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Legislative Update: March 12, 2019 - Privacy Protection Hearings Held


Senate Judiciary Committee Holds Informational Hearing on CCPA

 

The Senate Judiciary Committee held an informational hearing last week titled “The State of Data Privacy Protection: Exploring the California Consumer Privacy Act and its European Counterpart.”

Chairwoman Jackson, a staunch privacy advocate herself, began the hearing by declaring privacy is a right granted to all citizens by the California Constitution. This was a right provided to Californians over 40 years ago by a ballot proposition in 1972 drafted by Assemblymember Kenneth Cory and Senator George Moscone. Chairwoman Jackson continued by stating in 2019, Californians have far more concerns with regard to privacy such as “Big Brother” devices and technology invading homes and listening into personal conversations, taking information from consumers and monetizing it. While she is pleased that California passed the CCPA, she feels strongly more needs to be done in this sensitive area.

Mactaggert, Chairman of Californians for Consumer Privacy and the author of the initiative, opened the hearing by providing an overview of the CCPA and its three pillars—the right to know, the right to say no and the right to have your information safe. He stressed the bill, despite the opposition’s claims, only applies to big businesses and data brokers. He reviewed the specifics of the deal agreed upon last year by all parties to remove the ballot from the initiative. He stated that while opponents will say the process was rushed, the CCPA was the product of two years of research around the world and drafting by his attorneys and privacy experts. He acknowledged there may need to be a few technical cleanups to the CCPA, stating he does think the definition of “household/device” needs to be tightened up. He urged the Legislature, however, in considering the cleanup changes, to not rollback any protections to consumers. Notably, when asked about the private right of action (PRA) in the bill and the negotiations that led to the decision to limit it to just the negligent data breach, Mactaggert stated he believed (and still believes) the negotiation was the right thing to do. In exchange for limiting the scope of the PRA, privacy advocates were able to achieve better protection for children and for consumers. This is significant, as Chairwoman Jackson is currently carrying a bill (SB 561) with the Attorney General to expand the PRA.

The second panel spoke to comparing the CCPA with Europe’s GDPR and discussed compliance issues. Lydia de la Torre, Professor, Co-Director, Data Privacy Certificate Program, Santa Clara Law School; Jessica B. Lee, Partner, Co-Chair, Privacy, Security & Data Innovations, Loeb & Loeb, LLP; and, Ariel Fox Johnson, Senior Counsel, Policy and Privacy, Common Sense Media/Kids Action were the three panelists. All three panelists did a brief dive into the differences between the CCPA and GDPR. They spent some time examining opt-in versus opt-out models, and the burden placed on businesses versus the burden placed on the consumer. In addition, they debated the protection of minors in the CCPA versus the GDPR. All three witnesses recognized there were changes that could be made to make the CCPA more effective for consumers and potentially easier to comply with.

The third panel consisted of stakeholder insights on the CCPA. Panelists included Sarah Boot on behalf of the CalChamber and Maureen Mahoney, a Policy Analyst with Consumer Reports. Ms. Boot asked the committee and interested parties to recall that there were promises made and deals cut last year as part of this comprehensive negotiation to accomplish the CCPA. However, because it was completed in a rushed manner, there were errors that were made and unintended consequences as a result. Many of those mistakes and unintended consequences will have a huge impact on businesses trying to comply with those requirements unless changes are made this year to correct those errors. Among the changes that need to be made: the definition of “consumer” needs to be changed; the definition of “household/devices” needs to be tightened up; the definition of “personal information” is too broad and also needs to be narrowed; clarifications need to made to non-discrimination provision so as to allow loyalty programs; and, fraud prevention activities need to be allowed, particularly with local governments. 

Maureen Mahoney testified the debate about the CCPA is too focused on the workability for businesses and not as much on the workability for consumers. More focus needs to be on the amount of work there still is for a consumer, even under this bill. That being said, CCPA should provide a universal opt-out option, greater control of data sharing, and better enforcement and oversight. She agreed there are a few technical fixes that need to be worked out (loyalty points and household/device), but the Legislature needs to be careful that in doing so, they are not rolling back protections on personal information. Consumer Reports would oppose any rollback of online advertising provisions.

