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Once again, it is time to make sure that there are no surprises lurking within the subparagraphs of the many new laws that went into effect as of the first of the year. Several bills signed by Gov. Arnold Schwarzenegger in 2004 enact changes to insurance industry practices and coverages in the state. Even if your company is not involved directly in the insurance industry, these changes are worthy of note since they affect a wide rage of non-insurance businesses as well. Employers, health care providers and businesses that maintain electronic records relating to California consumers are among the entities that may benefit by a second look at the following new “insurance” laws. � WORKERS’ COMPENSATION California’s workers’ compensation law has undergone substantial changes in recent years, with 2004 marking the probable apex in reform with the passage of SB 899. Several other bills enacted last year address fraud in workers’ compensation. Because SB 899 was passed as an urgency act, some of its provisions went into effect immediately upon the governor’s approval in April 2004. The remaining provisions went into effect on July 1, 2004, and Jan. 1, 2005, as specified in the statute. The legislation was primarily designed to achieve cost savings for California employers. Two key elements of the bill, which cuts a wide swath across the state’s Labor Code, are the creation of medical provider networks and implementation of a permanent disability schedule. SB 899 makes significant procedural and substantive changes to the penalties for unreasonable delays in payment of claims. Prior legislation imposed a penalty of 10 percent on the entire amount of benefits paid, including amounts that are paid on a timely basis. The new rules impose either a 25 percent penalty on the amount of compensation that is unreasonably delayed or $10,000, whichever is less. Employers who discover potential violations before the employee claims a penalty may pay a self-imposed penalty of 10 percent if it is paid within 90 days of the discovery date. The new penalty legislation also specifically provides that it creates no civil cause of action, maintaining California’s exclusive remedy in workers’ compensation. The Legislature last year also gave employers and authorities new tools to combat workers’ compensation fraud. Under AB 2866 (codified in Insurance Code �1871.9), the Department of Insurance will now maintain a public Web page that posts information relating to the case of any individual convicted of a violation of any insurance fraud provisions that involve workers’ compensation insurance, services or benefits. In addition, the list of government agencies that are authorized to request that an insurer release relevant information deemed important to a workers’ compensation fraud investigation under Insurance Code �1877 was expanded to include, among other authorities, the Department of Corrections, any city attorney whose duties include criminal prosecutions and any law enforcement agency investigating workers’ compensation fraud. � REGISTERED DOMESTIC PARTNER INSURANCE BENEFITS The California Insurance Equality Act (AB 2208) requires health insurers and HMOs that offer policies in the state to provide registered domestic partners with coverage equal to that of married spouses. The legislation applies to HMO contracts and health insurance policies that were issued, amended, delivered or renewed effective on or after Jan. 2, 2005 (HMO contracts) or Jan. 1, 2005 (health insurance policies). AB 2208 also added �381.5 to the California Insurance Code to apply the same “equal coverage” requirement to all other forms of insurance regulated by the Department of Insurance, such as auto, rental, disability and life insurance. The California Insurance Equality Act complements the 2003 California Domestic Partner Rights and Responsibilities Act (AB 205), which also took effect Jan. 1, 2005. AB 205, which was signed by former Gov. Gray Davis, revises various sections of the Family Code and Government Code to extend all the rights and duties of marriage to same-sex couples who are registered as domestic partners. California domestic partnership law already provided certain rights for same-sex domestic partners with respect to insurance coverage. The new law goes further, proclaiming that “[r]egistered domestic partners shall have the same rights, protections and benefits, and shall be subject to the same responsibilities, obligations and duties under law � as are granted to and imposed upon spouses.” Areas covered by AB 205 include government benefits, funeral concerns, parenting status, property ownership, taxes, health issues and financial concerns. Together, AB 2208 and AB 205 create new standards for employers — particularly in the areas of health care benefits, life insurance benefits, medical leave and other policies. � PRIVACY New laws expanding consumer privacy safeguards affect insurance companies as well as other businesses that maintain electronic records containing personal information about California residents. Existing laws obligated businesses to notify consumers if a breach of security might have resulted in the disclosure of electronic records containing the individual’s personal information, which is defined as an individual’s name along with either a Social Security number, driver’s license or California ID number or a credit card number. (Civil Code ��1798.29 and 1798.84.) AB 1950, which added �1798.81.5 to the Civil Code, further obligates businesses to implement and maintain reasonable security procedures to protect personal information from unauthorized access or disclosure. The statute also requires businesses that share personal information with third parties to require by contract that the third party also implement reasonable security practices. Privacy legislation of this type is particularly pertinent to technology vendors and consultants that service all types of industries, including insurance. Insurers (and other businesses) are under increasing pressure to manage records electronically, and insurance requirements are changing to facilitate the transition from paper to computer files. When insurers and other companies outsource electronic record creation and retention systems to third-party consultants, they will likely seek increased protections for third-party failures that may result in privacy violations. Bruce D. Celebrezze, a partner in the San Francisco office of Sedgwick, Detert, Moran & Arnold, co-chairs the firm’s insurance coverage and bad faith litigation group.

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