Amended in Assembly March 30, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2884

Introduced by Committee on Insurance (Assembly Members Daly (Chair), Bigelow, Calderon, begin insert Chu, end insert Cooley, begin insert Cooper, end insert Dababneh, Frazier, Gatto, Gonzalez, and Rodriguez)

February 25, 2016

An act to amend begin delete Section 1726 of end delete begin insert Sections 660, 789, 1669, 1681, 1726, 1749.6, 1807.5, 10168.6, 10234.6, 10234.95, 11520.5, and 11691 of, and to repeal and add Section 1682 of, end insert the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 2884, as amended, Committee on Insurance. Insurance: licensees: Internet: disclosures.

begin insert

(1) Existing law defines “policy,” to mean, among others, an automobile liability, automobile physical damage, or automobile collision policy insuring a single individual or individuals residing in the same household, as the named insured, and under which the insured vehicles designated under are of specified types including a motor vehicle, as specified, and any other 4-wheel motor vehicle with a load capacity of 1,500 pounds or less, for the purposes of various requirements for a notice of cancellation of a policy. Existing law further provides that the requirements for a notice of cancellation of a policy do not apply to any policy issued under an automobile assigned risk plan, any policy insuring more than 4 vehicles, and to any policy covering, among other things, garage, automobile sales agency, or public parking place operation hazards.

end insert begin insert

This bill would, among other things, remove the exemption for any policy insuring more than 4 automobiles.

end insert begin insert

(2) Existing law prohibits a person from soliciting, negotiating, or effecting contracts of insurance, or acting in the capacity of various types of insurance agents, unless the person holds a valid license from the Insurance Commissioner authorizing the person to act in that capacity. Existing law authorizes the commissioner to deny an application for a license for various reasons including if the applicant committed a felony or a misdemeanor as shown by a plea of guilty or nolo contendere. Existing law also requires an applicant to pass the qualifying examination for the license prior to receiving a permanent license and allows the applicant to retake the qualifying examination subject to reasonable time limits limiting when a person who has failed the examination may retake.

end insert begin insert

This bill would add that the commissioner may deny an application for a license if the applicant has been convicted of a felony or misdemeanor, as specified. The bill would also prohibit a person who has failed any license qualification examination 10 times within the previous 12-month period from enrolling in any further license qualification examinations for a period of 12 months.

end insert begin delete

Existing

end delete

begin insert (3) end insert begin insert   end insert begin insert Existing end insert law requires a person who is licensed in this state as an insurance agent or broker, advertises insurance on the Internet, and transacts insurance in this state, to identify certain information on the Internet, regardless of whether the insurance agent or broker maintains his or her Internet presence or if the presence is maintained on his or her behalf. The required information includes, but is not limited to, his or her name as it appears on his or her license, and any fictitious name approved by the begin delete Insurance Commissioner. end delete begin insert commissioner. end insert

This bill would instead require that the person provide his or her name as filed with the commissioner that has not been disapproved pursuant to the provisions regarding the use of fictitious names.

begin insert

(4) Existing law automatically terminates the license of a person failing to meet various requirements and who has not been granted an extension of time within which to comply by the commissioner until the person demonstrates that he or she has complied with all of the requirements, as specified.

end insert begin insert

This bill would add the failure by an insurance adjuster and a public insurance adjuster to complete continuing education requirements to the list of requirements for which the failure to complete will result in an automatic termination of the license.

end insert begin insert

(5) Existing law prohibits an insurer from executing an undertaking of bail except by and through a person holding a bail license, as provided. Existing law also prohibits the commissioner from suspending or revoking any license, issued as specified, without first granting a hearing, as specified.

end insert begin insert

This bill would prohibit the commissioner from denying a license to an applicant without first granting a hearing, as specified.

end insert begin insert

(6) Existing law provides that for the purpose of determining certain benefits, that in the case of annuity contracts under which an election may be made to have annuity payments commence at optional maturity dates, the maturity date shall be deemed to be the latest date for which election is permitted by the contract.

end insert begin insert

This bill would add that in the case of annuity contracts under which the fixed maturity date is later than the later of the anniversary of the contract next following the annuitant’s 70th birthday or the 10th anniversary of the contract, the maturity date shall be deemed to be the later of the anniversary of the contract next following the annuitant’s 70th birthday or the 10th anniversary of the contract.

end insert begin insert

(7) Existing law requires the commissioner to annually prepare a consumer rate guide for long-term care insurance and to include specified information, including a history of the rates of all policies issued in California for the current year and for the 4 preceding years.

end insert begin insert

This bill would require the history of the rates of all policies issued in California to be listed for the 9 preceding years.

end insert begin insert

(8) Existing law requires an insurer, in order to be admitted in this state to transact specified workers’ compensation transactions, among other things, to deposit cash instruments or approved interest-bearing securities or approved stocks readily convertible into cash, investment certificates, or share accounts issued by a savings and loan association doing business in this state and insured by the Federal Deposit Insurance Corporation, certificates of deposit, or savings deposits in a bank licensed to do business in this state that is either domiciled in and with its principal place of business in this state or that is a national banking association with a trust office located in this state.

end insert begin insert

This bill would instead include a bank licensed to do business in this state, or a trust company, licensed to do business and located in this state that is either domiciled in and with its principal place of business in this state or that is a national banking association with a trust office located in this state.

end insert

Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . 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 660 of the end insert begin insert Insurance Code end insert begin insert is amended to
read: end insert

660.  

