Amended in Senate May 19, 2015

Amended in Assembly April 20, 2015

Amended in Assembly April 6, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 1515


Introduced by Committee on Insurance (Daly (Chair), Calderon, Cooley, Cooper, Dababneh, Frazier, Gatto, Gonzalez, Mayes, and Rodriguez)

March 5, 2015


An act to amend Sectionsbegin delete 510,end delete 739.3,begin delete 742.34, 790.034, 1725.5,end deletebegin insert 922.41end insert 1729.2,begin delete 1764.1,end delete 1861.02, 1861.025, 10111.2, 10127.13,begin delete 10169, 10192.18,end delete 10232.3,begin delete 10233.5,end delete 10235.35, 12418.4,begin delete 12820,end delete and 12921 of,begin insert to amend, repeal, and add Sections 510, 742.34, 790.034, 1725.5, 1764.1, 10169, 10192.18, and 12820 of,end insert and to repeal Section 10233.9 of, the Insurance Code, and to amend Section 1299.04 of the Penal Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 1515, as amended, Committee on Insurance. Insurance.

(1) Existing law requires certain insurance disclosures in various circumstances, including, but not limited to, when a life or disability insurance policy or certificate of coverage is first issued or delivered to a new insured or policyholder, when an employer obtains coverage from a multiple employer welfare arrangement, when a claim is up for settlement, and when a vehicle service contract form is offered.

This billbegin insert, commencing January 1, 2017,end insert would generally require those disclosures to also include the Department of Insurance’s Internet Web site.

(2) Existing law defines the term “Adjusted RBC Report” as a Risk-Based Capital (RBC) report that has been adjusted by the Insurance Commissioner in accordance with specified provisions governing the determination of a property and casualty insurer’s RBC. Existing law requires the filing of an RBC report by a life or health insurer if the insurer has a Total Adjusted Capital that is greater than or equal to its Company Action Level RBC but the Total Adjusted Capital is less than the product of its Authorized Control Level RBC and 2.5.

This bill would require the RBC report if the Total Adjusted Capital is less than the product of its Authorized Control Level RBC and 3.0.

begin insert

(3) Existing law requires every insurer doing business in this state to make and file with the Insurance Commissioner financial statements exhibiting its condition and affairs as of the previous year. Existing law, until January 1, 2016, requires that credit be allowed for a domestic insurer when the reinsurance is ceded to an assuming insurer that has been certified by the commissioner as a reinsurer in this state and secures its obligations in accordance with certain requirements, as specified.

end insert
begin insert

This bill would extend the above-described credit allowed for a domestic insurer until January 1, 2021.

end insert
begin insert

(4) Existing law provides requirements for a licensee to include certain information on a business card.

end insert
begin insert

Commencing July 1, 2016, this bill would modify the requirements.

end insert
begin delete

(3)

end delete

begin insert(5)end insert Existing law provides requirements for various written insurance-related documents, including, among other things,begin delete the requirement on a licensee to include certain information on a business card,end delete the requirement on all individual life insurance policies and individual annuity contracts to be in certainbegin delete font,end deletebegin insert fontend insert and an outline of coverage for long-term care insurance policies.

This bill would modify the requirements with respect to those written documents, as specified.

begin delete

(4)

end delete

begin insert(6)end insert Existing law requires an applicant or licensee to update his or her application if background information that was provided in the application for a license changes.

This bill would expand the definition of a license to include, among others, title insurance.

begin delete

(5)

end delete

begin insert(7)end insert This bill would make technical, nonsubstantive changes to correct obsolete cross-references and would delete obsolete provisions.

begin delete

(6)

end delete

begin insert(8)end insert Existing law, governing life and disability insurance, provides, among other things, that the only measure of insurer liability and damage is the sum payable to the insured in the manner and at the times as provided in the policy. Existing law requires, in addition, if any insurer fails to pay any benefits under a policy of disability income insurance, as defined, within 30 calendar days after the insurer has received all information needed to determine liability and has determined that liability exists, any delayed payment to bear interest, as specified.

This bill would specify that the above requirement to pay interest does not apply to health insurance, as defined.

begin delete

(7) Existing law requires an outline of coverage to be delivered to a prospective applicant for long-term care insurance at the time of initial solicitation. Existing law specifies the form for the outline of coverage and requires the form to state that the policy provides coverage for insureds diagnosed with Alzheimer’s disease, organic disorders, or related degenerative and dementing illnesses.

end delete
begin delete

This bill would require the form to state that the policy provides coverage for insureds for all mental illnesses.

end delete
begin delete

(8)

end delete

begin insert(9)end insert Existing law provides that any insurer offering long-term care insurance shall provide to the Department of Insurance a copy of the specimen individual policy form or group master policy and certificate forms, corresponding outline of coverage, and representative advertising materials to be used in the state.

This bill would eliminate that requirement.

begin delete

(9)

end delete

begin insert(10)end insert Existing law provides various procedural rights for, and requirements of, a title insurance representative applicant.

This bill would add the requirement to immediately notify the commissioner, using an approved method, of any change in email, other personal information, or other background information.

begin delete

(10)

end delete

begin insert(11)end insert Existing law requires the Insurance Commissioner to perform all duties imposed upon him or her by the Insurance Code and other laws regulating the business of insurance in this state and to enforce the execution of those provisions and laws. In an administrative action to enforce the Insurance Code and other laws regulating the business of insurance in this state, any settlement is subject to various requirements, including that the commissioner may delegate the power to negotiate the terms and conditions of a settlement, but shall not delegate the power to approve the settlement.

This bill would authorize the commissioner to delegate the power tobegin insert negotiate a settlement to designate deputy commissioners, and to delegate the power toend insert approve settlements that do not involve an insurer, a managing general agent or production agent that manages the business of an insurer, a title company, a home protection company, an insurance adjuster whose claims practices are at issue, and an insurance agent or broker, or an insurance agent or broker applicant, who has allegedly engaged in theft, fraud, or the misappropriation of premium or other funds in an amount that exceeds $50,000.

begin delete

(11)

end delete

begin insert(12)end insert Existing law requires a licensed bail agent, bail permittee, or bail solicitor who engages, in the arrest of a defendant to satisfy specified requirements, including, among other things, the completion of 20 hours of classroom education pertinent to the duties and responsibilities of a bail licensee.

This bill would require a bail fugitive recovery person licensed after December 31, 2012, to have at least 20 hours of classroom prelicensing education, and a bail fugitive recovery person licensed between January 1, 1994, and December 31, 2012, to have at least 12 hours of classroom prelicensing education. The bill would provide that a person licensed prior to January 1, 1994, has no prelicensing education requirement.

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

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

begin delete
P4    1

SECTION 1.  

Section 510 of the Insurance Code is amended
2to read:

3

510.  

Whenever a policy of insurance specified in Section 660
4or 675, a policy of life insurance as defined in Section 101, a policy
5of disability insurance as defined in Section 106, or a certificate
6of coverage as defined in Section 10270.6, is first issued to or
7delivered to a new insured or a new policyholder in this state, the
8insurer shall include a written disclosure containing the name,
9address, toll-free telephone number, and Internet Web site of the
10unit within the Department of Insurance that deals with consumer
P5    1affairs. The telephone number shall be the same as that provided
2to consumers under Section 12921.1. The disclosure shall be
3printed in large, boldface type.

4The disclosure shall also contain the address and customer
5service telephone number of the insurer, or the address and
6customer service telephone number of the agent or broker of record,
7or all of those addresses and telephone numbers. All addresses and
8telephone numbers for the insurer or the agent or broker of record
9shall be prominently displayed, in boldfaced type. The disclosure
10shall also contain a statement that the Department of Insurance
11should be contacted only after discussions with the insurer, or its
12agent or other representative, or both, have failed to produce a
13satisfactory resolution to the problem. If the policy or certificate
14was issued or delivered by an agent or broker, the disclosure shall
15specifically advise the insured to contact his or her agent or broker
16for assistance.

end delete
17begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 510 of the end insertbegin insertInsurance Codeend insertbegin insert is amended to
18read:end insert

19

510.  

begin insert(a)end insertbegin insertend insertWhenever a policy of insurance specified in Section
20660 or 675, a policy of life insurance as defined in Section 101, a
21policy of disability insurance as defined in Section 106, or a
22certificate of coverage as defined in Section 10270.6, is first issued
23to or delivered to a new insured or a new policyholder in this state,
24the insurer shall include a written disclosure containing the name,
25address, and toll-free telephone number of the unit within the
26Department of Insurance that deals with consumer affairs. The
27telephone number shall be the same as that provided to consumers
28under Section 12921.1. The disclosure shall be printed in large,
29boldface type.

30The disclosure shall also contain the address and customer
31service telephone number of the insurer, or the address and
32customer service telephone number of the agent or broker of record,
33or all of those addresses and telephone numbers. All addresses and
34telephone numbers for the insurer or the agent or broker of record
35shall be prominently displayed, in boldfaced type. The disclosure
36shall also contain a statement that the Department of Insurance
37should be contacted only after discussions with the insurer, or its
38agent or other representative, or both, have failed to produce a
39satisfactory resolution to the problem. If the policy or certificate
40was issued or delivered by an agent or broker, the disclosure shall
P6    1specifically advise the insured to contact his or her agent or broker
2for assistance.

begin insert

3(b) This section shall remain in effect only until January 1, 2017,
4and as of that date is repealed, unless a later enacted statute, that
5is enacted before January 1, 2017, deletes or extends that date.

end insert
6begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 510 is added to the end insertbegin insertInsurance Codeend insertbegin insert, to read:end insert

begin insert
7

begin insert510.end insert  

(a) Whenever a policy of insurance specified in Section
8660 or 675, a policy of life insurance as defined in Section 101, a
9policy of disability insurance as defined in Section 106, or a
10certificate of coverage as defined in Section 10270.6, is first issued
11to or delivered to a new insured or a new policyholder in this state,
12the insurer shall include a written disclosure containing the name,
13address, toll-free telephone number, and Internet Web site of the
14unit within the Department of Insurance that deals with consumer
15affairs. The telephone number shall be the same as that provided
16to consumers under Section 12921.1. The disclosure shall be
17printed in large, boldface type.

18The disclosure shall also contain the address and customer
19service telephone number of the insurer, or the address and
20customer service telephone number of the agent or broker of
21record, or all of those addresses and telephone numbers. All
22addresses and telephone numbers for the insurer or the agent or
23broker of record shall be prominently displayed, in boldfaced type.
24The disclosure shall also contain a statement that the Department
25of Insurance should be contacted only after discussions with the
26insurer, or its agent or other representative, or both, have failed
27to produce a satisfactory resolution to the problem. If the policy
28or certificate was issued or delivered by an agent or broker, the
29disclosure shall specifically advise the insured to contact his or
30her agent or broker for assistance.

31(b) This section shall become operative on January 1, 2017.

end insert
32

begin deleteSEC. 2.end delete
33begin insertSEC. 3.end insert  

Section 739.3 of the Insurance Code is amended to
34read:

35

739.3.  

(a) “Company Action Level Event” means any of the
36following events:

37(1) The filing of an RBC Report by an insurer that indicates any
38of the following:

P7    1(A) The insurer’s Total Adjusted Capital is greater than or equal
2to its Regulatory Action Level RBC but less than its Company
3Action Level RBC.

4(B) If a life or health insurer, the insurer has Total Adjusted
5Capital that is greater than or equal to its Company Action Level
6RBC but less than the product of its Authorized Control Level
7RBC and 3.0, and has a negative trend.

8(C) If a property and casualty insurer, the insurer has Total
9Adjusted Capital that is greater than or equal to its Company Action
10Level RBC but less than the product of its Authorized Control
11Level RBC and 3.0, and triggers the trend test determined in
12accordance with the trend test calculation included in the Property
13and Casualty RBC instructions.

14(2) The notification by the commissioner to the insurer of an
15Adjusted RBC Report that indicates the event in paragraph (1),
16provided that the insurer does not challenge the Adjusted RBC
17Report under Section 739.7.

18(3) If the insurer challenges, under Section 739.7, an Adjusted
19RBC Report that indicates the event in paragraph (1), the
20notification by the commissioner to the insurer that the
21 commissioner has, after a hearing, rejected the insurer’s challenge.

22(b) In the event of a Company Action Level Event, the insurer
23shall prepare and submit to the commissioner a comprehensive
24financial plan that shall do all of the following:

25(1) Identify the conditions in the insurer that contribute to the
26Company Action Level Event.

27(2) Contain proposals of corrective actions that the insurer
28intends to take and would be expected to result in the elimination
29of the Company Action Level Event.

30(3) Provide projections of the insurer’s financial results in the
31current year and at least the four succeeding years, both in the
32absence of proposed corrective actions and giving effect to the
33proposed corrective actions, including projections of statutory
34 operating income, net income, capital, or surplus, or a combination.
35The projections for both new and renewal business may include
36separate projections for each major line of business and separately
37identify each significant income, expense, and benefit component.

38(4) Identify the key assumptions impacting the insurer’s
39projections and the sensitivity of the projections to the assumptions.

P8    1(5) Identify the quality of, and problems associated with, the
2insurer’s business, including, but not limited to, its assets,
3anticipated business growth and associated surplus strain,
4extraordinary exposure to risk, mix of business, and use of
5reinsurance in each case, if any.

6(c) The RBC Plan shall be submitted as follows:

7(1) Within 45 days of the Company Action Level Event.

8(2) If the insurer challenges an Adjusted RBC Report pursuant
9to Section 739.7, within 45 days after notification to the insurer
10that the commissioner has, after a hearing, rejected the insurer’s
11challenge.

12(d) Within 60 days after the submission by an insurer of an RBC
13Plan to the commissioner, the commissioner shall notify the insurer
14whether the RBC Plan shall be implemented or is, in the judgment
15of the commissioner, unsatisfactory. If the commissioner
16determines that the RBC Plan is unsatisfactory, the notification to
17the insurer shall set forth the reasons for the determination, and
18may set forth proposed revisions that will render the RBC Plan
19satisfactory, in the judgment of the commissioner. Upon
20notification from the commissioner, the insurer shall prepare a
21Revised RBC Plan, which may incorporate by reference revisions
22proposed by the commissioner, and shall submit the Revised RBC
23Plan to the commissioner as follows:

24(1) Within 45 days after the notification from the commissioner.

25(2) If the insurer challenges the notification from the
26commissioner under Section 739.7, within 45 days after a
27notification to the insurer that the commissioner has, after a
28hearing, rejected the insurer’s challenge.

29(e) In the event of a notification by the commissioner to an
30insurer that the insurer’s RBC Plan or Revised RBC Plan is
31unsatisfactory, the commissioner may, at his or her discretion,
32subject to the insurer’s right to a hearing under Section 739.7,
33specify in the notification that the notification constitutes a
34Regulatory Action Level Event.

35(f) Every domestic insurer that files an RBC Plan or Revised
36RBC Plan with the commissioner shall file a copy of the RBC Plan
37or Revised RBC Plan with the insurance commissioner in any state
38in which the insurer is authorized to do business if both of the
39following apply:

P9    1(1) That state has an RBC provision substantially similar to
2subdivision (a) of Section 739.8.

3(2) The insurance commissioner of that state has notified the
4insurer of its request for the filing in writing, in which case the
5insurer shall file a copy of the RBC Plan or Revised RBC Plan in
6that state no later than the later of:

7(A) Fifteen days after the receipt of notice to file a copy of its
8RBC Plan or Revised RBC Plan with the state.

9(B) The date on which the RBC Plan or Revised RBC Plan is
10filed under subdivision (c) of Section 739.7.

begin delete
11

SEC. 3.  

Section 742.34 of the Insurance Code is amended to
12read:

13

742.34.  

(a) The following notice shall be provided to
14employers and employees who obtain coverage from a multiple
15employer welfare arrangement:

1617 “NOTICE
18

19(A) THE MULTIPLE EMPLOYER WELFARE
20ARRANGEMENT IS NOT AN INSURANCE COMPANY AND
21DOES NOT PARTICIPATE IN ANY OF THE GUARANTEE
22FUNDS CREATED BY CALIFORNIA LAW. THEREFORE,
23THESE FUNDS WILL NOT PAY YOUR CLAIMS OR
24PROTECT YOUR ASSETS IF A MULTIPLE EMPLOYER
25WELFARE ARRANGEMENT BECOMES INSOLVENT AND
26IS UNABLE TO MAKE PAYMENTS AS PROMISED.

27(B) THE HEALTH CARE BENEFITS THAT YOU HAVE
28PURCHASED OR ARE APPLYING TO PURCHASE ARE
29BEING ISSUED BY A MULTIPLE EMPLOYER WELFARE
30ARRANGEMENT THAT IS LICENSED BY THE STATE OF
31 CALIFORNIA.

32(C) FOR ADDITIONAL INFORMATION ABOUT THE
33MULTIPLE EMPLOYER WELFARE ARRANGEMENT YOU
34SHOULD ASK QUESTIONS OF YOUR TRUST
35ADMINISTRATOR OR YOU MAY CONTACT THE
36CALIFORNIA DEPARTMENT OF INSURANCE AT ________.”

37(b) Each multiple employer welfare arrangement should include
38the department’s current “800” consumer service telephone number
39and Internet Web site address in the blank provided in paragraph
40(C) of this notice.

P10   1

SEC. 4.  

Section 790.034 of the Insurance Code is amended to
2read:

3

790.034.  

(a) Regulations adopted by the commissioner
4pursuant to this article that relate to the settlement of claims shall
5take into consideration settlement practices by classes of insurers.

6(b) (1) Upon receiving notice of a claim, every insurer shall
7immediately, but no more than 15 calendar days after receipt of
8the claim, provide the insured with a legible reproduction of
9subdivisions (h) and (i) of Section 790.03 along with a written
10notice containing the following language in at least 10-point type:


12“In addition to Section 790.03 of the Insurance Code, Fair Claims
13Settlement Practices Regulations govern how insurance claims
14must be processed in this state. These regulations are available at
15the Department of Insurance Internet Web site,
16www.insurance.ca.gov, or by calling the department’s consumer
17information line at 1-800-927-HELP(4357). You may also obtain
18a copy of this law and these regulations free of charge from this
19insurer.”
20


21(2) Every insurer shall provide, when requested orally or in
22writing by an insured, a legible reproduction of Section 790.03 of
23the Insurance Code and copies of Sections 2695.5, 2695.7, 2695.8,
24and 2695.9 of Subchapter 7.5 of Chapter 5 of Title 10 of the
25California Code of Regulations, unless the regulations are
26inapplicable to that class of insurer. This law and these regulations
27shall be provided to the insured within 15 calendar days of request.

28(3) The provisions of this subdivision shall apply to all insurers
29except for those that are licensed pursuant to Chapter 1
30(commencing with Section 12340) of Part 6 of Division 2, with
31respect to policies and endorsements described in Section 790.031.

32

SEC. 5.  

Section 1725.5 of the Insurance Code is amended to
33read:

34

1725.5.  

(a) For purposes of Sections 32.5, 1625, 1626, 1724.5,
351758.1, 1765, 1800, 14020, 14021, and 15006, every licensee shall
36prominently affix, type, or cause to be printed on business cards,
37written price quotations for insurance products, and print
38advertisements distributed exclusively in this state for insurance
39products its license number in type the same size as any indicated
40telephone number, address, or fax number. If the licensee maintains
P11   1more than one organization license, one of the organization license
2numbers is sufficient for compliance with this section.

3(b) Effective January 1, 2005, for purposes of Sections 32.5,
41625, 1626, 1724.5, 1758.1, 1765, 14020, 14021, and 15006, every
5licensee shall prominently affix, type, or cause to be printed on
6business cards, written price quotations for insurance products,
7and print advertisements, distributed in this state for insurance
8products, the word “Insurance” in type size that is at least as large
9as the smallest telephone number or 12-point type, whichever is
10larger.

11(c) In the case of transactors, or agent and broker licensees, who
12are classified for licensing purposes as solicitors, working as
13exclusive employees of motor clubs, organizational licensee
14numbers shall be used.

15(d) Any person in violation of this section shall be subject to a
16fine levied by the commissioner in the amount of two hundred
17dollars ($200) for the first offense, five hundred dollars ($500) for
18the second offense, and one thousand dollars ($1,000) for the third
19and subsequent offenses. The penalty shall not exceed one thousand
20dollars ($1,000) for any one offense. These fines shall be deposited
21into the Insurance Fund.

22(e) A separate penalty shall not be imposed upon each piece of
23printed material that fails to conform to the requirements of this
24section.

25(f) If the commissioner finds that the failure of a licensee to
26comply with the provisions of subdivision (a) or (b) is due to
27reasonable cause or circumstance beyond the licensee’s control,
28and occurred notwithstanding the exercise of ordinary care and in
29the absence of willful neglect, the licensee may be relieved of the
30penalty in subdivision (d).

31(g) A licensee seeking to be relieved of the penalty in
32subdivision (d) shall file with the department a statement with
33supporting documents setting forth the facts upon which the
34licensee bases its claims for relief.

35(h) This section does not apply to any person or entity that is
36not currently required to be licensed by the department or that is
37exempted from licensure.

38(i) This section does not apply to general advertisements of
39motor clubs that merely list insurance products as one of several
P12   1services offered by the motor club, and do not provide any details
2of the insurance products.

3(j) This section does not apply to life insurance policy
4illustrations required by Chapter 5.5 (commencing with Section
510509.950) of Part 2 of Division 2 or to life insurance cost indexes
6required by Chapter 5.6 (commencing with Section 10509.970)
7of Part 2 of Division 2.

8(k) This section shall become operative January 1, 1997.

end delete
9begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 742.34 of the end insertbegin insertInsurance Codeend insertbegin insert is amended to
10read:end insert

11

742.34.  

(a) The following notice shall be provided to
12employers and employees who obtain coverage from a multiple
13employer welfare arrangement:

14

1516begin deleteNOTICE end deletebegin insert“NOTICEend insert
17

18(A) THE MULTIPLE EMPLOYER WELFARE
19ARRANGEMENT IS NOT AN INSURANCE COMPANY AND
20DOES NOT PARTICIPATE IN ANY OF THE GUARANTEE
21FUNDS CREATED BY CALIFORNIA LAW. THEREFORE,
22THESE FUNDS WILL NOT PAY YOUR CLAIMS OR
23PROTECT YOUR ASSETS IF A MULTIPLE EMPLOYER
24WELFARE ARRANGEMENT BECOMES INSOLVENT AND
25IS UNABLE TO MAKE PAYMENTS AS PROMISED.

26(B) THE HEALTH CARE BENEFITS THAT YOU HAVE
27PURCHASED OR ARE APPLYING TO PURCHASE ARE
28BEING ISSUED BY A MULTIPLE EMPLOYER WELFARE
29ARRANGEMENT THAT IS LICENSED BY THE STATE OF
30CALIFORNIA.

31(C) FOR ADDITIONAL INFORMATION ABOUT THE
32MULTIPLE EMPLOYER WELFARE ARRANGEMENT YOU
33SHOULD ASK QUESTIONS OF YOUR TRUST
34ADMINISTRATOR OR YOU MAY CONTACT THE
35CALIFORNIA DEPARTMENT OF INSURANCE ATbegin delete ________.end delete
36begin insert ________.”end insert
37


begin insertend insert

38(b) Each multiple employer welfare arrangement should include
39the department’s current “800” consumer service telephone number
40in the blank provided in paragraph (C) of this notice.

begin insert

P13   1(c) This section shall remain in effect only until January 1, 2017,
2and as of that date is repealed, unless a later enacted statute, that
3is enacted before January 1, 2017, deletes or extends that date.

end insert
4begin insert

begin insertSEC. 5.end insert  

end insert

begin insertSection 742.34 is added to the end insertbegin insertInsurance Codeend insertbegin insert, to
5read:end insert

begin insert
6

begin insert742.34.end insert  

(a) The following notice shall be provided to employers
7and employees who obtain coverage from a multiple employer
8welfare arrangement:

910“NOTICE
11

12(A) THE MULTIPLE EMPLOYER WELFARE ARRANGEMENT
13IS NOT AN INSURANCE COMPANY AND DOES NOT
14PARTICIPATE IN ANY OF THE GUARANTEE FUNDS CREATED
15BY CALIFORNIA LAW. THEREFORE, THESE FUNDS WILL
16NOT PAY YOUR CLAIMS OR PROTECT YOUR ASSETS IF A
17MULTIPLE EMPLOYER WELFARE ARRANGEMENT BECOMES
18INSOLVENT AND IS UNABLE TO MAKE PAYMENTS AS
19PROMISED.

