Samuel Sorich

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Which Insurance-Related Bills Met the California Deadline for Passage?

The deadline for California Assembly and Senate bills to pass their respected houses was May 30, 2014. Bills that met the deadline are eligible for enactment this year.

Bills that met the May 30 deadline will now be considered by the opposing house, with the regular legislative session ending on August 31.

Here are summaries of noteworthy insurance-related bills that met the May 30 deadline for passage.

Assembly Bills

AB 1234 would exempt from discovery or from admission in civil litigation information pertaining to an insurer that is a member of an insurance holding company system when that information is included in a registration statement or obtained by or disclosed to the insurance commissioner in the course of an examination or investigation.

AB 1804 would require private passenger auto insurers, homeowners insurers, and insurers providing individual disability income insurance policies to maintain a process which allows an insured to designate an additional person to receive notice of lapse, termination, expiration, non-renewal, or cancellation of a policy for nonpayment of premium.

AB 2064 would revise the disclosure language which must be included in a homeowners insurer’s mandatory offer of earthquake insurance. AB 2064 also would increase the statutory cap on the California Earthquake Authority’s operating expenses from 3% of its premium income to 5% of its premium income.

AB 2128 would extend the sunset date on statutory provisions relating to the Department of Insurance’s California Organized Investment Network (COIN) program from January 1, 2015, to January 1, 2020.

AB 2293 would require a transportation network company to advise its participating drivers of the company’s insurance coverage and limits of liability. AB 2293 defines a “transportation network company” as an organization “that provides prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using their personal vehicles.” AB 2293 provides that a transportation network company’s insurance policy is the primary policy coverage and that a transportation network company’s policy shall apply in the event of a loss or injury when a participating driver logs on to a transportation network company’s application program.  

AB 2734 would make changes to the Insurance Code which the Assembly Insurance Committee characterizes as “noncontroversial.” Among other changes, AB 2734 would 1) increase from $5,000 to $20,000 the threshold which triggers the obligation on a surplus lines broker or insurer to make tax payments in quarterly installments, 2) clarify what constitutes a “California business” for purposes of insurers’ duty to file information with the insurance commissioner concerning procurement contracts with minority, women, and disabled veteran-owned businesses, and 3) change the annual data call on private passenger auto insurance information to an every-other-year data call.

AB 2735 would set forth in statute that a homeowner who has purchased an earthquake insurance policy that does not satisfy the standard coverage requirement must be reminded by the insurer at renewal that the homeowner has the right to purchase a policy that meets the standard coverage requirement.

Senate Bills

SB 1034 would make clear that a health plan or insurer offering group coverage may not impose a separate waiting period in addition to the 90-day waiting period that the federal Affordable Care Act allows an employer to use.

SB 1205 would require the Department of Insurance’s curriculum board to develop or recommend a course of study for agents and brokers on commercial earthquake risk management.

SB 1273 would extend the sunset date on the California Low-Cost Automobile Insurance Program from January 1, 2016, to January 1, 2020. SB 1273 also would amend several statutory provisions relating to the program. Among other changes to the program, AB 1273 would repeal the $20,000 cap on the value of a vehicle insured under the program and would allow a person who has fewer than three years of driving history to qualify for coverage under the program.

SB 1446 would allow a small employer health plan or a small employer health insurance policy in effect on December 31, 2013, that does not qualify as a grandfathered health plan under the federal Affordable Care Act, to be renewed until January 1, 2015, and to continue to be in force until December 31, 2016.

Permits to test driverless vehicles pass DMV regulatory speed bumps

On January 14, 2014, the California Department of Motor Vehicles (DMV) held a hearing on proposed regulations governing the testing of autonomous vehicles on public roads in California. 

An autonomous vehicle is a vehicle that is equipped with technology which allows the vehicle to be operated without the active control or monitoring of a natural person. 

SB 1298, which was enacted in 2012, directs the DMV to adopt regulations on the testing of autonomous vehicles. The DMV’s proposed regulations set forth requirements which a vehicle manufacturer would have to satisfy in order to conduct testing of autonomous vehicles on public roads. 

The requirements include the obligation that the manufacturer provides evidence of its ability to respond to a judgment for damages or injuries arising from the operation of autonomous vehicles in the amount of five million dollars. The evidence may be in the form of a policy issued by an insurer, a surety bond, or a certificate of self-insurance.