As used in this chapter:

(a) “Policy” means an automobile liability, automobile physical
damage, or automobile collision policy, or any combination thereof,
delivered or issued for delivery in this state, insuring a single
individual or individuals residing in the same household, as named
insured, and under which the insured vehicles therein designated
are of the following types only:

(1) A motor vehicle of the private passenger or station wagon
type that is not used as a public or livery conveyance for
passengers, nor rented to others; or

(2) Any other four-wheel motor vehicle with a load capacity of
1,500 pounds or less; provided, however, that this chapter shall
not apply begin delete (i) to any end delete begin insert to either of the following: end insert

begin insert (A) end insert begin insert   end insert begin insert Any end insert policy issued under an automobile assigned risk begin delete plan,
or (ii) to any policy insuring more than four automobiles, or (iii)
to any end delete begin insert plan. end insert

begin insert (B) end insert begin insert   end insert begin insert Any end insert policy covering garage, automobile sales agency, repair
shop, service station, or public parking place operation begin delete hazards;
or end delete begin insert hazards. end insert

(3) A motorcycle.

(b) “Automobile liability coverage” includes only coverage of
bodily injury and property damage liability, medical payments,
and uninsured motorists coverage.

(c) “Automobile physical damage coverage” includes all
coverage of loss or damage to an automobile insured under the
policy except loss or damage resulting from collision or upset.

(d) “Automobile collision coverage” includes all coverage of
loss or damage to an automobile insured under the policy resulting
from collision or upset.

(e) “Renewal” or “to renew” means to continue coverage with
either the insurer which issued the policy or an affiliated insurer,
as defined in Section 1215, for an additional policy period upon
expiration of the current policy period of a policy, provided that
if coverage is continued with an affiliated insurer, it shall be the
same or broader coverage as provided by the present insurer, and
the insured shall be notified in writing at least 20 days prior to
expiration of the current policy period of all of the begin delete following: (1)
that end delete begin insert following: end insert

begin insert (1) end insert begin insert   end insert begin insert That end insert the insurer has determined that it will not offer renewal
of the policy with the present begin delete insurer, (2) That end delete begin insert insurer. end insert

begin insert (2) end insert begin insert   end insert begin insert That end insert it is offering replacement in an affiliated begin delete insurer, and
(3) That end delete begin insert insurer. end insert

begin insert (3) end insert begin insert   end insert begin insert That end insert the insured may obtain in writing the reasons for the
change in insurers if he or she requests in writing not later than
one month following the expiration of the policy period the reason
or reasons for the change in insurers. Any policy with a policy
period or term of six months or less, whether or not made
continuous for successive terms upon the payment of additional
premiums, shall for the purpose of this chapter be considered as
if written for a policy period or term of six months. Any policy
written for a term longer than one year, or any policy with no fixed
expiration date, shall for the purpose of this chapter, be considered
as if written for successive policy periods or terms of one year.

(f) “Nonpayment of premium” means failure of the named
insured to discharge when due any of his obligations in connection
with the payment of premiums on a policy, or any installment of
such premium, whether the premium is payable directly to the
insurer or its agent or indirectly under any premium finance plan
or extension of credit.

(g) “Cancellation” means termination of coverage by an insurer
(other than termination at the request of the insured) during a policy
period.

(h) “Nonrenewal” means a notice by the insurer to the named
insured that the insurer is unwilling to renew a policy.

(i) “Expiration” means termination of coverage by reason of
the policy having reached the end of the term for which it was
issued or the end of the period for which a premium has been paid.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 789 of the end insert begin insert Insurance Code end insert begin insert is amended to read: end insert

789.  

(a) The commissioner shall have the administrative
authority to assess penalties against insurers, brokers, agents, and
other entities engaged in the transaction of insurance or any other
person or entity for violations of this article.

(b) Upon a showing of a violation of this article in any civil
action, a court may also assess the penalties prescribed in this

begin delete chapter. end delete begin insert article. end insert

(c) Whenever the commissioner has reasonable cause to believe
or determines after a public hearing that any insurer, agent, broker,
or other person or entity engaged in the transaction of insurance,
has violated this article the commissioner shall make and serve
upon the insurer, broker, agent, or other person or entity a notice
of hearing. The notice shall state the commissioner’s intent to
assess the administrative penalties, the time and place of the
hearing, and the conduct, condition or ground upon which the
commissioner is holding the hearing, and assessing the penalties.
The hearing shall occur within 30 days after the notice is served.
Within 30 days after the hearing the commissioner shall issue an
order specifying the amount of the penalties to be paid. The
penalties resulting from the hearing shall be paid to the Insurance
Fund.

