BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2887|
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CONSENT
Bill No: AB 2887
Author: Committee on Insurance
Introduced:2/25/16
Vote: 21
SENATE INSURANCE COMMITTEE: 8-0, 6/22/16
AYES: Roth, Gaines, Berryhill, Glazer, Hall, Hernandez,
Mitchell, Wieckowski
NO VOTE RECORDED: Liu
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 76-0, 4/28/16 (Consent) - See last page for
vote
SUBJECT: State Compensation Insurance Fund:
out-of-state-risks
SOURCE: Author
DIGEST: This bill repeals the sunset date on the statute
authorizing the State Compensation Insurance Fund (State Fund)
to provide limited workers' compensation insurance coverage for
out-of-state employees of California employers, as specified.
ANALYSIS:
Existing law:
1)Establishes State Fund, a quasi-state agency, for the purpose
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Page 2
of transacting workers' compensation insurance, to be
administered by a board with full power, authority and
jurisdiction to conduct the business of the fund;
2)Authorizes State 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;
3)Authorizes, until December 31, 2016, State Fund to insure a
California employer whose principal place of business is
California, provided the majority of the employer's operations
and employees are located in California, against liability for
workers' compensation benefits under the laws of any other
state, if the Fund insurers the employer's employees who work
in California, as specified;
4)Requires the California Department of Insurance (CDI), on or
before March 1, 2015, to issue a report to the legislature
assessing the experience of State Fund insuring employees in
other states pursuant to #3, and to make recommendations
concerning its continuation, limitation or expansion;
5)Prohibits State Fund from paid advertising or solicitations to
market or promote its ability to insure qualified employers
under the laws of any other state.
This bill deletes the December 31, 2016 sunset on the ability of
State Fund to insure employees of California employers who are
working in other states, as specified, and deletes an obsolete
CDI report requirement.
Background
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Prior to the adoption of AB 228 (Fuentes, Chapter 670 Statutes
of 2011), State Fund was only permitted to insure a California
employer against the employer's liability for workers'
compensation benefits, under the laws of any other state, for
California employees temporarily working outside of California
on a specific assignment if State Fund insures the employer's
other employees who work within California. AB 228 expanded that
authority to include employees of a California employer that
work permanently outside of California if the majority of the
California employer's employees work in California. AB 228 was
intended to reduce the time, effort and paperwork of California
employers who need to purchase workers' compensation insurance
regardless of where their employees are located.
Since State Fund is licensed only in California, the insurance
coverage it issues for non-California employees is issued by an
insurance carrier licensed in the out of state jurisdiction,
with State Fund operating in the capacity of a reinsurer. State
Fund is then liable for 100% of incurred losses and loss
adjustment expenses arising out of each accident, occurrence or
claim covered by the policies, although they are administered by
the ceding insurer.
According to the CDI report required by AB 228 assessing the
program expansion, the demand for insurance as allowed by AB 228
has been minimal, comprising less than 0.1% of State Fund's
total policies. State Fund issued four such policies in 2012, 42
in in 2013 and 53 in 2014. Its losses on the out-of-state
business have been very low, with loss ratios of 0% in 2012 and
2014, and 0.3% in 2013. CDI has recommended extending the
authority.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified8/1/16)
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State Compensation Insurance Fund (source)
OPPOSITION: (Verified8/1/16)
None received
ARGUMENTS IN SUPPORT: The Assembly Insurance Committee
introduced this bill to make permanent a moderate expansion of
State Fund's authority to provide coverage for non-California
employees that was enacted in 2011, with a sunset clause. AB
228 -- the legislation that authorized this expansion, required
the IC to report on the effects of State Fund covering more
out-of-state employees. That report was completed, and
concluded that the program was operating as hoped, without any
unintended consequences. Accordingly, to ensure the continued
benefits for some California employers, the Committee determined
that the sunset date ought to be repealed.
ASSEMBLY FLOOR: 76-0, 4/28/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper,
Dababneh, Dahle, Dodd, Eggman, Frazier, Beth Gaines,
Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger
Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey,
Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty,
Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell,
Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Chávez, Daly, Mathis, Olsen
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Prepared by: Erin Ryan / INS. / (916) 651-4110
8/3/16 18:40:34
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