Amended in Assembly March 17, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2710

Introduced by Assembly Member Cooley

February 19, 2016

An act to begin delete amend Section 38.5 of end delete begin insert amend, renumber, and add Sections 1063.5 and 1063.14 of, and to repeal Sections 1063.45 and 1063.135 of, end insert the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 2710, as amended, Cooley. Insurance: begin delete notice: electronic transmission. end delete begin insert California Insurance Guarantee Association: premium charges. end insert

begin insert

(1) Existing law creates the California Insurance Guarantee Association (CIGA) and requires all insurers admitted to transact specified insurance lines in this state to become members. Each time an insurer becomes insolvent, to the extent necessary to secure funds for payment of covered claims of that insolvent insurer and also for payment of reasonable costs of adjusting the claims, CIGA is required to collect premium payments from its member insurers sufficient to discharge its obligations, as specified.

end insert begin insert

This bill, among other things, would no longer require an insurer to become insolvent in order for CIGA to collect premium payments from the member insurers and would require CIGA to collect premiums in order to secure funds for the payment of its administrative expenses.

end insert begin insert

(2) Existing law requires that the rate of premium charged be a uniform percentage of net direct written premium, as defined, in the preceding calendar year applicable to specific categories of insurance. The rate of premium charges to each member insurer in the appropriate categories are initially based on the written premium of each insurer as shown in the latest year’s annual financial statement on file with the Insurance Commissioner and are later adjusted as provided.

end insert begin insert

This bill would delete the requirements that the rate of premium charges be initially based on the written premium of each insurer and be adjusted later as provided, and would instead require that the rate of premium charges to each member insurer in the appropriate categories be based on the net direct written premium of each insurer as shown in the latest year’s annual financial statement on file with the commissioner. The bill would also make conforming changes.

end insert begin insert

(3) Existing law authorizes CIGA to exempt or defer a member insurer from paying the premium charge if the payment would cause the member insurer’s financial statement to reflect an amount of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. Deferred premium charges are required to be paid when the payment will not reduce capital or surplus below required minimums. These payments are credited against future premium charges to those companies receiving larger premium charges by virtue of the deferment.

end insert begin insert

This bill would delete the requirement that the payments be credited against future premium charges to those companies receiving larger premium charges by virtue of the deferment.

end insert begin insert

(4) Existing law requires CIGA’s plan of operations to contain provisions requiring each member insurer to recoup the premium charge paid to CIGA from its insureds over a reasonable length of time by way of a reasonably calculated surcharge on insurance policies to which the provisions of CIGA apply.

end insert begin insert

This bill, commencing January 1, 2017, among other things, would instead require each member insurer to recoup the premium charge from its insureds in the year following the charge, would require the member insurer to file a report in accordance with the provisions of the plan of operation indicating the amount of surcharges it has collected, and would prohibit a member insurer electing to omit collecting surcharges from any of its insureds from being entitled to any reimbursement from CIGA, as specified.

end insert begin delete

Existing law authorizes any written notice required to be given or mailed to any person by an insurer relating to any insurance on risks or on operations in this state, with exceptions, to be provided by electronic transmission, pursuant to certain provisions, if each party has agreed to conduct the transaction by electronic means, as provided.

end delete begin delete

This bill would make nonsubstantive, technical changes to those provisions.

end delete

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

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

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 1063.5 of the end insert begin insert Insurance Code end insert begin insert is amended
and renumbered, to immediately precede Section 1063.5 of the
Insurance Code, to read: end insert

begin delete 1063.5. end delete
begin insert 1063.45. end insert   

begin insert (a) end insert begin insert   end insert begin insert (1) end insert begin insert   end insert Each time an insurer becomes insolvent then,
to the extent necessary to secure funds for the association for
payment of covered claims of that insolvent insurer and also for
payment of reasonable costs of adjusting the claims, the association
shall collect premium payments from its member insurers sufficient
to discharge its obligations. begin delete The end delete

begin insert (2) end insert begin insert   end insert begin insert The end insert association shall allocate its claim payments and costs,
incurred or estimated to be incurred, to one or more of the
following categories: begin delete (a) workers’ compensation claims; (b)
homeowners’ claims, and automobile claims, which shall include:
automobile material damage, automobile liability (both personal
injury and death and property damage), medical payments and
uninsured motorist claims; and (c) claims other than workers’
compensation, homeowners’, and automobile, as above defined.
Separate end delete

begin insert

(A) Workers’ compensation claims.