(d) The powers vested in the commissioner by this section shall
be in addition to any and all powers and remedies vested in the
commissioner by law.

(e) Actions for injunctive relief, penalties specified in Section
789.3, damages, restitution, and all other remedies in law, may be
brought in superior court by the Attorney General, district attorney,
or city attorney on behalf of the people of California. The court
shall award reasonable attorney’s fees and court costs to the
prevailing plaintiff who establishes a violation of this article.

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 1669 of the end insert begin insert Insurance Code end insert begin insert is amended to
read: end insert

1669.  

The commissioner may, without hearing, deny an
application if the applicant begin delete has: end delete begin insert has done one or more of the
following: end insert

begin delete

(a) Committed a felony as shown by a plea of guilty or nolo
contendere, or by a final judgment of conviction thereof;

end delete begin delete

(b) Committed a misdemeanor denounced by this code or by
other laws regulating insurance as shown by a plea of guilty or
nolo contendere, or by a final judgment of conviction thereof;

end delete begin insert

(a) (1) Been convicted of a felony.

end insert begin insert

(2) Been convicted of a misdemeanor denounced by this code
or by other laws regulating insurance.

end insert begin insert

(3) A judgment, plea, or verdict of guilty or a conviction
following a plea of nolo contendere is deemed to be a conviction
within the meaning of this subdivision.

end insert begin delete

(c)

end delete

begin insert (b) end insert  Had a previous application for a professional, occupational,
or vocational license denied for cause by any licensing authority,
within five years of the date of the filing of the application to be
acted upon, on grounds that should preclude the granting of a
license by the commissioner under this begin delete chapter; or end delete begin insert chapter. end insert

begin delete

(d)

end delete

begin insert (c) end insert  Had a previously issued professional, occupational, or
vocational license suspended or revoked for cause by any licensing
authority, within five years of the date of the filing of the
application to be acted upon, on grounds that should preclude the
granting of a license by the commissioner under this chapter.

In the event the commissioner issues an order based on a plea
that does not at any time result in a judgment of conviction, the
commissioner shall vacate the order upon petition by the applicant.

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 1681 of the end insert begin insert Insurance Code end insert begin insert is amended to
read: end insert

1681.  

If an applicant fails the qualifying examination, he begin insert or
she end insert may, subject to the provisions of begin delete this article and such rules
and regulations as may be promulgated hereunder, retake such
qualifying examination within the period prescribed in Section
1670 during which he must qualify for the license sought. end delete begin insert Section
1682, retake a qualifying examination. end insert

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Section 1682 of the end insert begin insert Insurance Code end insert begin insert is repealed. end insert

begin delete

1682.  

The commissioner may, in accordance with the procedure
set forth in Chapter 4 of Part I of Division 3 of Title 2 of the
Government Code, promulgate rules setting reasonable time limits
within which a person who has twice failed an examination or
failed to fulfill examination requirements may not take further
examinations.

end delete

begin insert

begin insert SEC. 6. end insert   

end insert

begin insert Section 1682 is added to the end insert begin insert Insurance Code end insert begin insert , to read: end insert

begin insert

begin insert 1682. end insert   

(a) A person who has failed any license qualification
examination 10 times within the previous 12-month period shall
not be permitted to enroll in any further license qualification
examinations for a period of 12 months, beginning from the date
of the 10th license qualification examination failure.

(b) For the purpose of this section, “license qualification
examination” includes examinations for all types of licenses issued
by the commissioner pursuant to this chapter, Chapter 7
(commencing with Section 1800) and Chapter 8 (commencing with
Section 1831), and Chapter 1 (commencing with Section 14000)
and Chapter 2 (commencing with Section 15000) of Division 5.

end insert

begin delete SECTION 1. end delete

begin insert SEC. 7. end insert   

Section 1726 of the Insurance Code is amended to
read:

1726.  

(a) A person who is licensed in this state as an insurance
agent or broker, advertises insurance on the Internet, and transacts
insurance in this state, shall identify all of the following
information on the Internet, regardless of whether the insurance
agent or broker maintains his or her Internet presence or if the
presence is maintained on his or her behalf:

(1) His or her name as filed with the commissioner that has not
been disapproved pursuant to Section 1724.5.

(2) The state of his or her domicile and principal place of
business.

(3) His or her license number.

(b) A person shall be deemed to be transacting insurance in this
state when the person advertises on the Internet, regardless of
whether the insurance agent or broker maintains his or her Internet
presence or if it is maintained on his or her behalf, and does any
of the following:

(1) Provides an insurance premium quote to a California
resident.

(2) Accepts an application for coverage from a California
resident.

(3) Communicates with a California resident regarding one or
more terms of an agreement to provide insurance or an insurance
policy.

begin insert

begin insert SEC. 8. end insert   

end insert

begin insert Section 1749.6 of the end insert begin insert Insurance Code end insert begin insert is amended to
read: end insert

1749.6.  

