Amended in Senate June 16, 2014

Amended in Assembly April 2, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 1395

Introduced by Committee on Insurance (Perea (Chair), Hagman (Vice Chair), Bonilla, Bradford, Ian Calderon, Cooley, Frazier, Mitchell, Olsen, Torres, and Wieckowski)

March 4, 2013

An act to amend begin delete Section 1775.4 end delete begin insert Sections 1872.81 and 12975.9 end insert of the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 1395, as amended, Committee on Insurance. Insurance: begin delete surplus line brokers. end delete begin insert special assessments: Seismic Safety Account. end insert

begin insert

Existing law requires a special purpose assessment of $0.25, commencing July 1, 2014, until January 1, 2016, and not exceeding $0.25 thereafter, on each vehicle insured under an insurance policy issued in this state by the insurer. Existing law specifies that, upon appropriation by the Legislature, 2⁄3 of the special purpose assessment be used for the purpose of funding the consumer service functions of the Department of Insurance related to regulating automobile insurers, as provided, and 1⁄3 of the special purpose assessment be used for the purpose of improving consumer functions of the department, related to regulating automobile insurers, as specified. Existing law also authorizes, upon appropriation by the Legislature, to use up to $0.05 of the $0.25 special purpose assessment revenues collected to notify insurers and other members of the public about the existence of any low-cost automobile insurance program.

end insert begin insert

This bill would raise the amount of the special purpose assessment to $0.26, until January 1, 2016, and not exceeding $0.26 thereafter.

end insert begin insert

Existing law created the Seismic Safety Account as a special account within the Insurance Fund with the funds to be distributed, upon appropriation by the Legislature, to the Alfred E. Alquist Seismic Safety Commission for the support of the commission and to the department for the actual administrative costs incurred in collecting the assessments. In order to fund the account, an assessment, as specified, is imposed on each person who owns real property, commercial or residential, that is covered by a property insurance policy.

end insert begin insert

This bill would provide that the insurer is not required to refund any portion of an assessment because the policy or coverage is terminated prior to the expiration date of the policy or coverage.

end insert begin delete

Existing law requires every surplus line broker to pay annually to the Insurance Commissioner a tax of 3% of the gross premiums charged less return premiums upon business done by the surplus line broker under the authority of his or her license. If the annual tax for the preceding calendar year was $5,000 or more, existing law requires the surplus line broker to make monthly installment payments on account of the annual tax on business done during the current calendar year. Existing law requires the amount of the payment to be 3% of the gross premiums charged less return premiums upon business done by the surplus line broker during the calendar month ending 2 calendar months immediately preceding the due date of the payment, as specified. Existing law requires a surplus line broker to file a return showing that his or her return premiums exceeded his or her gross premiums even when no payment is payable by the broker.

end delete begin delete

This bill would delete the provision requiring a surplus line broker to file a return showing that his or her return premiums exceeded his or her gross premiums even when no payment is payable by the broker. The bill would instead provide that if no payment is payable by the broker, the commissioner may waive or modify the requirements by issuance of a notice published on the department’s Internet Web site.

end delete

Vote: majority. Appropriation: no. Fiscal committee:  begin delete yes end delete begin insert no end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 1872.81 of the end insert begin insert Insurance Code end insert begin insert is amended
to read: end insert

1872.81.  

In addition to the special purpose assessment imposed
pursuant to Section 1872.8, effective July 1, 2014, an insurer doing
business in this state shall, until January 1, 2016, pay to the
commissioner an annual special purpose assessment of begin delete twenty-five
cents ($0.25), end delete begin insert twenty-six cents ($0.26), end insert and thereafter pay to the
commissioner an annual special purpose assessment in an amount
not to exceed begin delete twenty-five cents ($0.25), end delete begin insert twenty-six cents ($0.26), end insert
as determined by the commissioner, for each vehicle insured under
an insurance policy it issues in this state, for expenditure, upon
appropriation by the Legislature, as follows:

(a) Two-thirds of the special purpose assessment shall be used
for the purpose of funding the consumer service functions of the
department that are related to regulating automobile insurers,
including those functions performed by the rating and underwriting
service bureau, the claims service bureau, the investigations bureau,
or any successor bureaus of the department that may assume the
consumer service functions of these bureaus, and legal services in
support of these bureaus.

