BILL NUMBER: AB 2956 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 24, 2008
INTRODUCED BY Assembly Member Coto
FEBRUARY 22, 2008
An act to add Section 1623.5 to amend
Sections 1623, 1704, 1731, and 1732 of, and to add Section 1623.1 to,
the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 2956, as amended, Coto. Insurance: agents and brokers.
Existing law provides that an insurance agent is a person
authorized by and on behalf of an insurer to transact all classes of
insurance, except life insurance. Existing law provides that an
insurance broker is a person who, for compensation and on behalf of
another person, transacts insurance other than life insurance with,
but not on behalf of, an insurer.
This bill would provide that a determination as to
whether a licensee is acting as an insurance agent or insurance
broker in a particular transaction shall be determined by the
totality of the circumstances of the transaction.
establish a rebuttable presumption, subject to exception, that a
person is acting as an insurance broker if the application shows that
the person is acting as an insurance broker and is
licensed to act as an insurance broker in the state in which the
application is submitted. The bill would specify the grounds for
rebutting the presumption.
Existing law provides that life agents, travel agents, and fire
and casualty insurance agents shall not act as an agent of an insurer
unless the insurer has filed with the commissioner a notice of
appointment, executed by the insurer, appointing the licensee as the
insurer's agent.
This bill would additionally require the notice to specify the
scope of the agency appointment.
Existing law provides that a person licensed as a broker-agent
shall be deemed to be acting as an insurance agent in the transaction
of insurance placed with those insurers for whom a notice of
appointment has been filed, as specified.
This bill would additionally provide that the person would also be
deemed to be acting within the express scope of the notice.
The bill would make additional conforming changes, and would state
the intent of the Legislature and findings of the Legislature
regarding insurance brokers.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. (a) It is the intent of the Legislature
that this act foster a competitive marketplace for all insurance
products and services.
(b) The Legislature finds and declares that it is in the best
interest of consumers of insurance products to encourage and maintain
a variety of different insurance delivery systems that will compete
for consumers on price and service. In order to achieve this goal, it
is important to remove any ambiguity in the law defining insurance
brokers, provide circumstances wherein a licensee can be presumed to
be acting in the capacity of a broker, and set forth circumstances
where the presumption may be rebutted.
SEC. 2. Section 1623 of the Insurance
Code is amended to read:
1623. An insurance broker is a person who, for compensation and
on behalf of another person, transacts insurance other than life
insurance with, but not on behalf of, an admitted insurer.
Every application for insurance submitted by an insurance broker to
an admitted insurer shall show that the person is acting
as an insurance broker. If the application shows that the
person is acting as an insurance broker and is licensed as an
insurance broker in the state in which the application is submitted,
it shall be presumed, for licensing purposes only, that the person is
acting as an insurance broker. It shall be presumed
that the person is acting as an insurance broker if the application
shows that the person is acting as an insurance broker and is
licensed to act as an insurance broker in the state in which the
application is submitted. The presumption shall not apply to those
transactions in which fees are charged unless the nature and the
amount of all fees and the fact of any insurer compensation is
disclosed in an agr eement covering the transaction signed
by the applicant. In the event that any transaction involves both a
retail broker and a wholesale intermediary broker, the wholesale
intermediary broker shall satisfy its disclosure obligation under
this section if it provides written disclosure to the retail broker
of the nature and amount of its fees, and the fact of any insurer
compensation it receives. Nothing in this section is intended
to affect any rights or remedies otherwise available under the law.
SEC. 3. Section 1623.1 is added to the
Insurance Code , to read:
1623.1. (a) The presumption set forth in Section 1623 may be
rebutted only in conformity with the provisions of subdivisions (b)
and (c).
(b) The presumption of broker status may be rebutted if, on the
basis of the totality of the circumstances, there is clear and
convincing evidence that the broker-agent is performing essential
insurer functions on behalf of the insurer, such as establishing
underwriting criteria, binding insurance coverage without prior
authorization of an insurer, appointing agents, or investigating and
paying claims.
(c) In determining whether the presumption set forth in Section
1623 has been rebutted in any particular case, no consideration may
be given to acts that merely benefit an insurer, including, but not
limited to the following:
(1) Actions authorized by Section 1732.
(2) Interpretation or application of underwriting or
preunderwriting criteria established by the insurer.
(3) Incidental use of an insurer's name or mark in advertising or
marketing.
(4) Contractual provisions permitting an insurer to train brokers,
or regulate or control broker conduct other than essential insurer
functions.
(5) Referral by the insurer of brokers to consumers, or consumers
to brokers.