During the hearing, representatives of Volkswagen and Google voiced general support for the regulations but urged the DMV to make several revisions before adopting the regulations. None of the revisions outlined at the hearing related to the manufacturer’s obligation to provide evidence of its ability to respond to damages.    

A representative of the Association of California Insurance Companies (ACIC) objected to the provision in proposed section 227.06 which states that the manufacturer’s evidence of insurance is in addition to the requirement that the driver must provide proof of insurance. ACIC argued that the testing of an autonomous vehicle should not involve personal insurance coverage.

At the close of the hearing, the DMV counsel said that the DMV hopes to attain final adoption of the regulations by early in the summer of 2014.          

Documents of note:

 

California Insurance Laws Enacted in 2013

October 13, 2013 was the deadline for Governor Jerry Brown to act on bills passed by the California Legislature this year. Here are summaries of noteworthy insurance-related bills which Governor Brown signed into law. Unless indicated otherwise the new laws will go into effect on January 1, 2014.  

AB 32 increases the annual aggregate amount of qualified investments eligible for the existing Community Development Financial Institution tax credit from $10 million to $50 million. AB 32 authorizes the Insurance Commissioner to adopt emergency regulations to implement this credit against the insurance gross premium tax. AB 32 requires the Legislative Analyst’s Office, on or before June 30, 2016, to submit a report to the Legislature on the effectiveness of the tax credits allowed. AB 32 went into effect on October 7, 2013.

AB 584 requires admitted and nonadmitted insurance companies to regularly conduct an Own Risk and Solvency Assessment (ORSA) consistent with the NAIC’s ORSA Guidance Manual. Upon the request of the Insurance Commissioner, an insurer must submit an ORSA Summary Report to the Insurance Commissioner. AB 584 provides that the Report is not subject to public disclosure. An insurer that has an annual direct written premium of less than $500 million is exempt from the bill’s requirements however the Insurance Commissioner has the authority to require an exempt insurer to conduct an ORSA based on specified criteria. AB 584 becomes operative on January 1, 2015

AB 1236 authorizes a licensed contractor organized as a limited liability company to obtain statutorily required liability insurance coverage from an eligible surplus line insurer.   

AB 1309 limits access to the occupational disease and cumulative injury provisions of California’s workers’ compensation laws for professional athletes who are employed by out-of-state teams. The limitations established by AB 1309 do not apply to a professional athlete who played at least two years for a California team or played more than 20% of his or her career for a California team. AB 1309 applies to all claims for benefits filed on or after September 15, 2013

AB 1371 requires the driver of a vehicle to provide a three-feet distance between the vehicle and a bicycle when passing. AB 1371 becomes operative on September 16, 2014.   

AB 1391 is the Department of Insurance’s omnibus bill which addresses a number of issues. Among other things, AB 1391 deletes statutory provisions relating to the cancellation of an automobile insurance policy that has been in effect for less than 60 days, repeals Insurance Code provisions which exempt risk retention groups from the Business Transacted with Producer Controlled Insurer Act, modifies statutory provisions relating to insurer risk-based capital reports to conform to NAIC model language, amends statutory provisions relating to the exam waiver for licensees moving to California to conform to the NAIC Producer Licensing Model Act, and specifies in statute a three-hour ethics component for inclusion in the 24 hours of continuing education which agents and brokers must complete every two years. 

SB 36 requires the Department of Insurance to include on its website a dedicated web page that includes workers’ compensation data, statistics, and reports relating to insurers, including, but not limited to, claims loss data, expenses and financial reports. The Department is to only use data already collected by both the Department and the Department of Industrial Relations. The Department of Insurance must comply with SB 36 beginning on July 1, 2014.

SB 135 authorizes the Office of Emergency Services (OES), in collaboration with other entities, to create a comprehensive statewide earthquake early warning system. The authorization is contingent on OES identifying a funding source for the system by January 1, 2016. 

SB 146 has three elements. First, the bill provides that a copy of a prescription for workers’ compensation pharmaceutical services is not necessary unless the provider of services has entered into a written agreement that requires a copy of the prescription for a pharmacy service. Second, an employer, pharmacy benefit manager, insurer, or third-party claims administrator may request a copy of the prescription during a review of any records of prescription drugs dispensed by a pharmacy. Third, any entity that submits a pharmacy bill for payment, on or after January 1, 2013, and is denied payment for not including a copy of the prescription from the treating physician, has until March 31, 2014 to resubmit the bill for payment. SB 146 went into effect on August 19, 2013. 