(b) One-third of the special purpose assessment shall be used
for the purpose of improving consumer functions identified in
subdivision (a) of the department that are related to regulating
automobile insurers, including, for improving the ability of the
department to respond to consumer complaints and information
requests through the department’s toll-free telephone number, and
for improving the ability of the department to offer information
about automobile insurance rates to the public.

(c) Upon appropriation by the Legislature, the Department of
Insurance may use up to five cents ($0.05) of the special purpose
assessment revenues collected pursuant to this section to notify
insurers and other members of the public about the existence of
any low-cost automobile insurance program established pursuant
to Section 11629.7 or other statutes that establish a program of the
type identified in Section 11629.7. In requesting an appropriation
for this purpose under its proposed plan developed pursuant to
Section 11629.85, the Department of Insurance shall explain, with
as much specificity as is reasonably possible, the objectives for
the use of the funds and the quantitative criteria by which the
Legislature may evaluate the effectiveness of the department’s use
of the funds.

(d) The commissioner shall include, in the annual report
submitted pursuant to Section 12922, all of the following
information:

(1) The number of opened consumer complaints related to
automobile insurance.

(2) The number of opened investigations related to automobile
insurance.

(3) The number of investigations related to automobile insurance
referred to prosecuting agencies.

(4) The number of administrative or regulatory cases related to
automobile insurance referred to the department’s legal division.

(5) The number of administrative or regulatory enforcement
actions taken in cases related to automobile insurance.

(6) Total aggregate annual assessment revenue and expenditures
pursuant to the assessment.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 12975.9 of the end insert begin insert Insurance Code end insert begin insert is amended to
read: end insert

12975.9.  

(a) The Seismic Safety Account is hereby created as
a special account within the Insurance Fund. Moneys in the account
are available, upon appropriation by the Legislature, for the
purposes of this section to fund the department and the Alfred E.
Alquist Seismic Safety Commission.

(b) There is hereby imposed an assessment on each person who
owns real property, commercial or residential, that is insured by
a property insurance policy. The department shall calculate the
annual assessment to be charged to each commercial and residential
earned property exposure. The assessment shall be set annually
every August 1, beginning August 1, 2014, for all commercial and
residential earned property exposures reported during the previous
calendar year. The annual assessment shall be set at fifteen cents
($0.15) per earned property exposure for the first three years of
the implementation of this section. Each year thereafter, the annual
assessment shall be based upon the number of earned property
exposures from both commercial and residential insurance policies,
the amount required for the support of the Alfred E. Alquist
Seismic Safety Commission, the actual collection and
administrative costs of the department, and the maintenance of an
adequate reserve, but shall not exceed fifteen cents ($0.15) per
earned property exposure.

(c) The insurer, upon receipt of an invoice from the department,
shall transmit payment to the department for deposit into the
Seismic Safety Account. The insurer shall recover the assessment
from the insured, unless the insurer elects to pay the assessment
on the insured’s behalf. The insurer may provide a description of
the assessment to the insured as part of its billing statement. begin insert The
insurer is not required to refund any portion of an assessment
because the policy or coverage is terminated prior to the expiration
date of the policy or coverage. end insert Any deficiency or excess in the
amount collected in relation to the appropriation authority for the
commission and the department shall be accounted for in the
subsequent annual fee calculation. Any balance remaining in the
Seismic Safety Account at the end of each fiscal year shall be
retained in the account and carried forward to the next fiscal year.