20(B) THE HEALTH CARE BENEFITS THAT YOU HAVE
21PURCHASED OR ARE APPLYING TO PURCHASE ARE BEING
22ISSUED BY A MULTIPLE EMPLOYER WELFARE
23ARRANGEMENT THAT IS LICENSED BY THE STATE OF
24CALIFORNIA.

25(C) FOR ADDITIONAL INFORMATION ABOUT THE
26MULTIPLE EMPLOYER WELFARE ARRANGEMENT YOU
27SHOULD ASK QUESTIONS OF YOUR TRUST ADMINISTRATOR
28OR YOU MAY CONTACT THE CALIFORNIA DEPARTMENT
29OF INSURANCE AT ________.”

30(b) Each multiple employer welfare arrangement should include
31the department’s current “800” consumer service telephone
32number and Internet Web site in the blank provided in paragraph
33(C) of this notice.

34(c) This section shall become operative on January 1, 2017.

end insert
35begin insert

begin insertSEC. 6.end insert  

end insert

begin insertSection 790.034 of the end insertbegin insertInsurance Codeend insertbegin insert is amended to
36read:end insert

37

790.034.  

(a) Regulations adopted by the commissioner
38pursuant to this article that relate to the settlement of claims shall
39take into consideration settlement practices by classes of insurers.

P14   1(b) (1) Upon receiving notice of a claim, every insurer shall
2immediately, but no more than 15 calendar days after receipt of
3the claim, provide the insured with a legible reproduction of
4subdivisions (h) and (i) of Section 790.03 along with a written
5notice containing the following language in at least 10-point type:


7“In addition to Section 790.03 of the Insurance Code, Fair Claims
8Settlement Practices Regulations govern how insurance claims
9must be processed in this state. These regulations are available at
10the Department of Insurance Internet Web site,
11www.insurance.ca.gov. You may also obtain a copy of this law
12and these regulations free of charge from this insurer.”


14(2) Every insurer shall provide, when requested orally or in
15writing by an insured, a legible reproduction of Section 790.03 of
16the Insurance Code and copies of Sections 2695.5, 2695.7, 2695.8,
17and 2695.9 of Subchapter 7.5 of Chapter 5 of Title 10 of the
18California Code of Regulations, unless the regulations are
19inapplicable to that class of insurer. This law and these regulations
20shall be provided to the insured within 15 calendar days of request.

21(3) The provisions of this subdivision shall apply to all insurers
22except for those that are licensed pursuant to Chapter 1
23(commencing with Section 12340) of Part 6 of Division 2, with
24respect to policies and endorsements described in Section 790.031.

begin insert

25(c) This section shall remain in effect only until January 1, 2017,
26and as of that date is repealed, unless a later enacted statute, that
27is enacted before January 1, 2017, deletes or extends that date.

end insert
28begin insert

begin insertSEC. 7.end insert  

end insert

begin insertSection 790.034 is added to the end insertbegin insertInsurance Codeend insertbegin insert, to
29read:end insert

begin insert
30

begin insert790.034.end insert  

(a) Regulations adopted by the commissioner
31pursuant to this article that relate to the settlement of claims shall
32take into consideration settlement practices by classes of insurers.

33(b) (1) Upon receiving notice of a claim, every insurer shall
34immediately, but no more than 15 calendar days after receipt of
35the claim, provide the insured with a legible reproduction of
36subdivisions (h) and (i) of Section 790.03 along with a written
37notice containing the following language in at least 10-point type:


39“In addition to Section 790.03 of the Insurance Code, Fair
40Claims Settlement Practices Regulations govern how insurance
P15   1claims must be processed in this state. These regulations are
2available at the Department of Insurance Internet Web site,
3www.insurance.ca.gov, or by calling the department’s consumer
4information line at 1-800-927-HELP(4357). You may also obtain
5a copy of this law and these regulations free of charge from this
6insurer.”


8(2) Every insurer shall provide, when requested orally or in
9writing by an insured, a legible reproduction of Section 790.03 of
10the Insurance Code and copies of Sections 2695.5, 2695.7, 2695.8,
11and 2695.9 of Subchapter 7.5 of Chapter 5 of Title 10 of the
12California Code of Regulations, unless the regulations are
13inapplicable to that class of insurer. This law and these regulations
14shall be provided to the insured within 15 calendar days of request.

15(3) The provisions of this subdivision shall apply to all insurers
16except for those that are licensed pursuant to Chapter 1
17(commencing with Section 12340) of Part 6 of Division 2, with
18respect to policies and endorsements described in Section 790.031.

19(c) This section shall become operative on January 1, 2017.

end insert
20begin insert

begin insertSEC. 8.end insert  

end insert

begin insertSection 922.41 of the end insertbegin insertInsurance Codeend insertbegin insert is amended to
21read:end insert

22

922.41.  

(a) Credit shall be allowed a domestic insurer when
23the reinsurance is ceded to an assuming insurer that has been
24certified by the commissioner as a reinsurer in this state and secures
25its obligations in accordance with the requirements of this section.
26Credit shall be allowed at all times for which statutory financial
27statement credit for reinsurance is claimed under this section. The
28credit allowed shall be based upon the security held by or on behalf
29of the ceding insurer in accordance with a rating assigned to the
30certified reinsurer by the commissioner. The security shall be in
31a form consistent with this section, any regulations promulgated
32by the commissioner, and Section 922.5.

33(b) In order to be eligible for certification, the assuming insurer
34shall meet the following requirements:

35(1) The assuming insurer shall be domiciled and licensed to
36transact insurance or reinsurance in a qualified jurisdiction, as
37determined by the commissioner pursuant to subdivisions (f) and
38(g).

39(2) The assuming insurer shall maintain minimum capital and
40surplus, or its equivalent, in an amount to be determined by the
P16   1commissioner, but no less than two hundred fifty million dollars
2($250,000,000) calculated in accordance with paragraph (4) of
3subdivision (f) of this section or Section 922.5. This requirement
4may also be satisfied by an association including incorporated and
5individual unincorporated underwriters having minimum capital
6and surplus equivalents (net of liabilities) of at least two hundred
7fifty million dollars ($250,000,000) and a central fund containing
8a balance of at least two hundred fifty million dollars
9($250,000,000).

10(3) The assuming insurer shall maintain financial strength ratings
11from two or more rating agencies deemed acceptable by the
12commissioner. These ratings shall be based on interactive
13communication between the rating agency and the assuming insurer
14and shall not be based solely on publicly available information.
15These financial strength ratings will be one factor used by the
16commissioner in determining the rating that is assigned to the
17assuming insurer. Acceptable rating agencies include the following:

18(A) Standard & Poor’s.

19(B) Moody’s Investors Service.

20(C) Fitch Ratings.

21(D) A.M. Best Company.

22(E) Any other nationally recognized statistical rating
23organization.

24(4) The assuming insurer shall agree to submit to the jurisdiction
25of this state, appoint the commissioner or a designated attorney in
26this state as its agent for service of process in this state, and agree
27to provide security for 100 percent of the assuming insurer’s
28liabilities attributable to reinsurance ceded by United States ceding
29insurers if it resists enforcement of a final United States judgment.

30(5) The assuming insurer shall agree to meet applicable
31information filing requirements as determined by the commissioner,
32both with respect to an initial application for certification and on
33an ongoing basis.

34(6) The certified reinsurer shall comply with any other
35requirements deemed relevant by the commissioner.

36(c) (1) If an applicant for certification has been certified as a
37reinsurer in a National Association of Insurance Commissioners
38(NAIC) accredited jurisdiction, the commissioner may defer to
39that jurisdiction’s certification, and has the discretion to defer to
40the rating assigned by that jurisdiction if the assuming insurer
P17   1submits a properly executed Form CR-1 (as published on the
2department’s Internet Web site), and such additional information
3as the commissioner requires. The commissioner, however, may
4perform an independent review and determination of any applicant.
5The assuming insurer shall then be considered to be a certified
6reinsurer in this state.

7(2) If the commissioner defers to a certification determination
8by another state, any change in the certified reinsurer’s status or
9rating in the other jurisdiction shall apply automatically in this
10state as of the date it takes effect in the other jurisdiction unless
11the commissioner otherwise determines. The certified reinsurer
12shall notify the commissioner of any change in its status or rating
13within 10 days after receiving notice of the change.

14(3) The commissioner may withdraw recognition of the other
15jurisdiction’s rating at any time and assign a new rating in
16accordance with subdivision (h).

17(4) The commissioner may withdraw recognition of the other
18jurisdiction’s certification at any time, with written notice to the
19certified reinsurer. Unless the commissioner suspends or revokes
20the certified reinsurer’s certification in accordance with this section
21and Section 922.42, the certified reinsurer’s certification shall
22remain in good standing in this state for a period of three months,
23which shall be extended if additional time is necessary to consider
24the assuming insurer’s application for certification in this state.

25(d) An association, including incorporated and individual
26unincorporated underwriters, may be a certified reinsurer. In order
27to be eligible for certification, in addition to satisfying requirements
28of subdivision (b), the reinsurer shall meet all of the following
29requirements:

30(1) The association shall satisfy its minimum capital and surplus
31requirements through the capital and surplus equivalents (net of
32liabilities) of the association and its members, which shall include
33a joint central fund that may be applied to any unsatisfied
34obligation of the association or any of its members, in an amount
35determined by the commissioner to provide adequate protection.

36(2) The incorporated members of the association shall not be
37engaged in any business other than underwriting as a member of
38the association and shall be subject to the same level of regulation
39and solvency control by the association’s domiciliary regulator as
40are the unincorporated members.

P18   1(3) Within 90 days after its financial statements are due to be
2filed with the association’s domiciliary regulator, the association
3shall provide to the commissioner an annual certification by the
4association’s domiciliary regulator of the solvency of each
5underwriter member or, if a certification is unavailable, financial
6statements, prepared by independent public accountants, of each
7underwriter member of the association.

8(e) (1) The commissioner shall post notice on the department’s
9Internet Web site promptly upon receipt of any application for
10certification, including instructions on how members of the public
11may respond to the application. The commissioner shall not take
12final action on the application until at least 30 days after posting
13the notice required by this subdivision.

14(2) The commissioner shall issue written notice to an assuming
15insurer that has made application and has been approved as a
16certified reinsurer. Included in that notice shall be the rating
17assigned the certified reinsurer in accordance with subdivision (h).
18The commissioner shall publish a list of all certified reinsurers and
19their ratings.

20(f) The certified reinsurer shall agree to meet applicable
21information filing requirements as determined by the commissioner,
22both with respect to an initial application for certification and on
23an ongoing basis. All information submitted by certified reinsurers
24that is not otherwise public information subject to disclosure shall
25be exempted from disclosure under Chapter 3.5 (commencing with
26Section 6250) of Division 7 of Title 1 of the Government Code,
27and shall be withheld from public disclosure. The applicable
28information filing requirements are as follows:

29(1) Notification within 10 days of any regulatory actions taken
30against the certified reinsurer, any change in the provisions of its
31domiciliary license or any change in rating by an approved rating
32agency, including a statement describing those changes and the
33reasons for those changes.

34(2) Annually, Form CR-F or CR-S, as applicable pursuant to
35the instructions published on the department’s Internet Web site.

36(3) Annually, the report of the independent auditor on the
37financial statements of the insurance enterprise, on the basis
38described in paragraph (4).

39(4) Annually, audited financial statements, (audited United
40States Generally Accepted Accounting Principles basis, if available,
P19   1audited International Financial Reporting Standards basis
2statements are allowed, but must include an audited footnote
3reconciling equity and net income to a United States Generally
4Accepted Accounting Principles basis, or, with the written
5permission of the commissioner, audited International Financial
6Reporting Standards statements with reconciliation to United States
7Generally Accepted Accounting Principles certified by an officer
8of the company), regulatory filings, and actuarial opinion (as filed
9with the certified reinsurer’s supervisor). Upon the initial
10certification, audited financial statements for the last three years
11filed with the certified reinsurer’s supervisor.

12(5) At least annually, an updated list of all disputed and overdue
13reinsurance claims regarding reinsurance assumed from United
14States domestic ceding insurers.

15(6) A certification from the certified reinsurer’s domestic
16regulator that the certified reinsurer is in good standing and
17maintains capital in excess of the jurisdiction’s highest regulatory
18action level.

19(7) Any other information that the commissioner may reasonably
20require.

21(g) If the commissioner certifies a non-United States domiciled
22insurer, the commissioner shall create and publish a list of qualified
23jurisdictions, under which an assuming insurer licensed and
24domiciled in that jurisdiction is eligible to be considered for
25certification by the commissioner as a certified reinsurer.

26(1) In order to determine whether the domiciliary jurisdiction
27of a non-United States assuming insurer is eligible to be recognized
28as a qualified jurisdiction, the commissioner shall evaluate the
29appropriateness and effectiveness of the reinsurance supervisory
30system of the jurisdiction, both initially and on an ongoing basis,
31and consider the rights, benefits, and the extent of reciprocal
32recognition afforded by the non-United States jurisdiction to
33reinsurers licensed and domiciled in the United States. The
34commissioner shall determine the appropriate process for
35evaluating the qualifications of those jurisdictions. Prior to its
36listing, a qualified jurisdiction shall agree in writing to share
37information and cooperate with the commissioner with respect to
38all certified reinsurers domiciled within that jurisdiction. A
39jurisdiction may not be recognized as a qualified jurisdiction if the
40commissioner has determined that the jurisdiction does not
P20   1adequately and promptly enforce final United States judgments
2and arbitration awards. Additional factors may be considered in
3the discretion of the commissioner, including, but not limited to,
4the following:

5(A) The framework under which the assuming insurer is
6regulated.

7(B) The structure and authority of the domiciliary regulator with
8regard to solvency regulation requirements and financial
9surveillance.

10(C) The substance of financial and operating standards for
11assuming insurers in the domiciliary jurisdiction.

12(D) The form and substance of financial reports required to be
13filed or made publicly available by reinsurers in the domiciliary
14jurisdiction and the accounting principles used.

15(E) The domiciliary regulator’s willingness to cooperate with
16United States regulators in general and the commissioner in
17particular.

18(F) The history of performance by assuming insurers in the
19domiciliary jurisdiction.

20(G) Any documented evidence of substantial problems with the
21enforcement of final United States judgments in the domiciliary
22jurisdiction.

23(H) Any relevant international standards or guidance with
24respect to mutual recognition of reinsurance supervision adopted
25by the International Association of Insurance Supervisors or a
26successor organization.

27(I) Any other matters deemed relevant by the commissioner.

28(2) The commissioner shall consider the list of qualified
29jurisdictions published through the NAIC committee process in
30determining qualified jurisdictions. The commissioner may include
31on the list published pursuant to this section any jurisdiction on
32the NAIC list of qualified jurisdictions or on any equivalent list
33of the United States Treasury.

34(3) If the commissioner approves a jurisdiction as qualified that
35does not appear on either the NAIC list of qualified jurisdictions,
36or the United States Treasury list, the commissioner shall provide
37thoroughly documented justification in accordance with criteria
38to be developed under this section.

P21   1(4) United States jurisdictions that meet the requirements for
2accreditation under the NAIC financial standards and accreditation
3program shall be recognized as qualified jurisdictions.

4(5) If a certified reinsurer’s domiciliary jurisdiction ceases to
5be a qualified jurisdiction, the commissioner has the discretion to
6suspend the reinsurer’s certification indefinitely, in lieu of
7revocation.

8(h) The commissioner shall assign a rating to each certified
9 reinsurer, giving due consideration to the financial strength ratings
10that have been assigned by rating agencies deemed acceptable to
11the commissioner pursuant to this section. The commissioner shall
12publish a list of all certified reinsurers and their ratings.

13(1) Each certified reinsurer shall be rated on a legal entity basis,
14with due consideration being given to the group rating where
15appropriate, except that an association including incorporated and
16individual unincorporated underwriters that has been approved to
17do business as a single certified reinsurer may be evaluated on the
18basis of its group rating. Factors that may be considered as part of
19the evaluation process include, but are not limited to, the following:

20(A) The certified reinsurer’s financial strength rating from an
21acceptable rating agency. The maximum rating that a certified
22reinsurer may be assigned shall correspond to its financial strength
23rating as set forth in clauses (i) to (vi), inclusive. The commissioner
24shall use the lowest financial strength rating received from an
25approved rating agency in establishing the maximum rating of a
26certified reinsurer. A failure to obtain or maintain at least two
27financial strength ratings from acceptable rating agencies shall
28result in loss of eligibility for certification.

29(i) Ratings category “Secure - 1” corresponds to A.M. Best
30Company rating A++; Standard & Poor’s rating AAA; Moody’s
31Investors Service rating Aaa; and Fitch Ratings rating AAA.

32(ii) Ratings category “Secure - 2” corresponds to A.M. Best
33Company rating A+; Standard & Poor’s rating AA+, AA, or AA-;
34Moody’s Investors Service rating Aa1, Aa2, or Aa3; and Fitch
35Ratings rating AA+, AA, or AA-.

36(iii) Ratings category “Secure - 3” corresponds to A.M. Best
37Company rating A; Standard & Poor’s rating A+ or A; Moody’s
38Investors Service rating A1 or A2; and Fitch Ratings rating A+ or
39A.

P22   1(iv) Ratings category “Secure - 4” corresponds to A.M. Best
2Company rating A-; Standard & Poor’s rating A-; Moody’s
3Investors Service rating A3; and Fitch Ratings rating A-.

4(v) Ratings category “Secure - 5” corresponds to A.M. Best
5Company rating B++ or B+; Standard & Poor’s rating BBB+,
6BBB, or BBB-; Moody’s Investors Service rating Baa1, Baa2, or
7Baa3; and Fitch Ratings rating BBB+, BBB, or BBB-.

8(vi) Ratings category “Vulnerable - 6” corresponds to A.M.
9Best Company rating B, B-, C++, C+, C, C-, D, E, or F; Standard
10& Poor’s rating BB+, BB, BB-, B+, B, B-, CCC, CC, C, D, or R;
11Moody’s Investors Service rating Ba1, Ba2, Ba3, B1, B2, B3, Caa,
12Ca, or C; and Fitch Ratings rating BB+, BB, BB-, B+, B, B-,
13CCC+, CC, CCC-, or DD.

14(B) The business practices of the certified reinsurer in dealing
15with its ceding insurers, including its record of compliance with
16reinsurance contractual terms and obligations.

17(C) For certified reinsurers domiciled in the United States, a
18review of the most recent applicable NAIC Annual Statement
19Blank, either Schedule F (for property/casualty reinsurers) or
20Schedule S (for life and health reinsurers).

21(D) For certified reinsurers not domiciled in the United States,
22a review annually of Form CR-F (for property/casualty reinsurers)
23or Form CR-S (for life and health reinsurers) (as published on the
24department’s Internet Web site).

25(E) The reputation of the certified reinsurer for prompt payment
26of claims under reinsurance agreements, based on an analysis of
27ceding insurers’ Schedule F reporting of overdue reinsurance
28recoverables, including the proportion of obligations that are more
29than 90 days past due or are in dispute, with specific attention
30given to obligations payable to companies that are in administrative
31supervision or receivership.

32(F) Regulatory actions against the certified reinsurer.

33(G) The report of the independent auditor on the financial
34statements of the insurance enterprise, on the basis described in
35subparagraph (H).

36(H) For certified reinsurers not domiciled in the United States,
37audited financial statements, (audited United States Generally
38Accepted Accounting Principles basis, if available, audited
39International Financial Reporting Standards basis statements are
40allowed, but must include an audited footnote reconciling equity
P23   1and net income to a United States Generally Accepted Accounting
2Principles basis, or, with the written permission of the
3commissioner, audited International Financial Reporting Standards
4statements with reconciliation to United States Generally Accepted
5Accounting Principles certified by an officer of the company),
6regulatory filings, and actuarial opinion (as filed with the
7non-United States jurisdiction supervisor). Upon the initial
8application for certification, the commissioner shall consider
9audited financial statements for the last three years filed with its
10non-United States jurisdiction supervisor.

11(I) The liquidation priority of obligations to a ceding insurer in
12the certified reinsurer’s domiciliary jurisdiction in the context of
13an insolvency proceeding.

14(J) A certified reinsurer’s participation in any solvent scheme
15of arrangement, or similar procedure, which involves United States
16ceding insurers. The commissioner shall receive prior notice from
17a certified reinsurer that proposes participation by the certified
18reinsurer in a solvent scheme of arrangement.

19(K) Any other information deemed relevant by the
20commissioner.

21(2) Based on the analysis conducted under subparagraph (E) of
22paragraph (1) of a certified reinsurer’s reputation for prompt
23payment of claims, the commissioner may make appropriate
24adjustments in the security the certified reinsurer is required to
25post to protect its liabilities to United States ceding insurers,
26provided that the commissioner shall, at a minimum, increase the
27security the certified reinsurer is required to post by one rating
28level under regulations promulgated by the commissioner, if the
29commissioner finds either of the following:

30(A) More than 15 percent of the certified reinsurer’s ceding
31insurance clients have overdue reinsurance recoverables on paid
32losses of 90 days or more that are not in dispute and that exceed
33one hundred thousand dollars ($100,000) for each ceding insurer.

34(B) The aggregate amount of reinsurance recoverables on paid
35losses that are not in dispute and that are overdue by 90 days or
36more exceeds fifty million dollars ($50,000,000).

37(3) The assuming insurer shall submit a properly executed Form
38CR-1 (as published on the department’s Internet Web site) as
39evidence of its submission to the jurisdiction of this state,
40appointment of the commissioner as an agent for service of process
P24   1in this state, and agreement to provide security for 100 percent of
2the assuming insurer’s liabilities attributable to reinsurance ceded
3by United States ceding insurers if it resists enforcement of a final
4United States judgment. The commissioner shall not certify any
5assuming insurer that is domiciled in a jurisdiction that the
6commissioner has determined does not adequately and promptly
7enforce final United States judgments or arbitration awards.

8(4) (A) In the case of a downgrade by a rating agency or other
9disqualifying circumstance, the commissioner shall, upon written
10notice, assign a new rating to the certified reinsurer in accordance
11with the requirements of this subdivision.

12(B) The commissioner shall have the authority to suspend,
13revoke, or otherwise modify a certified reinsurer’s certification at
14any time if the certified reinsurer fails to meet its obligations or
15security requirements under this section, or if other financial or
16operating results of the certified reinsurer, or documented
17significant delays in payment by the certified reinsurer, lead the
18commissioner to reconsider the certified reinsurer’s ability or
19willingness to meet its contractual obligations.

20(C) If the rating of a certified reinsurer is upgraded by the
21commissioner, the certified reinsurer may meet the security
22requirements applicable to its new rating on a prospective basis,
23but the commissioner shall require the certified reinsurer to post
24security under the previously applicable security requirements as
25to all contracts in force on or before the effective date of the
26upgraded rating. If the rating of a certified reinsurer is downgraded
27by the commissioner, the commissioner shall require the certified
28reinsurer to meet the security requirements applicable to its new
29rating for all business it has assumed as a certified reinsurer.

30(D) Upon revocation of the certification of a certified reinsurer
31by the commissioner, the assuming insurer shall be required to
32post security in accordance with Section 922.5 in order for the
33ceding insurer to continue to take credit for reinsurance ceded to
34the assuming insurer. If funds continue to be held in trust in
35accordance with subdivision (d) of Section 922.4, the commissioner
36may allow additional credit equal to the ceding insurer’s pro rata
37share of those funds, discounted to reflect the risk of
38uncollectibility and anticipated expenses of trust administration.
39Notwithstanding the change of a certified reinsurer’s rating or
40revocation of its certification, a domestic insurer that has ceded
P25   1reinsurance to that certified reinsurer shall not be denied credit for
2reinsurance for a period of three months for all reinsurance ceded
3to that certified reinsurer, unless the reinsurance is found by the
4commissioner to be at high risk of uncollectibility.