SB 161 establishes required attachment points and exclusion prohibitions for stop-loss health insurance for small employers.

SB 251 allows an insurer to offer its automobile, homeowners, earthquake, commercial and workers’ compensation insurance policyholders the option to receive renewal notices electronically. 

SB 353 requires health care service plans and insurers that advertise or market health insurance products in the individual or small group markets in a non-English language that is not a threshold language described in the Health and Safety Code or the Insurance Code to provide specified documents and communications in that non-English language. 

SB 476 eliminates the sunset dates for the Auto Consumer Assessment, the Organized Automobile Fraud Activity Interdiction Assessment, and the Life and Annuity Consumer Protection Fund. SB 476 also lowers the maximum assessment for the Auto Consumer Assessment from $0.30 per vehicle to $0.25 per vehicle and expands the application of Life and Annuity Consumer Protection Fund to include life insurance and annuity products valued at less than $15,000.  

SB 639 codifies certain provisions of the federal Affordable Care Act (ACA) and allows a carrier, no more frequently than each calendar quarter, to establish an index rate for the small employer health insurance market based on the total combined claims cost for providing essential health benefits within the single risk pool required by the ACA.     

 

No Settlement Offer, No Bad Faith Liability for Insurer

By Samuel Sorich and Larry Golub

On October 7, 2013, the California Court of Appeal for the Second Appellate District held in Reid v. Mercury Insurance Company that an insurer that acknowledged its insured’s liability for a third party’s injuries and recognized that there was a substantial likelihood of a recovery in excess of policy limits had no liability for bad faith failure to settle in the absence of a settlement demand by the claimant or any other manifestation that the claimant was interested in settlement.

The Court of Appeal’s decision in this case provides guidance on the scope of an insurer’s duty to settle. The issue became confused when, in June 2012, the Ninth Circuit ruled in Du v. Allstate Insurance Company that an insurer had a duty to initiate settlement once liability was reasonably clear even though the injured party made no settlement demand. The Ninth Circuit retracted that portion of its  ruling in October 2012. The Du rulings are discussed on this blog here and here.

The Court of Appeal’s decision puts any confusion resulting from Du to rest in stating,

In short, nothing in California law supports the proposition that bad faith liability for failure to settle may attach if an insurer fails to initiate settlement discussions, or offer its policy limits, as soon as an insured’s liability in excess of policy limits has become clear. Nor will this court make such a rule of law, for which neither precedent nor sound policy considerations have been offered.”   

This case involves a Mercury insured who failed to stop at a red light and collided with another car. The driver of the other car was seriously injured. Within a few weeks of the accident, Mercury advised the injured party’s representative that Mercury “was accepting liability and that there may be a ‘limits issue.’”

Mercury requested medical records from the injured party, which were not made available. Mercury and the injured party’s attorney exchanged correspondence on the medical records and other matters, but the injured party never made a settlement demand.

The injured party filed a lawsuit against Mercury’s insured. The lawsuit resulted in a $5.9 million judgment against the insured. The Mercury policy covering the insured had a $100,000 policy limit.

Mercury was sued for bad faith failure to settle. The lawsuit alleged that the insurer’s failure to make a settlement offer exposed the insured to a judgment in excess of policy limits.

Mercury filed a motion for summary judgment, arguing that the plaintiff could not establish a bad faith action because the injured party never made a settlement demand. The trial court granted Mercury’s motion. The Court of Appeal affirmed the trial court’s decision.

The Court of Appeal explained that in a case where the insured is exposed to a judgment in excess of policy limits, in order to establish a bad faith action against an insurer for failure to pursue settlement discussions:

there must be, at a minimum, some evidence either that the injured party has communicated to the insurer an interest in settlement, or some other circumstance demonstrating that the insurer knew that settlement within policy limits could feasibly be negotiated.” 

The court concluded that there no evidence in this case that could support a finding Mercury knew or should have known that the injured party was interested in settlement. The court ruled, “Accordingly, defendant cannot be liable for bad faith failure to settle.”

New Insurance Laws and Pending Legislation in California

The California Legislature ended its 2013 session on September 13, 2013. The Legislature passed a number of insurance-related bills during this year’s session. Some of the bills passed this year have already been signed into law; other passed bills are waiting action by Governor Jerry Brown.