(d) Funds in the Seismic Safety Account shall be distributed,
upon appropriation by the Legislature, to the Alfred E. Alquist
Seismic Safety Commission for the support of the commission
and to the department for the actual administrative costs incurred
in collecting the assessments.

(e) Any assessment collected from an insured that has not been
remitted to the department shall be a debt owed to the state by the
insurer. This part does not impose any obligation upon an insurer
to take any legal action to enforce the collection of the assessment
imposed by this section.

(f) Payment of the assessment shall be considered delinquent
if not paid within 45 days of the invoice date. The department is
authorized to charge a late fee of 1.5 percent per month of the
balance due, compounded monthly, for any amount not paid within
this period in accordance with Section 12995.

(g) (1) Notwithstanding Section 10231.5 of the Government
Code, the department shall report by December 1 of each year,
beginning on December 1, 2014, to the Legislature, the Alfred E.
Alquist Seismic Safety Commission, and the Department of
Finance on the assessment calculation methodology employed.

(2) A report to be submitted to the Legislature pursuant to this
subdivision shall be submitted in compliance with Section 9795
of the Government Code.

begin delete

SECTION 1.  

Section 1775.4 of the Insurance Code is amended
to read:

1775.4.  

(a) The amount of the payment shall be 3 percent of
the gross premiums charged less return premiums upon business
done by the surplus line broker during the calendar month ending
two calendar months immediately preceding the due date of the
payment, as specified in Section 1775.3, excluding gross premiums
and return premiums paid by him or her upon business governed
by the provisions of Section 1760.5. If during any calendar month
those return premiums upon business done by a surplus line broker
exceed the gross premiums upon the business done by him or her
in that calendar month, then no payment shall be payable by him
or her in respect to that calendar month, and he or she may carry
forward that excess to the next succeeding calendar month or
months and apply it in reduction of the taxable premiums on
business done by him or her in that succeeding calendar month or
months. If no payment is payable by the broker, the commissioner
may waive or modify the requirements by issuance of a notice
published on the department’s Internet Web site.

(b) In determining the applicability of subdivision (a) of Section
1775.1 to a surplus line broker who has acquired the business of
another surplus line broker, the amount of tax liability of the
acquired broker for the immediately preceding calendar year shall
be added to the amount of the tax liability of the acquiring broker
for the immediately preceding calendar year.

(c) All amounts paid, other than penalties and interest, shall be
allowed as a credit on the annual tax imposed by Section 1775.5.

(d) If the total amount of monthly installment payments for any
calendar year exceeds the amount of annual tax for that year, the
excess shall be treated as an overpayment of annual tax and be
allowed as a credit or refund.

(e) A penalty of 10 percent of the amount of the monthly
payment due shall be levied upon and paid by any surplus line
broker who fails to make the necessary payment within the time
required, plus interest at the rate of 1 percent per calendar month
or fraction thereof from the due date of the payment until the date
payment is received by the commissioner, but not for any period
after the due date of the annual tax. The penalty and interest shall
be applied as prescribed in Section 12636.5 of the Revenue and
Taxation Code. The commissioner may remit the penalty in a case
where he or she finds, as a result of examination or otherwise, that
the failure of, or delay in, payment arose out of excusable mistake
or excusable inadvertence.

(f) For any part of a payment required that was not made within
the time required by law, when the nonpayment or late payment
was due to fraud on the part of the taxpayer, a penalty of 25 percent
of the amount unpaid shall be added thereto, in addition to all other
penalties otherwise imposed.

(g) The commissioner, upon a showing of good cause, may
extend for not to exceed 10 days the time for making a monthly
payment. The extension may be granted at any time, provided that
a request therefor is filed with the commissioner within or prior
to the period for which the extension may be granted. Any surplus
line broker to whom an extension is granted shall, in addition to
the monthly payment, pay interest at the rate of 1 percent per
month, or fraction thereof, from the due date until the annual tax
due date.

end delete