Panel four examined the role of the Attorney General’s Office. Stacey Schesser, Supervising Deputy Attorney General, Consumer Law Section, Privacy Unit, California Department of Justice testified on behalf of the AG’s office. Ms. Schesser’s began her testimony with an overview of the CCPA, the regulatory authority provided to the AG’s office, and a short synopsis of their forums throughout the state. Schesser reiterated the three remaining issues the AG has with the CCPA: 1) Free advice to businesses at taxpayer expense; 2) 30-day right to cure allows bad guys a get-out-of-jail-free card; and, 3) the private right of action should be expanded. These three provisions are the basis for Senator Jackson’s SB 561 (as mentioned above), sponsored by the AG’s office. Schesser also stated again the AG’s office is highly understaffed and underfinanced for the task at hand. At this point, they will not be issuing their first draft of regulations until fall of this year. They also realize changes will likely be made during this session, further complicating their task at hand of drafting regulations for implementation.

The last two panels centered around understanding industry models and how consumer information is being collected, used, and valued. 

This hearing is likely the last informational hearing on the issue for the year. Policy hearings will now begin for the 30+ bills addressing CCPA clean-up and various other privacy issues.


CDI’s Legislative Package for 2019

 

The California Department of Insurance is sponsoring thirteen measures for the 2019 legislative session. The bill package includes:

AB 1209 (Nazarian): Allows consumers that have a hybrid policy (e.g. life insurance policy with a long-term care (LTC) rider) to borrow against their life insurance even if they are receiving LTC benefits. The bill would also require hybrid policies to have level premium based rates instead of attained-age based rates. Lastly, the bill would increase the minimum LTC daily benefit from $50 to $100. (Note, this is still a spot bill)

AB 1535 (Carillo): Adds a disclosure requirement for pet insurance carriers to provide their insurance company name and contact information as well as the CDI’s contact information rather than just their advertised pet insurance brand name.

AB 1538 (Webber): Clarifies that consumers have the right to choose a cash payment in lieu of repairing a damaged vehicle under an automobile insurance policy.

AB 1616 (Low): Encourage insurance innovation in California (Note, this is currently a two-year spot bill)

AB 1679 (Daly): Increases the annual assessment for CDI’s Automobile Insurance Fraud Program and the Organized Automobile Fraud Activity Interdiction Program. (Note, currently a spot bill)

AB 1104 (Calderon): Obtains expressed statutory authorization to assess LTC insurers in order to fund CDI’s Office of Principle-Based Reserving for new workload associated with implementation of enacted  

SB 290 (Dodd): Authorizes the Government, Insurance Commissioner, and Treasurer to enter into an insurance policy that pays out when California has unexpected costs for disaster response.

SB 508 (Leyva): Requires insurers to provide mobile homeowners with the Residential Property Insurance Disclosure statement and to provide renters and condo owners with the California Residential Property Insurance Bill of Rights Disclosure.

SB 534 (Bradford): Expands the existing Insurance Diversity Survey, expands current definitions to be inclusive of additional diverse communities/categories such as LGBT and veterans, and codifies the Governing Board Diversity Survey and Diversity Task Force in statute.

SB 570 (Rubio): Allows the California Low-Cost Auto Program to continue beyond its expiration date of 1/1/2020, thus extending this auto insurance program for underserved consumers needing car insurance.

SB 740 (Mitchell): Mandates life insurers to check national death master list in order to inform beneficiaries of benefits owed to them. (Note, currently a spot bill)

 

Bill Number Pending (Assembly Insurance Committee): This is the annual insurance omnibus bill. It contains the following several issues identified by CDI and stakeholders to clarify and update numerous provisions of the Insurance Code:

·     Amend Holding Company Confidentiality Reference Sections

·     Update Internet Advertising provisions

·     Amend Posting and Removal Time Periods for CDI Website

·     Add CDI’s Contact Info to Homeowner’s Cancellations and Nonrenewal notifications sent to consumers

·     Remove the January 1, 2021 sunset provision from the credit for reinsurance law relating to Certified Reinsurers.

·     Provide NAIC Required Insurer Audit Language

 

Bill Number Pending (Senate Health Committee): This is the annual health insurance omnibus bill. Conforms state law to both recent federal statutory changes and adopted NAIC Model Regulations made to the Medicare program and, specifically, Medicare Supplement policies issued on or after January 1, 2020.


