For too long, California's business community has struggled to navigate our state's complex legal environment, getting burned with billions of dollars in frivolous lawsuits. But for some reason, the State Supreme Court recently decided to pour gasoline on the fire and set a precedent where laws can be applied retroactively, even to legally binding contracts.
For those who didn't hear, the State Supreme Court recently decided that a life insurance reform bill from 2013 (AB 1747) applies to policies signed before the law took effect. This has concerned those of us who don’t want to see life insurance premiums skyrocket, including many business owners who struggle to operate within California's burdensome, often opaque legal environment.
Above that, trial lawyers have been given the green light to launch a wave of new frivolous class action lawsuits against life insurance providers. Over 20 class action lawsuits have already been launched in California seeking to hold insurance companies liable for lapsed policies, even though many of the plaintiffs have suffered no actual harm.
The Golden State is consistently rated as one of the worst to start and operate a business. Trial attorneys and the state justice department run a legal system easily manipulated by unscrupulous litigators who enrich themselves by suing vulnerable businesses.
But now, our state courts are creating the precedent for applying laws retroactively, even to legally binding contracts. It troublingly suggests that our courts can change the rules anytime, without considering the impact on businesses/consumers. This leaves small business owners in California vulnerable and uncertain about their future.
If a business or industry follows the rules yet can still be targeted by ridiculous legal theories concocted by the trial bar, I can't see this trend leading to anything but a disaster.
Consider the lawsuit issues around the Private-Attorneys-General-Act (PAGA), California's unique system of deputizing employees to bring lawsuits against their employers with the backing of the state. Beyond the possible cases that could come from retroactive operations-related infractions, there also stands the possibility of litigation around the retroactive application of new laws towards preexisting employment contracts.
For instance, if California creates a law requiring all employers to provide 30 days of paid vacation for every employee, it would be possible under the new precedent for courts to apply that to preexisting contracts and possibly create a new robust avenue for trial lawyers to pursue entrepreneurial litigation.
The State Supreme Court ruling on life insurance isn't going to improve California's ability to recruit new employers to the state. The net effect will be fewer jobs and reduced economic growth–something that is already spiraling out of control.
Don't believe me? A recent report from ABC10 indicates that California businesses are shutting down in-state operations to expand jobs elsewhere. Furthermore, a Los Angeles Times article reveals that living conditions are deteriorating and fueling a resident exodus.
Let's not create another reason for people to leave California.
It's also worth considering that fewer jobs and a poorer state will make it harder for individuals to obtain and pay for life insurance, which is the opposite objective of the original 2013 life insurance reform bill.
The court overstepping its authority, not the work of legislators, caused this mess. But that also provides a path for a resolution. Lawmakers in Sacramento need only to reestablish their role as the sole creator of legislation and draft new reforms that prevent their laws from being implemented in the ways that hurt their constituents. Concern over the struggling business environment has been bipartisan, and a desire to improve conditions is also.
Additionally, our state’s appellate courts and judges must put a stop to the dangerous precedent of class action lawsuits currently targeting life insurance companies by requiring that plaintiffs demonstrate that they were harmed by an insurance company.
Now is the time for action
Hopefully, lawmakers and judges muster the strength to protect our job creators before it's too late.
— Salvador Rosas, Turlock