Amended in Assembly April 13, 2016

Amended in Assembly March 31, 2016

Amended in Assembly March 17, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2591

Introduced by Assembly Member Dababneh

(Coauthors: Assembly Members begin delete Travis Allen and O'Donnell end delete begin insert Travis end insert begin insert  Allen, O end insert begin insert 'Donnell, and Olsen end insert )

(Coauthor: Senator Bates)

February 19, 2016

An act to amend Section 1633.3 of the Civil Code, and to amend Section 38.6 of, and to repeal Section 38.5 of, the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 2591, as amended, Dababneh. Insurance: electronic transmission.

Existing law generally requires, with exceptions, that specified provisions of the Civil Code apply to electronic records and electronic signatures relating to a transaction.

This bill would remove various notices, including a policy cancellation notice by the named insured and a written notice of nonrenewal of the policy from the above exemptions.

Existing law generally requires that any required notice related to insurance transactions be made by mail. Existing law authorizes an insurer, under specified conditions, to provide by electronic transmission the required offer of renewal for automobile insurance, the required offer of renewal or conditional renewal for property insurance, the required offer of coverage or renewal or any disclosure required regarding earthquake insurance, and the offer of renewal for a workers’ compensation policy.

The bill would, for the above-specified records, authorize persons in addition to the insurer to send those records by electronic transmission by providing that an agent, broker, or any other person licensed by the Department of Insurance may send those records electronically. The bill would also repeal various provisions on the electronic transmission of certain notices.

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

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

SECTION 1.  

Section 1633.3 of the Civil Code, as amended
by Section 1.5 of Chapter 638 of the Statutes of 2015, is amended
to read:

1633.3.  

(a) Except as otherwise provided in subdivisions (b)
and (c), this title applies to electronic records and electronic
signatures relating to a transaction.

(b) This title does not apply to transactions subject to the
following laws:

(1) A law governing the creation and execution of wills, codicils,
or testamentary trusts.

(2) Division 1 (commencing with Section 1101) of the Uniform
Commercial Code, except Sections 1206 and 1306.

(3) Division 3 (commencing with Section 3101), Division 4
(commencing with Section 4101), Division 5 (commencing with
Section 5101), Division 8 (commencing with Section 8101),
Division 9 (commencing with Section 9101), and Division 11
(commencing with Section 11101) of the Uniform Commercial
Code.

(4) A law that requires that specifically identifiable text or
disclosures in a record or a portion of a record be separately signed,
including initialed, from the record. However, this paragraph does
not apply to Section 1677 or 1678 of this code or Section 1298 of
the Code of Civil Procedure.

(c) This title does not apply to any specific transaction described
in Section 17511.5 of the Business and Professions Code, Section
56.11, 56.17, 798.14, 1133, or 1134 of, Section 1689.6, 1689.7,
or 1689.13 of, Chapter 2.5 (commencing with Section 1695) of
Title 5 of Part 2 of Division 3 of, Section 1720, 1785.15, 1789.14,
1789.16, or 1793.23 of, Chapter 1 (commencing with Section
1801) of Title 2 of Part 4 of Division 3 of, Section 1861.24, 1862.5,
1917.712, 1917.713, 1950.6, 1983, 2924b, 2924c, 2924f, 2924i,
2924j, 2924.3, or 2937 of, Article 1.5 (commencing with Section
2945) of Chapter 2 of Title 14 of Part 4 of Division 3 of, Section
2954.5 or 2963 of, Chapter 2b (commencing with Section 2981)
or 2d (commencing with Section 2985.7) of Title 14 of Part 4 of
Division 3 of, Section 3071.5 of, Part 5 (commencing with Section
4000) of Division 4 of, or Part 5.3 (commencing with Section
6500) of Division 4 of this code, subdivision (b) of Section 18608
or Section 22328 of the Financial Code, Section 1358.15, 1365,
1368.01, 1368.1, 1371, or 18035.5 of the Health and Safety Code,
Section 786 as it applies to individual and group disability policies,
Section 10192.18, 10199.44, 10199.46, 10235.16, 10235.40,
11624.09, or 11624.1 of the Insurance Code, Section 779.1,
10010.1, or 16482 of the Public Utilities Code, or Section 9975
or 11738 of the Vehicle Code. An electronic record may not be
substituted for any notice that is required to be sent pursuant to
Section 1162 of the Code of Civil Procedure. Nothing in this
subdivision shall be construed to prohibit the recordation of any
document with a county recorder by electronic means.