Here are summaries of noteworthy new laws and bills being considered by Governor Brown.

New Laws

AB 584 requires admitted and nonadmitted insurance companies to regularly conduct an Own Risk and Solvency Assessment (ORSA) consistent with the NAIC’s ORSA Guidance Manual. Upon the request of the Insurance Commissioner, an insurer must submit an ORSA Summary Report to the Insurance Commissioner. AB 584 provides that the Report is not subject to public disclosure. An insurer that has an annual direct written premium of less than $500 million is exempt from the bill’s requirements however the Insurance Commissioner has the authority to require an exempt insurer to conduct an ORSA based on specified criteria. AB 584 becomes operative on January 1, 2015.

AB 1236 authorizes a licensed contractor organized as a limited liability company to obtain statutorily required liability insurance coverage from an eligible surplus line insurer. AB 1236 goes into effect on January 1, 2014. 

SB 146 has three elements. First, the bill provides that a copy of a prescription for workers’ compensation pharmaceutical services is not necessary unless the provider of services has entered into a written agreement that requires a copy of the prescription for a pharmacy service. Second, an employer, pharmacy benefit manager, insurer, or third-party claims administrator may request a copy of the prescription during a review of any records of prescription drugs dispensed by a pharmacy. Third, any entity that submits a pharmacy bill for payment, on or after January 1, 2013, and is denied payment for not including a copy of the prescription from the treating physician, has until March 31, 2014 to resubmit the bill for payment. SB 146 went into effect on August 19, 2013. 

Bills Being Considered by the Governor

Governor Brown has until October 13, 2013 to act on these bills.

AB 32 would increase the annual aggregate amount of qualified investments eligible for the existing Community Development Financial Institution tax credit from $10 million to $50 million. AB 32 would authorize the Insurance Commissioner to adopt emergency regulations to implement this credit against the insurance gross premium tax. AB 32 would require the Legislative Analyst’s Office, on or before June 30, 2016, to submit a report to the Legislature on the effectiveness of the tax credits allowed.  

AB 1113 would make changes to the provisional driver’s license program which applies to individuals between 16 and 18 years old. AB 1113 would require a person to hold an instructional driver’s permit for a minimum of nine months prior to applying for a provisional driver’s license (current law sets a minimum of six months), would prohibit a provisional licensee from driving between the hours of 10 p.m. and 5 a.m., with exceptions (current law sets the hours at 11 p.m. and 5 a.m.), and would prohibit a provisional licensee from transporting passengers who are under 21 years of age, with exceptions (current law applies the prohibition to passengers under 20 years of age).       

AB 1309 would limit access to the occupational disease and cumulative injury provisions of California’s workers’ compensation laws for professional athletes who are employed by out-of-state teams. 

AB 1371 would require the driver of a vehicle to provide a three-feet distance between the vehicle and a bicycle when passing.   

AB 1391 is the Department of Insurance’s omnibus bill which addresses a number of issues. Among other things, AB 1391 would repeal Insurance Code provisions which exempt risk retention groups from the Business Transacted with Producer Controlled Insurer Act, would modify statutory provisions relating to insurer risk-based capital reports to conform to NAIC model language, would amend statutory provisions relating to the exam waiver for licensees moving to California to conform to the NAIC Producer Licensing Model Act, and would specify in statute a three-hour ethics component for inclusion in the 24 hours of continuing education which agents and brokers must complete every two years. 

SB 36 would require the Department of Insurance to include on its website a dedicated web page that includes workers’ compensation data, statistics, and reports relating to insurers, including, but not limited to, claims loss data, expenses and financial reports. The Department would only use data already collected by both the Department and the Department of Industrial Relations.

SB 161 would establish required attachment points and exclusion prohibitions for stop-loss health insurance for small employers.

SB 251 would allow an insurer to offer its automobile, homeowners, earthquake, commercial and workers’ compensation insurance policyholders the option to receive renewal notices electronically. 

SB 353 would require health care service plans and insurers that advertise or market health insurance products in the individual or small group markets in a non-English language that is not a threshold language described in the Health and Safety Code or the Insurance Code to provide specified documents and communications in that non-English language. 

