BILL NUMBER: AB 1953 CHAPTERED 09/20/04 CHAPTER 600 FILED WITH SECRETARY OF STATE SEPTEMBER 20, 2004 APPROVED BY GOVERNOR SEPTEMBER 20, 2004 PASSED THE ASSEMBLY AUGUST 18, 2004 PASSED THE SENATE AUGUST 16, 2004 AMENDED IN SENATE JULY 19, 2004 AMENDED IN SENATE JUNE 24, 2004 AMENDED IN ASSEMBLY MARCH 30, 2004 AMENDED IN ASSEMBLY MARCH 18, 2004 INTRODUCED BY Assembly Member Vargas FEBRUARY 12, 2004 An act to amend Sections 15006 and 15027 of, and to add Section 15027.1 to, of the Insurance Code, relating to public insurance adjusters. LEGISLATIVE COUNSEL'S DIGEST AB 1953, Vargas. Public insurance adjusters: contracts. Existing law provides for the licensing and regulation of public insurance adjusters by the Insurance Commissioner. Existing law prohibits a person from acting as a public insurance adjuster unless he or she is licensed, and provides for a civil penalty not exceeding $5,000 for a violation of these provisions, or not exceeding $10,000 if the violation was willful. This bill would raise these fines to $10,000 if the violation was not willful, and $25,000 if the violation was willful. Existing law prohibits a public adjuster from acting in this capacity without having first entered into a contract, in writing, on a form approved by the commissioner and executed in duplicate by the public adjuster and the insured or a duly authorized representative. Existing law requires that this contract contain a provision allowing the client to rescind the contract within 72 hours of signature. A violation of the provisions regulating public insurance adjusters is a crime. This bill would require that the contract include specified provisions, including a provision disclosing the percentage of the insured's claim, or other fee, that the public adjuster will charge for his or her services, and would further require that the adjuster obtain the initials of the insured next to this provision. The bill would specify the form of the notice of cancellation to be included in the contract, and would allow the client to cancel the contract by midnight of the 3rd business day after signature. It would require a public adjuster to return any payment made by the client within 10 days of cancellation. The bill would provide that the provisions regarding contract requirements and the notice of cancellation may not be waived. A violation of these provisions would be a crime. By creating a new crime, the bill would impose a state-mandated local program. Existing law prohibits a public insurance adjuster from soliciting a client for employment between 6 p.m. and 8 a.m. This bill would apply this prohibition, in addition, to any other person or entity offering, for a fee, service related to a loss-producing occurrence. By expanding the scope of an existing crime, the bill would impose a state-mandated local program. The bill would also prohibit a public insurance adjuster from soliciting a contract of engagement until 7 calendar days have elapsed since the occurrence of a disaster, as defined. This prohibition would not apply if the adjuster is contacted by the insured or the insured's representative. By creating a new crime, the bill would impose a state-mandated local program. Existing law requires the commissioner to enforce the execution of laws regulating the business of insurance. This bill would require the commissioner to enforce the provisions of law regarding, and prosecute all violations of these provisions by, persons or entities, whether licensed or not, that hold themselves out or act as public insurance adjusters. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 15006 of the Insurance Code is amended to read: 15006. (a) No person shall engage in a business regulated by this chapter, or act or assume to act as, or represent himself or herself to be, a licensee unless he or she is licensed under this chapter. Any person who violates this subdivision shall, in addition to any other penalties provided by law, be liable to the state for a civil penalty in an amount not exceeding ten thousand dollars ($10,000), or if that violation is willful, in an amount not exceeding twenty-five thousand dollars ($25,000). The penalty shall be assessed and recovered in a civil action brought by the commissioner in a court of competent jurisdiction in the name of the people of the State of California. (b) Any contract for services regulated by this chapter that is entered into by an insured with any person who is in violation of subdivision (a) may be voided at the option of the insured, and the insured shall not be liable for the payment of any past services rendered, or future services to be rendered, by that person under that contract or otherwise. (c) Whenever it appears to the commissioner that any person is engaging in acts or practices in violation of subdivision (a), the commissioner may, without any requirement of notice or hearing, issue and cause to be served upon that person an order requiring that person to cease and desist immediately from engaging further in those acts or practices. (d) Any person who fails to comply fully with an order of the commissioner issued under subdivision (c) shall be liable to the state for a civil penalty in an amount not exceeding one hundred dollars ($100) per day for each and every day that the violation or failure to comply continues, but in no event to exceed a maximum amount of five thousand dollars ($5,000). The commissioner shall collect the amount so payable and may bring an action in a court of competent jurisdiction in the name of the people of the State of California to enforce collection. This penalty is in addition to any other penalties provided by law. (e) The powers vested in the commissioner by this section are in addition to any and all other powers and remedies vested in the commissioner by law, and nothing herein shall be construed as requiring the commissioner to employ the powers conferred in this section instead of or as a condition precedent to the exercise of any other power or remedy vested in the commissioner. SEC. 2. Section 15027 of the Insurance Code is amended to read: 15027. (a) No licensee shall, directly or indirectly, act within this state as a public insurance adjuster without having first entered into a contract, in writing, on a form approved by the insurance commissioner and executed in duplicate by the public adjuster and the insured or a duly authorize representative. One