(d) This title applies to an electronic record or electronic
signature otherwise excluded from the application of this title under
subdivision (b) when used for a transaction subject to a law other
than those specified in subdivision (b).

(e) A transaction subject to this title is also subject to other
applicable substantive law.

(f) The exclusion of a transaction from the application of this
title under subdivision (b) or (c) shall be construed only to exclude
the transaction from the application of this title, but shall not be
construed to prohibit the transaction from being conducted by
electronic means if the transaction may be conducted by electronic
means under any other applicable law.

(g) Notwithstanding subdivisions (b) and (c), this title shall
apply to electronic records and electronic signatures relating to
transactions conducted by a person licensed, certified, or registered
pursuant to the Alarm Company Act (Chapter 11.6 (commencing
with Section 7590) of Division 3 of the Business and Professions
Code) for purposes of activities authorized by Section 7599.54 of
the Business and Professions Code.

(h) This section shall remain in effect only until January 1, 2019,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2019, deletes or extends that date.

SEC. 2.  

Section 1633.3 of the Civil Code, as amended by
Section 2.5 of Chapter 638 of the Statutes of 2015, is amended to
read:

1633.3.  

(a) Except as otherwise provided in subdivisions (b)
and (c), this title applies to electronic records and electronic
signatures relating to a transaction.

(b) This title does not apply to transactions subject to the
following laws:

(1) A law governing the creation and execution of wills, codicils,
or testamentary trusts.

(2) Division 1 (commencing with Section 1101) of the Uniform
Commercial Code, except Sections 1206 and 1306.

(3) Divisions 3 (commencing with Section 3101), 4
(commencing with Section 4101), 5 (commencing with Section
5101), 8 (commencing with Section 8101), 9 (commencing with
Section 9101), and 11 (commencing with Section 11101) of the
Uniform Commercial Code.

(4) A law that requires that specifically identifiable text or
disclosures in a record or a portion of a record be separately signed,
including initialed, from the record. However, this paragraph does
not apply to Section 1677 or 1678 of this code or Section 1298 of
the Code of Civil Procedure.

(c) This title does not apply to any specific transaction described
in Section 17511.5 of the Business and Professions Code, Section
56.11, 56.17, 798.14, 1133, or 1134 of, Section 1689.6, 1689.7,
or 1689.13 of, Chapter 2.5 (commencing with Section 1695) of
Title 5 of Part 2 of Division 3 of, Section 1720, 1785.15, 1789.14,
1789.16, or 1793.23 of, Chapter 1 (commencing with Section
1801) of Title 2 of Part 4 of Division 3 of, Section 1861.24, 1862.5,
1917.712, 1917.713, 1950.6, 1983, 2924b, 2924c, 2924f, 2924i,
2924j, 2924.3, or 2937 of, Article 1.5 (commencing with Section
2945) of Chapter 2 of Title 14 of Part 4 of Division 3 of, Section
2954.5 or 2963 of, Chapter 2b (commencing with Section 2981)
or 2d (commencing with Section 2985.7) of Title 14 of Part 4 of
Division 3 of, Section 3071.5 of Part 5 (commencing with Section
4000) of Division 4 of, or Part 5.3 (commencing with Section
6500) of Division 4 of this code, subdivision (b) of Section 18608
or Section 22328 of the Financial Code, Section 1358.15, 1365,
1368.01, 1368.1, 1371, or 18035.5 of the Health and Safety Code,
Section 786 as it applies to individual and group disability policies,
10192.18, 10199.44, 10199.46, 10235.16, 10235.40, 11624.09, or
11624.1 of the Insurance Code, Section 779.1, 10010.1, or 16482
of the Public Utilities Code, or Section 9975 or 11738 of the
Vehicle Code. An electronic record may not be substituted for any
notice that is required to be sent pursuant to Section 1162 of the
Code of Civil Procedure. Nothing in this subdivision shall be
construed to prohibit the recordation of any document with a county
recorder by electronic means.

