AIA Comments on Legislative ‘Highlights’ of Calif. Session’s Final Weeks

As the West Coast heads into the “dog days of summer,” the California Legislature commenced the final four weeks of its 2001 session on Aug. 20. To mark the occasion, the American Insurance Association (AIA) recently held a briefing to cover a number of issues on the legislative agenda.

Nicole Mahrt, AIA director, public affairs-western region, gave a brief rundown of several bills, with particular emphasis on three which she considered to be among the most important: SB 71 (Burton, D-San Francisco); SB 11 (Escutia, D-Montebello); and SB 773 (Speier, D-San Francisco).

SB 71: Workers’ Comp
According to a Senate floor analysis, SB 71 “expresses the intent of the Legislature to meaningfully increase temporary disability indemnity, permanent total disability indemnity, permanent partial disability indemnity, life pension, and death benefits for all injured workers and their dependents. The bill also provides unspecified minimum and maximum benefit amounts for injuries occurring on or after an unspecified time for temporary and total permanent disability, permanent partial disability, life pension benefits and death benefits.”

Mahrt indicated that the big question regarding SB 71, and the effort to get a workers’ comp bill in this year, would center on whether labor, the trial lawyers, employers and insurers will be able to agree to a package of reforms that will offset some of the costs of a benefit increase.

“We would like to see some reforms on the bill that would get control of a lot of rising medical costs and unnecessary medical treatment,” Mahrt said.

SB 11: Confidential Settlements
An analysis of SB 11 states that the bill “provides that in any action based upon injury, wrongful death or financial loss allegedly caused by a defective product, unlawful energy price manipulation, an unfair insurance claims practice, or an environmental hazard, information acquired through discovery or information contained in a secret settlement agreement not filed with the court may not be kept confidential except as specified. The bill also makes void and unenforceable any provision in a settlement agreement that restricts the ability of a party to disclose information that is evidence of one of the specified public hazards to a governmental agency with enforcement authority over that public hazard, unless the information is a trade secret or is otherwise privileged under the law.”

“It gives people a right to access to information that really is unprecedented,” Mahrt explained. “The insurance and employers community have been working very closely in a very diverse, strong, coalition in opposition to this bill because it will basically let anyone who wants to pay a filing fee for a lawsuit ask for whatever information they want, and then that’s made public.”

SB 773: Privacy
According to an Assembly Committee analysis, SB 773 “seeks to provide significant protections to consumers regarding the sharing of their personal financial information by their financial institutions. The bill requires a financial institution to obtain the written or electronic consent of a consumer before the financial institution may disclose or share the consumer’s ‘confidential consumer information’ with any nonaffiliated third party (an ‘opt-in’ approach). The bill also requires a financial institution, before disclosing confidential consumer information to an affiliate, to give a consumer an opportunity to direct that his or her confidential consumer information not be disclosed to an affiliate (an ‘opt-out’ approach). The measure also provides that a financial institution without affiliates may share confidential consumer information with a nonaffiliated third party subject to an opt-out requirement.”

According to Mahrt, the bill limits the use of financial information, but is completely inconsistent with the Gramm Leach Bliley Act (GLBA).

“It also creates a private right of action,” Mahrt said. “So if information is shared, and it’s found that it’s in violation of this bill [if passed]—even if no damage was caused, even if it was just accident—if you have hundreds of thousands of customers, you can be sued for $100 per transaction. That’s basically an open invitation for a class-action lawsuit.”

Mahrt said another problem with SB 773 is the way affiliates are defined. “We would like to see that section of the bill cleaned up,” she said. “Also, there [would] be duplicative notices required…This would set up another whole system to have to send slightly similar notices to the [GLBA] ones. So customers are just going to get really confused.”

With just four weeks left in California’s legislative session, a lot of big issues that have implications for the insurance industry continue to be debated. Some of those issues may come to resolution and move onto the governor’s desk, but at press time, it’s still anyone’s guess.