5(i) A certified reinsurer shall secure obligations assumed from
6United States ceding insurers under this subdivision at a level
7consistent with its rating. The amount of security required in order
8for full credit to be allowed shall correspond with the following
9requirements:

10Ratings security required

11Secure - 1:begin delete 0%end deletebegin insert 0 percentend insert

12Secure - 2:begin delete 10%end deletebegin insert 10 percentend insert

13Secure - 3:begin delete 20%end deletebegin insert 20 percentend insert

14Secure - 4:begin delete 50%end deletebegin insert 50 percentend insert

15Secure - 5:begin delete 75%end deletebegin insert 75 percentend insert

16Vulnerable - 6:begin delete 100%end deletebegin insert 100 percentend insert

17(1) In order for a domestic ceding insurer to qualify for full
18financial statement credit for reinsurance ceded to a certified
19 reinsurer, the certified reinsurer shall maintain security in a form
20acceptable to the commissioner and consistent with Section 922.5,
21or in a multibeneficiary trust in accordance with subdivision (d)
22of Section 922.4, except as otherwise provided in this subdivision.
23In order for a domestic insurer to qualify for full financial statement
24credit, reinsurance contracts entered into or renewed under this
25section shall include a proper funding clause that requires the
26certified reinsurer to provide and maintain security in an amount
27sufficient to avoid the imposition of any financial statement penalty
28on the ceding insurer under this section for reinsurance ceded to
29the certified reinsurer.

30(2) If a certified reinsurer maintains a trust to fully secure its
31obligations subject to subdivision (d) of Section 922.4, and chooses
32to secure its obligations incurred as a certified reinsurer in the form
33of a multibeneficiary trust, the certified reinsurer shall maintain
34separate trust accounts for its obligations incurred under
35reinsurance agreements issued or renewed as a certified reinsurer
36with reduced security as permitted by this subdivision or
37comparable laws of other United States jurisdictions and for its
38obligations subject to subdivision (d) of Section 922.4. It shall be
39a condition to the grant of certification under this section that the
40certified reinsurer shall have bound itself, by the language of the
P26   1trust and agreement with the commissioner with principal
2regulatory oversight of each of those trust accounts, to fund, upon
3termination of any of those trust accounts, out of the remaining
4surplus of those trusts any deficiency of any other of those trust
5accounts.

6(3) The minimum trusteed surplus requirements provided in
7subdivision (d) of Section 922.4 are not applicable with respect to
8a multibeneficiary trust maintained by a certified reinsurer for the
9purpose of securing obligations incurred under this subdivision,
10except that the trust shall maintain a minimum trusteed surplus of
11ten million dollars ($10,000,000).

12(4) With respect to obligations incurred by a certified reinsurer
13under this subdivision, if the security is insufficient, the
14commissioner shall reduce the allowable credit by an amount
15proportionate to the deficiency, and have the discretion to impose
16further reductions in allowable credit upon finding that there is a
17material risk that the certified reinsurer’s obligations will not be
18paid in full when due.

19(5) For purposes of this subdivision, a certified reinsurer whose
20certification has been terminated for any reason shall be treated
21as a certified reinsurer required to secure 100 percent of its
22obligations.

23(A) As used in this subdivision, the term “terminated” means
24revocation, suspension, voluntary surrender, and inactive status.

25(B) If the commissioner continues to assign a higher rating as
26permitted by other provisions of this section, this requirement shall
27not apply to a certified reinsurer in inactive status or to a reinsurer
28whose certification has been suspended.

29(6) The commissioner shall require the certified reinsurer to
30post 100-percent security in accordance with Section 922.5, for
31the benefit of the ceding insurer or its estate, upon the entry of an
32order of rehabilitation, liquidation, or conservation against the
33ceding insurer.

34(7) Affiliated reinsurance transactions shall receive the same
35opportunity for reduced security requirements as all other
36reinsurance transactions.

37(8) In order to facilitate the prompt payment of claims, a certified
38reinsurer shall not be required to post security for catastrophe
39recoverables for a period of one year from the date of the first
40instance of a liability reserve entry by the ceding company as a
P27   1result of a loss from a catastrophic occurrence that is likely to result
2in significant insured losses, as recognized by the commissioner.
3The one-year deferral period is contingent upon the certified
4reinsurer continuing to pay claims in a timely manner, as
5determined by the commissioner, in writing. Reinsurance
6recoverables for only the following lines of business as reported
7on the NAIC annual financial statement related specifically to the
8catastrophic occurrence shall be included in the deferral:

9(A) Line 1: Fire.

10(B) Line 2: Allied lines.

11(C) Line 3: Farmowners’ multiple peril.

12(D) Line 4: Homeowners’ multiple peril.

13(E) Line 5: Commercial multiple peril.

14(F) Line 9: Inland marine.

15(G) Line 12: Earthquake.

16(H) Line 21: Auto physical damage.

17(9) Credit for reinsurance under this section shall apply only to
18reinsurance contracts entered into or renewed on or after the
19effective date of the certification of the assuming insurer. Any
20reinsurance contract entered into prior to the effective date of the
21certification of the assuming insurer that is subsequently amended
22by mutual agreement of the parties to the reinsurance contract after
23the effective date of the certification of the assuming insurer, or a
24new reinsurance contract, covering any risk for which collateral
25was provided previously, shall only be subject to this section with
26respect to losses incurred and reserves reported from and after the
27effective date of the amendment or new contract.

28(10) Nothing in this section shall be construed to prohibit the
29parties to a reinsurance agreement from agreeing to provisions
30establishing security requirements that exceed the minimum
31security requirements established for certified reinsurers under
32this section.

33(j) A certified reinsurer that ceases to assume new business in
34this state may request to maintain its certification in inactive status
35in order to continue to qualify for a reduction in security for its
36in-force business. An inactive certified reinsurer shall continue to
37comply with all applicable requirements of this section, and the
38commissioner shall assign a rating that takes into account, if
39relevant, the reasons why the reinsurer is not assuming new
40business.

P28   1(k) Notwithstanding this section, credit for reinsurance or
2deduction from liability by a domestic ceding insurer for cessions
3to a certified reinsurer may be disallowed upon a finding by the
4commissioner that the application of the literal provisions of this
5section does not accomplish its intent, or either the financial
6condition of the reinsurer or the collateral or other security provided
7by the reinsurer does not, in substance, satisfy the credit for
8reinsurance requirements in Section 922.4.

9(l) This section shall remain in effect only until January 1,begin delete 2016,end delete
10begin insert 2021end insert and as of that date is repealed, unless a later enacted statute,
11that is enacted before January 1,begin delete 2016,end deletebegin insert 2021end insert deletes or extends
12that date.

13begin insert

begin insertSEC. 9.end insert  

end insert

begin insertSection 1725.5 of the end insertbegin insertInsurance Codeend insertbegin insert is amended to
14read:end insert

15

1725.5.  

(a) For purposes of Sections 32.5, 1625, 1626, 1724.5,
161758.1, 1765, 1800, 14020, 14021, and 15006, every licensee shall
17prominently affix, type, or cause to be printed on business cards,
18written price quotations for insurance products, and print
19advertisements distributed exclusively in this state for insurance
20products its license number in type the same size as any indicated
21telephone number, address, or fax number. If the licensee maintains
22more than one organization license, one of the organization license
23numbers is sufficient for compliance with this section.

24(b) Effective January 1, 2005, for purposes of Sections 32.5,
251625, 1626, 1724.5, 1758.1, 1765, 1800, 14020, 14021, and 15006,
26every licensee shall prominently affix, type, or cause to be printed
27on business cards, written price quotations for insurance products,
28and print advertisements, distributed in this state for insurance
29products, the word “Insurance” in type size no smaller than the
30largest indicated telephone number.

31(c) In the case of transactors, or agent and broker licensees, who
32are classified for licensing purposes as solicitors, working as
33exclusive employees of motor clubs, organizational licensee
34numbers shall be used.

35(d) Any person in violation of this section shall be subject to a
36fine levied by the commissioner in the amount of two hundred
37dollars ($200) for the first offense, five hundred dollars ($500) for
38the second offense, and one thousand dollars ($1,000) for the third
39and subsequent offenses. The penalty shall not exceed one thousand
P29   1dollars ($1,000) for any one offense. These fines shall be deposited
2into the Insurance Fund.

3(e) A separate penalty shall not be imposed upon each piece of
4printed material that fails to conform to the requirements of this
5section.

6(f) If the commissioner finds that the failure of a licensee to
7comply with the provisions of subdivision (a) or (b) is due to
8reasonable cause or circumstance beyond the licensee’s control,
9and occurred notwithstanding the exercise of ordinary care and in
10the absence of willful neglect, the licensee may be relieved of the
11penalty in subdivision (d).

12(g) A licensee seeking to be relieved of the penalty in
13subdivision (d) shall file with the department a statement with
14supporting documents setting forth the facts upon which the
15licensee bases its claims for relief.

16(h) This section does not apply to any person or entity that is
17not currently required to be licensed by the department or that is
18exempted from licensure.

19(i) This section does not apply to general advertisements of
20motor clubs that merely list insurance products as one of several
21services offered by the motor club, and do not provide any details
22of the insurance products.

23(j) This section does not apply to life insurance policy
24illustrations required by Chapter 5.5 (commencing with Section
2510509.950) of Part 2 of Division 2 or to life insurance cost indexes
26required by Chapter 5.6 (commencing with Section 10509.970)
27of Part 2 of Division 2.

28(k) This section shall become operative January 1, 1997.

begin insert

29(l) This section shall remain in effect only until July 1, 2016,
30and as of that date is repealed, unless a later enacted statute, that
31is enacted before July 1, 2016, deletes or extends that date.

end insert
32begin insert

begin insertSEC. 10.end insert  

end insert

begin insertSection 1725.5 is added to the end insertbegin insertInsurance Codeend insertbegin insert, to
33read:end insert

begin insert
34

begin insert1725.5.end insert  

(a) For purposes of Sections 32.5, 1625, 1626, 1724.5,
351758.1, 1765, 1800, 14020, 14021, and 15006, every licensee shall
36prominently affix, type, or cause to be printed on business cards,
37written price quotations for insurance products, and print
38advertisements distributed exclusively in this state for insurance
39products its license number in type the same size as any indicated
40telephone number, address, or fax number. If the licensee maintains
P30   1more than one organization license, one of the organization license
2numbers is sufficient for compliance with this section.

3(b) Effective January 1, 2005, for purposes of Sections 32.5,
41625, 1626, 1724.5, 1758.1, 1765, 14020, 14021, and 15006, every
5licensee shall prominently affix, type, or cause to be printed on
6business cards, written price quotations for insurance products,
7and print advertisements, distributed in this state for insurance
8products, the word “Insurance” in type size that is at least as large
9as the smallest telephone number or 12-point type, whichever is
10larger.

11(c) In the case of transactors, or agent and broker licensees,
12who are classified for licensing purposes as solicitors, working
13as exclusive employees of motor clubs, organizational licensee
14numbers shall be used.

15(d) Any person in violation of this section shall be subject to a
16fine levied by the commissioner in the amount of two hundred
17dollars ($200) for the first offense, five hundred dollars ($500) for
18the second offense, and one thousand dollars ($1,000) for the third
19and subsequent offenses. The penalty shall not exceed one thousand
20dollars ($1,000) for any one offense. These fines shall be deposited
21into the Insurance Fund.

22(e) A separate penalty shall not be imposed upon each piece of
23printed material that fails to conform to the requirements of this
24section.

25(f) If the commissioner finds that the failure of a licensee to
26comply with the provisions of subdivision (a) or (b) is due to
27reasonable cause or circumstance beyond the licensee’s control,
28and occurred notwithstanding the exercise of ordinary care and
29in the absence of willful neglect, the licensee may be relieved of
30the penalty in subdivision (d).

31(g) A licensee seeking to be relieved of the penalty in subdivision
32(d) shall file with the department a statement with supporting
33documents setting forth the facts upon which the licensee bases
34its claims for relief.

35(h) This section does not apply to any person or entity that is
36not currently required to be licensed by the department or that is
37exempted from licensure.

38(i) This section does not apply to general advertisements of
39motor clubs that merely list insurance products as one of several
P31   1services offered by the motor club, and do not provide any details
2of the insurance products.

3(j) This section does not apply to life insurance policy
4illustrations required by Chapter 5.5 (commencing with Section
510509.950) of Part 2 of Division 2 or to life insurance cost indexes
6required by Chapter 5.6 (commencing with Section 10509.970) of
7Part 2 of Division 2.

8(k) This section shall become operative July 1, 2016.

end insert
9

begin deleteSEC. 6.end delete
10begin insertSEC. 11.end insert  

Section 1729.2 of the Insurance Code is amended to
11read:

12

1729.2.  

(a) An applicant or licensee shall notify the
13commissioner when any of the background information set forth
14in this section changes after the application has been submitted or
15the license has been issued. If the licensee is listed as an endorsee
16on any business entity license, the licensee shall also provide this
17notice to any officer, director, or partner listed on that business
18entity license.

19(b) A business entity licensee, upon learning of a change in
20background information pertaining to any unlicensed person listed
21on its business entity license or application therefor, shall notify
22the commissioner of that change. The changes subject to this
23requirement include changes pertaining to any unlicensed officer,
24director, partner, member, or controlling person, or any other
25natural person named under the business entity license or in an
26application therefor.

27(c) The following definitions apply for the purposes of this
28section:

29(1) “License” includes all types of licenses issued by the
30commissioner pursuant to Chapter 5 (commencing with Section
311621), Chapter 5A (commencing with Section 1759), Chapter 6
32(commencing with Section 1760), Chapter 6.5 (commencing with
33Section 1781.1), Chapter 7 (commencing with Section 1800), and
34Chapter 8 (commencing with Section 1831) of Part 2 of Division
351, Chapter 1 (commencing with Section 10110) of Part 2 of
36Division 2, Chapter 4 (commencing with Section 12280) of Part
375 of Division 2, Article 8 (commencing with Section 12418) of
38Chapter 1 of Part 6 of Division 2, and Chapter 1 (commencing
39with Section 14000) and Chapter 2 (commencing with Section
4015000) of Division 5.

P32   1(2) “Background information” means any of the following: a
2misdemeanor or felony conviction; a filing of felony criminal
3charges in state or federal court; an administrative action regarding
4a professional or occupational license; any licensee’s discharge or
5attempt to discharge, in a personal or organizational bankruptcy
6proceeding, an obligation regarding any insurance premiums or
7fiduciary funds owed to any company, including a premium finance
8company, or managing general agent; and any admission, or
9judicial finding or determination, of fraud, misappropriation or
10conversion of funds, misrepresentation, or breach of fiduciary
11duty.

12(3) “Applicant” and “licensee” include individual and
13organization applicants and licensees, and officers, directors,
14partners, members, and controlling persons (as defined in
15subdivision (b) of Section 1668.5) of an organization.

16(d) Notification to the commissioner shall be in writing and
17shall be sent within 30 days of the date the applicant or licensee
18learns of the change in background information.

19(e) The commissioner may adopt regulations necessary or
20desirable to implement this section.

begin delete
21

SEC. 7.  

Section 1764.1 of the Insurance Code is amended to
22read:

23

1764.1.  

(a) (1) Every nonadmitted insurer, in the case of
24insurance to be purchased by a home state insured pursuant to
25Section 1760, and surplus line broker, in the case of any insurance
26with a nonadmitted carrier for a home state insured to be transacted
27by the surplus line broker, shall be responsible to ensure that, at
28the time of accepting an application for an insurance policy, other
29than a renewal of that policy, issued by a nonadmitted insurer, the
30signature of the applicant on the disclosure statement set forth in
31subdivision (b) is obtained. In fulfillment of this responsibility,
32the nonadmitted insurer and the surplus line broker may rely, if it
33is reasonable under all the circumstances to do so, on the disclosure
34statement received from a licensee involved in the transaction as
35prima facie evidence that the disclosure statement and appropriate
36signature from the applicant have been obtained. The surplus line
37broker shall maintain a copy of the signed disclosure statement in
38his or her records for a period of at least five years. These records
39shall be made available to the commissioner and the insured upon
40request. This disclosure shall be signed by the applicant, and is
P33   1not subject to a limited power of attorney agreement between the
2applicant and an agent or broker or a surplus line broker. The
3disclosure statement shall be in boldface 16-point type on a
4freestanding document. In addition, every policy issued by a
5nonadmitted insurer and every certificate evidencing the placement
6of insurance shall contain, or have affixed to it by the insurer or
7surplus line broker, the disclosure statement set forth in subdivision
8(b) in boldface 16-point type on the front page of the policy.

9(2) In a case in which the applicant has not received and
10 completed the signed disclosure form required by this section, he
11or she may cancel the insurance so placed. The cancellation shall
12be on a pro rata basis as to premium, and the applicant shall be
13entitled to the return of any broker’s fees charged for the placement.

14(b) The following notice shall be provided to home state insureds
15and home state insured applicants for insurance as provided by
16subdivision (a), and shall be printed in English and in the language
17principally used by the surplus line broker and nonadmitted insurer
18to advertise, solicit, or negotiate the sale and purchase of surplus
19line insurance. The surplus line broker and nonadmitted insurer
20shall use the appropriate bracketed language for application and
21issued policy disclosures:

2223“NOTICE:
24

251. THE INSURANCE POLICY THAT YOU [HAVE
26PURCHASED] [ARE APPLYING TO PURCHASE] IS BEING
27ISSUED BY AN INSURER THAT IS NOT LICENSED BY THE
28STATE OF CALIFORNIA. THESE COMPANIES ARE CALLED
29“NONADMITTED” OR “SURPLUS LINE” INSURERS.

302. THE INSURER IS NOT SUBJECT TO THE FINANCIAL
31SOLVENCY REGULATION AND ENFORCEMENT THAT
32APPLY TO CALIFORNIA LICENSED INSURERS.

333. THE INSURER DOES NOT PARTICIPATE IN ANY OF
34THE INSURANCE GUARANTEE FUNDS CREATED BY
35CALIFORNIA LAW. THEREFORE, THESE FUNDS WILL
36NOT PAY YOUR CLAIMS OR PROTECT YOUR ASSETS IF
37THE INSURER BECOMES INSOLVENT AND IS UNABLE
38TO MAKE PAYMENTS AS PROMISED.

394. THE INSURER SHOULD BE LICENSED EITHER AS A
40FOREIGN INSURER IN ANOTHER STATE IN THE UNITED
P34   1STATES OR AS A NON-UNITED STATES (ALIEN) INSURER.
2YOU SHOULD ASK QUESTIONS OF YOUR INSURANCE
3AGENT, BROKER, OR “SURPLUS LINE” BROKER OR
4CONTACT THE CALIFORNIA DEPARTMENT OF
5INSURANCE AT THE FOLLOWING TOLL-FREE
6TELEPHONE NUMBER ____ OR INTERNET WEB SITE
7WWW.INSURANCE.CA.GOV. ASK WHETHER OR NOT THE
8INSURER IS LICENSED AS A FOREIGN OR NON-UNITED
9STATES (ALIEN) INSURER AND FOR ADDITIONAL
10INFORMATION ABOUT THE INSURER. YOU MAY ALSO
11CONTACT THE NAIC’S INTERNET WEB SITE AT
12WWW.NAIC.ORG.

135. FOREIGN INSURERS SHOULD BE LICENSED BY A
14STATE IN THE UNITED STATES AND YOU MAY CONTACT
15THAT STATE’S DEPARTMENT OF INSURANCE TO OBTAIN
16MORE INFORMATION ABOUT THAT INSURER.

176. FOR NON-UNITED STATES (ALIEN) INSURERS, THE
18INSURER SHOULD BE LICENSED BY A COUNTRY
19OUTSIDE OF THE UNITED STATES AND SHOULD BE ON
20THE NAIC’S INTERNATIONAL INSURERS DEPARTMENT
21(IID) LISTING OF APPROVED NONADMITTED
22NON-UNITED STATES INSURERS. ASK YOUR AGENT,
23BROKER, OR “SURPLUS LINE” BROKER TO OBTAIN MORE
24INFORMATION ABOUT THAT INSURER.

257. CALIFORNIA MAINTAINS A LIST OF APPROVED
26SURPLUS LINE INSURERS. ASK YOUR AGENT OR BROKER
27IF THE INSURER IS ON THAT LIST, OR VIEW THAT LIST
28AT THE INTERNET WEB SITE OF THE CALIFORNIA
29DEPARTMENT OF INSURANCE:
30WWW.INSURANCE.CA.GOV.

318. IF YOU, AS THE APPLICANT, REQUIRED THAT THE
32INSURANCE POLICY YOU HAVE PURCHASED BE BOUND
33IMMEDIATELY, EITHER BECAUSE EXISTING COVERAGE
34WAS GOING TO LAPSE WITHIN TWO BUSINESS DAYS OR
35BECAUSE YOU WERE REQUIRED TO HAVE COVERAGE
36WITHIN TWO BUSINESS DAYS, AND YOU DID NOT
37RECEIVE THIS DISCLOSURE FORM AND A REQUEST FOR
38YOUR SIGNATURE UNTIL AFTER COVERAGE BECAME
39EFFECTIVE, YOU HAVE THE RIGHT TO CANCEL THIS
40POLICY WITHIN FIVE DAYS OF RECEIVING THIS
P35   1DISCLOSURE. IF YOU CANCEL COVERAGE, THE PREMIUM
2WILL BE PRORATED AND ANY BROKER’S FEE CHARGED
3FOR THIS INSURANCE WILL BE RETURNED TO YOU.”


5(c) When a contract is issued to an industrial insured, neither
6the nonadmitted insurer nor the surplus line broker is required to
7provide the notice required in this section except on the
8confirmation of insurance, the certificate of placement, or the
9policy, whichever is first provided to the insured, nor is the insurer
10or surplus line broker required to obtain the insured’s signature.
11The producer shall ensure that the notice affixed to the confirmation
12of insurance, certificate of placement, or the policy is provided to
13the insured. The producer shall insert the current toll-free telephone
14number of the Department of Insurance as provided in paragraph
154 of the notice.

16(1) An industrial insured is an insured that does both of the
17following:

18(A) Employs at least 25 employees on average during the prior
1912 months.

20(B) Has aggregate annual premiums for insurance for all risks
21other than workers’ compensation and health coverage totaling no
22less than twenty-five thousand dollars ($25,000) or obtains
23insurance through the services of a full-time employee acting as
24an insurance manager or a continuously retained insurance
25consultant. A “continuously retained insurance consultant” does
26not include: (i) an agent or broker through whom the insurance is
27being placed, (ii) a subagent or subproducer involved in the
28transaction, or (iii) an agent or broker that is a business organization
29employing or contracting with a person mentioned in clauses (i)
30and (ii).

31(2) The surplus line broker shall be responsible for ensuring
32that the applicant is an industrial insured. A surplus line broker
33who reasonably relies on information provided in good faith by
34the applicant, whether directly or through the producer, shall be
35deemed to be in compliance with this requirement.

36(d) For purposes of compliance with the requirement of
37subdivision (a) that the signature of the applicant be obtained, the
38following shall apply:

39(1) If the insurance transaction is not conducted at an in-person,
40face-to-face meeting, the applicant’s signature on the disclosure
P36   1form may be transmitted by the applicant to the agent or broker
2via facsimile or comparable electronic transmittal.

3(2) In the case of commercial lines coverage, or personal
4insurance coverage subject to Section 675 and any umbrella
5coverage associated therewith, where an applicant requires that
6insurance coverage be bound immediately, either because existing
7coverage will lapse within two business days of the time the
8insurance is bound or because the applicant is required to have
9 coverage in place within two business days, and the applicant
10cannot meet in person with the agent or broker to sign the
11disclosure form, the agent or broker may obtain the signature of
12the applicant within five days of binding coverage, provided that
13the applicant may cancel the insurance so placed within five days
14of receiving the disclosure form from the agent or broker. The
15cancellation shall be on a pro rata basis, and the applicant shall be
16entitled to the rescission or return of any broker’s fees charged for
17the placement. When a policy is canceled, the broker shall inform
18the applicant that the broker’s fee must be returned and that the
19premium must be prorated.