(d) This title applies to an electronic record or electronic
signature otherwise excluded from the application of this title under
subdivision (b) when used for a transaction subject to a law other
than those specified in subdivision (b).

(e) A transaction subject to this title is also subject to other
applicable substantive law.

(f) The exclusion of a transaction from the application of this
title under subdivision (b) or (c) shall be construed only to exclude
the transaction from the application of this title, but shall not be
construed to prohibit the transaction from being conducted by
electronic means if the transaction may be conducted by electronic
means under any other applicable law.

(g) Notwithstanding subdivisions (b) and (c), this title shall
apply to electronic records and electronic signatures relating to
transactions conducted by a person licensed, certified, or registered
pursuant to the Alarm Company Act (Chapter 11.6 (commencing
with Section 7590) of Division 3 of the Business and Professions
Code) for purposes of activities authorized by Section 7599.54 of
the Business and Professions Code.

(h) This section shall become operative on January 1, 2019.

(i) This section shall remain in effect only until January 1, 2021,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2021, deletes or extends that date.

SEC. 3.  

Section 1633.3 of the Civil Code, as added by Section
3.5 of Chapter 638 of the Statutes of 2015, is amended to read:

1633.3.  

(a) Except as otherwise provided in subdivisions (b)
and (c), this title applies to electronic records and electronic
signatures relating to a transaction.

(b) This title does not apply to transactions subject to the
following laws:

(1) A law governing the creation and execution of wills, codicils,
or testamentary trusts.

(2) Division 1 (commencing with Section 1101) of the Uniform
Commercial Code, except Sections 1206 and 1306.

(3) Divisions 3 (commencing with Section 3101), 4
(commencing with Section 4101), 5 (commencing with Section
5101), 8 (commencing with Section 8101), 9 (commencing with
Section 9101), and 11 (commencing with Section 11101) of the
Uniform Commercial Code.

(4) A law that requires that specifically identifiable text or
disclosures in a record or a portion of a record be separately signed,
including initialed, from the record. However, this paragraph does
not apply to Section 1677 or 1678 of this code or Section 1298 of
the Code of Civil Procedure.

(c) This title does not apply to any specific transaction described
in Section 17511.5 of the Business and Professions Code, Section
56.11, 56.17, 798.14, 1133, or 1134 of, Section 1689.6, 1689.7,
or 1689.13 of, Chapter 2.5 (commencing with Section 1695) of
Title 5 of Part 2 of Division 3 of, Section 1720, 1785.15, 1789.14,
1789.16, or 1793.23 of, Chapter 1 (commencing with Section
1801) of Title 2 of Part 4 of Division 3 of, Section 1861.24, 1862.5,
1917.712, 1917.713, 1950.6, 1983, 2924b, 2924c, 2924f, 2924i,
2924j, 2924.3, or 2937 of, Article 1.5 (commencing with Section
2945) of Chapter 2 of Title 14 of Part 4 of Division 3 of, Section
2954.5 or 2963 of, Chapter 2b (commencing with Section 2981)
or 2d (commencing with Section 2985.7) of Title 14 of Part 4 of
Division 3 of, Section 3071.5 of Part 5 (commencing with Section
4000) of Division 4 of, or Part 5.3 (commencing with Section
6500) of Division 4 of this code, subdivision (b) of Section 18608
or Section 22328 of the Financial Code, Section 1358.15, 1365,
1368.01, 1368.1, 1371, or 18035.5 of the Health and Safety Code,
Section 786, 10086, 10113.7, 10127.7, 10127.9, 10127.10,
10192.18, 10199.44, 10199.46, 10235.16, 10235.40, 10509.4,
10509.7, 11624.09, or 11624.1 of the Insurance Code, Section
779.1, 10010.1, or 16482 of the Public Utilities Code, or Section
9975 or 11738 of the Vehicle Code. An electronic record may not
be substituted for any notice that is required to be sent pursuant to
Section 1162 of the Code of Civil Procedure. Nothing in this
subdivision shall be construed to prohibit the recordation of any
document with a county recorder by electronic means.

