California Legislature—2015–16 Regular Session

Assembly BillNo. 2887


Introduced by Committee on Insurance (Assembly Members Daly (Chair), Bigelow, Calderon, Cooley, Dababneh, Frazier, Gatto, Gonzalez, and Rodriguez)

February 25, 2016


An act to amend Section 11780.5 of the Insurance Code, relating to the State Compensation Insurance Fund.

LEGISLATIVE COUNSEL’S DIGEST

AB 2887, as introduced, Committee on Insurance. State Compensation Insurance Fund: out-of-state-risks.

Existing law creates the State Compensation Insurance Fund administered by a board of directors for the purpose of transacting workers’ compensation insurance, insurance against the expense of defending any suit for serious and willful misconduct against an employer or his or her agent, and insurance for employees and other persons for the compensation fixed by the workers’ compensation laws for employees and their dependents.

Existing law authorizes the fund to insure a California employer against the employer’s liability for workers’ compensation benefits, under the law of any other state, for California employees temporarily working outside of California on a specific assignment if the fund insures the employer’s other employees who work within California. Existing law also provides, among other things, that, until December 31, 2016, the fund is only authorized, pursuant to the above provisions, to insure a qualified employer whose principal place of business is in California, provided the majority of the employer’s operations and employees are located within California, against the employer’s liability for workers’ compensation benefits, under the law of any other state, if the fund insures the employees who work within California. The fund is prohibited, until December 31, 2016, from initiating paid advertising or soliciting sponsorship of advertising campaigns to market or promote to prospective insureds the ability to insure qualified employers under the law of any other state.

This bill would delete the requirement that the above provisions be inoperative as of December 31, 2016. The bill would also delete obsolete provisions.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

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

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SECTION 1.  

Section 11780.5 of the Insurance Code is
2amended to read:

3

11780.5.  

(a) The fund may also insure a California employer
4against his or her liability for workers’ compensation benefits,
5under the law of any other state, for California employees
6temporarily working outside of California on a specific assignment
7if the fund insures the employer’s other employees who work
8within California.

9(b) (1) The fund is only authorized under this subdivision to
10insure an employer whose principal place of business is in
11California, provided the majority of the employer’s operations and
12employees are located within California, against his or her liability
13for workers’ compensation benefits, under the law of any other
14state, if the fund insures the employer’s employees who work
15within California.

16(2) The fund is only authorized pursuant to this subdivision to
17contract as a reinsurer with a ceding insurer that has responded to
18a request for proposal from the fund and is admitted to transact
19workers’ compensation insurance in California and in the
20out-of-state jurisdiction where the non-California employees are
21located. The fund may only contract for purposes of this
22subdivision if the ceding insurer meets all of the following criteria:

23(A) The insurer has an A minus (A-) rating or better from A.M.
24Best Company.

25(B) The insurer has substantial prior experience in transacting
26workers’ compensation business on another insurer’s behalf.

P3    1(C) The insurer has a minimum surplus of one hundred million
2dollars ($100,000,000).

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3(c) On or before March 1, 2015, the Department of Insurance
4shall provide to the Secretary of the Senate and Chief Clerk of the
5Assembly, pursuant to Section 9795 of the Government Code, a
6report assessing the experience of the fund that is authorized
7pursuant to subdivision (b) and shall make recommendations
8concerning its continuation, limitation, or expansion with special
9attention to the extent of advantages this practice offers California
10employers, the California workers’ compensation marketplace,
11and the impact of this class of insurance, whether pro or con, on
12the fund, its management, and the California marketplace. The
13report shall be posted on the Department of Insurance Internet
14Web site upon completion. The costs incurred by the Department
15of Insurance in the assessment, writing, and publication of this
16report shall be provided by the fund.

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17(d)

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18begin insert(c)end insert The fund shall not initiate paid advertising or solicit
19sponsorship of advertising campaigns to market or promote to
20prospective insureds the ability to insure qualified employers under
21the law of any other state.

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22(e) Subdivisions (b), (c), and (d) shall be operative only until
23December 31, 2016.

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