California Insurance Laws Enacted in 2013

by Hinshaw & Culbertson LLP

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 1113 makes changes to the provisional driver’s license program which applies to individuals between 16 and 18 years old. AB 1113 requires 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), prohibits 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 prohibits 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 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.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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