Assembly Labor and Employment Committee Hearing Update

 

The Assembly Labor and Employment Committee held their first policy committee hearing this past week. The committee heard and passed the following bills: 

AB 9 (Reyes): Extends the filing period with the Department of Fair Employment and Housing (DFEH) for complaints of unlawful employment practices to three years but prohibits the revival of lapsed claims. This bill is intended to address sexual harassment claims and assist those who fear coming forward due to retaliation or just need additional time to process what has happened to them. AB 9 is sponsored by the Consumer Attorneys of California and opposed by a large business community coalition led by the CalChamber. 

AB 9 passed the committee with a vote of 5-0. 

AB 51 (Gonzalez): Prohibits the following employment practices: 1) Requiring a non-disclosure agreement in regards to a person being a victim of, witness to, or participant in an investigation of workplace sexual harassment; 2) Requiring a person to waive a right to take employment-related claims to court; and 3) Retaliating against a person for refusing to consent to such a waiver. 

The author argues that employers are increasingly requiring workers to give up their rights in industries you would not expect to have mandatory arbitration agreements, such as in food service, hospitality, and retail, and that forcing workers to sign arbitration agreements allows for harassment, discrimination, and labor violation claims to be kept out of court, effectively cloaking them in secrecy and, in some cases, allowing serial harassers and repeat violators to continue their conduct for years. This bill is sponsored by the California Labor Federation and opposed by the large business coalition led by the CalChamber.

AB 51 passed the committee with a vote of 5-1.

AB 170 (Gonzalez): Also known as Sandra’s Law, this bill would require a company to share the legal responsibility for all workers who are provided by a contractor in cases of sexual harassment, assault, and discrimination if they work in the company’s usual course on the company’s premises or worksite.

According to the author, this bill is necessary to address and provide recourse for these workers,

often contracted or even subcontracted, if they are sexually harassed. This is a repeat introduction of a bill passed last year but ultimately vetoed by Governor Brown. The bill is supported by American Federation Of State, County And Municipal Employees, AFL-CIO, California Employment Lawyers Association, and Consumer Attorneys Of California. AB 170 is opposed by a large business coalition led by the CalChamber.

AB 170 passed the committee with a vote of 5-1.

AB 171 (Gonzalez): Prohibits an employer from discharging, discriminating or retaliating against an employee who is a victim of sexual harassment and establishes a rebuttable presumption of retaliation based on the employee’s status if the employer takes certain action within 90 days of obtaining knowledge of the victim’s status.

This is another repeat introduction of a bill passed last year but ultimately vetoed by Governor Brown. The bill is supported by American Federation of State, County And Municipal Employees, AFL-CIO, California Employment Lawyers Association, and Consumer Attorneys Of California. AB 171 is opposed by a large business coalition led by the CalChamber.

AB 171 passed the committee with a vote of 6-0, including one Republican vote.


CDI Fiscal Review


The California Department of Insurance held its 2018 Industry Fiscal Review in Sacramento today. This is an annual event where the department’s fiscal and licensing staff shares information and developments affecting the CDI budget and seeks industry input and support for additional expenditures that require Legislative approval. This year Commissioner Ricardo Lara joined the meeting to welcome participants and asked for the industry’s input and cooperation to assist the department in serving the industry and protecting consumers. He emphasized his priorities for the year were looking at issues relative to climate change which affect the industry and its products, doing more in the area of automobile insurance fraud, and looking at how technology and innovative insurance products worldwide could assist California with issues relative to wildfires and other challenges relating to the state’s infrastructure and the state’s interest in protecting consumers.

The department’s budget calls for expenditures totaling $299,462,000. Of this, 31.41% or $94,116,000 comes from fees imposed on insurers and the cost of licenses for insurance agents and brokers. The department indicated there are approximately 410,000 licensed agents and brokers when both individual licenses and organizational licenses are considered. Individual agent and broker licenses total approximately 391,000, at a cost for most of these licenses at $188 for a two-year term or renewal. This includes a 10% increase in license fees that went into effect March 1, 2019.