Any person failing to meet the requirements imposed
by Section begin delete 1749.3 or end delete begin insert 1749.3, end insert 1749.31, begin insert 14090.1, or 15059.1 end insert and
who has not been granted an extension of time within which to
comply by the commissioner shall have his or her license
automatically terminated until the time that the person demonstrates
to the satisfaction of the commissioner that he or she has complied
with all of the requirements of this article and all other laws
applicable thereto. begin delete Where end delete begin insert If end insert a person cannot perform the
requirements of this article due to a disability or inactivity due to
special circumstances, the commissioner shall provide a procedure
for the person to place his or her license on inactive status until
the time that the person demonstrates to the satisfaction of the
commissioner that he or she has complied with or made up all of
the requirements of this article for the period of disability or
inactivity.

begin insert

begin insert SEC. 9. end insert   

end insert

begin insert Section 1807.5 of the end insert begin insert Insurance Code end insert begin insert is amended to
read: end insert

1807.5.  

Except as provided in Sections 1669 and 1738, the
commissioner shall not begin delete suspend end delete begin insert deny, suspend, end insert or revoke any
license, issued under this article, without first granting a hearing,
upon reasonable notice to the begin delete applicant, end delete begin insert applicant or licensee, end insert
except that he may temporarily suspend a license for a period not
exceeding 15 days pending the hearing. Where a hearing is held
under this section the proceedings shall be conducted in accordance
with Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code, and the
commissioner shall have all the powers granted pursuant to that
chapter.

begin insert

begin insert SEC. 10. end insert   

end insert

begin insert Section 10168.6 of the end insert begin insert Insurance Code end insert begin insert is amended
to read: end insert

10168.6.  

For the purpose of determining the benefits calculated
under Sections 10168.4 and 10168.5, begin delete in end delete begin insert the following apply: end insert

begin insert (a) end insert begin insert   end insert begin insert In end insert the case of annuity contracts under which begin delete an end delete begin insert the fixed
maturity date is later than the later of the anniversary of the
contract next following the annuitant’s 70th birthday or the 10th
anniversary of the contract, the maturity date shall be deemed to
be the later of the anniversary of the contract next following the
annuitant’s 70th birthday or the 10th anniversary of the contract. end insert

begin insert (b) end insert begin insert   end insert begin insert In the case of annuity contracts under which an end insert election
may be made to have annuity payments commence at optional
maturity dates, the maturity date shall be deemed to be the latest
date for which election shall be permitted by the contract, but shall
not be deemed to be later than the anniversary of the contract next
following the annuitant’s seventieth birthday or the tenth
anniversary of the contract, whichever is later.

begin insert

begin insert SEC. 11. end insert   

end insert

begin insert Section 10234.6 of the end insert begin insert Insurance Code end insert begin insert is amended
to read: end insert

10234.6.  

(a) The commissioner shall, by June 1 of each year,
jointly design the format and content of a consumer rate guide for
long-term care insurance with a working group that includes
representatives of the Health Insurance Counseling and Advocacy
Program, the insurance industry, and insurance agents. The
commissioner shall annually prepare the consumer rate guide for
long-term care insurance that shall include, but not be limited to,
the following information:

(1) A comparison of the different types of long-term care
insurance and coverages available to California consumers and a
specimen outline of coverage for each product currently marketed
by each insurer listed in the rate guide.

(2) A premium history of each insurer that writes long-term
care policies for all the types of long-term care insurance and
coverages issued by the insurer in California.

(b) The consumer rate guide to be prepared by the commissioner
shall consist of two parts: a history of the rates for all policies
issued in California for the current year and for begin delete four end delete begin insert nine end insert preceding
years, and a comparison of the policies, benefits, and sample
premiums for all policies currently being issued for delivery in
California.

(1) For the rate history portion of the rate guide required by this
section, the department shall collect, and each insurer shall provide
to the department, all of the following information for each
long-term care policy, including all policies, whether issued by
the insurer or purchased or acquired from another insurer, issued
in California for the current year and for begin delete four end delete begin insert nine end insert preceding years:

(A) Company name.

(B) Policy type.

(C) Policy form identification.

(D) Dates sold.

(E) Date acquired (if applicable).

(F) Premium rate increases requested.

(G) Premium rate increases approved.

(H) Dates of premium rate increase approvals.

(I) Any other information requested by the department.

(2) For the policy comparison portion of the rate guide required
by this section, the department shall collect, and each insurer shall
provide to the department, the information needed to complete the
following form, along with any other information requested by the
department, for each long-term care policy currently issued for
delivery in California, including all policies, whether issued by
the insurer or purchased or acquired from another insurer:

PRINTER PLEASE NOTE: TIP-IN MATERIAL TO BE
INSERTED

[1 page]

If an insurer does not offer a policy for sale that fits the criteria
set forth in the sample premium portion of the policy comparison
section of the rate guide, the department shall include in that section
of the form for that policy a statement explaining that a policy
fitting that criteria is not offered by the insurer and that the
consumer may seek, from an agent, sample premium information
for the insurer’s policy that most closely resembles the policy in
the sample.