SB 476 would eliminate the sunset dates for the Auto Consumer Assessment, the Organized Automobile Fraud Activity Interdiction Assessment, and the Life and Annuity Consumer Protection Fund. The bill also would lower the maximum assessment for the Auto Consumer Assessment from $0.30 per vehicle to $0.25 per vehicle and would expand the application of Life and Annuity Consumer Protection Fund to include life insurance and annuity products valued at less than $15,000.  

SB 639 would codify certain provisions of the federal Affordable Care Act (ACA) and would allow a carrier, no more frequently than each calendar quarter, to establish an index rate for the small employer health insurance market based on the total combined claims cost for providing essential health benefits within the single risk pool required by the ACA.

 

California Legislators to Consider Insurance Bills During Final Weeks of Session

Members of the California Assembly will return to Sacramento from their summer recess on August 5. State Senators will return to the Capitol on August 12. This year’s legislative session will end on September 13.

During the last weeks of this year’s session, legislators will vote on insurance-related bills that have advanced to the final stages of passage. Here are summaries of noteworthy bills:

Assembly Bills

AB 32 would increase the annual aggregate amount of qualified investments eligible for the Community Development Financial Institution tax credit from $10 million to $50 million.  Insurers are able to obtain a credit against the insurance gross premium tax for qualifying investments. AB 32 has passed the Assembly and is scheduled to be heard by the Senate Governance & Finance Committee on August 14.

AB 584 would require domestic insurance companies to regularly conduct an Own Risk and Solvency Assessment (ORSA) consistent with the NAIC’s ORSA Guidance Manual. Insurers would be required to submit an ORSA Summary Report annually to the Insurance Commissioner. AB 584 provides that the Report is not subject to public disclosure. An insurer that has an annual direct written premium of less than $500 million would be exempt from the bill’s requirements, however the Insurance Commissioner would have the authority to require an exempt insurer to conduct an ORSA based on specified criteria. AB 584 has passed the Assembly and is scheduled to be heard by the Senate Appropriations Committee on August 12.

AB 612 would require local agencies that use red light cameras at intersections to establish yellow light intervals that are one second longer than the yellow light intervals which are normally in place. AB 612 has passed the Assembly and is pending before the Senate Transportation & Housing Committee.

AB 1113 would make changes to the provisional driver’s licensing program which applies to individuals between 16 and 18 years old. AB 1113 would require a person to hold an instructional driver’s permit for a minimum of nine months prior to applying for a provisional driver’s license (current law sets a minimum of six months), would prohibit a provisional licensee from driving between the hours of 10 p.m. and 5 a.m., with exceptions (current law sets the hours at 11 p.m. to 5 a.m.), and would prohibit a provisional licensee from transporting passengers who are under 21 years of age, with exceptions (current law applies the prohibition to passengers under 20 years of age). AB 1113 would prohibit the Department of Motor Vehicles from issuing a provisional license if the applicant has been convicted of a driving offense in the prior six months. AB 1113 has passed the Assembly and is scheduled to be heard by the Senate Appropriations Committee on August 12.

AB 1236 would authorize a licensed contractor organized as a limited liability company to obtain statutorily required liability insurance coverage from an eligible surplus line insurer. AB 1236 has passed the Assembly and the Senate; the bill is back on the Assembly floor, waiting for concurrence in amendments which were adopted in the Senate.

AB 1309 would limit access to the California workers’ compensation system for professional athletes who are employed by out-of-state teams. AB 1309 also would establish a special statute of limitations for workers’ compensation cumulative injury claims involving professional athletes. AB 1309 has passed the Assembly and is pending before the Senate Rules Committee.

AB 1371 would require the driver of a vehicle to provide a three-feet distance between the vehicle and a bicycle when passing. AB 1371 has passed the Assembly and is scheduled to be heard by the Senate Appropriations Committee on August 12.   

AB 1391 is the Department of Insurance’s omnibus bill which addresses a number of issues. Among other things, AB 1391 would repeal Insurance Code provisions which exempt risk retention groups from the Business Transacted with Producer Controlled Insurer Act, would modify statutory provisions relating to insurer risk-based capital reports to conform to NAIC model language, would amend statutory provisions relating to the exam waiver for licensees moving to California to conform to the NAIC Producer Licensing Model Act, and would specify in statute a three-hour ethics component for inclusion in the 24-hours of continuing education which agents and brokers must complete every two years. AB 1391 has passed the Assembly and is scheduled to be heard by the Senate Appropriations Committee on August 12.