20(e) Notwithstanding subdivision (a), this section shall not apply
21to insurance issued or delivered in this state by a nonadmitted
22Mexican insurer by and through a surplus line broker affording
23coverage exclusively in the Republic of Mexico on property located
24temporarily or permanently in, or operations conducted temporarily
25or permanently within, the Republic of Mexico.

end delete
26begin insert

begin insertSEC. 12.end insert  

end insert

begin insertSection 1764.1 of the end insertbegin insertInsurance Codeend insertbegin insert is amended to
27read:end insert

28

1764.1.  

(a) (1) Every nonadmitted insurer, in the case of
29insurance to be purchased by a home state insured pursuant to
30Section 1760, and surplus line broker, in the case of any insurance
31with a nonadmitted carrier for a home state insured to be transacted
32by the surplus line broker, shall be responsible to ensure that, at
33the time of accepting an application for an insurance policy, other
34than a renewal of that policy, issued by a nonadmitted insurer, the
35signature of the applicant on the disclosure statement set forth in
36subdivision (b) is obtained. In fulfillment of this responsibility,
37the nonadmitted insurer and the surplus line broker may rely, if it
38is reasonable under all the circumstances to do so, on the disclosure
39statement received from a licensee involved in the transaction as
40prima facie evidence that the disclosure statement and appropriate
P37   1signature from the applicant have been obtained. The surplus line
2broker shall maintain a copy of the signed disclosure statement in
3his or her records for a period of at least five years. These records
4shall be made available to the commissioner and the insured upon
5request. This disclosure shall be signed by the applicant, and is
6not subject to a limited power of attorney agreement between the
7applicant and an agent or broker or a surplus line broker. The
8disclosure statement shall be in boldface 16-point type on a
9freestanding document. In addition, every policy issued by a
10nonadmitted insurer and every certificate evidencing the placement
11of insurance shall contain, or have affixed to it by the insurer or
12surplus line broker, the disclosure statement set forth in subdivision
13(b) in boldface 16-point type on the front page of the policy.

14(2) In a case in which the applicant has not received and
15 completed the signed disclosure form required by this section, he
16or she may cancel the insurance so placed. The cancellation shall
17be on a pro rata basis as to premium, and the applicant shall be
18entitled to the return of any broker’s fees charged for the placement.

19(b) The following notice shall be provided to home state insureds
20and home state insured applicants for insurance as provided by
21subdivision (a), and shall be printed in English and in the language
22principally used by the surplus line broker and nonadmitted insurer
23to advertise, solicit, or negotiate the sale and purchase of surplus
24line insurance. The surplus line broker and nonadmitted insurer
25shall use the appropriate bracketed language for application and
26issued policy disclosures:

2728“NOTICE:
29

301. THE INSURANCE POLICY THAT YOU [HAVE
31PURCHASED] [ARE APPLYING TO PURCHASE] IS BEING
32ISSUED BY AN INSURER THAT IS NOT LICENSED BY THE
33STATE OF CALIFORNIA. THESE COMPANIES ARE CALLED
34“NONADMITTED” OR “SURPLUS LINE” INSURERS.

352. THE INSURER IS NOT SUBJECT TO THE FINANCIAL
36SOLVENCY REGULATION AND ENFORCEMENT THAT
37APPLY TO CALIFORNIA LICENSED INSURERS.

383. THE INSURER DOES NOT PARTICIPATE IN ANY OF
39THE INSURANCE GUARANTEE FUNDS CREATED BY
40CALIFORNIA LAW. THEREFORE, THESE FUNDS WILL
P38   1NOT PAY YOUR CLAIMS OR PROTECT YOUR ASSETS IF
2THE INSURER BECOMES INSOLVENT AND IS UNABLE
3TO MAKE PAYMENTS AS PROMISED.

44. THE INSURER SHOULD BE LICENSED EITHER AS A
5FOREIGN INSURER IN ANOTHER STATE IN THE UNITED
6STATES OR AS A NON-UNITED STATES (ALIEN) INSURER.
7YOU SHOULD ASK QUESTIONS OF YOUR INSURANCE
8AGENT, BROKER, OR “SURPLUS LINE” BROKER OR
9CONTACT THE CALIFORNIA DEPARTMENT OF
10INSURANCE AT THE FOLLOWING TOLL-FREE
11TELEPHONE NUMBER ____. ASK WHETHER OR NOT THE
12INSURER IS LICENSED AS A FOREIGN OR NON-UNITED
13STATES (ALIEN) INSURER AND FOR ADDITIONAL
14INFORMATION ABOUT THE INSURER. YOU MAY ALSO
15CONTACT THE NAIC’S INTERNET WEB SITE AT
16WWW.NAIC.ORG.

175. FOREIGN INSURERS SHOULD BE LICENSED BY A
18STATE IN THE UNITED STATES AND YOU MAY CONTACT
19THAT STATE’S DEPARTMENT OF INSURANCE TO OBTAIN
20MORE INFORMATION ABOUT THAT INSURER.

216. FOR NON-UNITED STATES (ALIEN) INSURERS, THE
22INSURER SHOULD BE LICENSED BY A COUNTRY
23OUTSIDE OF THE UNITED STATES AND SHOULD BE ON
24THE NAIC’S INTERNATIONAL INSURERS DEPARTMENT
25(IID) LISTING OF APPROVED NONADMITTED
26NON-UNITED STATES INSURERS. ASK YOUR AGENT,
27BROKER, OR “SURPLUS LINE” BROKER TO OBTAIN MORE
28INFORMATION ABOUT THAT INSURER.

297. CALIFORNIA MAINTAINS A LIST OF APPROVED
30SURPLUS LINE INSURERS. ASK YOUR AGENT OR BROKER
31IF THE INSURER IS ON THAT LIST, OR VIEW THAT LIST
32AT THE INTERNET WEB SITE OF THE CALIFORNIA
33DEPARTMENT OF INSURANCE:
34WWW.INSURANCE.CA.GOV.

358. IF YOU, AS THE APPLICANT, REQUIRED THAT THE
36INSURANCE POLICY YOU HAVE PURCHASED BE BOUND
37IMMEDIATELY, EITHER BECAUSE EXISTING COVERAGE
38WAS GOING TO LAPSE WITHIN TWO BUSINESS DAYS OR
39BECAUSE YOU WERE REQUIRED TO HAVE COVERAGE
40WITHIN TWO BUSINESS DAYS, AND YOU DID NOT
P39   1RECEIVE THIS DISCLOSURE FORM AND A REQUEST FOR
2YOUR SIGNATURE UNTIL AFTER COVERAGE BECAME
3EFFECTIVE, YOU HAVE THE RIGHT TO CANCEL THIS
4POLICY WITHIN FIVE DAYS OF RECEIVING THIS
5DISCLOSURE. IF YOU CANCEL COVERAGE, THE PREMIUM
6WILL BE PRORATED AND ANY BROKER’S FEE CHARGED
7FOR THIS INSURANCE WILL BE RETURNED TO YOU.”


9(c) When a contract is issued to an industrial insured, neither
10the nonadmitted insurer nor the surplus line broker is required to
11provide the notice required in this section except on the
12confirmation of insurance, the certificate of placement, or the
13policy, whichever is first provided to the insured, nor is the insurer
14or surplus line broker required to obtain the insured’s signature.
15The producer shall ensure that the notice affixed to the confirmation
16of insurance, certificate of placement, or the policy is provided to
17the insured. The producer shall insert the current toll-free telephone
18number of the Department of Insurance as provided in paragraph
194 of the notice.

20(1) An industrial insured is an insured that does both of the
21following:

22(A) Employs at least 25 employees on average during the prior
2312 months.

24(B) Has aggregate annual premiums for insurance for all risks
25other than workers’ compensation and health coverage totaling no
26less than twenty-five thousand dollars ($25,000) or obtains
27insurance through the services of a full-time employee acting as
28an insurance manager or a continuously retained insurance
29consultant. A “continuously retained insurance consultant” does
30not include: (i) an agent or broker through whom the insurance is
31being placed, (ii) a subagent or subproducer involved in the
32transaction, or (iii) an agent or broker that is a business organization
33employing or contracting with a person mentioned in clauses (i)
34and (ii).

35(2) The surplus line broker shall be responsible for ensuring
36that the applicant is an industrial insured. A surplus line broker
37who reasonably relies on information provided in good faith by
38the applicant, whether directly or through the producer, shall be
39deemed to be in compliance with this requirement.

P40   1(d) For purposes of compliance with the requirement of
2subdivision (a) that the signature of the applicant be obtained, the
3following shall apply:

4(1) If the insurance transaction is not conducted at an in-person,
5face-to-face meeting, the applicant’s signature on the disclosure
6form may be transmitted by the applicant to the agent or broker
7via facsimile or comparable electronic transmittal.

8(2) In the case of commercial lines coverage, or personal
9insurance coverage subject to Section 675 and any umbrella
10coverage associated therewith, where an applicant requires that
11insurance coverage be bound immediately, either because existing
12coverage will lapse within two business days of the time the
13insurance is bound or because the applicant is required to have
14coverage in place within two business days, and the applicant
15cannot meet in person with the agent or broker to sign the
16disclosure form, the agent or broker may obtain the signature of
17the applicant within five days of binding coverage, provided that
18the applicant may cancel the insurance so placed within five days
19of receiving the disclosure form from the agent or broker. The
20cancellation shall be on a pro rata basis, and the applicant shall be
21entitled to the rescission or return of any broker’s fees charged for
22the placement. When a policy is canceled, the broker shall inform
23the applicant that the broker’s fee must be returned and that the
24premium must be prorated.

25(e) Notwithstanding subdivision (a), this section shall not apply
26to insurance issued or delivered in this state by a nonadmitted
27Mexican insurer by and through a surplus line broker affording
28coverage exclusively in the Republic of Mexico on property located
29temporarily or permanently in, or operations conducted temporarily
30or permanently within, the Republic of Mexico.

begin insert

31(f) This section shall remain in effect only until January 1, 2017,
32and as of that date is repealed, unless a later enacted statute, that
33is enacted before January 1, 2017, deletes or extends that date.

end insert
34begin insert

begin insertSEC. 13.end insert  

end insert

begin insertSection 1764.1 is added to the end insertbegin insertInsurance Codeend insertbegin insert, to
35read:end insert

begin insert
36

begin insert1764.1.end insert  

(a) (1) Every nonadmitted insurer, in the case of
37insurance to be purchased by a home state insured pursuant to
38Section 1760, and surplus line broker, in the case of any insurance
39with a nonadmitted carrier for a home state insured to be
40transacted by the surplus line broker, shall be responsible to ensure
P41   1that, at the time of accepting an application for an insurance
2policy, other than a renewal of that policy, issued by a nonadmitted
3insurer, the signature of the applicant on the disclosure statement
4set forth in subdivision (b) is obtained. In fulfillment of this
5responsibility, the nonadmitted insurer and the surplus line broker
6may rely, if it is reasonable under all the circumstances to do so,
7on the disclosure statement received from a licensee involved in
8the transaction as prima facie evidence that the disclosure
9statement and appropriate signature from the applicant have been
10obtained. The surplus line broker shall maintain a copy of the
11signed disclosure statement in his or her records for a period of
12at least five years. These records shall be made available to the
13commissioner and the insured upon request. This disclosure shall
14be signed by the applicant, and is not subject to a limited power
15of attorney agreement between the applicant and an agent or
16broker or a surplus line broker. The disclosure statement shall be
17in boldface 16-point type on a freestanding document. In addition,
18every policy issued by a nonadmitted insurer and every certificate
19evidencing the placement of insurance shall contain, or have
20affixed to it by the insurer or surplus line broker, the disclosure
21statement set forth in subdivision (b) in boldface 16-point type on
22the front page of the policy.

23(2) In a case in which the applicant has not received and
24 completed the signed disclosure form required by this section, he
25or she may cancel the insurance so placed. The cancellation shall
26be on a pro rata basis as to premium, and the applicant shall be
27entitled to the return of any broker’s fees charged for the
28placement.

29(b) The following notice shall be provided to home state insureds
30and home state insured applicants for insurance as provided by
31subdivision (a), and shall be printed in English and in the language
32principally used by the surplus line broker and nonadmitted insurer
33to advertise, solicit, or negotiate the sale and purchase of surplus
34line insurance. The surplus line broker and nonadmitted insurer
35shall use the appropriate bracketed language for application and
36issued policy disclosures:

P42   1“NOTICE:
2

31. THE INSURANCE POLICY THAT YOU [HAVE
4PURCHASED] [ARE APPLYING TO PURCHASE] IS BEING
5ISSUED BY AN INSURER THAT IS NOT LICENSED BY THE
6STATE OF CALIFORNIA. THESE COMPANIES ARE CALLED
7“NONADMITTED” OR “SURPLUS LINE” INSURERS.

82. THE INSURER IS NOT SUBJECT TO THE FINANCIAL
9SOLVENCY REGULATION AND ENFORCEMENT THAT APPLY
10TO CALIFORNIA LICENSED INSURERS.

113. THE INSURER DOES NOT PARTICIPATE IN ANY OF THE
12INSURANCE GUARANTEE FUNDS CREATED BY CALIFORNIA
13LAW. THEREFORE, THESE FUNDS WILL NOT PAY YOUR
14CLAIMS OR PROTECT YOUR ASSETS IF THE INSURER
15BECOMES INSOLVENT AND IS UNABLE TO MAKE PAYMENTS
16AS PROMISED.

174. THE INSURER SHOULD BE LICENSED EITHER AS A
18FOREIGN INSURER IN ANOTHER STATE IN THE UNITED
19STATES OR AS A NON-UNITED STATES (ALIEN) INSURER.
20YOU SHOULD ASK QUESTIONS OF YOUR INSURANCE
21AGENT, BROKER, OR “SURPLUS LINE” BROKER OR
22CONTACT THE CALIFORNIA DEPARTMENT OF INSURANCE
23AT THE FOLLOWING TOLL-FREE TELEPHONE NUMBER
24____ OR INTERNET WEB SITE WWW.INSURANCE.CA.GOV.
25ASK WHETHER OR NOT THE INSURER IS LICENSED AS A
26FOREIGN OR NON-UNITED STATES (ALIEN) INSURER AND
27FOR ADDITIONAL INFORMATION ABOUT THE INSURER.
28YOU MAY ALSO CONTACT THE NAIC’S INTERNET WEB SITE
29AT WWW.NAIC.ORG.

305. FOREIGN INSURERS SHOULD BE LICENSED BY A STATE
31IN THE UNITED STATES AND YOU MAY CONTACT THAT
32STATE’S DEPARTMENT OF INSURANCE TO OBTAIN MORE
33INFORMATION ABOUT THAT INSURER.

346. FOR NON-UNITED STATES (ALIEN) INSURERS, THE
35INSURER SHOULD BE LICENSED BY A COUNTRY OUTSIDE
36OF THE UNITED STATES AND SHOULD BE ON THE NAIC’S
37INTERNATIONAL INSURERS DEPARTMENT (IID) LISTING
38OF APPROVED NONADMITTED NON-UNITED STATES
39INSURERS. ASK YOUR AGENT, BROKER, OR “SURPLUS LINE”
P43   1BROKER TO OBTAIN MORE INFORMATION ABOUT THAT
2INSURER.

37. CALIFORNIA MAINTAINS A LIST OF APPROVED
4SURPLUS LINE INSURERS. ASK YOUR AGENT OR BROKER
5IF THE INSURER IS ON THAT LIST, OR VIEW THAT LIST AT
6THE INTERNET WEB SITE OF THE CALIFORNIA
7DEPARTMENT OF INSURANCE: WWW.INSURANCE.CA.GOV.

88. IF YOU, AS THE APPLICANT, REQUIRED THAT THE
9INSURANCE POLICY YOU HAVE PURCHASED BE BOUND
10IMMEDIATELY, EITHER BECAUSE EXISTING COVERAGE
11WAS GOING TO LAPSE WITHIN TWO BUSINESS DAYS OR
12BECAUSE YOU WERE REQUIRED TO HAVE COVERAGE
13WITHIN TWO BUSINESS DAYS, AND YOU DID NOT RECEIVE
14THIS DISCLOSURE FORM AND A REQUEST FOR YOUR
15SIGNATURE UNTIL AFTER COVERAGE BECAME EFFECTIVE,
16YOU HAVE THE RIGHT TO CANCEL THIS POLICY WITHIN
17FIVE DAYS OF RECEIVING THIS DISCLOSURE. IF YOU
18CANCEL COVERAGE, THE PREMIUM WILL BE PRORATED
19AND ANY BROKER’S FEE CHARGED FOR THIS INSURANCE
20WILL BE RETURNED TO YOU.”


22(c) When a contract is issued to an industrial insured, neither
23the nonadmitted insurer nor the surplus line broker is required to
24provide the notice required in this section except on the
25confirmation of insurance, the certificate of placement, or the
26policy, whichever is first provided to the insured, nor is the insurer
27or surplus line broker required to obtain the insured’s signature.
28The producer shall ensure that the notice affixed to the
29confirmation of insurance, certificate of placement, or the policy
30is provided to the insured. The producer shall insert the current
31toll-free telephone number of the Department of Insurance as
32provided in paragraph 4 of the notice.

33(1) An industrial insured is an insured that does both of the
34following:

35(A) Employs at least 25 employees on average during the prior
3612 months.

37(B) Has aggregate annual premiums for insurance for all risks
38other than workers’ compensation and health coverage totaling
39no less than twenty-five thousand dollars ($25,000) or obtains
40insurance through the services of a full-time employee acting as
P44   1an insurance manager or a continuously retained insurance
2consultant. A “continuously retained insurance consultant” does
3not include: (i) an agent or broker through whom the insurance
4is being placed, (ii) a subagent or subproducer involved in the
5transaction, or (iii) an agent or broker that is a business
6organization employing or contracting with a person mentioned
7in clauses (i) and (ii).

8(2) The surplus line broker shall be responsible for ensuring
9that the applicant is an industrial insured. A surplus line broker
10who reasonably relies on information provided in good faith by
11the applicant, whether directly or through the producer, shall be
12deemed to be in compliance with this requirement.

13(d) For purposes of compliance with the requirement of
14subdivision (a) that the signature of the applicant be obtained, the
15following shall apply:

16(1) If the insurance transaction is not conducted at an in-person,
17face-to-face meeting, the applicant’s signature on the disclosure
18form may be transmitted by the applicant to the agent or broker
19via facsimile or comparable electronic transmittal.

20(2) In the case of commercial lines coverage, or personal
21insurance coverage subject to Section 675 and any umbrella
22coverage associated therewith, where an applicant requires that
23insurance coverage be bound immediately, either because existing
24coverage will lapse within two business days of the time the
25insurance is bound or because the applicant is required to have
26coverage in place within two business days, and the applicant
27cannot meet in person with the agent or broker to sign the
28disclosure form, the agent or broker may obtain the signature of
29the applicant within five days of binding coverage, provided that
30the applicant may cancel the insurance so placed within five days
31of receiving the disclosure form from the agent or broker. The
32cancellation shall be on a pro rata basis, and the applicant shall
33be entitled to the rescission or return of any broker’s fees charged
34for the placement. When a policy is canceled, the broker shall
35inform the applicant that the broker’s fee must be returned and
36that the premium must be prorated.

37(e) Notwithstanding subdivision (a), this section shall not apply
38to insurance issued or delivered in this state by a nonadmitted
39Mexican insurer by and through a surplus line broker affording
40coverage exclusively in the Republic of Mexico on property located
P45   1temporarily or permanently in, or operations conducted
2temporarily or permanently within, the Republic of Mexico.

3(f) This section shall become operative on January 1, 2017.

end insert
4

begin deleteSEC. 8.end delete
5begin insertSEC. 14.end insert  

Section 1861.02 of the Insurance Code is amended
6to read:

7

1861.02.  

(a) Rates and premiums for an automobile insurance
8policy, as described in subdivision (a) of Section 660, shall be
9determined by application of the following factors in decreasing
10order of importance:

11(1) The insured’s driving safety record.

12(2) The number of miles he or she drives annually.

13(3) The number of years of driving experience the insured has
14had.

15(4) Those other factors that the commissioner may adopt by
16regulation and that have a substantial relationship to the risk of
17loss. The regulations shall set forth the respective weight to be
18given each factor in determining automobile rates and premiums.
19Notwithstanding any other provision of law, the use of any criterion
20without approval shall constitute unfair discrimination.

21(b) (1) Every person who meets the criteria of Section 1861.025
22shall be qualified to purchase a Good Driver Discount policy from
23the insurer of his or her choice. An insurer shall not refuse to offer
24and sell a Good Driver Discount policy to any person who meets
25the standards of this subdivision.

26(2) The rate charged for a Good Driver Discount policy shall
27comply with subdivision (a) and shall be at least 20 percent below
28the rate the insured would otherwise have been charged for the
29 same coverage. Rates for Good Driver Discount policies shall be
30approved pursuant to this article.

31(3) (A) This subdivision shall not prevent a reciprocal insurer,
32organized prior to November 8, 1988, by a motor club holding a
33certificate of authority under Chapter 2 (commencing with Section
3412160) of Part 5 of Division 2, and that requires membership in
35the motor club as a condition precedent to applying for insurance
36from requiring membership in the motor club as a condition
37precedent to obtaining insurance described in this subdivision.

38(B) This subdivision shall not prevent an insurer that requires
39membership in a specified voluntary, nonprofit organization, which
40was in existence prior to November 8, 1988, as a condition
P46   1precedent to applying for insurance issued to or through those
2membership groups, including franchise groups, from requiring
3that membership as a condition to applying for the coverage offered
4to members of the group, provided that it or an affiliate also offers
5and sells coverage to those who are not members of those
6membership groups.

7(C) However, all of the following conditions shall be applicable
8to the insurance authorized by subparagraphs (A) and (B):

9(i) Membership, if conditioned, is conditioned only on timely
10payment of membership dues and other bona fide criteria not based
11upon driving record or insurance, provided that membership in a
12motor club may not be based on residence in any area within the
13state.

14(ii) Membership dues are paid solely for and in consideration
15of the membership and membership benefits and bear a reasonable
16relationship to the benefits provided. The amount of the dues shall
17not depend on whether the member purchases insurance offered
18by the membership organization. None of those membership dues
19or any portion thereof shall be transferred by the membership
20organization to the insurer, or any affiliate of the insurer,
21attorney-in-fact, subsidiary, or holding company thereof, provided
22that this provision shall not prevent any bona fide transaction
23between the membership organization and those entities.

24(iii) Membership provides bona fide services or benefits in
25addition to the right to apply for insurance. Those services shall
26be reasonably available to all members within each class of
27membership.

28Any insurer that violates clause (i), (ii), or (iii) shall be subject
29to the penalties set forth in Section 1861.14.

30(c) The absence of prior automobile insurance coverage, in and
31of itself, shall not be a criterion for determining eligibility for a
32Good Driver Discount policy, or generally for automobile rates,
33premiums, or insurability.

34(d) An insurer may refuse to sell a Good Driver Discount policy
35insuring a motorcycle unless all named insureds have been licensed
36to drive a motorcycle for the previous three years.

37(e) This section shall become operative on November 8, 1989.
38The commissioner shall adopt regulations implementing this
39section and insurers may submit applications pursuant to this article
P47   1which comply with those regulations prior to that date, provided
2that no such application shall be approved prior to that date.

3

begin deleteSEC. 9.end delete
4begin insertSEC. 15.end insert  

Section 1861.025 of the Insurance Code is amended
5to read:

6

1861.025.  

A person is qualified to purchase a Good Driver
7Discount policy if he or she meets all of the following criteria:

8(a) He or she has been licensed to drive a motor vehicle for the
9previous three years.

10(b) During the previous three years, he or she has not done any
11of the following:

12(1) Had more than one violation point count determined as
13provided by subdivision (a), (b), (c), (d), (f), or (j) of, or paragraph
14(1) of subdivision (i) of, Section 12810 of the Vehicle Code, but
15subject to the following modifications:

16(A) For the purposes of this section, the driver of a motor vehicle
17involved in an accident for which he or she was principally at fault
18that resulted only in damage to property shall receive one violation
19point count, in addition to any other violation points that may be
20imposed for this accident.

21(B) If, under Section 488 or 488.5, an insurer is prohibited from
22increasing the premium on a policy on account of a violation, that
23violation shall not be included in determining the point count of
24the person.