end insert begin insert

(B) Homeowners’ claims and automobile claims, including all
of the following:

end insert begin insert

(i) Automobile material damage.

end insert begin insert

(ii) Automobile liability (both personal injury and death and
property damage).

end insert begin insert

(iii) Medical payments.

end insert begin insert

(iv) Uninsured motorist claims.

end insert begin insert

(C) Claims other than workers’ compensation, homeowners,
and automobile, as defined above.

end insert

begin insert (3) end insert begin insert   end insert begin insert Separate end insert premium payments shall be required for each
category. begin delete The end delete

begin insert (4) end insert begin insert   end insert begin insert The end insert premium payments for each category shall be used to
pay the claims and costs allocated to that category. begin delete The end delete

begin insert (b) end insert begin insert   end insert begin insert (1) end insert begin insert   end insert begin insert The end insert rate of premium charged shall be a uniform
percentage of net direct written premium in the preceding calendar
year applicable to that category. begin delete The end delete

begin insert (2) end insert begin insert   end insert begin insert The end insert rate of premium charges to each member begin insert insurer end insert in the
appropriate categories shall initially be based on the written
premium of each insurer as shown in the latest year’s annual
financial statement on file with the commissioner. begin delete The end delete

begin insert (3) end insert begin insert   end insert begin insert The end insert initial premium shall be adjusted by applying the same
rate of premium charge as initially used to each insurer’s written
premium as shown on the annual statement for the second year
following the year on which the initial premium charge was based.
begin delete The end delete

begin insert (4) end insert begin insert   end insert begin insert (A) end insert begin insert   end insert begin insert The end insert difference between the initial premium charge and
the adjusted premium charge shall be charged or credited to each
member insurer by the association as soon as practical after the
filing of the annual statements of the member insurers with the
commissioner for the year on which the adjusted premium is based.
begin delete Any end delete

begin insert (B) end insert begin insert   end insert begin insert Any end insert credit due in a specific category to a member insurer
as a result of the adjusted premium calculation may be refunded
to the member insurer at the discretion of the association if the
member insurer has agreed with the commissioner to no longer
write insurance in that category but has not withdrawn from the
state and surrendered its certificate of authority. However, in the
case of an insurer that was a member insurer when the initial
premium charge was made and that paid the initial assessment but
is no longer a member insurer at the time of the adjusted premium
charge by reason of its insolvency or its withdrawal from the state
and surrender of its certificate of authority to transact insurance
in this state, any credit accruing to that insurer shall be refunded
to it by the association. begin delete “Net end delete

begin insert (c) end insert begin insert   end insert begin insert (1) end insert begin insert   end insert begin insert For purposes of this section, “net end insert direct written
premiums” begin delete shall mean end delete begin insert means end insert the amount of gross premiums, less
return premiums, received in that calendar year upon business
done in this state, other than premiums received for reinsurance.
begin delete In end delete

begin insert (2) end insert begin insert   end insert begin insert In end insert cases of a dispute as to the amount of the net direct written
premium between the association and one of its begin delete members end delete begin insert member end insert
begin insert insurers, end insert the written decision of the commissioner shall be final.
begin delete The end delete

begin insert (d) end insert begin insert   end insert begin insert (1) end insert begin insert   end insert begin insert The end insert premium charged to any member insurer for any of
the three categories or a category established by the association
shall not be more than 2 percent of the net direct premium written
in that category in this state by that member begin insert insurer end insert per year,
starting on January 1, 2003, until December 31, 2007, and
thereafter shall be 1 percent per year, until January 1, 2015.
begin delete Commencing end delete

begin insert (2) end insert begin insert   end insert begin insert Commencing end insert January 1, 2015, the premium charged to any
member insurer for any of the three categories or a category
established by the association shall not be more than 2 percent of
the net direct written premium unless there are bonds outstanding
that were issued pursuant to Article 14.25 (commencing with
Section 1063.50) or Article 14.26 (commencing with Section
1063.70). begin delete If end delete