(6) Payment by an insurer of any compensation to a broker that has
been disclosed to the consumer in conformity with Section 1623.
(7) A frequent or regular business relationship between the broker
and the insurer.
SEC. 4. Section 1704 of the Insurance
Code is amended to read:
1704. (a) Life agents, travel agents, and fire and casualty
insurance agents shall not act as an agent of an insurer unless the
insurer has filed with the commissioner a notice of appointment,
executed by the insurer, appointing the licensee as the insurer's
agent , and specifying the scope of the agency appointment
. Every fire and casualty broker-agent acting in the capacity of an
insurance solicitor shall have filed on his or her behalf with the
commissioner a notice executed by an insurance agent or insurance
broker appointing and agreeing to employ the solicitor as an employee
within this state. Additional notices of appointment may be filed by
other insurers before the license is issued and thereafter as long
as the license remains in force. The authority to transact insurance
given to a licensee by an insurer or fire and casualty broker-agent,
as the case may be, by appointment shall be effective as of the date
the notice of appointment is signed. That authority to transact shall
apply to transactions occurring after that date and for the purpose
of determining the insurer's or fire and casualty broker-agent's
liability for acts of the appointed licensee. No notice of
appointment of a life agent, fire and casualty broker-agent, or
travel insurance agent shall be filed under this subdivision unless
the licensee being appointed has consented to that filing. Each
appointment made under this subdivision shall by its terms continue
in force until:
(1) The cancellation or expiration of the license applied for or
held at the time the appointment was filed.
(2) The filing of a notice of termination by the insurer or
employing fire and casualty broker-agent, or by the appointed life
agent, fire and casualty broker-agent, travel insurance agent, or
insurance solicitor.
(b) Upon the termination of all appointments, or all endorsements
naming the licensee on the license of an organization licensee, and
the cancellation of the bond required pursuant to Section 1662 if
acting as a broker, the permanent license shall not be canceled, but
shall become inactive. It may be renewed pursuant to Section 1718. It
may be reactivated at any time prior to its expiration by the filing
of a new appointment pursuant to this section, Section 1707, and
Section 1751.3, or the filing of a new bond pursuant to Section 1662.
An inactive license shall not permit its holder to transact any
insurance for which a valid, active license is required.
(c) Upon the termination of all appointments of a person licensed
under a certificate of convenience, such certificate shall be
canceled and shall be returned by its lawful custodian to the
commissioner.
(d) A fire and casualty broker-agent appointing an insurance
solicitor pursuant to this section, if a natural person, must be the
holder of a permanent license to act as a fire and casualty
broker-agent or the holder of a certificate of convenience so to act
issued pursuant to either subdivision (a) or (b) of Section 1685. If
the fire and casualty broker-agent is an organization, it must be the
holder of a permanent license.
(e) The filing of an incomplete or deficient action notice with
the department shall require the filing of an amended, complete
action notice, together with the payment of the fee therefor
specified in subdivision (n) of Section 1751.
(f) A notice of appointment appointing a solicitor may be filed by
a second or subsequent fire and casualty broker-agent. The
broker-agent seeking to appoint the solicitor shall enter into an
agreement with all other fire and casualty broker-agents with whom
the insurance solicitor has an existing appointment. The agreement
shall govern how the broker-agents will determine on which fire and
casualty broker-agent's behalf the solicitor is working when dealing
with individuals who are customers of none of the fire and casualty
broker-agents with whom the solicitor has an appointment. If the
agreement does not identify which broker-agent or broker-agents are
liable for the act of the solicitor, all fire and casualty
broker-agents with whom the solicitor is appointed at the time of the
act shall be jointly and severally liable for that act.
SEC. 5. Section 1731 of the Insurance
Code is amended to read:
1731. A person licensed as a broker-agent shall be deemed to be
acting as an insurance agent in the transaction of insurance placed
with those insurers for whom a notice of appointment has been filed
with the Insurance Commissioner in accordance with Section 1704 and
is then in force , and shall be deemed to be acting within the
express scope of that notice .
SEC. 6. Section 1732 of the Insurance
Code is amended to read:
1732. A Notwithstanding Sections 1623 and
1623.1, a person licensed as a fire and casualty broker-agent
acting as an insurance broker may act as an insurance agent in
collecting and transmitting premium or return premium funds and
delivering policies and other documents evidencing insurance.
SECTION 1. Section 1623.5 is added to the
Insurance Code, to read:
1623.5. A determination as to whether a licensee is acting as an
insurance agent or insurance broker in a particular transaction shall
be determined by the totality of the circumstances of the
transaction.