25(C) If a violation is required to be reported under Section 1816
26of the Vehicle Code, or under Section 784 of the Welfare and
27Institutions Code, or any other provision requiring the reporting
28of a violation by a minor, the violation shall be included for the
29purposes of this section in determining the point count in the same
30manner as is applicable to adult violations.

31(2) Had more than one dismissal pursuant to Section 1803.5 of
32the Vehicle Code that was not made confidential pursuant to
33Section 1808.7 of the Vehicle Code, in the 36-month period for
34violations that would have resulted in the imposition of more than
35one violation point count under paragraph (1) if the complaint had
36not been dismissed.

37(3) Was the driver of a motor vehicle involved in an accident
38that resulted in bodily injury or in the death of any person and was
39principally at fault. The commissioner shall adopt regulations
P48   1setting guidelines to be used by insurers for the determination of
2fault for the purposes of this paragraph and paragraph (1).

3(c) During the period commencing on January 1, 1999, or the
4date 10 years prior to the date of application for the issuance or
5renewal of the Good Driver Discount policy, whichever is later,
6and ending on the date of the application for the issuance or
7renewal of the Good Driver Discount policy, he or she has not
8been convicted of a violation of Section 23140, 23152, or 23153
9of the Vehicle Code, a felony violation of Section 23550 or 23566,
10or former Section 23175 or, as those sections read on January 1,
111999, of the Vehicle Code, or a violation of Section 191.5 or
12subdivision (a) of Section 192.5 of the Penal Code.

13(d) Any person who claims that he or she meets the criteria of
14subdivisions (a), (b), and (c) based entirely or partially on a driver’s
15license and driving experience acquired anywhere other than in
16the United States or Canada is rebuttably presumed to be qualified
17to purchase a Good Driver Discount policy if he or she has been
18licensed to drive in the United States or Canada for at least the
19previous 18 months and meets the criteria of subdivisions (a), (b),
20and (c) for that period.

21

begin deleteSEC. 10.end delete
22begin insertSEC. 16.end insert  

Section 10111.2 of the Insurance Code is amended
23to read:

24

10111.2.  

(a) Under a policy of disability insurance other than
25health insurance, as defined in Section 106, including a policy of
26disability income insurance, as defined in subdivision (i) of Section
27799.01, payment of benefits to the insured shall be made within
2830 calendar days after the insurer has received all information
29needed to determine liability for a claim. However, the
3030-calendar-day period shall not include any time during which
31the insurer is doing any of the following:

32(1) Awaiting a response for relevant medical information from
33a health care provider.

34(2) Awaiting a response from the claimant to a request for
35additional relevant information.

36(3) Investigating possible fraud that has been reported to the
37department’s Fraud Division in compliance with subdivision (a)
38of Section 1872.4.

39(b) If the insurer has not received all information needed to
40determine liability for a claim within 30 calendar days after receipt
P49   1of the claim, the insurer shall notify the insured in writing and
2include a written list of all information it reasonably needs to
3determine liability for the claim. In that event, the 30-calendar-day
4period set out in subdivision (a) shall commence when the insured
5has provided to the insurer all information in that notification. If
6no notice is sent by the insurer within 30 calendar days after the
7claim is filed by the insured, interest shall begin to accrue on the
8payment of benefits on the 31st calendar day after receipt of the
9claim, at the rate of 10 percent per year.

10(c) When the insurer has received all information needed to
11determine liability for a claim, and the insurer determines that
12liability exists and fails to make payment of benefits to the insured
13within 30 calendar days after the insurer has received that
14information, any delayed payment shall bear interest, beginning
15the 31st calendar day, at the rate of 10 percent per year. Liability
16shall, in all cases, be determined by the insurer within 30 calendar
17days of receiving all information set out in the insurer’s written
18notification to the insured.

19(d) Nothing in this section is intended to restrict any other
20remedies available to an insured by statute or any other law.

21

begin deleteSEC. 11.end delete
22begin insertSEC. 17.end insert  

Section 10127.13 of the Insurance Code, as added
23by Section 8 of Chapter 166 of the Statutes of 2014, is amended
24to read:

25

10127.13.  

(a) All individual life insurance policies and
26individual annuity contracts for senior citizens that contain a charge
27upon surrender, partial surrender, excess withdrawal, or penalties
28upon surrender shall contain a notice disclosing the location of all
29of the following: the charge, the charge time period, the charge
30information, and any associated penalty information. The notice
31shall be in bold 12-point type on the front of the policy jacket or
32on the cover page of the policy.

33(b) A policy shall have just one cover page. If the notice required
34by this section and the statutorily required right to examine notice
35are both on the cover page, as opposed to the front cover of the
36policy jacket, they shall appear on the same page.

37(c) General references to “policy” in this section refer to both
38life insurance policies and annuity contracts.

39(d) This section shall become operative on July 1, 2015.

begin delete
P50   1

SEC. 12.  

Section 10169 of the Insurance Code, as added by
2Section 8 of Chapter 872 of the Statutes of 2012, is amended to
3read:

4

10169.  

(a) Commencing January 1, 2001, there is hereby
5established in the department the Independent Medical Review
6System.

7(b) For the purposes of this chapter, “disputed health care
8service” means any health care service eligible for coverage and
9payment under a disability insurance contract that has been denied,
10modified, or delayed by a decision of the insurer, or by one of its
11contracting providers, in whole or in part due to a finding that the
12service is not medically necessary. A decision regarding a disputed
13health care service relates to the practice of medicine and is not a
14coverage decision. A disputed health care service does not include
15services provided by a group or individual policy of vision-only
16or dental-only coverage, except to the extent that (1) the service
17involves the practice of medicine, or (2) is provided pursuant to a
18contract with a disability insurer that covers hospital, medical, or
19surgical benefits. If an insurer, or one of its contracting providers,
20issues a decision denying, modifying, or delaying health care
21services, based in whole or in part on a finding that the proposed
22health care services are not a covered benefit under the contract
23that applies to the insured, the statement of decision shall clearly
24specify the provision in the contract that excludes that coverage.

25(c) For the purposes of this chapter, “coverage decision” means
26the approval or denial of health care services by a disability insurer,
27or by one of its contracting entities, substantially based on a finding
28that the provision of a particular service is included or excluded
29as a covered benefit under the terms and conditions of the disability
30insurance contract. A coverage decision does not encompass a
31 disability insurer or contracting provider decision regarding a
32disputed health care service.

33(d) (1) All insured grievances involving a disputed health care
34service are eligible for review under the Independent Medical
35Review System if the requirements of this article are met. If the
36department finds that an insured grievance involving a disputed
37health care service does not meet the requirements of this article
38for review under the Independent Medical Review System, the
39insured request for review shall be treated as a request for the
40department to review the grievance. All other insured grievances,
P51   1including grievances involving coverage decisions, remain eligible
2for review by the department.

3(2) In any case in which an insured or provider asserts that a
4decision to deny, modify, or delay health care services was based,
5in whole or in part, on consideration of medical necessity, the
6department shall have the final authority to determine whether the
7grievance is more properly resolved pursuant to an independent
8medical review as provided under this article.

9(3) The department shall be the final arbiter when there is a
10question as to whether an insured grievance is a disputed health
11care service or a coverage decision. The department shall establish
12a process to complete an initial screening of an insured grievance.
13If there appears to be any medical necessity issue, the grievance
14shall be resolved pursuant to an independent medical review as
15provided under this article.

16(e) Every disability insurance contract that is issued, amended,
17renewed, or delivered in this state on or after January 1, 2000, shall
18provide an insured with the opportunity to seek an independent
19medical review whenever health care services have been denied,
20modified, or delayed by the insurer, or by one of its contracting
21providers, if the decision was based in whole or in part on a finding
22that the proposed health care services are not medically necessary.
23For purposes of this article, an insured may designate an agent to
24act on his or her behalf. The provider may join with or otherwise
25assist the insured in seeking an independent medical review, and
26may advocate on behalf of the insured.

27(f) Medicare beneficiaries enrolled in Medicare + Choice
28products shall not be excluded unless expressly preempted by
29federal law.

30(g) The department may seek to integrate the quality of care
31and consumer protection provisions, including remedies, of the
32Independent Medical Review System with related dispute
33resolution procedures of other health care agency programs,
34including the Medicare program, in a way that minimizes the
35potential for duplication, conflict, and added costs. Nothing in this
36subdivision shall be construed to limit any rights conferred upon
37insureds under this chapter.

38(h) The independent medical review process authorized by this
39article is in addition to any other procedures or remedies that may
40be available.

P52   1(i) Every disability insurer shall prominently display in every
2insurer member handbook or relevant informational brochure, in
3every insurance contract, on insured evidence of coverage forms,
4on copies of insurer procedures for resolving grievances, on letters
5of denials issued by either the insurer or its contracting
6organization, and on all written responses to grievances,
7information concerning the right of an insured to request an
8independent medical review when the insured believes that health
9care services have been improperly denied, modified, or delayed
10by the insurer, or by one of its contracting providers. The
11department’s telephone number, 1-800-927-4357, and Internet
12Web site, www.insurance.ca.gov, shall also be displayed.

13(j) An insured may apply to the department for an independent
14medical review when all of the following conditions are met:

15(1) (A) The insured’s provider has recommended a health care
16service as medically necessary, or

17(B) The insured has received urgent care or emergency services
18that a provider determined was medically necessary, or

19(C) The insured, in the absence of a provider recommendation
20under subparagraph (A) or the receipt of urgent care or emergency
21services by a provider under subparagraph (B), has been seen by
22a contracting provider for the diagnosis or treatment of the medical
23condition for which the insured seeks independent review. The
24insurer shall expedite access to a contracting provider upon request
25of an insured. The contracting provider need not recommend the
26disputed health care service as a condition for the insured to be
27eligible for an independent review.

28For purposes of this article, the insured’s provider may be a
29noncontracting provider. However, the insurer shall have no
30liability for payment of services provided by a noncontracting
31provider, except as provided pursuant to Section 10169.3.

32(2) The disputed health care service has been denied, modified,
33or delayed by the insurer, or by one of its contracting providers,
34based in whole or in part on a decision that the health care service
35is not medically necessary.

36(3) The insured has filed a grievance with the insurer or its
37contracting provider, and the disputed decision is upheld or the
38grievance remains unresolved after 30 days. The insured shall not
39be required to participate in the insurer’s grievance process for
40more than 30 days. In the case of a grievance that requires
P53   1expedited review, the insured shall not be required to participate
2in the insurer’s grievance process for more than three days.

3(k) An insured may apply to the department for an independent
4medical review of a decision to deny, modify, or delay health care
5services, based in whole or in part on a finding that the disputed
6health care services are not medically necessary, within six months
7of any of the qualifying periods or events under subdivision (j).
8The commissioner may extend the application deadline beyond
9six months if the circumstances of a case warrant the extension.

10(l) The insured shall pay no application or processing fees of
11any kind.

12(m) As part of its notification to the insured regarding a
13disposition of the insured’s grievance that denies, modifies, or
14delays health care services, the insurer shall provide the insured
15with a one- or two-page application form approved by the
16department, and an addressed envelope, which the insured may
17return to initiate an independent medical review. The insurer shall
18include on the form any information required by the department
19to facilitate the completion of the independent medical review,
20such as the insured’s diagnosis or condition, the nature of the
21disputed health care service sought by the insured, a means to
22identify the insured’s case, and any other material information.
23The form shall also include the following:

24(1) Notice that a decision not to participate in the independent
25review process may cause the insured to forfeit any statutory right
26to pursue legal action against the insurer regarding the disputed
27health care service.

28(2) A statement indicating the insured’s consent to obtain any
29necessary medical records from the insurer, any of its contracting
30providers, and any noncontracting provider the insured may have
31consulted on the matter, to be signed by the insured.

32(3) Notice of the insured’s right to provide information or
33documentation, either directly or through the insured’s provider,
34regarding any of the following:

35(A) A provider recommendation indicating that the disputed
36health care service is medically necessary for the insured’s medical
37condition.

38(B) Medical information or justification that a disputed health
39care service, on an urgent care or emergency basis, was medically
40necessary for the insured’s medical condition.

P54   1(C) Reasonable information supporting the insured’s position
2that the disputed health care service is or was medically necessary
3for the insured’s medical condition, including all information
4provided to the insured by the insurer or any of its contracting
5providers, still in the possession of the insured, concerning an
6insurer or provider decision regarding disputed health care services,
7and a copy of any materials the insured submitted to the insurer,
8still in the possession of the insured, in support of the grievance,
9as well as any additional material that the insured believes is
10 relevant.

11(4) A section designed to collect information on the insured’s
12ethnicity, race, and primary language spoken that includes both of
13the following:

14(A) A statement of intent indicating that the information is used
15for statistics only, in order to ensure that all insureds get the best
16care possible.

17(B) A statement indicating that providing this information is
18optional and will not affect the independent medical review process
19in any way.

20(n) Upon notice from the department that the insured has applied
21for an independent medical review, the insurer or its contracting
22providers, shall provide to the independent medical review
23organization designated by the department a copy of all of the
24following documents within three business days of the insurer’s
25receipt of the department’s notice of a request by an insured for
26an independent review:

27(1) (A) A copy of all of the insured’s medical records in the
28possession of the insurer or its contracting providers relevant to
29each of the following:

30(i) The insured’s medical condition.

31(ii) The health care services being provided by the insurer and
32its contracting providers for the condition.

33(iii) The disputed health care services requested by the insured
34for the condition.

35(B) Any newly developed or discovered relevant medical records
36in the possession of the insurer or its contracting providers after
37the initial documents are provided to the independent medical
38 review organization shall be forwarded immediately to the
39independent medical review organization. The insurer shall
40concurrently provide a copy of medical records required by this
P55   1subparagraph to the insured or the insured’s provider, if authorized
2by the insured, unless the offer of medical records is declined or
3otherwise prohibited by law. The confidentiality of all medical
4record information shall be maintained pursuant to applicable state
5and federal laws.

6(2) A copy of all information provided to the insured by the
7insurer and any of its contracting providers concerning insurer and
8provider decisions regarding the insured’s condition and care, and
9a copy of any materials the insured or the insured’s provider
10submitted to the insurer and to the insurer’s contracting providers
11in support of the insured’s request for disputed health care services.
12This documentation shall include the written response to the
13insured’s grievance. The confidentiality of any insured medical
14information shall be maintained pursuant to applicable state and
15federal laws.

16(3) A copy of any other relevant documents or information used
17by the insurer or its contracting providers in determining whether
18disputed health care services should have been provided, and any
19statements by the insurer and its contracting providers explaining
20the reasons for the decision to deny, modify, or delay disputed
21health care services on the basis of medical necessity. The insurer
22shall concurrently provide a copy of documents required by this
23paragraph, except for any information found by the commissioner
24to be legally privileged information, to the insured and the insured’s
25provider. The department and the independent medical review
26organization shall maintain the confidentiality of any information
27found by the commissioner to be the proprietary information of
28the insurer.

29(o) This section shall become operative on July 1, 2015.

30

SEC. 13.  

Section 10192.18 of the Insurance Code is amended
31to read:

32

10192.18.  

(a) Application forms shall include the following
33questions designed to elicit information as to whether, as of the
34date of the application, the applicant currently has Medicare
35supplement, Medicare Advantage, Medi-Cal coverage, or another
36health insurance policy or certificate in force or whether a Medicare
37supplement policy or certificate is intended to replace any other
38disability policy or certificate presently in force. A supplementary
39application or other form to be signed by the applicant and agent
40containing those questions and statements may be used.

P56   1

2(Statements)
3

4(1) You do not need more than one Medicare supplement policy.

5(2) If you purchase this policy, you may want to evaluate your
6existing health coverage and decide if you need multiple coverages.

7(3) You may be eligible for benefits under Medi-Cal and may
8not need a Medicare supplement policy.

9(4)  If after purchasing this policy you become eligible for
10Medi-Cal, the benefits and premiums under your Medicare
11supplement policy can be suspended, if requested, during your
12entitlement to benefits under Medi-Cal for 24 months. You must
13request this suspension within 90 days of becoming eligible for
14Medi-Cal. If you are no longer entitled to Medi-Cal, your
15suspended Medicare supplement policy or if that is no longer
16available, a substantially equivalent policy, will be reinstituted if
17requested within 90 days of losing Medi-Cal eligibility. If the
18Medicare supplement policy provided coverage for outpatient
19prescription drugs and you enrolled in Medicare Part D while your
20policy was suspended, the reinstituted policy will not have
21outpatient prescription drug coverage, but will otherwise be
22substantially equivalent to your coverage before the date of the
23suspension.

24(5) If you are eligible for, and have enrolled in, a Medicare
25supplement policy by reason of disability and you later become
26covered by an employer or union-based group health plan, the
27benefits and premiums under your Medicare supplement policy
28can be suspended, if requested, while you are covered under the
29employer or union-based group health plan. If you suspend your
30Medicare supplement policy under these circumstances and later
31lose your employer or union-based group health plan, your
32suspended Medicare supplement policy or if that is no longer
33available, a substantially equivalent policy, will be reinstituted if
34requested within 90 days of losing your employer or union-based
35group health plan. If the Medicare supplement policy provided
36coverage for outpatient prescription drugs and you enrolled in
37Medicare Part D while your policy was suspended, the reinstituted
38policy will not have outpatient prescription drug coverage, but will
39otherwise be substantially equivalent to your coverage before the
40date of the suspension.

P57   1(6) Counseling services are available in this state to provide
2advice concerning your purchase of Medicare supplement insurance
3and concerning medical assistance through the Medi-Cal program,
4including benefits as a qualified Medicare beneficiary (QMB) and
5a specified low-income Medicare beneficiary (SLMB). If you want
6to discuss buying Medicare supplement insurance with a trained
7insurance counselor, call the California Department of Insurance’s
8toll-free telephone number 1-800-927-HELP, or access the
9department’s Internet Web site, www.insurance.ca.gov, and ask
10how to contact your local Health Insurance Counseling and
11Advocacy Program (HICAP) office. HICAP is a service provided
12free of charge by the State of California.

13

14(Questions)
15

16If you lost or are losing other health insurance coverage and
17received a notice from your prior insurer saying you were eligible
18for guaranteed issue of a Medicare supplement insurance policy
19or that you had certain rights to buy such a policy, you may be
20guaranteed acceptance in one or more of our Medicare supplement
21plans. Please include a copy of the notice from your prior insurer
22with your application. PLEASE ANSWER ALL QUESTIONS.

23[Please mark Yes or No below with an “X.”]

24To the best of your knowledge,

25(1) (a) Did you turn 65 years of age in the last 6 months

26Yes____ No____

27(b) Did you enroll in Medicare Part B in the last 6 months

28Yes____ No____

29(c) If yes, what is the effective date  ___________________

30(2) Are you covered for medical assistance through California’s
31Medi-Cal program

32NOTE TO APPLICANT: If you have a share of cost under the
33Medi-Cal program, please answer NO to this question.

34Yes____ No____

35If yes,

36(a) Will Medi-Cal pay your premiums for this Medicare
37supplement policy

38Yes____ No____

39(b) Do you receive benefits from Medi-Cal OTHER THAN
40payments toward your Medicare Part B premium

P58   1Yes____ No____

2(3) (a) If you had coverage from any Medicare plan other than
3original Medicare within the past 63 days (for example, a Medicare
4Advantage plan or a Medicare HMO or PPO), fill in your start and
5end dates below. If you are still covered under this plan, leave
6“END” blank.

7START __/__/__ END __/__/__

8(b) If you are still covered under the Medicare plan, do you
9intend to replace your current coverage with this new Medicare
10supplement policy

11Yes____ No____

12(c) Was this your first time in this type of Medicare plan

13Yes____ No____

14(d) Did you drop a Medicare supplement policy to enroll in the
15Medicare plan

16Yes____ No____

17(4) (a) Do you have another Medicare supplement policy in
18force

19Yes____ No____

20(b) If so, with what company, and what plan do you have
21[optional for direct mailers]

22Yes____ No____

23(c) If so, do you intend to replace your current Medicare
24supplement policy with this policy

25Yes____ No____

26(5) Have you had coverage under any other health insurance
27within the past 63 days (For example, an employer, union, or
28individual plan)

29Yes____ No____

30(a) If so, with what companies and what kind of policy

31________________________________________________

32________________________________________________

33________________________________________________

34________________________________________________

35(b) What are your dates of coverage under the other policy

36START __/__/__ END __/__/__

37(If you are still covered under the other policy, leave “END”
38blank.)
39

P59   1(b) Agents shall list any other health insurance policies they
2have sold to the applicant as follows:

3(1) List policies sold that are still in force.

4(2) List policies sold in the past five years that are no longer in
5force.

6(c) In the case of a direct response issuer, a copy of the
7application or supplemental form, signed by the applicant, and
8acknowledged by the issuer, shall be returned to the applicant by
9the issuer upon delivery of the policy.

10(d) Upon determining that a sale will involve replacement of
11Medicare supplement coverage, any issuer, other than a direct
12response issuer, or its agent, shall furnish the applicant, prior to
13issuance for delivery of the Medicare supplement policy or
14certificate, a notice regarding replacement of Medicare supplement
15coverage. One copy of the notice signed by the applicant and the
16agent, except where the coverage is sold without an agent, shall
17be provided to the applicant and an additional signed copy shall
18be retained by the issuer as provided in Section 10508. A direct
19response issuer shall deliver to the applicant at the time of the
20issuance of the policy the notice regarding replacement of Medicare
21supplement coverage.

22(e) The notice required by subdivision (d) for an issuer shall be
23in the form specified by the commissioner, using, to the extent
24practicable, a model notice prepared by the National Association
25of Insurance Commissioners for this purpose. The replacement
26notice shall be printed in no less than 12-point type in substantially
27the following form:

28

29[Insurer’s name and address]
30

31NOTICE TO APPLICANT REGARDING REPLACEMENT
32OF MEDICARE SUPPLEMENT COVERAGE OR MEDICARE
33ADVANTAGE
34

35SAVE THIS NOTICE! IT MAY BE IMPORTANT IN THE
36FUTURE.

37If you intend to cancel or terminate existing Medicare supplement
38or Medicare Advantage insurance and replace it with coverage
39issued by [company name], please review the new coverage
40carefully and replace the existing coverage ONLY if the new
P60   1coverage materially improves your position. DO NOT CANCEL
2YOUR PRESENT COVERAGE UNTIL YOU HAVE RECEIVED
3YOUR NEW POLICY AND ARE SURE THAT YOU WANT
4TO KEEP IT.

5If you decide to purchase the new coverage, you will have 30
6days after you receive the policy to return it to the insurer, for any
7reason, and receive a refund of your money.

8If you want to discuss buying Medicare supplement or Medicare
9Advantage coverage with a trained insurance counselor, call the
10California Department of Insurance’s toll-free telephone number
111-800-927-HELP, and ask how to contact your local Health
12Insurance Counseling and Advocacy Program (HICAP) office.
13HICAP is a service provided free of charge by the State of
14California.

15STATEMENT TO APPLICANT FROM THE INSURER AND
16AGENT: I have reviewed your current health insurance coverage.
17To the best of my knowledge, the replacement of insurance
18involved in this transaction does not duplicate coverage or, if
19applicable, Medicare Advantage coverage because you intend to
20terminate your existing Medicare supplement coverage or leave
21your Medicare Advantage plan. In addition, the replacement
22coverage contains benefits that are clearly and substantially greater
23than your current benefits for the following reasons:

24__ Additional benefits that are: ______

25__ No change in benefits, but lower premiums.

26__ Fewer benefits and lower premiums.

27__ Plan has outpatient prescription drug coverage and applicant
28is enrolled in Medicare Part D.

29__ Disenrollment from a Medicare Advantage plan. Reasons for
30disenrollment:

31__ Other reasons specified here: ______

321. Note: If the issuer of the Medicare supplement policy being
33applied for does not impose, or is otherwise prohibited from
34imposing, preexisting condition limitations, please skip to statement
353 below. Health conditions that you may presently have
36(preexisting conditions) may not be immediately or fully covered
37under the new policy. This could result in denial or delay of a claim
38for benefits under the new policy, whereas a similar claim might
39have been payable under your present policy.