Senate Bills

SB 36 would require the Department of Insurance to include on its website a dedicated web page that includes workers’ compensation data, statistics, and reports covering both insurers and self-insurers, including, but not limited to, claims loss data, expenses and financial reports. SB 36 has passed the Senate and is scheduled to be heard by the Assembly Insurance Committee on August 7.

SB 251 would allow an insurer to offer its automobile, homeowners, earthquake, commercial and workers’ compensation insurance policyholders the option to receive renewal notices electronically. SB 251 has passed the Senate and is scheduled to be heard by the Assembly Judiciary Committee on August 13.

SB 476 would eliminate the sunset dates for the Auto Consumer Assessment, the Organized Automobile Fraud Activity Interdiction Assessment, and the Life and Annuity Consumer Protection Fund. The bill also would lower the maximum assessment for the Auto Consumer Assessment from $0.30 per vehicle to $0.25 per vehicle and would expand the application of Life and Annuity Consumer Protection Fund to include life insurance and annuity products valued at less than $15,000. SB 476 has passed the Senate and is pending before the Assembly Appropriations Committee.

 

California DMV to propose regulations on the testing of autonomous vehicles

On June 18, 2013, the California Department of Motor Vehicles (DMV) conducted a workshop on regulations that will govern the testing of autonomous vehicles on public roads. The workshop is a precursor to the drafting of regulations and the commencement of a rulemaking proceeding.

SB 1298, which was enacted last year, requires the DMV to adopt regulations on the testing of autonomous vehicles on public roads and the post-testing operation of autonomous vehicles by January 1, 2015.

SB 1298 defines “autonomous vehicle” as any vehicle that is equipped with autonomous technology that has been integrated into the vehicle. The law defines “autonomous technology” to mean “technology that has the capability to drive a vehicle without the active physical control or monitoring by a human operator.”

SB 1298 specifies the requirements that must be met in order to operate an autonomous vehicle on public roads for testing purposes:

  • The law mandates that the manufacturer of the autonomous technology performing the testing must obtain an instrument of insurance, surety bond, or proof of self-insurance in the amount of $5 million, and must provide evidence of insurance, surety bond, or self-insurance to the DMV in a form and manner set forth in regulations adopted by the DMV.
  • SB 1298 states that a driver must be seated in the vehicle’s driver seat during testing, and the driver must be an employee, contractor, or designee of the manufacturer.

Participants in the June 18 workshop included representatives of vehicle manufacturers, technology companies, insurers, and DMV staff. The discussion centered on permits that would have to be obtained in order to test autonomous vehicles, the certification of drivers, the registration of testing vehicles, and the financial responsibility requirement.

DMV staff opined that if a manufacturer complies with the financial responsibility requirement by obtaining an insurance policy, the policy must have a minimum policy limit of $5 million and must cover liability for bodily injury, death, and damage to property.  DMV plans to study the issue of whether the insurance coverage would have to be obtained from an insurer admitted to do business in California.

At the close of the workshop, DMV staff announced that the agency intends to propose regulations on the testing of autonomous vehicles in two months.

California Insurance-Related Bills Meet Deadline for Passage in 2013

The deadline for Assembly bills to be passed by the California State Assembly and for Senate bills to be passed by the California State Senate was last Friday, May 31. 

Bills that met the deadline are eligible for enactment this year.  Bills that failed to meet the deadline remain alive and may be considered in 2014.

Assembly bills that met the May 31 deadline are now being considered by the Senate. Senate bills that met the deadline are now being considered by the Assembly.

This year’s regular legislative session will end on September 13.

Here are summaries of noteworthy insurance-related bills that met the May 31 deadline.

Assembly Bills

AB 32 would increase the annual aggregate amount of qualified investments eligible for the Community Development Financial Institution tax credit from $10 million to $50 million. Insurers are able to obtain a credit against the insurance gross premium tax for qualifying investments.

AB 584 would require domestic insurance companies to regularly conduct an Own Risk and Solvency Assessment (ORSA) consistent with the NAIC’s ORSA Guidance Manual. Insurers would be required to submit annually an ORSA Summary Report to the Insurance Commissioner. An insurer that has an annual direct written premium of less than $500 million would be exempt from the bill’s requirements, however the Insurance Commissioner would have the authority to require an exempt insurer to conduct an ORSA based on specified criteria.

AB 715 would authorize an appellate court to review a trial court’s ruling on the admissibility of evidence in a summary judgment proceeding using a de novo standard of review.