begin insert (3) end insert begin insert   end insert begin insert If end insert bonds issued pursuant to either article are outstanding, the
premium charged to a member insurer for the category for which
the bond proceeds are being used to pay claims and expenses shall
not be more than 1 percent of the net direct written premium for
that category. begin delete The end delete

begin insert (e) end insert begin insert   end insert begin insert (1) end insert begin insert   end insert begin insert The end insert association may exempt or defer, in whole or in
part, the premium charge of any member insurer, if the premium
charge would cause the member insurer’s financial statement to
reflect an amount of capital or surplus less than the minimum
amounts required for a certificate of authority by any jurisdiction
in which the member insurer is authorized to transact insurance.
However, during the period of deferment, no dividends shall be
paid to shareholders or policyholders by the company whose
premium charge was deferred. begin delete Deferred end delete

begin insert (2) end insert begin insert   end insert begin insert Deferred end insert premium charges shall be paid when the payment
will not reduce capital or surplus below required minimums. These
payments shall be credited against future premium charges to those
companies receiving larger premium charges by virtue of the
deferment. begin delete After end delete

begin insert (f) end insert begin insert   end insert begin insert After end insert all covered claims of the insolvent insurer and expenses
of administration have been paid, any unused premiums and any
reimbursements or claims dividends from the liquidator remaining
in any category shall be retained by the association and applied to
reduce future premium charges in the appropriate category.
However, an insurer begin delete which end delete begin insert that end insert ceases to be a member of the
association, other than an insurer that has become insolvent or has
withdrawn from the state and has surrendered its certificate of
authority following an initial assessment that is entitled to a refund
based upon an adjusted assessment as provided above in this
section, shall have no right to a refund of any premium previously
remitted to the association. begin delete The end delete

begin insert (g) end insert begin insert   end insert begin insert The end insert commissioner may suspend or revoke the certificate of
authority to transact business in this state of a member insurer
begin delete which end delete begin insert that end insert fails to pay a premium when due and after demand has
been made.

begin delete

Interest

end delete

begin insert (h) end insert begin insert   end insert begin insert Interest end insert at a rate equal to the current federal reserve discount
rate plus 21⁄2 percent per annum shall be added to the premium of
any member insurer begin delete which end delete begin insert that end insert fails to submit the premium
requested by the association within 30 days after the mailing
request. However, in no event shall the interest rate exceed the
legal maximum.

begin insert

(i) This section shall apply only to premium charges paid prior
to January 1, 2017.

end insert begin insert

(j) This section shall remain in effect only until January 1, 2020,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2020, deletes or extends that date.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 1063.5 is added to the end insert begin insert Insurance Code end insert begin insert , to
read: end insert

begin insert

begin insert 1063.5. end insert   

(a) (1) To the extent necessary to secure funds for the
association for payment of the administrative expenses of the
association, covered claims of insolvent insurers, and for payment
of reasonable costs of adjusting the claims, the association shall
collect premium payments from its member insurers sufficient to
discharge its obligations.

(2) The association shall allocate its claim payments and costs,
incurred or estimated to be incurred, to one or more of the
following categories:

(A) Workers’ compensation claims.

(B) Homeowners’ claims and automobile claims, including all
of the following:

(i) Automobile material damage.

(ii) Automobile liability (both personal injury and death and
property damage).

(iii) Medical payments.

(iv) Uninsured motorist claims.

(C) Claims other than workers’ compensation, homeowners’,
and automobile, as defined above.

(3) Separate premium payments shall be required for each
category.

(4) The premium payments for each category shall be used to
pay the claims and costs allocated to that category.

(b)(1) The rate of premium charged shall be a uniform
percentage of net direct written premium in the preceding calendar
year applicable to that category.

(2) (A) The rate of premium charges to each member insurer
in the appropriate categories shall be based on the net direct
written premium of each member insurer as shown in the latest
year’s annual financial statement on file with the commissioner.

(B) Any credit due in a specific category to a member insurer
may be used as an offset against any subsequent premium charge
in that category and may be refunded to the member insurer at the
discretion of the association if the member insurer has agreed with
the commissioner to no longer write insurance in that category
but has not withdrawn from the state and surrendered its certificate
of authority. However, in the case of an insurer that was a member
insurer when the premium charge was made and that paid the
premium charge but is no longer a member insurer by reason of
its insolvency or its withdrawal from the state and surrender of
its certificate of authority to transact insurance in this state, any
credit accruing to that insurer shall be refunded to it by the
association.