P61   12. State law provides that your replacement Medicare supplement
2policy may not contain new preexisting conditions, waiting periods,
3elimination periods, or probationary periods. The insurer will waive
4any time periods applicable to preexisting conditions, waiting
5periods, elimination periods, or probationary periods in the new
6coverage for similar benefits to the extent that time was spent
7(depleted) under the original policy.

83. If you still wish to terminate your present policy and replace
9it with new coverage, be certain to truthfully and completely
10answer any and all questions on the application concerning your
11medical and health history. Failure to include all material medical
12information on an application requesting that information may
13provide a basis for the insurer to deny any future claims and to
14refund your premium as though your policy had never been in
15force. After the application has been completed and before you
16sign it, review it carefully to be certain that all information has
17been properly recorded. [If the policy or certificate is guaranteed
18issue, this paragraph need not appear.]

19DO NOT CANCEL YOUR PRESENT POLICY UNTIL YOU
20HAVE RECEIVED YOUR NEW POLICY AND ARE SURE
21THAT YOU WANT TO KEEP IT.


22

 

   

(Signature of Agent, Broker, or Other Representative)

   

(Signature of Applicant)

   

(Date)

P61  29

 

30(f) No issuer, broker, agent, or other person shall cause an
31insured to replace a Medicare supplement insurance policy
32unnecessarily. In recommending replacement of any Medicare
33supplement insurance, an agent shall make reasonable efforts to
34determine the appropriateness to the potential insured.

35(g) An issuer shall not require, request, or obtain health
36information as part of the application process for an applicant who
37is eligible for guaranteed issuance of, or open enrollment for, any
38Medicare supplement coverage pursuant to Section 10192.11 or
3910192.12, except for purposes of paragraph (1) or (2) of subdivision
40(a) of Section 10192.11 when the applicant is first enrolled in
P62   1Medicare Part B. The application form shall include a clear and
2conspicuous statement that the applicant is not required to provide
3health information during a period where guaranteed issue or open
4enrollment applies, as specified in Section 10192.11 or 10192.12,
5except for purposes of paragraph (1) or (2) of subdivision (a) of
6Section 10192.11 when the applicant is first enrolled in Medicare
7Part B, and shall inform the applicant of those periods of
8guaranteed issuance of Medicare supplement coverage. This
9subdivision shall not prohibit an issuer from requiring proof of
10eligibility for a guaranteed issuance of Medicare supplement
11coverage.

end delete
12begin insert

begin insertSEC. 18.end insert  

end insert

begin insertSection 10169 of the end insertbegin insertInsurance Codeend insertbegin insert, as added by
13Section 8 of Chapter 872 of the Statutes of 2012, is amended to
14read:end insert

15

10169.  

(a) Commencing January 1, 2001, there is hereby
16established in the department the Independent Medical Review
17System.

18(b) For the purposes of this chapter, “disputed health care
19service” means any health care service eligible for coverage and
20payment under a disability insurance contract that has been denied,
21modified, or delayed by a decision of the insurer, or by one of its
22contracting providers, in whole or in part due to a finding that the
23service is not medically necessary. A decision regarding a disputed
24health care service relates to the practice of medicine and is not a
25coverage decision. A disputed health care service does not include
26services provided by a group or individual policy of vision-only
27or dental-only coverage, except to the extent that (1) the service
28involves the practice of medicine, or (2) is provided pursuant to a
29contract with a disability insurer that covers hospital, medical, or
30surgical benefits. If an insurer, or one of its contracting providers,
31issues a decision denying, modifying, or delaying health care
32services, based in whole or in part on a finding that the proposed
33health care services are not a covered benefit under the contract
34that applies to the insured, the statement of decision shall clearly
35specify the provision in the contract that excludes that coverage.

36(c) For the purposes of this chapter, “coverage decision” means
37the approval or denial of health care services by a disability insurer,
38or by one of its contracting entities, substantially based on a finding
39that the provision of a particular service is included or excluded
40as a covered benefit under the terms and conditions of the disability
P63   1insurance contract. A coverage decision does not encompass a
2 disability insurer or contracting provider decision regarding a
3disputed health care service.

4(d) (1) All insured grievances involving a disputed health care
5service are eligible for review under the Independent Medical
6Review System if the requirements of this article are met. If the
7department finds that an insured grievance involving a disputed
8health care service does not meet the requirements of this article
9for review under the Independent Medical Review System, the
10insured request for review shall be treated as a request for the
11department to review the grievance. All other insured grievances,
12including grievances involving coverage decisions, remain eligible
13for review by the department.

14(2) In any case in which an insured or provider asserts that a
15decision to deny, modify, or delay health care services was based,
16in whole or in part, on consideration of medical necessity, the
17department shall have the final authority to determine whether the
18grievance is more properly resolved pursuant to an independent
19medical review as provided under this article.

20(3) The department shall be the final arbiter when there is a
21question as to whether an insured grievance is a disputed health
22care service or a coverage decision. The department shall establish
23a process to complete an initial screening of an insured grievance.
24If there appears to be any medical necessity issue, the grievance
25shall be resolved pursuant to an independent medical review as
26provided under this article.

27(e) Every disability insurance contract that is issued, amended,
28renewed, or delivered in this state on or after January 1, 2000, shall
29provide an insured with the opportunity to seek an independent
30medical review whenever health care services have been denied,
31modified, or delayed by the insurer, or by one of its contracting
32providers, if the decision was based in whole or in part on a finding
33that the proposed health care services are not medically necessary.
34For purposes of this article, an insured may designate an agent to
35act on his or her behalf. The provider may join with or otherwise
36assist the insured in seeking an independent medical review, and
37may advocate on behalf of the insured.

38(f) Medicare beneficiaries enrolled in Medicare + Choice
39products shall not be excluded unless expressly preempted by
40federal law.

P64   1(g) The department may seek to integrate the quality of care
2and consumer protection provisions, including remedies, of the
3Independent Medical Review System with related dispute
4resolution procedures of other health care agency programs,
5including the Medicare program, in a way that minimizes the
6potential for duplication, conflict, and added costs. Nothing in this
7subdivision shall be construed to limit any rights conferred upon
8insureds under this chapter.

9(h) The independent medical review process authorized by this
10article is in addition to any other procedures or remedies that may
11be available.

12(i) Every disability insurer shall prominently display in every
13insurer member handbook or relevant informational brochure, in
14every insurance contract, on insured evidence of coverage forms,
15on copies of insurer procedures for resolving grievances, on letters
16of denials issued by either the insurer or its contracting
17organization, and on all written responses to grievances,
18information concerning the right of an insured to request an
19independent medical reviewbegin delete in cases whereend deletebegin insert whenend insert the insured
20believes that health care services have been improperly denied,
21modified, or delayed by the insurer, or by one of its contracting
22providers.

23(j) An insured may apply to the department for an independent
24medical review when all of the following conditions are met:

25(1) (A) The insured’s provider has recommended a health care
26service as medically necessary, or

27(B) The insured has received urgent care or emergency services
28that a provider determined was medically necessary, or

29(C) The insured, in the absence of a provider recommendation
30under subparagraph (A) or the receipt of urgent care or emergency
31services by a provider under subparagraph (B), has been seen by
32a contracting provider for the diagnosis or treatment of the medical
33condition for which the insured seeks independent review. The
34insurer shall expedite access to a contracting provider upon request
35of an insured. The contracting provider need not recommend the
36disputed health care service as a condition for the insured to be
37eligible for an independent review.

38For purposes of this article, the insured’s provider may be a
39noncontracting provider. However, the insurer shall have no
P65   1liability for payment of services provided by a noncontracting
2provider, except as provided pursuant to Section 10169.3.

3(2) The disputed health care service has been denied, modified,
4or delayed by the insurer, or by one of its contracting providers,
5based in whole or in part on a decision that the health care service
6is not medically necessary.

7(3) The insured has filed a grievance with the insurer or its
8contracting provider, and the disputed decision is upheld or the
9grievance remains unresolved after 30 days. The insured shall not
10be required to participate in the insurer’s grievance process for
11more than 30 days. In the case of a grievance that requires
12expedited review, the insured shall not be required to participate
13in the insurer’s grievance process for more than three days.

14(k) An insured may apply to the department for an independent
15medical review of a decision to deny, modify, or delay health care
16services, based in whole or in part on a finding that the disputed
17health care services are not medically necessary, within six months
18of any of the qualifying periods or events under subdivision (j).
19The commissioner may extend the application deadline beyond
20six months if the circumstances of a case warrant the extension.

21(l) The insured shall pay no application or processing fees of
22any kind.

23(m) As part of its notification to the insured regarding a
24disposition of the insured’s grievance that denies, modifies, or
25delays health care services, the insurer shall provide the insured
26with a one- or two-page application form approved by the
27department, and an addressed envelope, which the insured may
28return to initiate an independent medical review. The insurer shall
29include on the form any information required by the department
30to facilitate the completion of the independent medical review,
31such as the insured’s diagnosis or condition, the nature of the
32disputed health care service sought by the insured, a means to
33identify the insured’s case, and any other material information.
34The form shall also include the following:

35(1) Notice that a decision not to participate in the independent
36review process may cause the insured to forfeit any statutory right
37to pursue legal action against the insurer regarding the disputed
38health care service.

39(2) A statement indicating the insured’s consent to obtain any
40necessary medical records from the insurer, any of its contracting
P66   1providers, and any noncontracting provider the insured may have
2consulted on the matter, to be signed by the insured.

3(3) Notice of the insured’s right to provide information or
4documentation, either directly or through the insured’s provider,
5regarding any of the following:

6(A) A provider recommendation indicating that the disputed
7health care service is medically necessary for the insured’s medical
8condition.

9(B) Medical information or justification that a disputed health
10care service, on an urgent care or emergency basis, was medically
11necessary for the insured’s medical condition.

12(C) Reasonable information supporting the insured’s position
13that the disputed health care service is or was medically necessary
14for the insured’s medical condition, including all information
15provided to the insured by the insurer or any of its contracting
16providers, still in the possession of the insured, concerning an
17insurer or provider decision regarding disputed health care services,
18and a copy of any materials the insured submitted to the insurer,
19still in the possession of the insured, in support of the grievance,
20as well as any additional material that the insured believes is
21relevant.

22(4) A section designed to collect information on the insured’s
23ethnicity, race, and primary language spoken that includes both of
24the following:

25(A) A statement of intent indicating that the information is used
26for statistics only, in order to ensure that all insureds get the best
27care possible.

28(B) A statement indicating that providing this information is
29optional and will not affect the independent medical review process
30in any way.

31(n) Upon notice from the department that the insured has applied
32for an independent medical review, the insurer or its contracting
33providers, shall provide to the independent medical review
34organization designated by the department a copy of all of the
35following documents within three business days of the insurer’s
36receipt of the department’s notice of a request by an insured for
37an independent review:

38(1) (A) A copy of all of the insured’s medical records in the
39possession of the insurer or its contracting providers relevant to
40each of the following:

P67   1(i) The insured’s medical condition.

2(ii) The health care services being provided by the insurer and
3its contracting providers for the condition.

4(iii) The disputed health care services requested by the insured
5for the condition.

6(B) Any newly developed or discovered relevant medical records
7in the possession of the insurer or its contracting providers after
8the initial documents are provided to the independent medical
9review organization shall be forwarded immediately to the
10independent medical review organization. The insurer shall
11concurrently provide a copy of medical records required by this
12subparagraph to the insured or the insured’s provider, if authorized
13by the insured, unless the offer of medical records is declined or
14otherwise prohibited by law. The confidentiality of all medical
15record information shall be maintained pursuant to applicable state
16and federal laws.

17(2) A copy of all information provided to the insured by the
18insurer and any of its contracting providers concerning insurer and
19provider decisions regarding the insured’s condition and care, and
20a copy of any materials the insured or the insured’s provider
21submitted to the insurer and to the insurer’s contracting providers
22in support of the insured’s request for disputed health care services.
23This documentation shall include the written response to the
24insured’s grievance. The confidentiality of any insured medical
25information shall be maintained pursuant to applicable state and
26federal laws.

27(3) A copy of any other relevant documents or information used
28by the insurer or its contracting providers in determining whether
29disputed health care services should have been provided, and any
30statements by the insurer and its contracting providers explaining
31the reasons for the decision to deny, modify, or delay disputed
32health care services on the basis of medical necessity. The insurer
33shall concurrently provide a copy of documents required by this
34paragraph, except for any information found by the commissioner
35to be legally privileged information, to the insured and the insured’s
36provider. The department and the independent medical review
37organization shall maintain the confidentiality of any information
38found by the commissioner to be the proprietary information of
39the insurer.

40(o) This section shall become operative on July 1, 2015.

begin insert

P68   1(p) This section shall remain in effect only until January 1, 2017,
2and as of that date is repealed, unless a later enacted statute, that
3is enacted before January 1, 2017, deletes or extends that date.

end insert
4begin insert

begin insertSEC. 19.end insert  

end insert

begin insertSection 10169 is added to the end insertbegin insertInsurance Codeend insertbegin insert, to
5read:end insert

begin insert
6

begin insert10169.end insert  

(a) Commencing January 1, 2001, there is hereby
7established in the department the Independent Medical Review
8System.

9(b) For the purposes of this chapter, “disputed health care
10service” means any health care service eligible for coverage and
11payment under a disability insurance contract that has been denied,
12modified, or delayed by a decision of the insurer, or by one of its
13contracting providers, in whole or in part due to a finding that the
14service is not medically necessary. A decision regarding a disputed
15health care service relates to the practice of medicine and is not
16a coverage decision. A disputed health care service does not
17include services provided by a group or individual policy of
18vision-only or dental-only coverage, except to the extent that (1)
19 the service involves the practice of medicine, or (2) is provided
20pursuant to a contract with a disability insurer that covers hospital,
21medical, or surgical benefits. If an insurer, or one of its contracting
22providers, issues a decision denying, modifying, or delaying health
23care services, based in whole or in part on a finding that the
24proposed health care services are not a covered benefit under the
25contract that applies to the insured, the statement of decision shall
26clearly specify the provision in the contract that excludes that
27coverage.

28(c) For the purposes of this chapter, “coverage decision” means
29the approval or denial of health care services by a disability
30insurer, or by one of its contracting entities, substantially based
31on a finding that the provision of a particular service is included
32or excluded as a covered benefit under the terms and conditions
33of the disability insurance contract. A coverage decision does not
34encompass a disability insurer or contracting provider decision
35regarding a disputed health care service.

36(d) (1) All insured grievances involving a disputed health care
37service are eligible for review under the Independent Medical
38Review System if the requirements of this article are met. If the
39department finds that an insured grievance involving a disputed
40health care service does not meet the requirements of this article
P69   1for review under the Independent Medical Review System, the
2insured request for review shall be treated as a request for the
3department to review the grievance. All other insured grievances,
4including grievances involving coverage decisions, remain eligible
5for review by the department.

6(2) In any case in which an insured or provider asserts that a
7decision to deny, modify, or delay health care services was based,
8in whole or in part, on consideration of medical necessity, the
9department shall have the final authority to determine whether the
10grievance is more properly resolved pursuant to an independent
11medical review as provided under this article.

12(3) The department shall be the final arbiter when there is a
13question as to whether an insured grievance is a disputed health
14care service or a coverage decision. The department shall establish
15a process to complete an initial screening of an insured grievance.
16If there appears to be any medical necessity issue, the grievance
17shall be resolved pursuant to an independent medical review as
18provided under this article.

19(e) Every disability insurance contract that is issued, amended,
20renewed, or delivered in this state on or after January 1, 2000,
21shall provide an insured with the opportunity to seek an
22independent medical review whenever health care services have
23been denied, modified, or delayed by the insurer, or by one of its
24contracting providers, if the decision was based in whole or in
25part on a finding that the proposed health care services are not
26medically necessary. For purposes of this article, an insured may
27designate an agent to act on his or her behalf. The provider may
28join with or otherwise assist the insured in seeking an independent
29medical review, and may advocate on behalf of the insured.

30(f) Medicare beneficiaries enrolled in Medicare + Choice
31products shall not be excluded unless expressly preempted by
32federal law.

33(g) The department may seek to integrate the quality of care
34and consumer protection provisions, including remedies, of the
35Independent Medical Review System with related dispute resolution
36procedures of other health care agency programs, including the
37Medicare program, in a way that minimizes the potential for
38 duplication, conflict, and added costs. Nothing in this subdivision
39shall be construed to limit any rights conferred upon insureds
40under this chapter.

P70   1(h) The independent medical review process authorized by this
2article is in addition to any other procedures or remedies that may
3be available.

4(i) Every disability insurer shall prominently display in every
5insurer member handbook or relevant informational brochure, in
6every insurance contract, on insured evidence of coverage forms,
7on copies of insurer procedures for resolving grievances, on letters
8of denials issued by either the insurer or its contracting
9organization, and on all written responses to grievances,
10information concerning the right of an insured to request an
11independent medical review when the insured believes that health
12care services have been improperly denied, modified, or delayed
13by the insurer, or by one of its contracting providers. The
14department’s telephone number, 1-800-927-4357, and Internet
15Web site, www.insurance.ca.gov, shall also be displayed.

16(j) An insured may apply to the department for an independent
17medical review when all of the following conditions are met:

18(1) (A) The insured’s provider has recommended a health care
19service as medically necessary, or

20(B) The insured has received urgent care or emergency services
21that a provider determined was medically necessary, or

22(C) The insured, in the absence of a provider recommendation
23under subparagraph (A) or the receipt of urgent care or emergency
24services by a provider under subparagraph (B), has been seen by
25a contracting provider for the diagnosis or treatment of the medical
26condition for which the insured seeks independent review. The
27insurer shall expedite access to a contracting provider upon
28 request of an insured. The contracting provider need not
29recommend the disputed health care service as a condition for the
30insured to be eligible for an independent review.

31For purposes of this article, the insured’s provider may be a
32noncontracting provider. However, the insurer shall have no
33liability for payment of services provided by a noncontracting
34provider, except as provided pursuant to Section 10169.3.

35(2) The disputed health care service has been denied, modified,
36or delayed by the insurer, or by one of its contracting providers,
37based in whole or in part on a decision that the health care service
38is not medically necessary.

39(3) The insured has filed a grievance with the insurer or its
40contracting provider, and the disputed decision is upheld or the
P71   1grievance remains unresolved after 30 days. The insured shall not
2be required to participate in the insurer’s grievance process for
3more than 30 days. In the case of a grievance that requires
4expedited review, the insured shall not be required to participate
5in the insurer’s grievance process for more than three days.

6(k) An insured may apply to the department for an independent
7medical review of a decision to deny, modify, or delay health care
8services, based in whole or in part on a finding that the disputed
9health care services are not medically necessary, within six months
10of any of the qualifying periods or events under subdivision (j).
11The commissioner may extend the application deadline beyond six
12months if the circumstances of a case warrant the extension.

13(l) The insured shall pay no application or processing fees of
14any kind.

15(m) As part of its notification to the insured regarding a
16disposition of the insured’s grievance that denies, modifies, or
17delays health care services, the insurer shall provide the insured
18with a one- or two-page application form approved by the
19department, and an addressed envelope, which the insured may
20return to initiate an independent medical review. The insurer shall
21include on the form any information required by the department
22to facilitate the completion of the independent medical review,
23such as the insured’s diagnosis or condition, the nature of the
24disputed health care service sought by the insured, a means to
25identify the insured’s case, and any other material information.
26The form shall also include the following:

27(1) Notice that a decision not to participate in the independent
28review process may cause the insured to forfeit any statutory right
29to pursue legal action against the insurer regarding the disputed
30health care service.

31(2) A statement indicating the insured’s consent to obtain any
32necessary medical records from the insurer, any of its contracting
33providers, and any noncontracting provider the insured may have
34consulted on the matter, to be signed by the insured.

35(3) Notice of the insured’s right to provide information or
36documentation, either directly or through the insured’s provider,
37regarding any of the following:

38(A) A provider recommendation indicating that the disputed
39health care service is medically necessary for the insured’s medical
40condition.

P72   1(B) Medical information or justification that a disputed health
2care service, on an urgent care or emergency basis, was medically
3 necessary for the insured’s medical condition.

4(C) Reasonable information supporting the insured’s position
5that the disputed health care service is or was medically necessary
6for the insured’s medical condition, including all information
7provided to the insured by the insurer or any of its contracting
8providers, still in the possession of the insured, concerning an
9insurer or provider decision regarding disputed health care
10services, and a copy of any materials the insured submitted to the
11insurer, still in the possession of the insured, in support of the
12grievance, as well as any additional material that the insured
13believes is relevant.

14(4) A section designed to collect information on the insured’s
15ethnicity, race, and primary language spoken that includes both
16of the following:

17(A) A statement of intent indicating that the information is used
18for statistics only, in order to ensure that all insureds get the best
19care possible.

20(B) A statement indicating that providing this information is
21optional and will not affect the independent medical review process
22in any way.

23(n) Upon notice from the department that the insured has applied
24for an independent medical review, the insurer or its contracting
25providers, shall provide to the independent medical review
26organization designated by the department a copy of all of the
27following documents within three business days of the insurer’s
28receipt of the department’s notice of a request by an insured for
29an independent review:

30(1) (A) A copy of all of the insured’s medical records in the
31possession of the insurer or its contracting providers relevant to
32 each of the following:

33(i) The insured’s medical condition.

34(ii) The health care services being provided by the insurer and
35its contracting providers for the condition.

36(iii) The disputed health care services requested by the insured
37for the condition.

38(B) Any newly developed or discovered relevant medical records
39in the possession of the insurer or its contracting providers after
40the initial documents are provided to the independent medical
P73   1review organization shall be forwarded immediately to the
2independent medical review organization. The insurer shall
3concurrently provide a copy of medical records required by this
4subparagraph to the insured or the insured’s provider, if authorized
5by the insured, unless the offer of medical records is declined or
6 otherwise prohibited by law. The confidentiality of all medical
7record information shall be maintained pursuant to applicable
8state and federal laws.

9(2) A copy of all information provided to the insured by the
10insurer and any of its contracting providers concerning insurer
11and provider decisions regarding the insured’s condition and care,
12and a copy of any materials the insured or the insured’s provider
13submitted to the insurer and to the insurer’s contracting providers
14in support of the insured’s request for disputed health care
15services. This documentation shall include the written response
16to the insured’s grievance. The confidentiality of any insured
17medical information shall be maintained pursuant to applicable
18state and federal laws.

19(3) A copy of any other relevant documents or information used
20by the insurer or its contracting providers in determining whether
21disputed health care services should have been provided, and any
22statements by the insurer and its contracting providers explaining
23the reasons for the decision to deny, modify, or delay disputed
24health care services on the basis of medical necessity. The insurer
25shall concurrently provide a copy of documents required by this
26paragraph, except for any information found by the commissioner
27to be legally privileged information, to the insured and the
28insured’s provider. The department and the independent medical
29review organization shall maintain the confidentiality of any
30information found by the commissioner to be the proprietary
31information of the insurer.

32(o) This section shall become operative on January 1, 2017.

end insert
33begin insert

begin insertSEC. 20.end insert  

end insert

begin insertSection 10192.18 of the end insertbegin insertInsurance Codeend insertbegin insert is amended
34to read:end insert

35

10192.18.  

(a) Application forms shall include the following
36questions designed to elicit information as to whether, as of the
37date of the application, the applicant currently has Medicare
38supplement, Medicare Advantage, Medi-Cal coverage, or another
39health insurance policy or certificate in force or whether a Medicare
40supplement policy or certificate is intended to replace any other
P74   1disability policy or certificate presently in force. A supplementary
2application or other form to be signed by the applicant and agent
3containing those questions and statements may be used.

4

5(Statements)

6

7(1) You do not need more than one Medicare supplement policy.

8(2) If you purchase this policy, you may want to evaluate your
9existing health coverage and decide if you need multiple coverages.

10(3) You may be eligible for benefits under Medi-Cal and may
11not need a Medicare supplement policy.

