BILL NUMBER: AB 2490 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 27, 2010
AMENDED IN ASSEMBLY APRIL 6, 2010
INTRODUCED BY Assembly Member Jones
FEBRUARY 19, 2010
An act to add Section 11658.5 to the Insurance Code, relating to
workers' compensation insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 2490, as amended, Jones. Workers' compensation insurance:
dispute resolution: arbitration clauses.
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 the rating organization
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 the endorsement prior to that time.
This bill would require any agreement , other than a
settlement agreement resolving a particular dispute, between an
employer and a workers' compensation insurer concerning resolution
of disputes, including, but not limited to, an arbitration clause
arising out of a workers' compensation policy ,
or endorsement , or plan be part of the
form or endorsement filed with the rating organization and approved
by the commissioner and contain provisions to resolve disputes
that arise in this state in the California courts and under
California law. Failure to observe those requirements would render
the dispute resolution agreement void and unenforceable.
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. The Legislature finds and declares all of the
following:
(a) All California employers subject to the Workers' Compensation
Law are required by law to obtain insurance for their employees.
(b) Workers' compensation plans policies
and endorsements are highly regulated and designed primarily to
protect the worker and ensure prompt payment of claims.
(c) The Legislature has authorized the Insurance Commissioner
(commissioner) and the Workers' Compensation Insurance
Rating Bureau (WCIRB) to oversee the form and substance of
all workers' compensation insurance plans
policies and endorsements , including everything from the scope
of required coverage provided to employees, to the amount employers
pay insurers for premiums.
(d) Insurance companies providing workers' compensation
policies are required by law to disclose and seek preapproval from
the commissioner and WCIRB of the insurance plan being purchased.
policies and endorsements are required by law to file
the policies and endorsements with the rating organization for
transfer to the commissioner.
(e) Disputes between employers and insurance companies regarding
workers' compensation plans can arise, and resolution of these
disputes through litigation can be expensive, uncertain, and time
consuming.
(f) In an effort to save time, costs, and the uncertainty of
litigation, national workers' compensation carriers often place
mandatory arbitration clauses into policies and, over time, these
arbitration clauses have become complex and expensive, and have
diminished the rights of the parties in the arbitration proceedings.
(g) Despite the requirement that the commissioner approve the form
and substance of all workers' compensation plans, some workers'
compensation carriers issue separate or side agreements, sometimes
called Insurance Program Agreements or IPAs, that are not provided to
the employer until after the policy or plan is accepted, that
require arbitration of any disputes between the employer and the
carrier concerning the approved workers' compensation plan, and lack
the approval of the commissioner.
(g) Despite the requirement that the workers' compensation carrier
file policies and endorsements with the rating organization and wait
a prescribed period, some workers' compensation carriers issue
separate or side agreements, sometimes called Insurance Program
Agreements or IPAs, that are not provided to the employer until after
the policy or endorsement is accepted, that require arbitration of
any disputes between the employer and the carrier concerning the
workers' compensation policy or endorsement, and that have not been
filed with the rating organization or commissioner.
(h) These unapproved unfiled
separate or side agreements (or IPAs) often choose
a foreign jurisdiction's law to interpret the plan and resolve
disputes, and choose a state other than California as the location or
venue to conduct arbitrations. This subjects Californians to another
state's laws and forces them to travel outside this state to conduct
dispute resolution proceedings, resulting in significant cost
burdens.
(i) California employers have successfully challenged some of
these side agreements containing arbitration clauses; however, it
should not be necessary to burden the California courts with these
cases.
(j) California has a compelling state interest in ensuring that
workers' compensation policies and plans
endorsements are enforced under California law and not subject
to interpretation by other jurisdictions, and that any dispute
resolution proceedings are conducted within its borders.
SEC. 2. Section 11658.5 is added to the Insurance Code, to read:
11658.5. (a) Any agreement , other than a settlement
agreement resolving a particular dispute, between an employer
and a workers' compensation insurer concerning resolution of
disputes, including, but not limited to, an arbitration clause
arising out of a workers' compensation policy, endorsement,
or plan policy or endorsement shall conform to
all of the following:
(1) It shall be part of the form or endorsement filed with the
rating organization and approved by the commissioner pursuant to
Section 11658.
(2) It shall contain a choice of law provision that identifies
California law as the law to be used to resolve any dispute that
arises in California .
(3) It shall contain a forum selection provision that identifies
California as the proper venue for any proceeding regarding a dispute
that arises in California .
(b) Failure to observe the requirements of this section shall
render the dispute resolution agreement void and unenforceable.