The department shall use the format set forth in this section for
the policy comparison portion of the rate guide, unless the working
group convened pursuant to subdivision (a) designs an alternative
format and agrees that it should be used instead.

In compiling the policy comparison portion of the rate guide,
the department shall separate the group policies from the individual
policies available for sale so that group policies for all insurers
appear together in the guide and individual policies for all insurers
appear together in the guide.

The policy comparison portion of the rate guide shall contain a
cross-reference for each policy form listed indicating the page in
the rate guide where rate information on the policy form can be
found.

(c) The department shall publish, on the department’s Internet
Web site, a premium history of each insurer that writes long-term
care policies for all the types of long-term care insurance and
coverages issued by the insurer in each state. Each insurer shall
provide to the department all of the information listed in paragraph
(1) of subdivision (b) for each long-term care policy, including all
policies, whether issued by the insurer or purchased or acquired
from another insurer, issued in the United States for the current
year and for the nine preceding years.

(d) Insurers shall provide the information required pursuant to
subdivisions (b) and (c) no later than July 31 of each year,
commencing in 2000.

(e) The consumer rate guide shall be published no later than
December 1 of each year commencing in 2000, and shall be
distributed using all of the following methods:

(1) Through Health Insurance Counseling and Advocacy
Program (HICAP) offices.

(2) By telephone using the department’s consumer toll-free
telephone number.

(3) On the department’s Internet Web site.

(4) A notice in the Long-Term Care Insurance Personal
Worksheet required by Section 10234.95.

(f) Notwithstanding any other provision of law, the data
submitted by insurers to the department pursuant to this section
are public records, and shall be open to inspection by members of
the public pursuant to the procedures of the California Public
Records Act. However, a trade secret, as defined in subdivision
(d) of Section 3426.1 of the Civil Code, is not subject to this
subdivision.

begin insert

begin insert SEC. 12. end insert   

end insert

begin insert Section 10234.95 of the end insert begin insert Insurance Code end insert begin insert is amended
to read: end insert

10234.95.  

(a) Every insurer or other entity marketing long-term
care insurance shall:

(1) Develop and use suitability standards to determine whether
the purchase or replacement of long-term care insurance is
appropriate for the needs of the applicant.

(2) Train its agents in the use of its suitability standards.

(3) Maintain a copy of its suitability standards and make them
available for inspection upon request by the commissioner.

(b) The agent and insurer shall develop procedures that take
into consideration, when determining whether the applicant meets
the standards developed by the insurer, the following:

(1) The ability to pay for the proposed coverage and other
pertinent financial information related to the purchase of the
coverage.

(2) The applicant’s goals or needs with respect to long-term
care and the advantages and disadvantages of insurance to meet
these goals or needs.

(3) The value, benefits, and costs of the applicant’s existing
insurance, if any, when compared to the values, benefits, and costs
of the recommended purchase or replacement.

(c) (1) The issuer, and where an agent is involved, the agent,
shall make reasonable efforts to obtain the information set out in
subdivision (b). The efforts shall include presentation to the
applicant, at or prior to application, of the “Long-Term Care
Insurance Personal Worksheet,” contained in the Long-Term Care
Insurance Model Regulations of the National Association of
Insurance Commissioners. The personal worksheet used by the
insurer shall contain, at a minimum, the information in the NAIC
worksheet in not less than 12-point type. The insurer may request
the applicant to provide additional information to comply with its
suitability standards.

(2) In the premium section of the personal worksheet, the insurer
shall disclose all rate increases and rate increase requests for all
policies, whether issued by the insurer or purchased or acquired
from another insurer, in the United States begin delete on or after January 1,
1990. end delete begin insert for the current year and for nine preceding years. end insert

(3) The premium section shall include a statement that reads as
follows: “A rate guide is available that compares the policies sold
by different insurers, the benefits provided in those policies, and
sample premiums. The rate guide also provides a history of the
rate increases, if any, for the policies issued by different insurers
in each state in which they do business, begin delete since January 1, 1990. end delete begin insert for
the current year and for the nine preceding years. end insert You can obtain
a copy of this rate guide by calling the Department of Insurance’s
consumer toll-free telephone number (1-800-927-HELP), by calling
the Health Insurance Counseling and Advocacy Program (HICAP)
toll-free telephone number (1-800-434-0222), or by accessing the
Department of Insurance’s Internet begin delete web end delete begin insert Web end insert site
(www.insurance.ca.gov).” If the personal worksheet is approved
prior to the availability of the rate guide, the worksheet shall
indicate that the rate guide will be available beginning December
1, 2000.

