BILL ANALYSIS Ó
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GOVERNOR'S VETO
AB
1232 (Cristina Garcia)
As Enrolled September 3, 2015
2/3 vote
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|ASSEMBLY: | 77-0 |(May 7, 2015) |SENATE: |40-0 |(August 31, |
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|ASSEMBLY: | 80-0 |(September 1, | | | |
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Original Committee Reference: INS.
SUMMARY: Permits administrative law judges (ALJs) at the
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Department of Insurance (department) to hear the appeal of
individuals who are denied a license by the department.
The Senate amendments make minor technical amendments.
EXISTING LAW:
1)Requires insurance agents/brokers and other "producers" to be
licensed by the department.
2)Establishes the Office of Administrative Hearings (OAH) to
perform the administrative adjudication function for other
state agencies.
3)Establishes the Administrative Procedures Act (APA) to define
the process by which administrative complaints are resolved.
4)Permits the department to hire ALJs to hear rate setting cases
under Proposition 103 (1988).
5)Permits the department to deny a license to an applicant for a
range of reasons including:
a) Absence of qualifications
b) Lying on an application
c) Conviction of a felony
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d) Conviction of a misdemeanor related to insurance
e) Unlicensed activity
FISCAL EFFECT: According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS:
1)Purpose. According to the author, existing law does not
provide the commissioner the authority to hear new licensee
applicant cases. As a result, an overwhelming majority of the
hearings are heard by OAH. OAH conducts hearings, mediations,
and settlement conferences for more than 1,600 state, local,
and county agencies, which makes it challenging to schedule
hearings for all outstanding applicants in a timely and
expeditious manner. Individuals with a pending application or
a new licensee applicant are unable to work in a licensed
capacity in the insurance industry and must wait for their
case to be resolved. The department sends approximately 160
licensee cases per year to the OAH since the commissioner does
not have the authority to assign licensing matters to the
Administrative Hearing Bureau (AHB) within the department.
However 60% (or roughly 100) of those cases are new licensee
applicant cases that could be heard by the AHB. It is not
uncommon for more than a year to pass before an ALJ in OAH is
able to hear a case. This bill will provide governmental
efficiency by streamlining the licensee hearing adjudication
process for new licensee applicants. An administratively
efficient process better serves new licensee applicants and
consumers protected.
2)Administrative Hearing Bureau. The department employs four
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ALJs in its AHB. These ALJs are hired to hear insurance rate
cases under Proposition 103 which requires property/casualty
insurers to submit their proposed rating plans to the
commissioner for approval. Because the flow of proposed
rating plans is irregular, these ALJs have time available for
other duties. Presently, the department assigns other legal
work to the ALJs when they have available time, but the
department would prefer to use available ALJ time to speed up
the process for license applicant cases. Applicant cases
would continue to be referred to OAH when AHB does not have
the time available to handle the cases.
3)License Denial Process. Insurance agents must obtain a
license in order to practice and this license must be renewed
every two years by the department. Every new applicant must
complete a background check prior to receiving a license as a
part of the application and examination process. If the
background check is cleared and the applicant has successfully
passed the examination a license is granted. However, in
certain cases, based on an applicant's background check, the
department may deny or grant a license with restrictions. When
this occurs applicants may request to have their case heard by
an ALJ, who in turn gives a proposed decision on the case at
the hearing. The commissioner then upholds, denies, or
modifies this decision.
GOVERNOR'S VETO MESSAGE:
This bill provides a person who has been denied a license as an
insurance agent, broker, or solicitor an additional option to
request a hearing from the Department of Insurance
Administrative Hearing Bureau.
This bill would create a redundancy in government and removes an
impartial body from the appeal process when no demonstrable
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problem has been proven to exist. The current process, which
allows an applicant to request a specific hearing date from the
Office of Administrative hearing, appears to be sufficient.
Analysis Prepared by:
Paul Riches / INS. / (916) 319-2086 FN: 0002514