(d) This title applies to an electronic record or electronic
signature otherwise excluded from the application of this title under
subdivision (b) when used for a transaction subject to a law other
than those specified in subdivision (b).

(e) A transaction subject to this title is also subject to other
applicable substantive law.

(f) The exclusion of a transaction from the application of this
title under subdivision (b) or (c) shall be construed only to exclude
the transaction from the application of this title, but shall not be
construed to prohibit the transaction from being conducted by
electronic means if the transaction may be conducted by electronic
means under any other applicable law.

(g) Notwithstanding subdivisions (b) and (c), this title shall
apply to electronic records and electronic signatures relating to
transactions conducted by a person licensed, certified, or registered
pursuant to the Alarm Company Act (Chapter 11.6 (commencing
with Section 7590) of Division 3 of the Business and Professions
Code) for purposes of activities authorized by Section 7599.54 of
the Business and Professions Code.

(h) This section shall become operative on January 1, 2021.

SEC. 4.  

Section 38.5 of the Insurance Code, as amended by
Section 4 of Chapter 369 of the Statutes of 2013, is repealed.

SEC. 5.  

Section 38.5 of the Insurance Code, as added by
Section 5 of Chapter 369 of the Statutes of 2013, is repealed.

SEC. 6.  

Section 38.6 of the Insurance Code is amended to read:

38.6.  

(a) (1) Any written record required to be given or mailed
to any person by a licensee, including an offer of renewal required
by Sections 663 and 678, the notice of policy change or
cancellation requested by the insured as required by Section 667.5,
the notice of conditional renewal required by Section 678.1, the
offer of coverage or renewal or any disclosure required by Section
10086, the offer of renewal for a workers’ compensation policy,
Section 662, paragraph (2) of subdivision (a) of Section 663,
Section 664, 667.5, 673, 677, paragraph (2) of subdivision (a) of
Section 678, subdivisions (a) and (b) of Section 678.1, or any
written record required to be given or mailed to any person by a
licensee relating to the business of life insurance, as defined in
Section 101 of this code may, if not excluded by subdivision (b)
or (c) of Section 1633.3 of the Civil Code, be provided by
electronic transmission pursuant to Title 2.5 (commencing with
Section 1633.1) of Part 2 of Division 3 of the Civil Code, if each
party has agreed to conduct the transaction by electronic means
pursuant to Section 1633.5 of the Civil Code, and if the licensee
complies with the provisions of this section. A valid electronic
signature shall be sufficient for any provision of law requiring a
written signature.

(2) For purposes of this section, the definitions set forth in
Section 1633.2 of the Civil Code shall apply. The term “licensee”
means an insurer, agent, broker, or any other person who is required
to be licensed by the department.

(3) Notwithstanding subdivision (l) of Section 1633.2 of the
Civil Code, for purposes of this section, “person” includes, but is
not limited to, the policy owner, policyholder, applicant, insured,
or assignee or designee of an insured.

(b) In order to transmit a record listed in subdivision (a)
electronically, a licensee shall comply with all of the following:

(1) A licensee, or licensee’s representative, acquires the consent
of the person to opt in to receive the record by electronic
transmission, and the person has not withdrawn that consent, prior
to providing the record by electronic transmission. A person’s
consent may be acquired verbally, in writing, or electronically. If
consent is acquired verbally, the licensee shall confirm consent in
writing or electronically. The licensee shall retain a record of the
person’s consent to receive the record by electronic transmission
with the policy information so that it is retrievable upon request
by the department while the policy is in force and for five years
thereafter.

(2) A licensee discloses, in writing or electronically, to the
person all of the following:

(A) The opt in to receive the record by electronic transmission
is voluntary.

(B) That the person may opt out of receiving the record by
electronic transmission at any time, and the process or system for
the person to opt out.

(C) A description of the record that the person will receive by
electronic transmission.

