BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2490|
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THIRD READING
Bill No: AB 2490
Author: Jones (D)
Amended: 8/20/10 in Senate
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 7-2, 6/16/10
AYES: Calderon, Florez, Kehoe, Liu, Lowenthal, Padilla,
Price
NOES: Cogdill, Runner
NO VOTE RECORDED: Correa, Cox
SENATE JUDICIARY COMMITTEE : 3-1, 6/29/10
AYES: Corbett, Hancock, Leno
NOES: Harman
NO VOTE RECORDED: Walters
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 41-28, 5/24/10 - See last page for vote
SUBJECT : Workers compensation insurance: dispute
resolution:
arbitration clauses
SOURCE : Author
DIGEST : This bill regulates agreements concerning
dispute resolution, other than settlement agreements
resolving particular disputes, made between an employer and
a workers' compensation insurer by requiring choice of law
CONTINUED
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and forum selection provisions providing for California
law, unless as specified.
Senate Floor Amendments of 8/20/10 refine the arbitration
clause requirements to require disclosure of the choice of
law and forum clauses prior to the inception of the
insurance policy, provide that the insurance carrier and
employer may negotiate the terms of the choice of law and
forum clauses after such disclosure, and limit the
application of the statute to employers with a principal
place of business in California.
ANALYSIS :
Existing law:
1. Requires employers to maintain workers' compensation
insurance.
2. Requires that a workers' compensation insurance policy
or endorsement proposed to be issued in California must
be filed with the insurance rating organization; the
policy cannot be issued until either 30 days from
receipt of the policy or endorsement by the ratings
organization and no notice has been issued by the
insurance commissioner or upon written approval of the
form or endorsement issued by the Insurance
Commissioner.
3. Provides that a limited workers' compensation policy may
be issued insuring either in the whole or any part of
the liability of any employer for compensation, as long
as the policy is previously approved as to substance and
form by the Insurance Commissioner; subject to these
restrictions, the policy can restrict or limit the
insurance in any manner.
4. Provides that a limited insurance policy cannot
otherwise be limited unless an endorsement is attached
in a form prescribed by the Insurance Commissioner or in
accordance with rules adopted by the Insurance
Commissioner.
This bill requires, as between an employer, whose principal
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place of business is in California, and a worker's
compensation insurer, any agreement concerning dispute
resolution, other than settlement agreements, to conform to
the following:
1. Be filed with the insurance rating organization and be
provided to the employer contemporaneously with any
written quote that offers to provide insurance coverage.
2. Contain a choice of law provision that identifies
California as the law to be used to resolve any disputes
that arise in California.
3. Contain a forum selection clause identifying California
as the proper venue for any proceeding regarding a
dispute that arises in California.
4. Allows, prior to inception of the policy, employers and
workers' compensation insurance companies, negotiate and
agree to a choice of law or a forum other than
California.
Background
California employers are required to provide workers'
compensation benefits to their employees. These benefits
are used by employees for medical services related to
on-the-job injuries or illnesses. Although workers'
compensation is required by the state, the state does not
pay employers for this program, rather, employers typically
maintain insurance policies to cover workers' compensation
benefits. Workers' compensation insurance policies are
highly regulated, and each policy must be submitted to the
Insurance Commissioner for approval before the policy can
be issued. Subsequent agreements regarding the insurance
policy, referred to as insurance program agreements (IPAs),
may be reached between the insurer and employer; these
agreements are not required to be submitted to the
Insurance Commissioner for approval.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 6/29/10) (Unable to reverify)
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Altman Plants, Inc.
Ceradyne, Inc.
Pacific Hospital of Long Beach
Roxborough, Pomerance, Nye & Adreani
OPPOSITION : (Verified 6/29/10) (Unable to reverify)
American Insurance Association
California Chamber of Commerce
Civil Justice Association of California
ARGUMENTS IN SUPPORT : Pacific Hospital of Long Beach
writes in support because, with respect to its workers'
compensation policies, it states 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.
Ceradyne, Inc. states it supports this bill as it was
unaware of any arbitration clause in their workers
compensation policies until after a dispute arose with
their insurance carrier.
Roxborough, Pomerance, Nye, & Adreani, 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.
ARGUMENTS IN OPPOSITION : The Civil Justice Association
of California (CJAC) is opposed to this bill as impairing
the rights of sophisticated parties to freely contract as
they wish. CJAC states the bill is unnecessary as
California law already protects our residents from
unreasonable contract terms and choice of law provisions,
will hinder the discretion of judges to balance factors in
specific cases to determine if a choice of law clause is
appropriate, and sets a dangerous precedent for prohibiting
other choice of law provisions.
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ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Beall, Block, Blumenfield,
Bradford, Brownley, Charles Calderon, Carter, Chesbro,
Coto, Davis, De La Torre, De Leon, Eng, Feuer, Fong,
Fuentes, Furutani, Hayashi, Hill, Huber, Huffman, Jones,
Lieu, Bonnie Lowenthal, Ma, Mendoza, Monning, V. Manuel
Perez, Portantino, Ruskin, Salas, Skinner, Solorio,
Swanson, Torlakson, Torres, Torrico, Yamada, John A.
Perez
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Blakeslee, Buchanan, Conway, Cook, DeVore, Emmerson,
Fletcher, Fuller, Gaines, Garrick, Gilmore, Hagman,
Harkey, Jeffries, Logue, Miller, Nestande, Niello,
Nielsen, Norby, Silva, Smyth, Audra Strickland, Tran
NO VOTE RECORDED: Bass, Caballero, Evans, Galgiani, Hall,
Hernandez, Knight, Nava, Saldana, Villines, Vacancy
JJA:mw 8/23/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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