(c) (1) For purposes of this section, “net direct written
premiums” means the amount of gross premiums, less return
premiums, received in that calendar year upon business done in
this state, other than premiums received for reinsurance.

(2) In cases of a dispute as to the amount of the net direct written
premium between the association and one of its member insurers,
the written decision of the commissioner shall be final.

(d) In charging premiums to member insurers, the association
shall adjust, if necessary, the net direct written premiums shown
on a member insurer’s annual statement by excluding any
premiums written for any lines of insurance or types of coverage
not covered by this article under paragraph (3) of subdivision (c)
of Section 1063.1.

(e) (1) The premium charged to any member insurer for any
of the three categories or a category established by the association
shall not be more than 2 percent of the net direct written premium
unless there are bonds outstanding that were issued pursuant to
Article 14.25 (commencing with Section 1063.50) or Article 14.26
(commencing with Section 1063.70).

(2) If bonds issued pursuant to either article are outstanding,
the premium charged to a member insurer for the category for
which the bond proceeds are being used to pay claims and expenses
shall not be more than 1 percent of the net direct written premium
for that category.

(f) (1) The association may exempt or defer, in whole or in part,
the premium charge of any member insurer, if the premium charge
would cause the member insurer’s financial statement to reflect
an amount of capital or surplus less than the minimum amounts
required for a certificate of authority by any jurisdiction in which
the member insurer is authorized to transact insurance. However,
during the period of deferment, no dividends shall be paid to
shareholders or policyholders by the company whose premium
charge was deferred.

(2) Deferred premium charges shall be paid when the payment
will not reduce capital or surplus below required minimums.

(g) After all covered claims of insolvent insurers and expenses
of administration have been paid, any unused premiums and any
reimbursements or claims dividends from liquidators remaining
in any category shall be retained by the association and applied
to reduce future premium charges in the appropriate category.

(h) The commissioner may suspend or revoke the certificate of
authority to transact business in this state of a member insurer
that fails to pay a premium when due and after demand has been
made.

(i) Interest at a rate equal to the current federal reserve discount
rate plus 21⁄2 percent per annum shall be added to the premium
of any member insurer that fails to submit the premium requested
by the association within 30 days after the mailing request.
However, in no event shall the interest rate exceed the legal
maximum.

(j) This section shall apply only to premium charges paid on or
after January 1, 2017.

end insert

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 1063.14 of the end insert begin insert Insurance Code end insert begin insert is amended
and renumbered, to immediately precede Section 1063.14 of the
Insurance Code, to read: end insert

begin delete 1063.14. end delete
begin insert 1063.135. end insert   

(a) The plan of operation adopted pursuant to
subdivision (c) of Section 1063 shall contain provisions whereby
each member insurer is required to recoup over a reasonable length
of time a sum reasonably calculated to recoup the assessments
paid by the member insurer under this article by way of a surcharge
on premiums charged for insurance policies to which this article
applies. Amounts recouped shall not be considered premiums for
any other purpose, including the computation of gross premium
tax or agents’ commission.

(b) The amount of any surcharge shall be separately stated on
either a billing or policy declaration sent to an insured. The
association shall determine the rate of the surcharge and the
collection period for each category and these shall be mandatory
for all member insurers of the association who write business in
those categories. Member insurers who collect surcharges in excess
of premiums paid pursuant to Section begin delete 1063.5 end delete begin insert 1063.45 end insert for an
insolvent insurer shall remit the excess to the association as an
additional premium within 30 days after the association has
determined the amount of the excess recoupment and given notice
to the member begin insert insurer end insert of that amount. The excess shall be applied
to reduce future premium charges in the appropriate category.

(c) The plan of operation may permit a member insurer to omit
collection of the surcharge from its insureds when the expense of
collecting the surcharge would exceed the amount of the surcharge.
However, nothing in this section shall relieve the member insurer
of its obligation to recoup the amount of surcharge otherwise
collectible.

begin insert

(d) This section shall apply only to premium charges paid prior
to January 1, 2017.

end insert begin insert

(e) This section shall remain in effect only until January 1, 2020,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2020, deletes or extends that date.

end insert

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 1063.14 is added to the end insert begin insert Insurance Code end insert begin insert , to
read: end insert

begin insert

begin insert 1063.14. end insert   

(a) (1) The plan of operation adopted pursuant to
subdivision (c) of Section 1063 shall contain provisions whereby
each member insurer is required to recoup in the year following
the premium charge a sum calculated to recoup the premium
charge paid by the member insurer under this article by way of a
surcharge on premiums charged for insurance policies to which
this article applies.