(D) The process or system to report a change or correction in
the person’s email address.

(E) The licensee’s contact information, which includes, but is
not limited to, a toll-free number or the licensee’s Internet Web
site address.

(3) The opt-in consent disclosure required by paragraph (2) may
be set forth in the application or in a separate document that is part
of the policy approved by the commissioner and shall be bolded
or otherwise set forth in a conspicuous manner. The person’s
signature shall be set forth immediately below the opt-in consent
disclosure. If the licensee seeks consent at any time prior to the
completion of the application, consent and signature shall be
obtained before the application is completed. If the person has not
opted in at the time the application is completed, the licensee may
receive the opt-in consent at any time thereafter, pursuant to the
same opt in requirements that apply at the time of the application.
The licensee shall retain a copy of the signed opt-in consent
disclosure with the policy information so that each is retrievable
upon request by the department while the policy is in force and
for five years thereafter.

(4) The email address of the person who has consented to
electronic transmission shall be set forth on the consent disclosure.
In addition, if the person who consented receives an annual
statement, the email address of the person who has consented shall
be set forth on that record.

(5) The licensee shall annually provide one free printed copy
of any record described in this subdivision upon request by the
person.

(6) If a provision of this code requires a licensee to transmit a
record by first-class mail, regular mail, does not specify a method
of delivery, or is a record that is required to be provided pursuant
to Article 6.6 (commencing with Section 791), and if the licensee
is not otherwise prohibited from transmitting the record
electronically under subdivision (b) of Section 1633.8 of the Civil
Code, then the record may be transmitted by electronic transmission
if the licensee complies with all of the requirements of Sections
1633.15 and 1633.16 of the Civil Code.

(7) Notwithstanding subdivision (b) of Section 1633.8 of the
Civil Code, if a provision of this code requires a licensee to
transmit a record by return receipt, registered mail, certified mail,
signed written receipt of delivery, or other method of delivery
evidencing actual receipt by the person, and if the licensee is not
otherwise prohibited from transmitting the record electronically
under Section 1633.3 of the Civil Code and the provisions of this
section, then the licensee shall maintain a process or system that
demonstrates proof of delivery and actual receipt of the record by
the person consistent with this paragraph. The licensee shall
document and retain information demonstrating delivery and actual
receipt so that it is retrievable, upon request, by the department at
least five years after the policy is no longer in force. The record
provided by electronic transmission shall be treated as if actually
received if the licensee delivers the record to the person in
compliance with applicable statutory delivery deadlines. A licensee
may demonstrate actual delivery and receipt by any of the
following:

(A) The person acknowledges receipt of the electronic
transmission of the record by returning an electronic receipt or by
executing an electronic signature.

(B) The record is made part of, or attached to, an email sent to
the email address designated by the person, and there is a
confirmation receipt, or some other evidence that the person
received the email in his or her email account and opened the
email.

(C) The record is posted on the licensee’s secure Internet Web
site, and there is evidence demonstrating that the person logged
onto the licensee’s secure Internet Web site and downloaded,
printed, or otherwise acknowledged receipt of the record.

(D) If a licensee is unable to demonstrate actual delivery and
receipt pursuant to this paragraph, the licensee shall resend the
record by regular mail to the person in the manner originally
specified by the underlying provision of this code.

(8) Notwithstanding any other law, a notice of lapse,
nonrenewal, cancellation, or termination of any product subject to
this section may be transmitted electronically if the licensee
demonstrates proof of delivery as set forth in paragraph (7) and
complies with the other provisions in this section.

(9) If the record is not delivered directly to the electronic address
designated by the person but placed at an electronic address
accessible to the person, a licensee shall notify the person in plain,
clear, and conspicuous language at the electronic address
designated by the person that describes the record, informs that
person that it is available at another location, and provides
instructions to the person as to how to obtain the record.