(4) A copy of the issuer’s personal worksheet shall be filed and
approved by the commissioner. A new personal worksheet shall
be filed and approved by the commissioner each time a rate is
increased in California and each time a new policy is filed for
approval by the commissioner. The new personal worksheet shall
disclose the amount of the rate increase in California and all prior
rate increases begin insert for the nine preceding years end insert in California as well as
all prior rate increases and rate increase requests or filings in any
other begin delete state. end delete begin insert state for the nine preceding years. end insert The new personal
worksheet shall be used by the insurer within 60 days of approval
by the commissioner in place of the previously approved personal
worksheet.

(d) A completed personal worksheet shall be returned to the
issuer prior to the issuer’s consideration of the applicant for
coverage, except the personal worksheet need not be returned for
sale of employer group long-term care insurance to employees and
their spouses and dependents.

(e) The sale or dissemination outside the company or agency
by the issuer or agent of information obtained through the personal
worksheet is prohibited.

(f) The issuer shall use the suitability standards it has developed
pursuant to this section in determining whether issuing long-term
care insurance coverage to an applicant is appropriate.

(g) Agents shall use the suitability standards developed by the
insurer in marketing long-term care insurance.

(h) If the issuer determines that the applicant does not meet its
financial suitability standards, or if the applicant has declined to
provide the information, the issuer may reject the application.
Alternatively, the issuers shall send the applicant a letter similar
to the “Long-Term Care Insurance Suitability Letter” contained
in the Long-Term Care Model Regulations of the National
Association of Insurance Commissioners. However, if the applicant
has declined to provide financial information, the issuer may use
some other method to verify the applicant’s intent. Either the
applicant’s returned letter or a record of the alternative method of
verification shall be made part of the applicant’s file.

(i) The insurer shall report annually to the commissioner the
total number of applications received from residents of this state,
the number of those who declined to provide information on the
personal worksheet, the number of applicants who did not meet
the suitability standards, and the number who chose to conform
after receiving a suitability letter.

(j) This section shall not apply to life insurance policies that
accelerate benefits for long-term care.

begin insert

begin insert SEC. 13. end insert   

end insert

begin insert Section 11520.5 of the end insert begin insert Insurance Code end insert begin insert is amended
to read: end insert

11520.5.  

No person shall transact in this state the business
described in this chapter without first procuring a certificate of
authority from the commissioner for such purpose. Application
for such certificate shall be made on a form prescribed by the
commissioner accompanied by a filing fee of one thousand seven
hundred seventy dollars ($1,770). begin delete Such end delete begin insert The end insert certificate shall not
be granted until the applicant conforms to the requirements of this
chapter and the laws of this state prerequisite to its issue. After
such issue the holder shall continue to comply with the
requirements of this chapter and the laws of this state. begin delete Where end delete begin insert When end insert
a hearing is held under this section the proceedings shall be
conducted in accordance with Chapter 5 (commencing with Section
11500) of Part 1, Division 3, Title 2 of the Government Code, and
the commissioner shall have all of the powers granted therein.

Subject to the annual fee provisions herein, every certificate of
authority issued or held under this chapter shall be for an indefinite
term and, unless sooner revoked by the commissioner, shall
terminate upon occurrence of any of the following:

(a) Upon the holder’s ceasing to exist as a separate entity.

(b) Upon the winding up or dissolution, or expiration or
forfeiture of the corporate existence of a corporate holder thereof.

(c) Upon winding up or dissolution of a holder not a corporation.

(d) In any event upon surrender by the holder of its certificate
of authority and cancellation of the same by the commissioner.

The commissioner shall not cancel a surrendered certificate of
authority until he is satisfied by examination, or otherwise, that
the former holder has discharged its annuity liabilities to residents
of this state or satisfactorily reinsured the same.

Notwithstanding the preceding provisions for a certificate of
authority of indefinite term, each holder of a certificate of authority
under this chapter shall owe and pay in advance to the
commissioner in lawful money of the United States an annual fee
of fifty-eight dollars ($58) on account of begin delete such end delete begin insert a end insert certificate of
authority until its final termination or revocation. begin delete Such end delete begin insert The end insert fee
shall be for annual periods commencing on July 1st of each year
and ending on June 30th of each year and shall be due on each
March 1st and shall be delinquent on and after each April 1st.

Each holder of a certificate of authority shall also be subject to
the payment in advance of the following fees, as appropriate:

(1) One hundred eighteen dollars ($118) for each amended
certificate of authority caused by a change of the name of the
holder.

(2)  Eighty-nine dollars ($89) for the services and expenses of
the commissioner in connection with the filing of amended articles
by a holder.

(3) Three hundred fifty-four dollars ($354) for all services and
expenses of the commissioner in connection with the withdrawal
of a holder of a certificate of authority under this chapter.

begin insert

(e) Upon the receipt of a notice of filing of a petition by or
against a certificate holder under the United States Bankruptcy
Code for bankruptcy or reorganization, the commissioner shall
cease imposing, billing, or collecting the annual fees due under
this chapter and this section to the certificate holder.

end insert begin insert

(f) Upon notice of the suspension of the corporate status of the
certificate holder for a period of 12 months by the Secretary of
State, the commissioner shall terminate the certificate of authority
and shall deem the certificate to be terminated.

end insert

begin insert

begin insert SEC. 14. end insert   

end insert

begin insert Section 11691 of the end insert begin insert Insurance Code end insert begin insert is amended to
read: end insert

11691.  

