AB 1236, as introduced, Hagman. Contractors: limited liability companies.
The Contractors’ State License Law provides for the licensure and regulation of contractors by the Contractors’ State License Board. Existing law authorizes the Contractors’ State License Board to issue a contractor’s license to a limited liability company, but requires, as a condition precedent to the issuance, reissuance, reinstatement, reactivation, renewal, or continued valid use of a limited liability company contractor’s license, that the applicant or licensee file or have on file a surety bond for damages arising out of specified claims of employees. Existing law also requires the limited liability company to maintain a policy or policies of insurance against liability imposed on or against it for damages arising out of claims, as specified, as a condition of licensure. Under existing law, the policy or policies of insurance secured to satisfy these provisions are required to be written by an insurer or insurers duly licensed by this state.
This bill would additionally permit those policies to be written by an eligible surplus lines insurer.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 7071.19 of the Business and Professions
2Code is amended to read:
(a) As a condition of the issuance, reinstatement,
4reactivation, or continued valid use of a license under this chapter,
5in addition to any bond required under this article, a limited liability
6company shall, in accordance withbegin delete the provisions ofend delete this section,
7maintain a policy or policies of insurance against liability imposed
8on or against it by law for damages arising out of claims based
9upon acts, errors, or omissions arising out of the contracting
10services it provides.
11(b) The total aggregate limit of liability under the policy or
12policies of insurance required under this section shall be as follows:
13(1) For a
limited liability company licensee with five or fewer
14persons listed on the members of the personnel of record, the
15aggregate limit shall not be less than one million dollars
16($1,000,000).
17(2) For a limited liability company licensee with more than five
18persons listed on the members of the personnel of record, an
19additional one hundred thousand dollars ($100,000) of insurance
20shall be obtained for each person listed on the personnel of record
21of the licensee except that the maximum amount of insurance is
22not required to exceed five million dollars ($5,000,000) in any one
23designated period, less amounts paid in defending, settling, or
24discharging claims as set forth under this section.
25(c) The policy or policies required by this section may be issued
26on a claims-made or occurrence basis, and shall cover: (1) in the
27case of a claims-made policy, claims initially asserted in the
28
designated period, and (2) in the case of an occurrence policy,
29occurrences during the designated period. For purposes of this
30section, “designated period” means a policy year or any other
31period designated in the policy that is not greater than 12 months.
32Any policy or policies secured to satisfybegin delete the provisions ofend delete this
33section shall be written by an insurer or insurers duly licensed by
34this statebegin insert or an eligible surplus lines insurerend insert, and may be in a form
35reasonably available in the commercial insurance market and may
36be subject to those terms, conditions, exclusions, and endorsements
37that are typically contained in those policies. A policy or policies
P3 1of insurance maintained pursuant to this section may be subject to
2a deductible or self-insured retention.
3(d) The impairment or exhaustion of the aggregate limit of
4liability by amounts paid under any policy in connection with the
5settlement, discharge, or defense of claims applicable to a
6designated period shall not require the licensee to acquire additional
7insurance coverage for that designated period. However, the
8aggregate limit of liability coverage (coverage limit) required by
9this section shall be reinstated by not later than the commencement
10date of the next designated period, and the license of any licensee
11that fails to comply with this provision shall be suspended by
12operation of law until the date that the licensee complies with the
13coverage limit requirements of this section. In addition, the amount
14to which any coverage limit is depleted may be reported on the
15license record.
16(e) Upon the dissolution and winding up of the company, the
17company shall, with respect to any insurance policy or policies
18then maintained
pursuant to this section, maintain or obtain an
19extended reporting period endorsement or equivalent provision in
20the maximum total aggregate limit of liability required to comply
21with this section for a minimum of three years if reasonably
22available from the insurer.
23(f) Prior to the issuance, reinstatement, or reactivation of a
24limited liability company license as provided under this chapter,
25the applicant or licensee shall, in the manner prescribed by the
26registrar, submit the information and documentation required by
27this section and requested by the registrar, demonstrating
28compliance with the financial security requirements specified by
29this section.
30(g) For any insurance policy secured by a licensee in satisfaction
31of this section, a Certificate of Liability Insurance, signed by an
32authorized agent or employee of the insurer, shall be submitted
33electronically or otherwise to
the registrar. The insurer issuing the
34certificate shall report to the registrar the following information
35for any policy required under this section: name, license number,
36policy number, dates that coverage is scheduled to commence and
37lapse, the date and amount of any payment of claims, and
38cancellation date if applicable.
P4 1(h) Upon the issuance, reinstatement, or reactivation of a license
2under this section, the registrar may post the following information
3to the licensee’s license record on the Internet:
4(1) The name of the insurer or insurers providing the liability
5policy or policies submitted by the licensee for the most recent
6designated period.
7(2) begin deleteThe end deletebegin insertAny
end insertpolicybegin delete number(s)end deletebegin insert numbersend insert and the sum of the
8aggregate limit of liability provided by each.
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