BILL NUMBER: SB 1011 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 11, 2014
AMENDED IN ASSEMBLY JUNE 26, 2014
AMENDED IN SENATE APRIL 22, 2014
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 benefit 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. 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.
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. Section 5005.1 of the Corporations Code is amended to
read:
5005.1. (a) Except for a liability that may be insured against
pursuant to Division 4 (commencing with Section 3200) of the Labor
Code, an authorized corporation may do any of the following:
(1) Insure itself against all or any part of any tort liability.
(2) Insure any employee of the corporation against all or any part
of his or her liability for injury resulting from an act or omission
in the scope of employment.
(3) Insure any board member, officer, or volunteer of the
corporation against any liability that may arise from any act or
omission in the scope of participation with the corporation.
(4) Insure itself against any loss arising from physical damage to
motor vehicles owned or operated by the corporation.
(5) Insure itself against the loss or damage to property of every
kind, including, but not limited to, losses and expenses related to
the loss of property.
(b) (1) The insurance arrangement
authorized pursuant to this section shall only be available to an
authorized corporation where that corporation has joined with two or
more other authorized corporations in an arrangement
providing to provide for the pooling of
self-insured claims or losses. The pooling arrangement shall be
organized as a nonprofit public benefit corporation pursuant to Part
2 (commencing with Section 5110) and shall not be considered
insurance nor be subject to regulation under the Insurance Code.
(2) All corporations participating in a pooling arrangement
established pursuant to this section shall 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.
(2) A pooling arrangement shall include in every application form
for membership and every risk pooling contract issued or renewed on
or after January 1, 2016, and in boldface 10-point type on the front
page, the following notice:
"Notice: This risk pooling contract is issued by a pooling
arrangement authorized by California Corporations Code Section
5005.1. The pooling arrangement is not subject to all of the
insurance laws of the State of California and is not subject to
regulation by the Insurance Commissioner. Insurance guaranty funds
are not available to pay claims in the event the risk pool becomes
insolvent."
(c) This section does not authorize a corporation organized
pursuant to this division to pay for, or to insure, contract, or
provide for payment for, any part of a claim or judgment against an
employee of the corporation for punitive or exemplary damages.
(d) (1) Any insurance pool established
pursuant to this section shall have initial pooled resources of not
less than two hundred fifty thousand dollars ($250,000).
(2) Any insurance pool providing the coverage described in
paragraph (5) of subdivision (a) shall do all of the following:
(A) Be organized for the purpose of providing the coverage
described in paragraph (1) of subdivision (a) for a period of no less
than five years.
(B) Have accumulated net assets of not less than five million
dollars ($5,000,000).
(e) All participating corporations in any pool established
pursuant to this section are required to agree to pay premiums or
make other mandatory financial contributions or commitments necessary
to ensure a financially sound risk pool.
(f) For the purpose of this section, an authorized "corporation"
means any corporation that meets all of the following criteria:
(1) Is organized chiefly to provide or fund health or human
services, but does not include a hospital.
(2) Is exempt from federal income taxation as an organization
described in Section 501(c)(3) of the United States Internal Revenue
Code.