(a) (1) In order to provide protection to the workers
of this state in the event that the insurers issuing workers’
compensation insurance to employers fail to pay compensable
workers’ compensation claims when due, except in the case of the
State Compensation Insurance Fund, every insurer desiring
admission to transact workers’ compensation insurance, or workers’
compensation reinsurance business, or desiring to reinsure the
injury, disablement, or death portions of policies of workers’
compensation insurance under the class of disability insurance
shall, as a prerequisite to admission, or ability to reinsure the injury,
disablement, or death portion of policies of workers’ compensation
insurance under the class of disability insurance, deposit cash
instruments or approved interest-bearing securities or approved
stocks readily convertible into cash, investment certificates, or
share accounts issued by a savings and loan association doing
business in this state and insured by the Federal Deposit Insurance
Corporation, certificates of deposit, or savings deposits in a bank
licensed to do business in this state, begin delete or is either domiciled in and
has a principal place of business in this state, or is a national bank
association with a trust office located in this state, end delete or approved
letters of credit that perform in material respects as any other
security allowable as a form of deposit for purposes of a workers’
compensation deposit and that meet the standard set forth in Section
922.5, or approved securities registered with a qualified depository
located in a reciprocal state as defined in Section 1104.9, with that
deposit to be in an amount and subject to any exceptions as set
forth in this article. The deposit shall be made from time to time
as demanded by the commissioner and may be made with the
Treasurer, or a bank or savings and loan association authorized to
engage in the trust business pursuant to Division 1 (commencing
with Section 99) or Division 2 (commencing with Section 5000)
of the Financial Code, or a trust company. A deposit of securities
registered with a qualified depository located in a reciprocal state
as defined in Section 1104.9 may only be made in a bank or savings
and loan association authorized to engage in the trust business
pursuant to Division 1 (commencing with Section 99) or Division
2 (commencing with Section 5000) of the Financial Code, or a
trust company, licensed to do business and located in this state
begin insert that is end insert begin insert either domiciled in and has a principal place of business
in this state, or is a national bank association with a trust office
located in this state, end insert that is a qualified custodian as defined in
paragraph (1) of subdivision (a) of Section begin delete 1104.9 end delete begin insert 1104.9, end insert and that
maintains deposits of at least seven hundred fifty million dollars
($750,000,000). The deposit shall be made subject to the approval
of the commissioner under those rules and regulations that he or
she shall promulgate. The deposit shall be maintained at a deposit
value specified by the commissioner, but in any event no less than
one hundred thousand dollars ($100,000), nor less than the reserves
required of the insurer to be maintained under any of the provisions
of Article 1 (commencing with Section 11550) of Chapter 1,
relating to loss reserves on workers’ compensation business of the
insurer in this state, nor less than the sum of the amounts specified
in subdivision (a) of Section 11693, whichever is greater. The
deposit shall be for the purpose of paying compensable workers’
compensation claims under policies issued by the insurer or
reinsured by the admitted reinsurer and expenses as provided in
Section 11698.02, in the event the insurer or reinsurer fails to pay
those claims when they come due. If the insurer providing the
deposit is domiciled in a state where a state statute, regulation, or
court decision provides that, with respect to covered claims within
the deductible amount that are paid by a guarantee association
after the entry of an order of liquidation under large deductible
workers’ compensation policies, any part of the reimbursement
proceeds, other than the reasonable expenses of the receiver related
to treatment of deductible policy arrangements of insurance
companies in liquidation, owed by insureds on those deductible
amounts, whether paid directly or through a draw of collateral, are
general assets of the estate, then the amount of the insurer’s deposit
pursuant to this article shall be calculated based on the gross
amount of that insurer’s liabilities for loss and loss adjustment
expenses under those policies without regard to the deductible,
and those reserves shall not be reduced by any collateral or
reimbursement obligations insureds were required to provide under
those policies.

(2)  begin delete Nothing in this end delete begin insert This end insert section begin delete shall end delete begin insert does not end insert require that the
deposit be calculated based on gross amounts of liabilities
described above if the domiciliary state does not have an existing
statute, regulation, or court decision providing that the
reimbursement proceeds described above are general assets of the
estate.

(b) Each insurer or reinsurer desiring to have the ability to
reinsure the injury, disablement, or death portions of policies of
workers’ compensation under the class of disability insurance shall
provide prior notice to the commissioner, in the manner and form
prescribed by the commissioner of its intent to reinsure that
insurance. In the event of late notice, a late filing fee shall be
imposed on the reinsurer pursuant to Section 924 for failure to
notify the commissioner of its intent to reinsure workers’
compensation insurance.