copy of this contract shall be kept on file by the licensee, available at all times for inspection, without notice, by the commissioner or his or her duly authorized representative. (b) No licensee shall solicit or attempt to solicit a client for employment during the progress of a loss-producing occurrence. (c) No licensee or any other person or entity offering, for a fee, service regulated by this chapter shall solicit a client for employment or initiate any contract with a policyholder between the hours of 6 p.m. and 8 a.m. (d) No licensee shall use any form of contract other than that approved by the commissioner and which contains each of the following: (1) A provision allowing the client to rescind the contract by written notice sent or delivered to the licensee by midnight of the third business day after the day on which the client signs an agreement which complies with this section. Each copy of the contract shall contain a completed form, captioned "Notice of Cancellation," which shall be placed at the end of the contract and be separated from the remainder of the contract by a printed line. Nothing shall be printed on the reverse side of the notice form. The notice form shall be completed by the licensee, and shall contain in type of at least 10-point the following statement written in the same language, e.g., Spanish, as used in the contract: Notice of Cancellation ______________________ (Date of Contract) You may cancel this contract, without any penalty or obligation, within three business days from the above date. If you cancel, any money or other consideration paid by you will be returned within 10 days following the receipt of your cancellation notice, and any security interest arising out of the transaction will be canceled. To cancel this contract, mail or deliver a signed and dated copy of this cancellation notice, or any other written notice, or send a telegram to: ______________________________________________________________ (name of public adjuster) at ______________________________________________________________ (address of public adjuster's place of business) not later than midnight of ___________________________________ (Date) I hereby cancel this contract ________________________________ (Date) ______________________________________________________________ (Client's signature) (2) The statement "WE REPRESENT THE INSURED ONLY" prominently displayed in at least 10-point type. (3) A provision disclosing the percentage of the insured's claim, or other fee, that the licensee will charge for his or her services. The licensee shall obtain the initials of the insured next to this provision. (4) A conspicuous statement in at least 10-point type in immediate proximity to the space reserved for the client's signature, as follows: "You may cancel this contract at any time before midnight of the third business day after the date of this contract. See the notice of cancellation form at the end of this contract for an explanation of this right." (e) No licensee shall knowingly make any false report to his or her employer or divulge to any other person, except as he or she may be required by law to do so, any information acquired by him or her except at the direction of the employer or a client for whom the information is obtained. (f) No licensee shall use a badge in connection with the official activities of the licensee's business. (g) No licensee shall permit an employee or agent in his or her own name to advertise, engage clients, furnish reports, or present bills to clients, or in any manner whatever to conduct business for which a license is required under this chapter. (h) Pursuant to subdivisions (a) and (c) of Section 15006, the commissioner shall have the authority to enforce the provisions of this chapter and prosecute violations thereunder committed by unlicensed persons or entities that hold themselves out or act as public insurance adjusters. (i) For purposes of this section, "business day" shall have the same meaning given to that term in subdivision (e) of Section 1689.5 of the Civil Code, as in effect on the operative date of this statute. (j) The contract and the notice of cancellation set forth in paragraph (1) of subdivision (d) shall be written in the same language, e.g., Spanish, as principally used in the negotiation of the contract. (k) Within 10 days after a contract has been canceled, the licensee shall tender to the client any payments made by the client and any note or other evidence of indebtedness. The licensee is not entitled to compensation for services performed prior to cancellation. Any security interest shall be canceled upon cancellation of the contract. (l) Notice of cancellation given by the client need not take the particular form specified in paragraph (1) of subdivision (d). Notice of cancellation, however expressed, is effective if it indicates the intention of the client not to be bound by the contract. (m) Cancellation occurs when the client gives written notice of cancellation to the licensee at the address specified in the contract. (n) Notice of cancellation, if given by mail, is effective when deposited in the mail properly addressed with postage prepaid. (o) Until the licensee has complied with this section, the client may cancel the contract. (p) The licensee shall provide the client with two completed copies of the contract and notice of cancellation at the time the client signs the contract. (q) Any confession of judgment or waiver of the provisions of this chapter shall be deemed contrary to public policy and shall be void and unenforceable. (r) The changes made to this section by the act that added this subdivision shall apply only to contracts entered into on and after January 1, 2005. SEC. 3. Section 15027.1 is added to the Insurance Code, to read: 15027.1. (a) Notwithstanding subdivision (c) of Section 15027, a licensee shall not solicit a contract of engagement under this chapter until seven days have elapsed since the occurrence of a disaster. (b) Subdivision (a) shall not apply if the licensee is contacted directly by the insured or the insured's representative. (c) For the purposes of this section, "disaster" means a loss-producing event that damages or destroys more than 25 dwellings, or a "disaster" as that term is defined in subdivision (b) of Section 1689.14 of the Civil Code. SEC. 4. No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.