12(4)  If after purchasing this policy you become eligible for
13Medi-Cal, the benefits and premiums under your Medicare
14supplement policy can be suspended, if requested, during your
15entitlement to benefits under Medi-Cal for 24 months. You must
16request this suspension within 90 days of becoming eligible for
17Medi-Cal. If you are no longer entitled to Medi-Cal, your
18suspended Medicare supplement policy or if that is no longer
19available, a substantially equivalent policy, will be reinstituted if
20requested within 90 days of losing Medi-Cal eligibility. If the
21Medicare supplement policy provided coverage for outpatient
22prescription drugs and you enrolled in Medicare Part D while your
23policy was suspended, the reinstituted policy will not have
24outpatient prescription drug coverage, but will otherwise be
25substantially equivalent to your coverage before the date of the
26suspension.

27(5) If you are eligible for, and have enrolled in, a Medicare
28supplement policy by reason of disability and you later become
29covered by an employer or union-based group health plan, the
30benefits and premiums under your Medicare supplement policy
31can be suspended, if requested, while you are covered under the
32employer or union-based group health plan. If you suspend your
33Medicare supplement policy under these circumstances and later
34lose your employer or union-based group health plan, your
35suspended Medicare supplement policy or if that is no longer
36available, a substantially equivalent policy, will be reinstituted if
37requested within 90 days of losing your employer or union-based
38group health plan. If the Medicare supplement policy provided
39coverage for outpatient prescription drugs and you enrolled in
40Medicare Part D while your policy was suspended, the reinstituted
P75   1policy will not have outpatient prescription drug coverage, but will
2otherwise be substantially equivalent to your coverage before the
3date of the suspension.

4(6) Counseling services are available in this state to provide
5advice concerning your purchase of Medicare supplement insurance
6and concerning medical assistance through the Medi-Cal program,
7including benefits as a qualified Medicare beneficiary (QMB) and
8a specified low-income Medicare beneficiary (SLMB). If you want
9to discuss buying Medicare supplement insurance with a trained
10insurance counselor, call the California Department of Insurance’s
11toll-free telephone number 1-800-927-HELP, and ask how to
12contact your local Health Insurance Counseling and Advocacy
13Program (HICAP) office. HICAP is a service provided free of
14charge by the State of California.

15

16(Questions)

17

18If you lost or are losing other health insurance coverage and
19received a notice from your prior insurer saying you were eligible
20for guaranteed issue of a Medicare supplement insurance policy
21or that you had certain rights to buy such a policy, you may be
22guaranteed acceptance in one or more of our Medicare supplement
23plans. Please include a copy of the notice from your prior insurer
24with your application. PLEASE ANSWER ALL QUESTIONS.

25[Please mark Yes or No below with an “X.”]

26To the best of your knowledge,

27(1) (a) Did you turn 65 years of age in the last 6begin delete monthsend deletebegin insert months.end insert

28Yes____ No____

29(b) Did you enroll in Medicare Part B in the last 6begin delete monthsend delete
30begin insert months.end insert

31Yes____ No____

32(c) If yes, what is the effectivebegin delete dateend deletebegin insert date.end insert ___________________

(2) Are you covered for medical assistance through California’s Medi-Calbegin delete programend deletebegin insert program.end insert

NOTE TO APPLICANT: If you have a share of cost under the Medi-Cal program, please answer NO to this question.

Yes____ No____

If yes,

(a) Will Medi-Cal pay your premiums for this Medicare supplementbegin delete policyend deletebegin insert policy.end insert

Yes____ No____

(b) Do you receive benefits from Medi-Cal OTHER THAN payments toward your Medicare Part Bbegin delete premiumend deletebegin insert premium.end insert

Yes____ No____

(3) (a) If you had coverage from any Medicare plan other than original Medicare within the past 63 days (for example, a Medicare Advantage plan or a Medicare HMO or PPO), fill in your start and end dates below. If you are still covered under this plan, leave “END” blank.

START __/__/__ END __/__/__

(b) If you are still covered under the Medicare plan, do you intend to replace your current coverage with this new Medicare supplementbegin delete policyend deletebegin insert policy.end insert

Yes____ No____

(c) Was this your first time in this type of Medicarebegin delete planend deletebegin insert plan.end insert

Yes____ No____

(d) Did you drop a Medicare supplement policy to enroll in the Medicarebegin delete planend deletebegin insert plan.end insert

Yes____ No____

(4) (a) Do you have another Medicare supplement policy inbegin delete forceend deletebegin insert force.end insert

Yes____ No____

(b) If so, with what company, and what plan do youbegin delete haveend deletebegin insert have.end insert [optional for direct mailers]

Yes____ No____

(c) If so, do you intend to replace your current Medicare supplement policy with thisbegin delete policyend deletebegin insert policy.end insert

Yes____ No____

(5) Have you had coverage under any other health insurance within the past 63 days (For example, an employer, union, or individualbegin delete plan)end deletebegin insert plan).end insert

Yes____ No____

(a) If so, with what companies and what kind ofbegin delete policyend deletebegin insert policy.end insert

________________________________________________

________________________________________________

________________________________________________

________________________________________________

(b) What are your dates of coverage under the otherbegin delete policyend deletebegin insert policy.end insert

START __/__/__ END __/__/__

(If you are still covered under the other policy, leave “END” blank.)

(b) Agents shall list any other health insurance policies they have sold to the applicant as follows:

(1) List policies sold that are still in force.

(2) List policies sold in the past five years that are no longer in force.

(c) In the case of a direct response issuer, a copy of the application or supplemental form, signed by the applicant, and acknowledged by the issuer, shall be returned to the applicant by the issuer upon delivery of the policy.

(d) Upon determining that a sale will involve replacement of Medicare supplement coverage, any issuer, other than a direct response issuer, or its agent, shall furnish the applicant, prior to issuance for delivery of the Medicare supplement policy or certificate, a notice regarding replacement of Medicare supplement coverage. One copy of the notice signed by the applicant and the agent, exceptbegin delete whereend deletebegin insert whenend insert the coverage is sold without an agent, shall be provided to the applicant and an additional signed copy shall be retained by the issuer as provided in Section 10508. A direct response issuer shall deliver to the applicant at the time of the issuance of the policy the notice regarding replacement of Medicare supplement coverage.

(e) The notice required by subdivision (d) for an issuer shall be in the form specified by the commissioner, using, to the extent practicable, a model notice prepared by the National Association of Insurance Commissioners for this purpose. The replacement notice shall be printed in no less than 12-point type in substantially the following form:

[Insurer’s name and address]

NOTICE TO APPLICANT REGARDING REPLACEMENT OF MEDICARE SUPPLEMENT COVERAGE OR MEDICARE ADVANTAGE

SAVE THIS NOTICE! IT MAY BE IMPORTANT IN THE FUTURE.

If you intend to cancel or terminate existing Medicare supplement or Medicare Advantage insurance and replace it with coverage issued by [company name], please review the new coverage carefully and replace the existing coverage ONLY if the new coverage materially improves your position. DO NOT CANCEL YOUR PRESENT COVERAGE UNTIL YOU HAVE RECEIVED YOUR NEW POLICY AND ARE SURE THAT YOU WANT TO KEEP IT.

If you decide to purchase the new coverage, you will have 30 days after you receive the policy to return it to the insurer, for any reason, and receive a refund of your money.

If you want to discuss buying Medicare supplement or Medicare Advantage coverage with a trained insurance counselor, call the California Department of Insurance’s toll-free telephone number 1-800-927-HELP, and ask how to contact your local Health Insurance Counseling and Advocacy Program (HICAP) office. HICAP is a service provided free of charge by the State of California.

STATEMENT TO APPLICANT FROM THE INSURER AND AGENT: I have reviewed your current health insurance coverage. To the best of my knowledge, the replacement of insurance involved in this transaction does not duplicate coverage or, if applicable, Medicare Advantage coverage because you intend to terminate your existing Medicare supplement coverage or leave your Medicare Advantage plan. In addition, the replacement coverage contains benefits that are clearly and substantially greater than your current benefits for the following reasons:

__ Additional benefits that are: ______

__ No change in benefits, but lower premiums.

__ Fewer benefits and lower premiums.

__ Plan has outpatient prescription drug coverage and applicant is enrolled in Medicare Part D.

__ Disenrollment from a Medicare Advantage plan. Reasons for disenrollment:

__ Other reasons specified here: ______

1. Note: If the issuer of the Medicare supplement policy being applied for does not impose, or is otherwise prohibited from imposing, preexisting condition limitations, please skip to statement 3 below. Health conditions that you may presently have (preexisting conditions) may not be immediately or fully covered under the new policy. This could result in denial or delay of a claim for benefits under the new policy, whereas a similar claim might have been payable under your present policy.

2. State law provides that your replacement Medicare supplement policy may not contain new preexisting conditions, waiting periods, elimination periods, or probationary periods. The insurer will waive any time periods applicable to preexisting conditions, waiting periods, elimination periods, or probationary periods in the new coverage for similar benefits to the extent that time was spent (depleted) under the original policy.

3. If you still wish to terminate your present policy and replace it with new coverage, be certain to truthfully and completely answer any and all questions on the application concerning your medical and health history. Failure to include all material medical information on an application requesting that information may provide a basis for the insurer to deny any future claims and to refund your premium as though your policy had never been in force. After the application has been completed and before you sign it, review it carefully to be certain that all information has been properly recorded. [If the policy or certificate is guaranteed issue, this paragraph need not appear.]

DO NOT CANCEL YOUR PRESENT POLICY UNTIL YOU HAVE RECEIVED YOUR NEW POLICY AND ARE SURE THAT YOU WANT TO KEEP IT.

 

   

(Signature of Agent, Broker, or Other Representative)

   

(Signature of Applicant)

   

(Date)

 

(f) No issuer, broker, agent, or other person shall cause an insured to replace a Medicare supplement insurance policy unnecessarily. In recommending replacement of any Medicare supplement insurance, an agent shall make reasonable efforts to determine the appropriateness to the potential insured.

(g) An issuer shall not require, request, or obtain health information as part of the application process for an applicant who is eligible for guaranteed issuance of, or open enrollment for, any Medicare supplement coverage pursuant to Section 10192.11 or 10192.12, except for purposes of paragraph (1) or (2) of subdivision (a) of Section 10192.11 when the applicant is first enrolled in Medicare Part B. The application form shall include a clear and conspicuous statement that the applicant is not required to provide health information during a period where guaranteed issue or open enrollment applies, as specified in Section 10192.11 or 10192.12, except for purposes of paragraph (1) or (2) of subdivision (a) of Section 10192.11 when the applicant is first enrolled in Medicare Part B, and shall inform the applicant of those periods of guaranteed issuance of Medicare supplement coverage. This subdivision shall not prohibit an issuer from requiring proof of eligibility for a guaranteed issuance of Medicare supplement coverage.

begin insert

(h) This section shall remain in effect only until January 1, 2017, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2017, deletes or extends that date.

end insert
P80  21begin insert

begin insertSEC. 21.end insert  

end insert

begin insertSection 10192.18 is added to the end insertbegin insertInsurance Codeend insertbegin insert, to
22read:end insert

begin insert
23

begin insert10192.18.end insert  

(a) Application forms shall include the following
24questions designed to elicit information as to whether, as of the
25date of the application, the applicant currently has Medicare
26supplement, Medicare Advantage, Medi-Cal coverage, or another
27health insurance policy or certificate in force or whether a
28Medicare supplement policy or certificate is intended to replace
29any other disability policy or certificate presently in force. A
30supplementary application or other form to be signed by the
31applicant and agent containing those questions and statements
32may be used.

33

34(Statements)

35

36(1) You do not need more than one Medicare supplement policy.

37(2) If you purchase this policy, you may want to evaluate your
38existing health coverage and decide if you need multiple coverages.

39(3) You may be eligible for benefits under Medi-Cal and may
40not need a Medicare supplement policy.

P81   1(4)  If after purchasing this policy you become eligible for
2Medi-Cal, the benefits and premiums under your Medicare
3supplement policy can be suspended, if requested, during your
4entitlement to benefits under Medi-Cal for 24 months. You must
5request this suspension within 90 days of becoming eligible for
6Medi-Cal. If you are no longer entitled to Medi-Cal, your
7suspended Medicare supplement policy or if that is no longer
8available, a substantially equivalent policy, will be reinstituted if
9requested within 90 days of losing Medi-Cal eligibility. If the
10Medicare supplement policy provided coverage for outpatient
11prescription drugs and you enrolled in Medicare Part D while
12your policy was suspended, the reinstituted policy will not have
13outpatient prescription drug coverage, but will otherwise be
14substantially equivalent to your coverage before the date of the
15suspension.

16(5) If you are eligible for, and have enrolled in, a Medicare
17supplement policy by reason of disability and you later become
18covered by an employer or union-based group health plan, the
19benefits and premiums under your Medicare supplement policy
20can be suspended, if requested, while you are covered under the
21employer or union-based group health plan. If you suspend your
22Medicare supplement policy under these circumstances and later
23lose your employer or union-based group health plan, your
24suspended Medicare supplement policy or if that is no longer
25available, a substantially equivalent policy, will be reinstituted if
26requested within 90 days of losing your employer or union-based
27group health plan. If the Medicare supplement policy provided
28coverage for outpatient prescription drugs and you enrolled in
29Medicare Part D while your policy was suspended, the reinstituted
30policy will not have outpatient prescription drug coverage, but
31will otherwise be substantially equivalent to your coverage before
32the date of the suspension.

33(6) Counseling services are available in this state to provide
34advice concerning your purchase of Medicare supplement
35insurance and concerning medical assistance through the Medi-Cal
36program, including benefits as a qualified Medicare beneficiary
37(QMB) and a specified low-income Medicare beneficiary (SLMB).
38If you want to discuss buying Medicare supplement insurance with
39a trained insurance counselor, call the California Department of
40Insurance’s toll-free telephone number 1-800-927-HELP, or access
P82   1the department’s Internet Web site, www.insurance.ca.gov, and
2ask how to contact your local Health Insurance Counseling and
3Advocacy Program (HICAP) office. HICAP is a service provided
4free of charge by the State of California.

5

6(Questions)

7

8If you lost or are losing other health insurance coverage and
9received a notice from your prior insurer saying you were eligible
10for guaranteed issue of a Medicare supplement insurance policy
11or that you had certain rights to buy such a policy, you may be
12guaranteed acceptance in one or more of our Medicare supplement
13plans. Please include a copy of the notice from your prior insurer
14with your application. PLEASE ANSWER ALL QUESTIONS.

15[Please mark Yes or No below with an “X.”]

16To the best of your knowledge,

17(1) (a) Did you turn 65 years of age in the last 6 months.

18Yes____ No____

19(b) Did you enroll in Medicare Part B in the last 6 months.

20Yes____ No____

21(c) If yes, what is the effective date.  ___________________

22(2) Are you covered for medical assistance through California’s
23Medi-Cal program.

24NOTE TO APPLICANT: If you have a share of cost under the
25Medi-Cal program, please answer NO to this question.

26Yes____ No____

27If yes,

28(a) Will Medi-Cal pay your premiums for this Medicare
29supplement policy.

30Yes____ No____

31(b) Do you receive benefits from Medi-Cal OTHER THAN
32payments toward your Medicare Part B premium.

33Yes____ No____

34(3) (a) If you had coverage from any Medicare plan other than
35original Medicare within the past 63 days (for example, a Medicare
36Advantage plan or a Medicare HMO or PPO), fill in your start
37and end dates below. If you are still covered under this plan, leave
38“END” blank.

39START __/__/__ END __/__/__

P83   1(b) If you are still covered under the Medicare plan, do you
2 intend to replace your current coverage with this new Medicare
3supplement policy.

4Yes____ No____

5(c) Was this your first time in this type of Medicare plan.

6Yes____ No____

7(d) Did you drop a Medicare supplement policy to enroll in the
8Medicare plan.

9Yes____ No____

10(4) (a) Do you have another Medicare supplement policy in
11force.

12Yes____ No____

13(b) If so, with what company, and what plan do you have.
14[optional for direct mailers]

15Yes____ No____

16(c) If so, do you intend to replace your current Medicare
17supplement policy with this policy.

18Yes____ No____

19(5) Have you had coverage under any other health insurance
20within the past 63 days (For example, an employer, union, or
21individual plan).

22Yes____ No____

23(a) If so, with what companies and what kind of policy.

24________________________________________________

25________________________________________________

26________________________________________________

27________________________________________________

28(b) What are your dates of coverage under the other policy.

29START __/__/__ END __/__/__

30(If you are still covered under the other policy, leave “END”
31blank.)

32

33(b) Agents shall list any other health insurance policies they
34have sold to the applicant as follows:

35(1) List policies sold that are still in force.

36(2) List policies sold in the past five years that are no longer in
37force.

38(c) In the case of a direct response issuer, a copy of the
39application or supplemental form, signed by the applicant, and
P84   1acknowledged by the issuer, shall be returned to the applicant by
2the issuer upon delivery of the policy.

3(d) Upon determining that a sale will involve replacement of
4Medicare supplement coverage, any issuer, other than a direct
5response issuer, or its agent, shall furnish the applicant, prior to
6issuance for delivery of the Medicare supplement policy or
7certificate, a notice regarding replacement of Medicare supplement
8coverage. One copy of the notice signed by the applicant and the
9agent, except when the coverage is sold without an agent, shall be
10provided to the applicant and an additional signed copy shall be
11retained by the issuer as provided in Section 10508. A direct
12response issuer shall deliver to the applicant at the time of the
13issuance of the policy the notice regarding replacement of
14Medicare supplement coverage.

15(e) The notice required by subdivision (d) for an issuer shall be
16in the form specified by the commissioner, using, to the extent
17practicable, a model notice prepared by the National Association
18of Insurance Commissioners for this purpose. The replacement
19notice shall be printed in no less than 12-point type in substantially
20the following form:

21

22[Insurer’s name and address]

23

24NOTICE TO APPLICANT REGARDING REPLACEMENT OF
25MEDICARE SUPPLEMENT COVERAGE OR MEDICARE
26ADVANTAGE

27

28SAVE THIS NOTICE! IT MAY BE IMPORTANT IN THE
29FUTURE.

30If you intend to cancel or terminate existing Medicare supplement
31or Medicare Advantage insurance and replace it with coverage
32issued by [company name], please review the new coverage
33carefully and replace the existing coverage ONLY if the new
34coverage materially improves your position. DO NOT CANCEL
35YOUR PRESENT COVERAGE UNTIL YOU HAVE RECEIVED
36YOUR NEW POLICY AND ARE SURE THAT YOU WANT TO
37KEEP IT.

38If you decide to purchase the new coverage, you will have 30
39days after you receive the policy to return it to the insurer, for any
40reason, and receive a refund of your money.

P85   1If you want to discuss buying Medicare supplement or Medicare
2Advantage coverage with a trained insurance counselor, call the
3California Department of Insurance’s toll-free telephone number
41-800-927-HELP, and ask how to contact your local Health
5Insurance Counseling and Advocacy Program (HICAP) office.
6HICAP is a service provided free of charge by the State of
7California.

8STATEMENT TO APPLICANT FROM THE INSURER AND
9AGENT: I have reviewed your current health insurance coverage.
10To the best of my knowledge, the replacement of insurance involved
11in this transaction does not duplicate coverage or, if applicable,
12Medicare Advantage coverage because you intend to terminate
13your existing Medicare supplement coverage or leave your
14Medicare Advantage plan. In addition, the replacement coverage
15contains benefits that are clearly and substantially greater than
16your current benefits for the following reasons:

17__ Additional benefits that are: ______

18__ No change in benefits, but lower premiums.

19__ Fewer benefits and lower premiums.

20__ Plan has outpatient prescription drug coverage and applicant
21is enrolled in Medicare Part D.

22__ Disenrollment from a Medicare Advantage plan. Reasons for
23disenrollment:

24__ Other reasons specified here: ______

251. Note: If the issuer of the Medicare supplement policy being
26applied for does not impose, or is otherwise prohibited from
27imposing, preexisting condition limitations, please skip to statement
283 below. Health conditions that you may presently have (preexisting
29conditions) may not be immediately or fully covered under the new
30policy. This could result in denial or delay of a claim for benefits
31under the new policy, whereas a similar claim might have been
32payable under your present policy.

332. State law provides that your replacement Medicare supplement
34policy may not contain new preexisting conditions, waiting periods,
35elimination periods, or probationary periods. The insurer will
36waive any time periods applicable to preexisting conditions,
37waiting periods, elimination periods, or probationary periods in
38the new coverage for similar benefits to the extent that time was
39spent (depleted) under the original policy.

P86   13. If you still wish to terminate your present policy and replace
2it with new coverage, be certain to truthfully and completely
3answer any and all questions on the application concerning your
4medical and health history. Failure to include all material medical
5information on an application requesting that information may
6provide a basis for the insurer to deny any future claims and to
7refund your premium as though your policy had never been in
8force. After the application has been completed and before you
9sign it, review it carefully to be certain that all information has
10been properly recorded. [If the policy or certificate is guaranteed
11issue, this paragraph need not appear.]

12DO NOT CANCEL YOUR PRESENT POLICY UNTIL YOU
13HAVE RECEIVED YOUR NEW POLICY AND ARE SURE THAT
14YOU WANT TO KEEP IT.


15

 

begin insert

   

end insert
begin insert

(Signature of Agent, Broker, or Other Representative)

end insert
begin insert

   

end insert
begin insert

(Signature of Applicant)

end insert
begin insert

   

end insert
begin insert

(Date)

end insert
P86  22

 

23(f) No issuer, broker, agent, or other person shall cause an
24insured to replace a Medicare supplement insurance policy
25unnecessarily. In recommending replacement of any Medicare
26supplement insurance, an agent shall make reasonable efforts to
27determine the appropriateness to the potential insured.

28(g) An issuer shall not require, request, or obtain health
29information as part of the application process for an applicant
30who is eligible for guaranteed issuance of, or open enrollment for,
31any Medicare supplement coverage pursuant to Section 10192.11
32or 10192.12, except for purposes of paragraph (1) or (2) of
33subdivision (a) of Section 10192.11 when the applicant is first
34enrolled in Medicare Part B. The application form shall include
35a clear and conspicuous statement that the applicant is not required
36to provide health information during a period where guaranteed
37issue or open enrollment applies, as specified in Section 10192.11
38or 10192.12, except for purposes of paragraph (1) or (2) of
39subdivision (a) of Section 10192.11 when the applicant is first
40enrolled in Medicare Part B, and shall inform the applicant of
P87   1those periods of guaranteed issuance of Medicare supplement
2coverage. This subdivision shall not prohibit an issuer from
3requiring proof of eligibility for a guaranteed issuance of Medicare
4supplement coverage.

5(h) This section shall become operative on January 1, 2017.

end insert
6

begin deleteSEC. 14.end delete
7begin insertSEC. 22.end insert  

Section 10232.3 of the Insurance Code is amended
8to read:

9

10232.3.  

(a) All applications for long-term care insurance
10except that which is guaranteed issue, shall contain clear,
11unambiguous, short, simple questions designed to ascertain the
12health condition of the applicant. Each question shall contain only
13one health status inquiry and shall require only a “yes” or “no”
14answer, except that the application may include a request for the
15name of any prescribed medication and the name of a prescribing
16physician. If the application requests the name of any prescribed
17medication or prescribing physician, then any mistake or omission
18shall not be used as a basis for the denial of a claim or the
19rescission of a policy or certificate.

20(b) The following warning shall be printed conspicuously and
21in close conjunction with the applicant’s signature block:

22“Caution: If your answers on this application are misstated or
23untrue, the insurer may have the right to deny benefits or rescind
24your coverage.”

25(c) Every application for long-term care insurance shall include
26a checklist that enumerates each of the specific documents that
27this chapter requires be given to the applicant at the time of
28solicitation. The documents and notices to be listed in the checklist
29include, but are not limited to, the following:

30(1) The outline of coverage pursuant to Section 10233.5.

31(2) The HICAP notice pursuant to paragraph (8) of subdivision
32(a) of Section 10234.93.

33(3) The long-term care insurance shoppers guide pursuant to
34paragraph (9) of subdivision (a) of Section 10234.93.

35(4) The “Long-Term Care Insurance Personal Worksheet”
36pursuant to subdivision (c) of Section 10234.95.

37(5) The “Notice to Applicant Regarding Replacement of
38Accident and Sickness or Long-Term Care Insurance” pursuant
39to Section 10235.16 if replacement is not made by direct response
40solicitation or Section 10235.18 if replacement is made by direct
P88   1response solicitation. Unless the solicitation was made by a direct
2response method, the agent and applicant shall both sign at the
3bottom of the checklist to indicate the required documents were
4delivered and received.