AB 802 would require a private arbitration company to collect additional information related to a consumer arbitration case and to make the information available in a single cumulative report.

AB 1236 would authorize a licensed contractor organized as a limited liability company to obtain limited liability insurance coverage from an eligible surplus line insurer.

AB 1113 would make changes to the provisional driver’s licensing program. AB 1113 would require a person to hold an instructional driver’s permit for a minimum of nine months prior to applying for a provisional driver’s license (current law sets a minimum of six months), would prohibit a provisional licensee from driving between the hours of 10 p.m. and 5 a.m., with exceptions (current law sets the hours at 11 p.m. to 5 a.m.), and would prohibit a provisional licensee from transporting passengers who are under 21 years of age, with exceptions (current law applies the prohibition to passengers under 20 years of the age).

AB 1309 would limit access to the California workers’ compensation system for professional athletes who are employed by out-of-state teams. AB 1309 also would establish a special statute of limitations for workers’ compensation cumulative injury claims involving professional athletes. 

AB 1371 would require a driver to provide a three-feet distance between the vehicle and a bicycle when passing.    

Senate Bills

SB 146 would enact a provision stating that a copy of a prescription for workers’ compensation pharmaceutical services is not necessary unless a copy is required under a written contract between an employer, insurer, or third-party administrator and a pharmacy.

SB 251 would allow an insurer to offer to its policyholders the option of receiving notices, offers, renewals, and disclosures electronically.    

SB 476 would eliminate the sunset dates for the Auto Consumer Assessment, the Organized Automobile Fraud Activity Interdiction Assessment, and the Life and Annuity Consumer Protection Fund. The bill also would lower the maximum assessment for the Auto Consumer Assessment from $0.30 per vehicle to $0.25 per vehicle and would expand the application of the Life and Annuity Consumer Protection Fund to include life insurance and annuity products valued at less than $15,000.

 

California Supreme Court Hears Argument on Whether Insurance Code Limits UCL Lawsuits Against Insurers

By Samuel Sorich and Larry Golub

On May 8, 2013, the California Supreme Court convened to hear oral argument in Zhang v. Superior Court. The case presents the issue of whether conduct of an insurer, which is related to conduct that would violate California’s Unfair Insurance Practices Act, Insurance Code, §790.03(h) et seq. (UIPA), can be the basis for a private civil cause of action against the insurer under California’s Unfair Competition Law, Business & Professions Code, §17200 et seq. (UCL).

The Court of Appeal in Zhang had ruled in October 2009 that an insurer may be sued by a private citizen for conduct prohibited by the UCL even though the conduct is within the scope of the UIPA. The Supreme Court accepted review of the matter in February 2010.

At the oral argument session, counsel for the insurer relied on the California Supreme Court’s 1988 ruling in Moradi-Shalal v. Fireman’s Fund Insurance Companies, which held that violations of the UIPA may be prosecuted only by administrative action taken by the Insurance Commissioner, not by civil action by private citizens. Counsel argued that the holding in Moradi-Shalal bars a UCL action against an insurer when the action is based on insurer conduct that is governed by the UIPA.

Counsel for the plaintiff insured responded that Moradi-Shalal does not preclude the insured’s UCL action against the insurer, pointing to language in the Moradi-Shalal decision which noted that “the courts retain jurisdiction to impose civil damages or other remedies against insurers in appropriate common law actions, based on such traditional theories as fraud, infliction of emotional distress, and (as to the insured) either breach of contract or breach of the implied covenant of good faith and fair dealing.”

We have monitored the Zhang case and other appellate court decisions on the interplay between the UIPA and the UCL in prior blogs. Please see here, here, here and here.

The Supreme Court is required to issue a written opinion in the Zhang case within 90 days of the date of the oral argument, or by August 6, 2013.

The Supreme Court focused on the UCL this week. On May 7, 2013, the Court heard oral argument in Rose v. Bank of America which presents an issue analogous to the issue in Zhang. The question in Rose is whether a cause of action under the UCL can be predicated on an alleged violation of the Truth in Savings Act (12 U.S.C. $4301 et seq.) despite Congress’s repeal of the private right of action initially provided for under that Act.