(2) Amounts recouped shall not be considered premiums for
any other purpose, including the computation of gross premium
tax or agents’ commission.

(b) (1) The amount of any surcharge shall be separately stated
on either a billing or policy declaration sent to an insured. The
association shall determine the rate of the surcharge and the
collection period for each category, and these shall be mandatory
for all member insurers of the association who write business in
those categories.

(2) Each member insurer shall file a report in accordance with
the provisions of the plan of operation indicating the amount of
surcharges it has collected.

(A) Member insurers who collect surcharges in excess of
premium charges paid in the preceding year pursuant to Section
1063.5 shall remit the excess to the association as an additional
premium within 30 days after the association has determined the
amount of the excess recoupment and given notice to the member
insurer of that amount. The excess shall be applied to reduce future
premium charges in the appropriate category.

(B) Member insurers who report surcharge collections that are
less than what they paid in the preceding year’s premium charge
shall receive reimbursement from the association for the shortfall
in surcharge collection.

(c) (1) The plan of operation may permit a member insurer to
omit collection of the surcharge from its insureds when the expense
of collecting the surcharge would exceed the amount of the
surcharge.

(2) A member insurer electing to omit collecting surcharges
from any of its insureds shall not be entitled to any reimbursement
from the association pursuant to subdivision (b).

(3) However, nothing in this section shall relieve the member
insurer of its obligation to recoup the amount of surcharge
otherwise collectible.

(d) This section shall apply only to premium charges paid on
or after January 1, 2017.

end insert

begin delete

SECTION 1.  

Section 38.5 of the Insurance Code, as amended
by Section 4 of Chapter 369 of the Statutes of 2013, is amended
to read:

38.5.  

(a) A written notice required to be given or mailed to a
person by an insurer relating to any insurance on risks or on
operations in this state not excepted by subdivision (a), (b), (c),
(d), (e), or (g) of Section 1851 from the coverage of Chapter 9
(commencing with Section 1850.4) of Part 2 of Division 1 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. The affidavit of the person who initiated the
electronic transmission, stating the facts of that transmission into
an information processing system outside of the control of the
sender or of a person that sent the electronic record on behalf of
the sender, is prima facie evidence that the notice was transmitted
and shall be sufficient proof of notice. A notice provided by
electronic transmission shall be treated as if mailed or given for
the purposes of any provision of this code, except as provided by
subdivision (g) of Section 1633.15 of the Civil Code. The insurance
company shall maintain a system for confirming that a notice or
document that is to be provided by electronic means has been sent
in a manner consistent with Section 1633.15 of the Civil Code. A
valid electronic signature shall be sufficient for any provision of
law requiring a written signature. The insurance company shall
retain a copy of the confirmation and electronic signature, when
either is required, with the policy information so that they are
retrievable upon request by the Department of Insurance while the
policy is in force and for five years thereafter.

(b) The offer of renewal required by Sections 663 and 678, the
notice of conditional renewal required by Section 678.1, and the
offer of coverage or renewal or any disclosure required by Section
10086 and the offer of renewal for a workers’ compensation policy
may be provided by electronic transmission if an insurer complies
with all of the following:

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

(2) An insurer discloses, in writing or electronically, to the
insured all of the following:

(A) The opt in to receive the offer, notice, or disclosure by
electronic transmission is voluntary.

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

(C)  A description of the offer, notice, or disclosure that the
insured will receive by electronic transmission.

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

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

(3) An insurer shall include the insured’s email address on the
policy declaration page.

(4)  An insurer shall annually provide one free printed copy of
any offer, notice, or disclosure described in this subdivision upon
request by the insured.

