manager; (B)   manager involved
in the evaluation of an ancillary agreement; (ii)  is
represented by counsel during  negotiations; (C) 
 negotiations regarding an ancillary agreement; (iii)  has
500 or more employees;  (D)   (iv)  has
annual gross  revenue   revenues  in excess
of twenty million dollars ($20,000,000); or  (E) 
 (v)  has a workers' compensation manual standard premium on
a countrywide basis in excess of seven hundred fifty thousand
dollars ($750,000). 
   (B) Paragraph (1) shall control, and paragraph (3) shall not
apply, to an ancillary agreement between an insurer and a California
employer that is either of the following:  
    (i) Issued to a coemployment arrangement, as defined in
subparagraph (C).  
   (ii) Negotiated, managed, or administered, in whole or in part, by
a managing general agent (MGA), as defined in subdivision (c) of
Section 769.81.  
   (C) "Coemployment arrangement" means any arrangement, under
contract or otherwise, whereby an entity utilizes the services of a
third party to provide workers for a fee or other compensation,
including, but not limited to:  
   (i) A professional employer organization.  
   (ii) A leasing employer, as defined in Section 606.5 of the
Unemployment Insurance Code.  
   (iii) A temporary services employer, as defined in Section 606.5
of the Unemployment Insurance Code.  
   (iv) Any employer, regardless of name or form of organization,
that is in the business of providing workers to other employers.

   (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.  The terms and conditions of a
workers' compensation policy and any endorsements shall take
precedence over the provisions contained in an ancillary agreement if
there is an inconsistency or a conflict between the policy or
endorsement and the ancillary agreement. 
   (5) This subdivision shall apply to ancillary agreements issued or
renewed on or after January 1, 2017.
   (c) If the commissioner notifies the insurer that the filed policy
form, endorsement, or ancillary agreement 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 form, endorsement,
or ancillary agreement in that form.
   (d) The withdrawal of a policy form, endorsement, or ancillary
agreement 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, endorsement, or ancillary agreement was in effect.
   (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.
   (f) This section shall not apply to limited policies submitted for
approval to the commissioner pursuant to Section 11657.
   (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.
   (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.