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Schwarzenegger draws praise for vetoing 'job killer' liability expansions

By Chris Rizo | Oct 12, 2009

Arnold Schwarzenegger (R)

SACRAMENTO, Calif. (Legal Newsline)-California Gov. Arnold Schwarzenegger drew praise Monday for his vetoes of three bills that critics said would have cost jobs and increased litigation in the state.

In interviews with Legal Newsline, representatives from tort reform groups and the business community said the governor acted in the best interests of the Golden State's economy when he rejected Democrat-backed proposals that would have expanded civil liability in certain cases.

Perhaps the most controversial of the three bills was AB 2 by Assemblyman Hector De La Torre, D-South Gate. The bill sought to restrict the ability of insurance companies to cancel individual policies of sick patients unless a patient intentionally lied to the insurer about preexisting conditions.

Charles Bacchi, executive vice president of the California Association of Health Plans, said the bill "went too far" by including a clause that companies had to prove that a patient intentionally lied about a preexisting condition before a policy could be rescinded.

"The bill would have increased litigation and insurance premiums as a result in California," he told Legal Newsline.

The bill -- one of about 700 sent to the Republican governor's desk in the final days of the 2009 legislative session -- was one of the most contentious of the legislative session, observers say.

"It was a hard-fought bill," Bacchi recounted. "Both Democrats and Republicans were for and against it at different times."

The bill was also opposed by the California Chamber of Commerce, which labeled the bill a "job killer" in letters to state lawmakers.

There was "significant confusion" among state lawmakers as to what the bill sought to do, said Marti Fisher, a lobbyist for the California Chamber of Commerce. She said the intentionality standard woven into the bill was flawed.

"That intentionality standard just invites litigation and litigation drives up costs and drives people out of the insurance market," Fisher said.

Business and trade groups also successfully fought hard against Assembly Bill 793, which would have made it easier for California workers to sue for alleged age discrimination on the job. The governor vetoed the legislation last weekend.

The bill was introduced by Assemblyman Dave Jones, D-Sacramento, in response to the 2007 U.S. Supreme Court decision in the case of Ledbetter v. Goodyear Tire & Rubber Co.

In a split decision, the high court affirmed an 11th U.S. Court of Appeals decision, which held that Ledbetter couldn't sue under the 1964 U.S. Civil Rights Act because the alleged discrimination occurred more than 180 days before she filed her claim.

In response to the controversial decision, Congress passed the Lilly Ledbetter Fair Pay Act of 2009, which amended the federal Civil Rights Act of 1964 to say that the 180-day statute of limitations for filing an equal-pay lawsuit resets with each new alleged discriminatory paycheck.

The federal bill -- introduced in the Senate by Barbara Mikulski, D-Md. -- was the first act of Congress signed by President Barack Obama after he took office Jan. 20.

The Jones bill would have expanded employer liability in workplace lawsuits "far beyond" the federal law, argued critics, including the chamber and tort reform groups like the Civil Justice Association of California.

"This bill is dangerous because it went further than the federal law and could have been interpreted as undoing the statute of limitations in all employment discrimination cases," said Kim Stone, vice president of legislation for CJAC. "The governor did a good thing in vetoing this bill," she added.

A third bill tort reformers and the chamber said would have unfairly increased civil liability for businesses was Senate Bill 242, which was also vetoed by the governor. They said the bill would have created "shakedown lawsuits" against businesses.

The measure by Sen. Leland Yee, D-San Francisco, would have made a violation of the California Unruh Civil Rights Act subject to minimum damages of $4,000 if a business prohibits the use of any language in or with its establishment, unless the policy is justified by a business necessity.

"This was a job killer because it would have resulted in frivolous lawsuits against small businesses," said Kyla Christoffersen, the chamber's lobbyist on legal and taxation issues.

She said there was a lot of misunderstanding surrounding the bill and what it would require of businesses.

"On its surface it sounds like a bill that had good intentions, and I think the author was well intentioned and didn't want to cause trouble for businesses, but unfortunately the language itself was going to do that very thing," Christoffersen said.

From Legal Newsline: Reach staff reporter Chris Rizo at chrisrizo@legalnewsline.com.

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