Forty percent of the department’s budget comes from surcharges on various insurance policies to fight fraud. By category, workers’ compensation fraud assessments total $72,752,000; automobile fraud $45,578,000; disability and healthcare $9,160,000; general assessment $5,608,000; for a grand total of $133,098,000. Other income received by the department comes from reimbursements for insurer examinations, Proposition 103 implementation, and other activities of the department that are charged to entities regulated by the department. This year the CDI is seeking just two changes in the state budget. First, an increase in the portion of workers’ compensation fraud funding shared with local district attorneys consistent with the increased assessment approved by the Governor and appointed by the Fraud Assessment Commission. Second, a request for an additional three positions to implement AB 2395 enacted last legislative session relative to the California Life and Health Insurance Guarantee Fund. The department is also seeking industry support for AB 1679, which would increase the automobile fraud assessments that have not been charged since their implementation over 20 years ago.

Lastly, the department announced all its licensing functions are being transferred over to a new online system, Sircon, that some 14 other states are currently using. This change will take place this coming summer and should provide a more timely and transparent licensing system to serve California producers. Applying for a new license for both organizations and individual license holders will be done online, along with the ability to update or modify those applications or renewals, check application status and timing, obtain the contact information of the department staff working on the application or renewal, print a license, look up CE courses, and view all department services. There will be no transaction fees added for these online services. 


Workers’ Comp Audit Requests Approved by JLAC

 

On Wednesday, March 6, the Joint Legislative Audit Committee approved two audit requests relating to workers’ compensation. The first was by Assemblymember Blanca Rubio relating to various issues with the Qualified Medical Evaluator (QME) program administered by the Division of Workers’ Compensation (DWC). QMEs are physicians licensed by the DWC who provide evaluations on a number of important issues, including apportionment, nature and extent of permanent disability and impairment, and need for continuing medical treatment, when there is a dispute between the employer and the injured worker. Recently, a group of QMEs successfully sued the DWC over what they alleged to be a number of improper practices in how the DWC was administering this program and disciplining QMEs. Their attorney, Nicholas Roxborough, testified in support of the audit. The proponents of the audit also complained of the delays in adopting revisions to the medical-legal fee schedule and raised the question of whether there was improper influence by “insurance industry insiders” in some of the complaints of actions by the DWC. For its part, DWC Administrative Director George Parisotto made no objections to the audit and looked forward to its completion. The audit will take roughly six months.  

The second approved audit request came from Senator John Moorlach. His request was a claims review by the State Auditor of state agencies whose workers’ compensation claims are adjusted by the State Compensation Insurance Fund (SCIF). This falls within the scope of those state agencies who are permissibly uninsured for which SCIF provides claims administration services per Labor Code Sec. 6111. Senator Moorlach was particularly interested in looking for opportunities to close cases more quickly. For purposes of perspective, the State of California’s total workers’ compensation costs in the 2019-20 budget are $726 million. 


New Way California Holds Event in Sacramento

New Way California, the product of former Assembly Republican Leader, Assemblyman Chad Mayes, held an event this past week in Sacramento in an effort to boost interest in a more centrist approach to issues in California. 

“The California Republican Party must not be a carbon copy of the national GOP,” Kevin Faulconer, the Republican mayor of San Diego, said to the modest crowd of political centrists who had flocked to the Crest Theatre in downtown Sacramento this morning for the group’s second annual summit.

“California Republicans need to create a party tailored to the people of California,” he continued, pointing to his own example as a center-right politician who has authored a local climate change action plan and recently announced a five-year campaign to make the city more welcoming to immigrants.

“Let’s take him out of the equation,” former Gov. Arnold Schwarzenegger said of President Trump. “It’s a mistake for a state party to mold themselves after the national party.” Schwarzenegger sits on the board of the New Way.

New Way's message is that California Republicans can embrace issues such as climate change, not always having to cater only to business or stand by the President. Mayes and New Way members recognize crafting a more centrist GOP brand separate from the national party is a tough sell to both sides of the political spectrum. Mayes himself was removed from his post as leader of the caucus for supporting a renewal of the state cap-and-trade program. In addition, many Democratic and independent voters may be unable or unwilling to distinguish state and local Republicans from the policies and persona of President Trump.

The New Way program offered a series of panels and guest speakers who touched on such themes as inclusivity, economic mobility, and bridging the partisan divide.