5(d) If an insurer does not complete medical underwriting and
6resolve all reasonable questions arising from information submitted
7on or with an application before issuing the policy or certificate,
8then the insurer may only rescind the policy or certificate or deny
9an otherwise valid claim, upon clear and convincing evidence of
10fraud or material misrepresentation of the risk by the applicant.
11The evidence shall:

12(1) Pertain to the condition for which benefits are sought.

13(2) Involve a chronic condition or involve dates of treatment
14before the date of application.

15(3) Be material to the acceptance for coverage.

16(e) No long-term care policy or certificate may be field issued.

17(f) The contestability period as defined in Section 10350.2 for
18long-term care insurance shall be two years.

19(g) A copy of the completed application shall be delivered to
20the insured at the time of delivery of the policy or certificate.

21(h) Every insurer shall maintain a record, in accordance with
22Section 10508, of all policy or certificate rescissions, both state
23and countrywide, and shall annually furnish this information to
24the commissioner, which shall include the reason for rescission,
25the length of time the policy or certificate was in force, and the
26age and gender of the insured person, in a format prescribed by
27the commissioner.

28(i) The commissioner may, in his or her discretion, make public
29the aggregate data collected under subdivision (h), upon request.

begin delete
30

SEC. 15.  

Section 10233.5 of the Insurance Code is amended
31to read:

32

10233.5.  

(a) An outline of coverage shall be delivered to a
33prospective applicant for long-term care insurance at the time of
34initial solicitation through means which prominently direct the
35attention of the recipient to the document and its purpose.

36(b) In the case of agent solicitations, an agent shall deliver the
37outline of coverage prior to the presentation of an application or
38enrollment form.

P89   1(c) In the case of direct response solicitations, the outline of
2coverage shall be presented in conjunction with any application
3or enrollment form.

4(d) The outline of coverage shall be a freestanding document,
5 using no smaller than 10-point type.

6(e) The outline of coverage shall contain no material of an
7advertising nature.

8(f) Use of the text and sequence of the text of the outline of
9coverage set forth in this section is mandatory, unless otherwise
10specifically indicated.

11(g) Text that is capitalized or underscored in the outline of
12coverage may be emphasized by other means that provide
13prominence equivalent to capitalization or underscoring.

14(h) The outline of coverage shall be in the following form:

1516“(COMPANY NAME)
17(ADDRESS--CITY AND STATE)
18(TELEPHONE NUMBER)
19LONG-TERM CARE INSURANCE
20OUTLINE OF COVERAGE
21(Policy Number or Group Master Policy and Certificate Number)
22

231. This policy is (an individual policy of insurance) ((a group
24policy) which was issued in the (indicate jurisdiction in which
25group policy was issued)).

262. PURPOSE OF OUTLINE OF COVERAGE. This outline
27of coverage provides a very brief description of the important
28features of the policy. You should compare this outline of coverage
29to outlines of coverage for other policies available to you. This is
30not an insurance contract, but only a summary of coverage. Only
31the individual or group policy contains governing contractual
32provisions. This means that the policy or group policy sets forth
33in detail the rights and obligations of both you and the insurance
34company. Therefore, if you purchase this coverage, or any other
35coverage, it is important that you READ YOUR POLICY (OR
36CERTIFICATE) CAREFULLY!

373. TERMS UNDER WHICH THE POLICY OR
38CERTIFICATE MAY BE RETURNED AND PREMIUM
39REFUNDED.

P90   1(a) Provide a brief description of the right to return--“free look”
2provision of the policy.

3(b) Include a statement that the policy either does or does not
4contain provisions providing for a refund or partial refund of
5premium upon the death of an insured or surrender of the policy
6or certificate. If the policy contains those provisions, include a
7description of them.

84. THIS IS NOT MEDICARE SUPPLEMENT COVERAGE.
9If you are eligible for Medicare, review the Medicare Supplement
10Buyer’s Guide available from the insurance company.

11(a) (For agents) Neither (insert company name) nor its agents
12represent Medicare, the federal government or any state
13government.

14(b) (For direct response) (insert company name) is not
15representing Medicare, the federal government or any state
16government.

175. LONG-TERM CARE COVERAGE. Policies of this category
18are designed to provide coverage for one or more necessary or
19medically necessary diagnostic, preventive, therapeutic,
20rehabilitative, maintenance, or personal care services, provided in
21a setting other than an acute care unit of a hospital, such as in a
22nursing home, in the community, or in the home.

23This policy provides coverage in the form of a fixed dollar
24indemnity benefit for covered long-term care expenses, subject to
25policy (limitations) (waiting periods) and (coinsurance)
26requirements. (Modify this paragraph if the policy is not an
27indemnity policy.)

286. BENEFITS PROVIDED BY THIS POLICY.

29(a) (Covered services, related deductible(s), waiting periods,
30elimination periods, and benefit maximums.)

31(b) (Institutional benefits, by skill level.)

32(c) (Noninstitutional benefits, by skill level.)

33(Any benefit screens must be explained in this section. If these
34screens differ for different benefits, explanation of the screen
35should accompany each benefit description. If an attending
36physician or other specified person must certify a certain level of
37functional dependency in order to be eligible for benefits, this too
38must be specified. If activities of daily living (ADLs) are used to
39measure an insured’s need for long-term care, then these qualifying
40criteria or screens must be explained.)

P91   17. LIMITATIONS AND EXCLUSIONS.

2(Describe:

3(a) Preexisting conditions.

4(b) Noneligible facilities/provider.

5(c) Noneligible levels of care (e.g., unlicensed providers, care
6or treatments provided by a family member, etc.).

7(d) Exclusions/exceptions.

8(e) Limitations.)

9(This section should provide a brief specific description of any
10policy provisions which limit, exclude, restrict, reduce, delay, or
11in any other manner operate to qualify payment of the benefits
12described in (6) above.)

13THIS POLICY MAY NOT COVER ALL THE EXPENSES
14ASSOCIATED WITH YOUR LONG-TERM CARE NEEDS.

158. RELATIONSHIP OF COST OF CARE AND BENEFITS.
16Because the costs of long-term care services will likely increase
17over time, you should consider whether and how the benefits of
18this plan may be adjusted. (As applicable, indicate the following:

19(a) That the benefit level will NOT increase over time.

20(b) Any automatic benefit adjustment provisions.

21(c) Whether the insured will be guaranteed the option to buy
22additional benefits and the basis upon which benefits will be
23increased over time if not by a specified amount or percentage.

24(d) If there is a guarantee, include whether additional
25underwriting or health screening will be required, the frequency
26and amounts of the upgrade options, and any significant restrictions
27or limitations.

28(e) And finally, describe whether there will be any additional
29premium charge imposed, and how that is to be calculated.)

309. TERMS UNDER WHICH THE POLICY (OR
31CERTIFICATE) MAY BE CONTINUED IN FORCE OR
32DISCONTINUED.

33(a) Describe the policy renewability provisions.

34(b) For group coverage, specifically describe
35continuation/conversion provisions applicable to the certificate
36and group policy.

37(c) Describe waiver of premium provisions or state that there
38are no waiver of premium provisions.

P92   1(d) State whether or not the company has a right to change
2premium, and if that right exists, describe clearly and concisely
3each circumstance under which the premium may change.

410. ALL MENTAL ILLNESSES COVERED.

5(State that the policy provides coverage for insureds for all
6mental illnesses. Specifically describe each benefit screen or other
7policy provision that provides preconditions to the availability of
8policy benefits for that insured.)

911. PREMIUM.

10(a) State the total annual premium for the policy.

11(b) If the premium varies with an applicant’s choice among
12benefit options, indicate the portion of annual premium which
13corresponds to each benefit option.

1412. ADDITIONAL FEATURES.

15(a) Indicate if medical underwriting is used.

16(b) Describe other important features.

1713. INFORMATION AND COUNSELING. The California
18Department of Insurance has prepared a Consumer Guide to
19Long-Term Care Insurance. This guide can be obtained by calling
20the Department of Insurance toll-free telephone number or by
21accessing the department’s Internet Web site at
22www.insurance.ca.gov. The department’s number is
231-800-927-HELP. Additionally, the Health Insurance Counseling
24and Advocacy Program (HICAP) administered by the California
25Department of Aging, provides long-term care insurance counseling
26to California senior citizens. Call the HICAP toll-free telephone
27number 1-800-434-0222 for a referral to your local HICAP office.”

end delete
28

begin deleteSEC. 16.end delete
29begin insertSEC. 23.end insert  

Section 10233.9 of the Insurance Code is repealed.

30

begin deleteSEC. 17.end delete
31begin insertSEC. 24.end insert  

Section 10235.35 of the Insurance Code is amended
32to read:

33

10235.35.  

(a) Notwithstanding any otherbegin delete provision ofend delete law, the
34commissioner may require the administration by an insurer of the
35contingent benefit upon lapse, as described in Section 28 (A), (D)
36(3), (E), (F), (G), and (J) of the Long-Term Care Insurance Model
37Regulation promulgated by the National Association of Insurance
38Commissioners, as adopted in September 2014, as a condition of
39approval or acknowledgment of a rate adjustment for a block of
P93   1business for which the contingent benefit upon lapse is not
2otherwise available.

3(b) The insurer shall notify policyholders and certificate holders
4of the contingent benefit upon lapse when required by the
5commissioner in conjunction with the implementation of a rate
6adjustment. The commissioner may require an insurer who files
7for such a rate adjustment to allow policyholders and certificate
8holders to reduce coverage pursuant to Section 10235.50 to avoid
9an increase in the policy’s premium amount.

10(c) The commissioner may also approve any other alternative
11mechanism filed by the insurer in lieu of the contingent benefit
12upon lapse.

13

begin deleteSEC. 18.end delete
14begin insertSEC. 25.end insert  

Section 12418.4 of the Insurance Code is amended
15to read:

16

12418.4.  

(a) Sections 1667, 1668, 1669, 1670, 1729, 1729.2,
171738, 1738.5, 1743, and Article 6 (commencing with Section
1812404), shall apply to all applicants or holders of a certificate of
19registration issued pursuant to this article.

20(b) The department may revoke, suspend, restrict, or decline to
21issue a certificate of registration if it determines that the title
22marketing representative or applicant has violated provisions of
23 Article 6 (commencing with Section 12404) pursuant to the due
24process and hearing requirements set forth in subdivision (c).

25(c) Except as provided in Section 1669, a certificate of
26registration shall not be denied, restricted, suspended, or revoked
27without a hearing conducted in accordance with Chapter 5
28(commencing with Section 11500) of Part 1 of Division 3 of Title
292 of the Government Code.

30(d) In addition to, or in lieu of, any other penalty that may be
31imposed under this article against a title marketing representative,
32the commissioner may bring an administrative action against a
33title marketing representative for any violation of the provisions
34of Article 6 (commencing with Section 12404). If a title marketing
35representative charged with a violation of Article 6 (commencing
36with Section 12404) is determined by the commissioner to have
37committed the violation, the commissioner may require the
38surrender of, temporarily suspend or revoke either permanently or
39temporarily the title marketing representative’s certificate of
40registration, and, in addition, may impose a monetary penalty. Any
P94   1payment of a monetary penalty pursuant to a settlement or final
2adjudication shall be made from the title marketing representative’s
3personal funds and not by his or her employer either directly or
4through the title marketing representative. This article shall not
5preclude an action against a company that had actual knowledge
6of the violation by the title marketing representative. A title
7marketing representative who is issued a certificate of registration
8under this article may not engage in any activity that is otherwise
9prohibited through a separate entity controlled by the title
10marketing representative or by the company or entity that employs
11him or her.

12(e) A title marketing representative who has his or her certificate
13of registration revoked by the department shall not be permitted
14to reapply for another certificate of registration with the department
15for five years from the date of revocation.

begin delete
16

SEC. 19.  

Section 12820 of the Insurance Code is amended to
17read:

18

12820.  

(a) Prior to offering a vehicle service contract form to
19a purchaser or providing a vehicle service contract form to a seller,
20an obligor shall file with the commissioner a specimen of that
21vehicle service contract form.

22(b) A vehicle service contract form may include any or all of
23the benefits described in subdivision (c) of Section 12800 and shall
24comply with all of the following requirements:

25(1) (A) If an obligor has complied with Section 12830, the
26vehicle service contract shall include a disclosure in substantially
27the following form: “Performance to you under this contract is
28guaranteed by a California approved insurance company. You may
29file a claim with this insurance company if any promise made in
30the contract has been denied or has not been honored within 60
31days after your request. The name and address of the insurance
32company is: (insert name and address). If you are not satisfied with
33the insurance company’s response, you may contact the California
34Department of Insurance at 1-800-927-4357 or access the
35department’s Internet Web site (www.insurance.ca.gov).”

36(B) If an obligor has complied with Section 12836, the vehicle
37service contract shall include a disclosure in substantially the
38following form: “If any promise made in the contract has been
39denied or has not been honored within 60 days after your request,
40you may contact the California Department of Insurance at
P95   11-800-927-4357 or access the department’s Internet Web site
2(www.insurance.ca.gov).”

3(C) The requirement that a vehicle service contract form include
4the department’s Internet Web site shall not apply to a form for
5which the department has issued a “no objection letter” as of
6December 31, 2016.

7(2) All vehicle service contract language that excludes coverage,
8or imposes duties upon the purchaser, shall be conspicuously
9printed in boldface type no smaller than the surrounding type.

10(3) The vehicle service contract shall do each of the following:

11(A) State the obligor’s full corporate name or a fictitious name
12approved by the commissioner, the obligor’s mailing address, the
13obligor’s telephone number, and the obligor’s vehicle service
14contract provider license number.

15(B) State the name of the purchaser and the name of the seller.

16(C) Conspicuously state the vehicle service contract’s purchase
17price.

18(D) Comply with Sections 1794.4 and 1794.41 of the Civil
19Code.

20(E) Name the administrator, if any, and provide the
21administrator’s license number.

22(4) If the vehicle service contract excludes coverage for
23preexisting conditions, the contract must disclose this exclusion
24in 12-point type.

25(c) The following benefits constitute insurance, whether offered
26as part of a vehicle service contract or in a separate agreement:

27(1) Indemnification for a loss caused by misplacement, theft,
28collision, fire, or other peril typically covered in the comprehensive
29coverage section of an automobile insurance policy, a homeowner’s
30policy, or a marine or inland marine policy.

31(2) Locksmith services, unless offered as part of an emergency
32road service benefit.

end delete
33begin insert

begin insertSEC. 26.end insert  

end insert

begin insertSection 12820 of the end insertbegin insertInsurance Codeend insertbegin insert is amended to
34read:end insert

35

12820.  

(a) Prior to offering a vehicle service contract form to
36a purchaser or providing a vehicle service contract form to a seller,
37an obligor shall file with the commissioner a specimen of that
38vehicle service contract form.

P96   1(b) A vehicle service contract form may include any or all of
2the benefits described in subdivision (c) of Section 12800 and shall
3comply with all of the following requirements:

4(1) (A) If an obligor has complied with Section 12830, the
5vehicle service contract shall include a disclosure in substantially
6the following form: “Performance to you under this contract is
7guaranteed by a California approved insurance company. You may
8file a claim with this insurance company if any promise made in
9the contract has been denied or has not been honored within 60
10days after your request. The name and address of the insurance
11company is: (insert name and address). If you are not satisfied with
12the insurance company’s response, you may contact the California
13Department of Insurance at 1-800-927-4357.”

14(B) If an obligor has complied with Section 12836, the vehicle
15service contract shall include a disclosure in substantially the
16following form: “If any promise made in the contract has been
17denied or has not been honored within 60 days after your request,
18you may contact the California Department of Insurance at
191-800-927-4357.”

20(2) All vehicle service contract language that excludes coverage,
21or imposes duties upon the purchaser, shall be conspicuously
22printed in boldface type no smaller than the surrounding type.

23(3) The vehicle service contract shall do each of the following:

24(A) State the obligor’s full corporate name or a fictitious name
25approved by the commissioner, the obligor’s mailing address, the
26obligor’s telephone number, and the obligor’s vehicle service
27contract provider license number.

28(B) State the name of the purchaser and the name of the seller.

29(C) Conspicuously state the vehicle service contract’s purchase
30price.

31(D) Comply with Sections 1794.4 and 1794.41 of the Civil
32Code.

33(E) Name the administrator, if any, and provide the
34administrator’s license number.

35(4) If the vehicle service contract excludes coverage for
36preexisting conditions, the contract must disclose this exclusion
37in 12-point type.

38(c) The following benefits constitute insurance, whether offered
39as part of a vehicle service contract or in a separate agreement:

P97   1(1) Indemnification for a loss caused by misplacement, theft,
2collision, fire, or other peril typically covered in the comprehensive
3coverage section of an automobile insurance policy, a homeowner’s
4policy, or a marine or inland marine policy.

5(2) Locksmith services, unless offered as part of an emergency
6road service benefit.

begin insert

7(d) This section shall remain in effect only until January 1, 2017,
8and as of that date is repealed, unless a later enacted statute, that
9is enacted before January 1, 2017, deletes or extends that date.

end insert
10begin insert

begin insertSEC. 27.end insert  

end insert

begin insertSection 12820 is added to the end insertbegin insertInsurance Codeend insertbegin insert, to
11read:end insert

begin insert
12

begin insert12820.end insert  

(a) Prior to offering a vehicle service contract form
13to a purchaser or providing a vehicle service contract form to a
14seller, an obligor shall file with the commissioner a specimen of
15that vehicle service contract form.

16(b) A vehicle service contract form may include any or all of
17the benefits described in subdivision (c) of Section 12800 and shall
18comply with all of the following requirements:

19(1) (A) If an obligor has complied with Section 12830, the
20vehicle service contract shall include a disclosure in substantially
21the following form: “Performance to you under this contract is
22guaranteed by a California approved insurance company. You
23may file a claim with this insurance company if any promise made
24in the contract has been denied or has not been honored within
2560 days after your request. The name and address of the insurance
26company is: (insert name and address). If you are not satisfied
27with the insurance company’s response, you may contact the
28California Department of Insurance at 1-800-927-4357 or access
29the department’s Internet Web site (www.insurance.ca.gov).”

30(B) If an obligor has complied with Section 12836, the vehicle
31service contract shall include a disclosure in substantially the
32following form: “If any promise made in the contract has been
33denied or has not been honored within 60 days after your request,
34you may contact the California Department of Insurance at
351-800-927-4357 or access the department’s Internet Web site
36(www.insurance.ca.gov).”

37(C) The requirement that a vehicle service contract form include
38the department’s Internet Web site shall not apply to a form for
39which the department has issued a “no objection letter” as of
40December 31, 2016.

P98   1(2) All vehicle service contract language that excludes coverage,
2or imposes duties upon the purchaser, shall be conspicuously
3printed in boldface type no smaller than the surrounding type.

4(3) The vehicle service contract shall do each of the following:

5(A) State the obligor’s full corporate name or a fictitious name
6approved by the commissioner, the obligor’s mailing address, the
7obligor’s telephone number, and the obligor’s vehicle service
8contract provider license number.

9(B) State the name of the purchaser and the name of the seller.

10(C) Conspicuously state the vehicle service contract’s purchase
11price.

12(D) Comply with Sections 1794.4 and 1794.41 of the Civil Code.

13(E) Name the administrator, if any, and provide the
14administrator’s license number.

15(4) If the vehicle service contract excludes coverage for
16preexisting conditions, the contract must disclose this exclusion
17in 12-point type.

18(c) The following benefits constitute insurance, whether offered
19as part of a vehicle service contract or in a separate agreement:

20(1) Indemnification for a loss caused by misplacement, theft,
21collision, fire, or other peril typically covered in the comprehensive
22coverage section of an automobile insurance policy, a
23homeowner’s policy, or a marine or inland marine policy.

24(2) Locksmith services, unless offered as part of an emergency
25road service benefit.

26(d) This section shall become operative on January 1, 2017.

end insert
27

begin deleteSEC. 20.end delete
28begin insertSEC. 28.end insert  

Section 12921 of the Insurance Code is amended to
29read:

30

12921.  

(a) The commissioner shall perform all duties imposed
31upon him or her by the provisions of this code and other laws
32regulating the business of insurance in this state, and shall enforce
33the execution of those provisions and laws.

34(b) In an administrative action to enforce the provisions of this
35code and other laws regulating the business of insurance in this
36state, any settlement is subject to all of the following:

37(1) The commissioner may delegate the power to negotiate the
38terms and conditions of abegin delete settlement.end deletebegin insert settlement to designated
39deputy commissioners.end insert
The commissioner may delegate the power
P99   1to approve a settlement, unless the settlement involves any of the
2following:

3(A) An insurer.

4(B) A managing general agent or production agent that manages
5the business of an insurer.

6(C) A title company.

7(D) A home protection company.

8(E) An insurance adjuster whose claims practices are at issue.

9(F) An insurance agent or broker, or an applicant for an
10insurance agent or broker license, who has allegedly engaged in
11theft, fraud, or the misappropriation of premium or other funds in
12an amount that exceeds fifty thousand dollars ($50,000).

13(2) Unless specifically provided for in a provision of this code,
14the commissioner may not agree to any of the following:

15(A) That the respondent contribute, deposit, or transfer any
16moneys or other resources to a nonprofit entity.

17(B) That a respondent contribute, deposit, or transfer any fine,
18penalty, assessment, cost, or fee except to the commissioner for
19deposit in the appropriate state fund pursuant to Section 12975.7.

20(C) That the commissioner may or shall direct the transfer,
21distribution, or payment to another person or entity of any fine,
22penalty, assessment, cost, or fee.

23(D) The use of the commissioner’s name, likeness, or voice in
24any printed material or audio or visual medium, either for general
25distribution or for distribution to specific recipients.

26(3) The commissioner may only agree to payment to those
27persons or entities to whom payment may be due because of the
28respondent’s violation of a provision of this code or other law
29regulating the business of insurance in this state.

30(4) A settlement may only include the sanctions provided by
31this code or other laws regulating the business of insurance in this
32state, except that the settlement may include attorney’s fees, costs
33of the department in bringing the enforcement action, and future
34costs of the department to ensure compliance with the settlement
35agreement.

36(c) Notwithstanding any other provision of law, the
37commissioner may accept documents submitted for filing or
38approval, process transactions, and maintain records in electronic
39form or as paper documents, and may adopt regulations to further
40this subdivision.

P100  1

begin deleteSEC. 21.end delete
2begin insertSEC. 29.end insert  

Section 1299.04 of the Penal Code is amended to
3read:

4

1299.04.  

(a) A bail fugitive recovery person, a bail agent, bail
5permittee, or bail solicitor who contracts his or her services to
6another bail agent or surety as a bail fugitive recovery person for
7the purposes specified in subdivision (d) of Section 1299.01, and
8any bail agent, bail permittee, or bail solicitor who obtains licensing
9after January 1, 2000, and who engages in the arrest of a defendant
10pursuant to Section 1301 shall comply with the following
11requirements:

12(1) The person shall be at least 18 years of age.

13(2) The person shall have completed a 40-hour power of arrest
14course certified by the Commission on Peace Officer Standards
15and Training pursuant to Section 832. Completion of the course
16shall be for educational purposes only and not intended to confer
17the power of arrest of a peace officer or public officer, or agent of
18any federal, state, or local government, unless the person is so
19employed by a governmental agency.

20(3) The person shall have completed a minimum of 20 hours of
21classroom prelicensing education certified pursuant to Section
221810.7 of the Insurance Code. For those persons licensed by the
23department as a bail licensee prior to January 1, 1994, there is no
24prelicensing education requirement. For those persons licensed by
25the department as a bail licensee between January 1, 1994, and
26December 31, 2012, a minimum of 12 hours of classroom
27prelicensing education is required.

28(4) The person shall not have been convicted of a felony, unless
29the person is licensed by the Department of Insurance pursuant to
30Section 1800 of the Insurance Code.

31(b) Upon completion of any course or training program required
32by this section, an individual authorized by Section 1299.02 to
33apprehend a bail fugitive shall carry certificates of completion
34with him or her at all times in the course of performing his or her
35duties under this article.



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