Amended in Assembly August 11, 2014

Amended in Assembly June 26, 2014

Amended in Senate April 22, 2014

Senate BillNo. 1011


Introduced by Senator Monning

February 13, 2014


An act to amend Section 5005.1 of the Corporations Code, relating to corporations.

LEGISLATIVE COUNSEL’S DIGEST

SB 1011, as amended, Monning. Nonprofit corporations: self-insurance.

The Nonprofit Corporation Law authorizes certain nonprofit corporations that are organized chiefly to provide or fund health or human services, other than hospitals, to establish an insurance pool to self-insure against various risks, including, among others, tort liability and any loss arising from physical damage to motor vehicles owned or operated by the nonprofit corporation. The pooling arrangement is not considered insurance nor is it subject to regulation under the insurance laws of this state.

This bill would extend these provisions to authorize the establishment of an insurance pool to self-insure against the loss or damage to property of every kind, including, but not limited to, losses and expenses related to the loss of property. The bill would require that the pooling arrangement be organized as a nonprofit public benefitbegin delete corporation. The bill would require that all corporations participating in a pooling arrangement established under these provisions be given written notice by the pooling arrangement corporation that the pool is not regulated by the Insurance Commissioner and that the state insurance insolvency guaranty funds are not available to safeguard its risk.end deletebegin insert corporation, be in existence for purposes of covering tort liability for no less than 5 years, and have accumulated net assets of not less than $5,000,000. The bill would require the pooling arrangement to include in every application form for membership and every risk pooling contract issued or renewed on or after January 1, 2016, in boldface 10-point type on the front page, a notice that states, among other things, that the risk pooling contract is not subject to all of the California insurance laws and is not subject to regulation by the Insurance Commissioner.end insert

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

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

P2    1

SECTION 1.  

Section 5005.1 of the Corporations Code is
2amended to read:

3

5005.1.  

(a) Except for a liability that may be insured against
4pursuant to Division 4 (commencing with Section 3200) of the
5Labor Code, an authorized corporation may do any of the
6following:

7(1) Insure itself against all or any part of any tort liability.

8(2) Insure any employee of the corporation against all or any
9part of his or her liability for injury resulting from an act or
10omission in the scope of employment.

11(3) Insure any board member, officer, or volunteer of the
12corporation against any liability that may arise from any act or
13omission in the scope of participation with the corporation.

14(4) Insure itself against any loss arising from physical damage
15to motor vehicles owned or operated by the corporation.

16(5) Insure itself against the loss or damage to property of every
17kind, including, but not limited to, losses and expenses related to
18the loss of property.

19(b) (1) Thebegin delete insuranceend deletebegin insert arrangementend insert authorized pursuant to this
20section shall only be available to an authorized corporation where
21that corporation has joined with two or more other authorized
22corporationsbegin delete in an arrangement providingend deletebegin insert to provideend insert for the pooling
23of self-insured claims or losses. The pooling arrangement shall be
24organized as a nonprofit public benefit corporation pursuant to
P3    1Part 2 (commencing with Section 5110) and shall not be considered
2insurance nor be subject to regulation under the Insurance Code.

begin delete

3(2) All corporations participating in a pooling arrangement
4established pursuant to this section shall be given written notice
5by the pooling arrangement corporation that the pool is not
6regulated by the Insurance Commissioner and that the state
7insurance insolvency guaranty funds are not available to safeguard
8its risk.

end delete
begin insert

9(2) A pooling arrangement shall include in every application
10form for membership and every risk pooling contract issued or
11renewed on or after January 1, 2016, and in boldface 10-point
12type on the front page, the following notice:

end insert

begin insertend insert
begin insert

14“Notice: This risk pooling contract is issued by a pooling
15arrangement authorized by California Corporations Code Section
165005.1. The pooling arrangement is not subject to all of the
17insurance laws of the State of California and is not subject to
18regulation by the Insurance Commissioner. Insurance guaranty
19funds are not available to pay claims in the event the risk pool
20becomes insolvent.”

end insert

begin insertend insert

22(c) This section does not authorize a corporation organized
23pursuant to this division to pay for, or to insure, contract, or provide
24for payment for, any part of a claim or judgment against an
25employee of the corporation for punitive or exemplary damages.

26(d) begin insert(1)end insertbegin insertend insert Any insurance pool established pursuant to this section
27shall have initial pooled resources of not less than two hundred
28fifty thousand dollars ($250,000).

begin insert

29(2) Any insurance pool providing the coverage described in
30paragraph (5) of subdivision (a) shall do all of the following:

end insert
begin insert

31(A) Be organized for the purpose of providing the coverage
32described in paragraph (1) of subdivision (a) for a period of no
33less than five years.

end insert
begin insert

34(B) Have accumulated net assets of not less than five million
35dollars ($5,000,000).

end insert

36(e) All participating corporations in any pool established
37pursuant to this section are required to agree to pay premiums or
38make other mandatory financial contributions or commitments
39necessary to ensure a financially sound risk pool.

P4    1(f) For the purpose of this section, an authorized “corporation”
2means any corporation that meets all of the following criteria:

3(1) Is organized chiefly to provide or fund health or human
4services, but does not include a hospital.

5(2) Is exempt from federal income taxation as an organization
6described in Section 501(c)(3) of the United States Internal
7Revenue Code.



O

    96