Current law authorizes workers’ compensation insurance policies to be either standard, guaranteed premium policies, or deductible policies and requires insurers to file workers’ compensation insurance policies and endorsements with the WCIRB. The WCIRB is the insurance commissioner’s designated statistical agent for workers’ compensation purposes. There are a range of functions the WCIRB performs on behalf of and with the approval of the commissioner.
Insurers are prohibited from the use of the policy or endorsement until 30 days have passed, or the commissioner has approved the filing. It is unlawful for an insurer to use an ancillary agreement if the commissioner notifies the insurer that the agreement does not comply with the law
AB 1922 was introduced this legislative session to modify this requirement. It attempted to establish exceptions from workers’ compensation insurance policy filing requirements for large employers that purchase high deductible policies. It was supported by the American Insurance Association (AIA), the California Chamber of Commerce, Liberty Mutual Insurance, and the National Association of Mutual Insurance Companies (NAMIC).
It was opposed by the California Department of Insurance. It however was approved by both houses of the legislature and sent to Governor Brown for signature. He vetoed the law.
In his veto message he said “I am supportive of efforts to increase the ability of insurance carriers to efficiently conduct their business. This bill, however, reverses Department of Insurance regulations that have been in effect less than six months. These regulations are designed to promote consumer protection and transparency. Let’s allow time for them to work.”
And the Insurance Commissioner was appreciative of his Veto. “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.”
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 the Insurance Commissioner 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.