(10) (A) Upon a licensee receiving information indicating that
the record sent by electronic transmission was not received by the
person, the licensee shall, within five business days, comply with
either clause (i) or (ii):

(i) Contact the person to confirm or update the person’s email
address and resend the record by electronic transmission. If the
licensee elects to resend the record by electronic transmission, the
licensee shall demonstrate the transmission was received by the
person, pursuant to paragraph (6), (7), or (8). If the licensee is
unable to confirm or update the person’s email address, the licensee
shall resend the record by regular mail to the licensee at the address
shown on the policy, or, if the underlying statute requires delivery
in a specified manner, send the record in that specified manner.

(ii) Resend the record initially provided by electronic
transmission by regular mail to the insured at the address shown
on the policy, or, if the underlying statute requires delivery in a
specified manner, send the record in that specified manner.

(B) If the licensee sends the first electronic record within the
time period required by law and the licensee complies with both
paragraph (5) and subparagraph (A) of this paragraph, the record
sent pursuant to clause (i) or (ii) of subparagraph (A) shall be
treated as if mailed in compliance with the applicable statutory
regular mail delivery deadlines.

(11) The licensee shall not charge any person who declines to
opt in to receive a record through electronic transmission from
receiving a record electronically. The licensee shall not provide a
discount or an incentive to any person to opt in to receive electronic
records.

(12) The licensee shall verify a person’s email address via paper
writing sent by regular mail when more than 12 months have
elapsed since the license’s last electronic communication.

(c) An insurance agent or broker acting under the direction of
a party that enters into a contract by means of an electronic record
or electronic signature shall not be held liable for any deficiency
in the electronic procedures agreed to by the parties under that
contract if all of the following are met:

(1) The insurance agent or broker has not engaged in negligent,
reckless, or intentional tortious conduct.

(2) The insurance agent or broker was not involved in the
development or establishment of the electronic procedures.

(3) The insurance agent or broker did not deviate from the
electronic procedures.

(d)  begin insert (1) end insert begin insert   end insert On or before January 1, 2020, the commissioner shall
submit a report to the Governor and to the committees of the Senate
and Assembly having jurisdiction over insurance and the judiciary,
regarding the impact and implementation of the authorization of
the electronic transmission of certain insurance renewal offers,
notices, or begin delete disclosures end delete begin insert disclosures, relating to the business of life
insurance, end insert as authorized by this section. The report shall include
input from insurers, consumers, and consumer organizations, and
shall include an assessment of the department’s experience
pertaining to the authorization of the electronic transmission of
insurance begin delete renewals end delete begin insert renewals, relating to the business of life
insurance, end insert as authorized by this section.

begin insert

(2) On or before January 1, 2018, the commissioner shall submit
a report to the Governor and to the committees of the Senate and
Assembly having jurisdiction over insurance and the judiciary,
regarding the impact and implementation of the authorization of
the electronic transmission of certain insurance renewal offers,
notices, or disclosures including an offer of renewal required by
Sections 663 and 678, the notice of conditional renewal required
by Section 678.1, the offer of coverage or renewal or any disclosure
required by Section 10086, and the offer of renewal for a workers’
compensation policy, as authorized by this section. The report
shall include input from insurers, consumers, and consumer
organizations, and shall include an assessment of the department’s
experience pertaining to the authorization of the electronic
transmission of insurance renewals, including, an offer of renewal
required by Sections 663 and 678, the notice of conditional renewal
required by Section 678.1, the offer of coverage or renewal or any
disclosure required by Section 10086, and the offer of renewal for
a workers’ compensation policy, as authorized by this section.

end insert

(e) Notwithstanding paragraph (4) of subdivision (b) of Section
1633.3 of the Civil Code, for any policy of life insurance, as
defined in Section 101, any statutory requirement for a separate
acknowledgment, signature, or initial, which is not expressly
prohibited by subdivision (c) of Section 1633.3 of the Civil Code,
may be transacted using an electronic signature, or by electronic
transaction, subject to all applicable provisions of this section.

(f) The department may suspend a licensee from providing
records by electronic transmission if there is a pattern or practices
that demonstrate the licensee has failed to comply with the
requirements of this section. A licensee may appeal the suspension
and resume its electronic transmission of records upon
communication from the department that the changes the licensee
made to its process or system to comply with the requirements of
this section are satisfactory.