BILL ANALYSIS
AB 2490
Page 1
ASSEMBLY THIRD READING
AB 2490 (Jones)
As Amended April 27, 2010
Majority vote
INSURANCE 8-4 APPROPRIATIONS 11-5
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|Ayes:|Solorio, Caballero, |Ayes:|Fuentes, Ammiano, |
| |Charles Calderon, Carter, | |Bradford, Coto, Davis, |
| |Feuer, Hayashi, Salas, | |Hill, Hall, Skinner, |
| |Torres | |Solorio, Torlakson, |
| | | |Torrico |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Blakeslee, Anderson, |Nays:|Conway, Harkey, Miller, |
| |Hagman, Niello | |Nielsen, Norby |
| | | | |
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SUMMARY : Requires dispute resolution clauses entered into between
an employer and a workers' compensation insurer to specify that
California law applies and the venue is to be in California.
Specifically, this bill :
1)Provides that any agreement between an employer and a workers'
compensation insurer concerning resolution of a California
dispute, including an arbitration clause, shall
a) Contain a choice of law provision that selects California
law as the law to be applied to any dispute;
b) Contain a forum selection clause that identifies
California as the proper venue for any proceedings arising
out of a dispute; and,
c) Be submitted to the Insurance Commissioner (IC) as part of
the policy form filing that is required of workers'
compensation insurers for workers' compensation policies.
2)Specifies that a failure to comply with the above requirements
renders the dispute resolution agreement void and unenforceable.
3)Contains legislative findings and declarations to the effect
that requiring California employers to be subject to the law of
AB 2490
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other states, and to conduct dispute resolution proceedings in
other states, is a burden on these employers.
EXISTING LAW :
1)Provides for a comprehensive system of workers' compensation
benefits to be paid to employees who are injured on the job.
2)Requires every employer in the state to obtain a policy of
workers' compensation insurance from an insurer licensed to
transact this insurance in the state, or obtain a certificate of
self-insurance from the Department of Industrial Relations.
3)Authorizes employers to purchase "high-deductible" workers'
compensation insurance policies, subject to certain conditions,
whereby the employer is effectively self-insured below the
deductible, but the insurer is ultimately responsible to
guarantee payment of benefits.
4)Requires workers' compensation insurers to file their policy
forms with the IC for approval, but does not specifically
require side agreements such as dispute resolution agreements to
be part of that filing.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, one-time fee-supported special fund costs of less than
$30,000 to the Department of Insurance (DOI). On-going absorbable
workload for DOI to continue oversight of the provisions
established by this bill.
COMMENTS :
1)According to the author, as evidenced by an unpublished Court of
Appeal decision (Ceradyne, Inc. v. Argonaut Insurance Company,
4th Dist., Div. 3, case No. G039873), some courts have held that
arbitration clauses relating to workers' compensation insurance
policies that have not been submitted to the IC for approval are
unenforceable. The author argues that it is expensive and
unfair to California employers to force them to litigate this
issue. Instead, the rules should be clear that these agreements
ought to be part of the policy form filed with the IC, and that
California law and California venue ought to be the rule for
resolving disputes that arise in California concerning
California employers.
AB 2490
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2)Pacific Hospital of Long Beach writes in support because, with
respect to its workers' compensation policies, it was not aware
of arbitration clauses until after disputes arose. In Pacific
Hospital's matters, it was advised that side agreements required
reliance on New York law to resolve a purely California dispute.
Roxborough, Pomerance, Nye, & Adriani, an employer's rights law
firm that handles many cases like Ceradyne and the Pacific
Hospital situation, writes that the late delivery of these side
agreements is increasingly common. In litigating the cases,
they win some and lose some, but always at great expense to the
employer.
3)The American Insurance Association (AIA) writes in opposition to
the bill that these agreements are typically between insurers
and large (sophisticated) employers, and the bill impedes the
right to freely contract for provisions that are beneficial to
both sides. AIA argues that there are valid business reasons
why an employer might want broader freedom to negotiate the
issues covered by the bill than is allowed. In this regard, it
points out that the current workers' compensation insurance
market is competitive, and if an employer does not like the
conditions being offered by an insurer, it has market
alternatives. In addition, AIA argues that these side
agreements are not standard form contracts like the insurance
policy itself. They are agreements negotiated between two
sophisticated parties, and the form changes from party to party,
making it impractical to have been previously filed by the
insurer when each agreement is reached with an employer.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086
FN: 0004343