 

Court of Appeal Applies Howell Rule to Future Medical Expenses and Noneconomic Damages

In Howell v. Hamilton Meats & Provisions, Inc., the California Supreme Court ruled that where a plaintiff’s medical care provider, pursuant to a prior agreement with the plaintiff’s health care provider, accepted less than the billed amount as full payment, evidence of the full amount billed is not relevant on the issue of past medical expenses. The Howell ruling is discussed in this post.

In its Howell ruling, the Supreme Court expressly declined to decide whether evidence of the full amount billed is relevant or admissible on the issues of future medical expenses and noneconomic damages.

The California Court of Appeal (Second Appellate District) addressed those issues in its April 30, 2013, decision in Corenbaum v. Lampkin. Guided by the reasoning in Howell, the Court of Appeal made these three key holdings:

  1. The full amount billed for past medical services is not relevant to the amount of future medical expenses and is inadmissible for that purpose.
  2. Evidence of the full amount billed for past medical services cannot support an expert opinion on the reasonable value of future medical services.
  3. Evidence of the full amount billed for past medical services is not admissible to determine the amount of noneconomic damages.

The Corenbaum decision is the latest appellate court case to apply the Howell ruling.

Last month, the Court of Appeal held in Luttrell v. Island Pacific Supermarkets Inc. that the Howell rule should be applied where the plaintiff’s health care was paid by Medicare. The court also explained how the Howell rule should be applied when the plaintiff’s recovery is reduced because of his failure to mitigate damages. The Luttrell case is discussed in this post.        

And, in March 2012, the Court of Appeal applied Howell’s holding to the analogous situation in which the insured employee’s medical expenses are paid through workers’ compensation. That decision, Sanchez v. Brooke, was the subject of this post.

Older Entries

April 19, 2013 — California Legislative Committees Considering Insurance Bills

April 11, 2013 — Howell Rule Applies When Medical Services Were Paid by Medicare, Court of Appeal Concludes

April 3, 2013 — Judge Invalidates California Regulation on Estimating Replacement Costs for Homeowners Insurance

February 6, 2013 — Two California Appellate Court Decisions Vacate Forfeiture of Bail Bonds

January 8, 2013 — California Department of Insurance Adopts Amendments to Auto Repair Regulations

November 6, 2012 — Courts Take Divergent Positions on "Disparagement" Under Advertising Injury Coverage

October 2, 2012 — More than 20 new insurance-related bills signed into law by Governor Brown

September 26, 2012 — California Legislative Committees Hold Hearing on Auto Insurance Initiative

September 4, 2012 — Updated: California Legislature Passes Insurance-Related Bills Prior to Ending 2012 Session

August 24, 2012 — Longstanding Liability Rule Abandoned by California Supreme Court

August 22, 2012 — California Legislature Passes Iran Investment Bill

August 20, 2012 — Supreme Court Defines Scope of "Power Press" Exception to Work Comp Exclusive Remedy Rule

July 3, 2012 — Bill That Could Nullify Howell Moves Forward

June 29, 2012 — California Health Insurance Initiative Fails to Qualify for November Ballot

June 8, 2012 — California Insurance Bills Meet Deadline for Passage

May 25, 2012 — Iran-Related Investment Bill Clear's California State Assembly

May 7, 2012 — California Assembly Passes Bill Requiring Health Insurance Filing and Disclosures

May 2, 2012 — Iran-Related Investment Bill Clears Committee

May 1, 2012 — California Senate Committee Approves Two Bills Based on NAIC Models

April 5, 2012 — California Court of Appeal Issues Two Rulings on Bail Bonds

April 4, 2012 — California Workers' Compensation Looms as a Major 2012 Legislative Issue

March 19, 2012 — Significant Insurance Bills Being Considered by California Legislature

January 19, 2012 — Auto Insurance Initiative Qualifies for November 2012 Ballot

January 9, 2012 — Signatures May Be Collected for California Health Insurance Initiative

January 3, 2012 — California Supreme Court Rules that Court of Appeal Used Incorrect Legal Analysis in Deciding that Claims Adjusters Are Not Exempt from Overtime Pay Requirement

October 27, 2011 — Department Provides Advice on Effective Date of Amendments to California Principally At-Fault Regulation

September 12, 2011 — Hearing Held on Premium Tax Payment Regulations

August 15, 2011 — Auto Insurance Discount Initiative Okayed to Collect Signatures

July 22, 2011 — New Law Makes Significant Changes to the Regulation and Taxation of Surplus Line Insurance