BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2490
                                                                  Page  1

          Date of Hearing:   May 12, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    AB 2490 (Jones) - As Amended:  April 27, 2010 

          Policy Committee:                              Insurance  
          Vote:8-4

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill requires workers' compensation dispute resolution  
          clauses, including arbitration clauses, to meet specified  
          standards. This bill specifies if a clause fails to meet the  
          requirements established by this bill, the clause is void and  
          unenforceable. Specifically, this bill: 

          1)Requires a clause to be filed with the workers' compensation  
            rating agency and to be approved by the California Department  
            of Insurance.

          2)Requires a clause to contain a choice of law provision,  
            meaning California law will be used to resolve any dispute  
            arising in this state. 

          3)Requires a clause to contain a forum selection provision,  
            meaning California will be the venue for the resolution of  
            disputes arising in this state. 

           FISCAL EFFECT  

          One-time fee-supported special fund costs of less than $30,000  
          to the California Department of Insurance (CDI). On-going  
          absorbable workload for CDI to continue oversight of the  
          provisions established by this bill.

           COMMENTS  

           1)Rationale  . This bill establishes standards by which dispute  
            resolution clauses will be judged in order to be enforceable  
            in California. This bill ensures workers' compensation  








                                                                  AB 2490
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            policies are enforced under California law and not in some  
            other jurisdiction. According to the author this bill stems  
            from a recent California Appellate court case, Ceradyne v.  
            Argonaut.

           2)Background  . According to the author, although current law  
            requires CDI to approve the form and substance of all workers'  
            compensation coverage, some insurance carriers issue  
            unapproved side agreements that require arbitration of  
            disputes between an employer and an insurance carrier.  
            Sometimes these arbitration clauses are subject to the laws of  
            another state and require travel which creates costs burdens. 

           Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081