(5) An insurer shall maintain a process or system that can
demonstrate that the offer, notice, or disclosure provided by
electronic transmission was both sent and received consistent with
Section 1633.15 of the Civil Code. If a different method of sending
or receiving is agreed upon by the insurer and the insured pursuant
to Section 1633.15 of the Civil Code, an insurer shall comply with
the provisions of this subdivision. The insurer shall retain and
document information so that the documentation and information
is retrievable upon request by the Department of Insurance while
the current policy is in force and for five years thereafter related
to its process or system demonstrating that the offer, notice, or
disclosure provided by electronic transmission was sent to the
insured by the applicable statutory regular mail delivery deadlines
and received electronically. The offer, notice, or disclosure
provided by electronic transmission shall be treated as if mailed
so long as the insurer delivers it to the insured in compliance with
the applicable statutory regular mail delivery deadlines.

(A) Acceptable methods for an insurer to demonstrate that the
offer, notice, or disclosure was sent to the insured include simple
mail transfer protocol server log files indicating transmission, or
other methodologies indicating sent transmission consistent with
standards set forth in Section 1633.15 of the Civil Code.

(B) Acceptable methods for an insurer to demonstrate that the
offer, notice, or disclosure was received by the insured include
server log files indicating that the email or application has been
received, or log files showing that the insured logged into his or
her secured account with the insurer, or other methodologies
indicating received transmission consistent with standards set forth
in Section 1633.15 of the Civil Code.

(6) If the offer, notice, or disclosure is not delivered directly to
the electronic address designated by the insured, but placed at an
electronic address accessible to the insured, an insurer shall notify
the insured in plain, clear, and conspicuous language at the
electronic address designated by the insured that describes the
offer, notice, or disclosure, informs that insured that it is available
at another location, and provides instructions to the insured as to
how to obtain the offer, notice, or disclosure.

(7) (A) Upon an insurer receiving information indicating that
the offer, notice, or disclosure sent by electronic transmission was
not received by the insured, the insurer shall, within two business
days, either clause (i) or (ii):

(i) Contact the insured to confirm or update the insured’s email
address and resend the offer, notice, or disclosure by electronic
transmission. If the insurer elects to resend the offer, notice, or
disclosure by electronic transmission, the insurer shall demonstrate
the transmission was received by the insured, pursuant to paragraph
(5). If the insurer is unable to confirm or update the insured’s email
address, the insurer shall resend the offer, notice, or disclosure by
regular mail to the insured at the address shown on the policy.

(ii) Resend the offer, notice, or disclosure initially provided by
electronic transmission by regular mail to the insured at the address
shown on the policy.

(B) If the insurer sends the first electronic offer, notice, or
disclosure within the time period required by law and the insurer
complies with both paragraph (5) and subparagraph (A) of this
paragraph, the electronic offer, notice, or disclosure 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.

(8) 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 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 as authorized by this section.

(c) The department may suspend an insurer from providing
offers, notices, or disclosures by electronic transmission if there
is a pattern or practices that demonstrate the insurer has failed to
comply with the requirements of this section. An insurer may
appeal the suspension and resume its electronic transmission of
offers, notices, or disclosures upon communication from the
department that the changes the insurer made to its process or
system to comply with the requirements of this section are
satisfactory.

(d) 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 38.5 of the Insurance Code, as added by
Section 5 of Chapter 369 of the Statutes of 2013, is amended to
read:

38.5.  

(a) A written notice required to be given or mailed to a
person by an insurer relating to any insurance on risks or on
operations in this state not excepted by Section 1851 from the
coverage of Chapter 9 (commencing with Section 1850.4) of Part
2 of Division 1 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. The affidavit of the
person who initiated the electronic transmission, stating the facts
of that transmission into an information processing system outside
of the control of the sender or of a person that sent the electronic
record on behalf of the sender, is prima facie evidence that the
notice was transmitted and shall be sufficient proof of notice. A
notice provided by electronic transmission shall be treated as if
mailed or given for the purposes of any provision of this code,
except as provided by subdivision (g) of Section 1633.15 of the
Civil Code. The insurance company shall maintain a system for
confirming that a notice or document that is to be provided by
electronic means has been sent in a manner consistent with Section
1633.15 of the Civil Code. A valid electronic signature shall be
sufficient for any provision of law requiring a written signature.
The insurance company shall retain a copy of the confirmation
and electronic signature, when either is required, with the policy
information so that they are retrievable upon request by the
Department of Insurance while the policy is in force and for five
years thereafter.

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

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