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CA Department of Insurance

Dave Jones praised Governor Brown for his veto of Assembly Bill 1922

News: 2016 Press Release

For Release: October 6, 2016
Media Calls Only: 916-492-3566
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Insurance Commissioner praises Governor for protecting workers and businesses  with veto of misguided workers’ compensation insurer legislation
SACRAMENTO, Calif. — Insurance Commissioner Dave Jones praised Governor Brown for his veto of Assembly Bill 1922. The bill, vetoed Friday, September 30, would have decreased transparency and weakened protections for businesses of all sizes. The bill also would have significantly eroded recently updated California Department of Insurance (CDI) regulations protecting businesses that took effect on April 1, 2016.

"I thank Governor Brown for his thoughtful and reasoned veto of AB 1922," Commissioner Jones said. "I opposed the bill, because it would have created a loophole enabling workers' compensation insurers to limit or avoid prior review of terms and conditions imposed on businesses. AB 1922 undercut the Department of Insurance's ability to protect businesses from becoming victimized by some workers' compensation insurer contracts and it would have resulted in more litigation between businesses and insurers. The bill was bad for employers of all sizes."

Current law requires workers' compensation insurers to file their policies and related agreements (known as ancillary agreements) with CDI and obtain approval prior to issuing the policy. CDI has a 30-day review window to ensure they comply with California law. AB 1922 would have instead enabled workers' compensation insurers to avoid regulatory oversight under a confusing and complicated scheme. CDI would not have been able to protect businesses from potential harm via these agreements.

Recent cases highlighted problems when CDI lacks oversight. Last month, after the department served on them an order to show cause why the insurers should not be barred from selling the policies, two Berkshire Hathaway companies agreed to stop selling certain workers' compensation policies with provisions not filed with CDI. The policies had serious and unexpected negative consequences for many California employers, including cancellation penalties of $1 million, non-renewal penalties, provisions shifting most if not all of the risk back to the employer, and provisions requiring any disputes with the insurer to be resolved in the British Virgin Islands under Nebraska law. These unfiled policies were successfully challenged by Shasta Linen, a small business in Sacramento. A range of business groups joined Commissioner Jones in opposing the bill, including the California Hispanic Chambers of Commerce, the California Small Business Association, the Asian Business Association, and the Sacramento Rainbow Chamber of Commerce.  

The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

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