AB 1236, as amended, 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 surplusbegin delete linesend deletebegin insert lineend insert insurerbegin insert, as specifiedend insert.
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 with this section, maintain a policy
7or policies of insurance against liability imposed on or against it
8by law for damages arising out of claims based upon acts, errors,
9or omissions arising out of the contracting services it provides.
10(b) The total aggregate limit of liability under the policy or
11policies of insurance required under this section shall be as follows:
12(1) For a limited liability company licensee
with five or fewer
13persons listed on the members of the personnel of record, the
14aggregate limit shall not be less than one million dollars
15($1,000,000).
16(2) For a limited liability company licensee with more than five
17persons listed on the members of the personnel of record, an
18additional one hundred thousand dollars ($100,000) of insurance
19shall be obtained for each person listed on the personnel of record
20of the licensee except that the maximum amount of insurance is
21not required to exceed five million dollars ($5,000,000) in any one
22designated period, less amounts paid in defending, settling, or
23discharging claims as set forth under this section.
24(c) The policy or policies required by this section may be issued
25on a claims-made or occurrence basis, and shall cover: (1) in
the
26case of a claims-made policy, claims initially asserted in the
27
designated period, and (2) in the case of an occurrence policy,
28occurrences during the designated period. For purposes of this
29section, “designated period” means a policy year or any other
30period designated in the policy that is not greater than 12 months.
31Any policy or policies secured to satisfybegin insert the requirements ofend insert this
32section shall be written by an insurer or insurers duly licensed by
33this state or an eligible surplusbegin delete linesend deletebegin insert lineend insert insurer,begin insert with the insurance
34procured pursuant to Section 1765.1 of the Insurance Code,end insert and
35may be in a form reasonably
available in the commercial insurance
36market and may be subject to those terms, conditions, exclusions,
37and endorsements that are typically contained in those policies. A
P3 1policy or policies of insurance maintained pursuant to this section
2may be subject to a 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
34certificatebegin insert, or, in the case of a surplus line policy, the surplus line
35broker,end insert shall report to the registrar the following information for
36any policy required under this section: name, license number,
37policy number, dates that
coverage is scheduled to commence and
38lapse, the date and amount of any payment of claims, and
39cancellation 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) Any policy numbers and the sum of the aggregate limit of
8liability provided by each.
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