BILL ANALYSIS
AB 2490
Page 1
ASSEMBLY THIRD READING
AB 2490 (Jones)
As Amended May 20, 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
AB 2490
Page 2
that requiring California employers to be subject to the law
of 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: 0004425