(c) If the deposit required by this section is not made with the
Treasurer, then the depositor shall execute a trust agreement in a
form approved by the commissioner between the insurer, the
institution in which the deposit is made or, where applicable, the
qualified custodian of the deposit, and the commissioner, that
grants to the commissioner the authority to withdraw the deposit
as set forth in Sections 11691.2, 11696, 11698, and 11698.3. The
insurer shall also execute and deliver in duplicate to the
commissioner a power of attorney in favor of the commissioner
for the purposes specified herein, supported by a resolution of the
depositor’s board of directors. The power of attorney and director’s
resolution shall be on forms approved by the commissioner, shall
provide that the power of attorney cannot be revoked or withdrawn
without the consent of the commissioner, and shall be
acknowledged as required by law.

(d) (1) The commissioner shall require payment in advance of
fees for the initial filing of a trust agreement with a bank, savings
and loan association, or trust company on deposits made pursuant
to subdivision (a); for each amendment, supplement, or other
change to the deposit agreement; for receiving and processing
deposit schedules pursuant to this section; and for each withdrawal,
substitution, or any other change in the deposit. The fees shall be
set forth in the department’s Schedule of Fees and Charges.

(2) The commissioner shall require payment in advance of a
fee for the initial filing of each letter of credit utilized pursuant to
subdivision (a). In addition, the commissioner shall require
payment in advance of a fee for each amendment of a letter of
credit. The fees shall be set forth in the department’s Schedule of
Fees and Charges.

(e) Any workers’ compensation insurer that deposits cash or
cash equivalents pursuant to this section shall be entitled to a
prompt refund of those deposits in excess of the amount determined
by the commissioner pursuant to subdivision (a). The commissioner
shall cause to be refunded any deposits determined by the
commissioner to be in excess of the amount required by subdivision
(a) within 30 days of that determination. In the alternative, an
insurer may use any excess deposit funds to offset a demand by
the commissioner to increase its deposit due to the failure of a
reinsurer to make a deposit pursuant to this section.

(f) (1) An admitted insurer reinsuring business covered in this
article (hereafter referred to as reinsurer) shall identify to the
commissioner, in a form prescribed by the commissioner, amounts
deposited for credit in the name of each ceding insurer.

(2) All reinsurance agreements covering claims and obligations
under business covered by this article, and allowable for purposes
of granting a ceding carrier a deposit credit, shall include a
provision granting the commissioner, in the event of a delinquency
proceeding, receivership, or insolvency of a ceding insurer, any
sums from a reinsurer’s deposit that are necessary for the
commissioner to pay those reinsured claims and obligations, or to
ensure their payment by the California Insurance Guarantee
Association, deemed by the commissioner due under the
reinsurance agreement, upon failure of the reinsurer for any reason
to make payments under the policy of reinsurance. The
commissioner shall give 30 days’ notice prior to drawing upon
these funds of an intent to do so. Notwithstanding the
commissioner’s right to draw on these funds, the reinsurer shall
otherwise retain its right to determine the validity of those claims
and obligations and to contest their payment under the reinsurance
agreement. Prior to a reinsurer’s deposit being drawn upon, in
whole or in part, by the department, the department shall provide
a reinsurer with an explanation of procedures that a reinsurer may
use to explain to the department why the use of the reinsurer’s
deposit may not be appropriate under the reinsurance agreement.

(3)  begin delete No end delete begin insert A end insert reinsurer entering into a contract identified in paragraph
(2), beginning on or after January 1, 2005, may begin insert not end insert cede claims
or obligations assumed from a ceding insurer unless the deposit
securing the ceded claims or obligations is governed by paragraph
(2) or, upon approval of the commissioner, would secure the ceded
claims or obligations in all material respects and in the same
manner as a deposit identified in paragraph (2) above.

(4) All sums received from the reinsurer by the commissioner
for those claims paid by the California Insurance Guarantee
Association shall be held separate and apart from and not included
in the general assets of the insolvent insurer, and shall be
transferred to the California Insurance Guarantee Association upon
receipt by the commissioner. In the event of a final judgment or
settlement adverse to the drawing of funds by the commissioner
pursuant to paragraph (2) or (3), the California Insurance Guarantee
Association shall repay funds it obtained to pay covered claims
and shall, if necessary, either levy a surcharge as needed or seek
legislative approval to levy the surcharge if the California Insurance
Guarantee Association is already levying the maximum surcharge
permissible under law.

(g) If a reinsurer has not maintained deposits as required by
subdivision (a) in amounts equal to the amounts of deposit credits
claimed by its ceding insurers, the commissioner, after notifying
the reinsurer and its ceding insurers of the deposit shortfall and
allowing 15 days from the date of the notice for the deposit shortfall
to be corrected, may disallow all or a portion of the reserve credits
claimed by the ceding insurers. A ceding insurer disallowed a
reserve credit pursuant to this provision shall immediately make
the deposit required by this section.

(h) For interest-bearing securities that are debt securities and
include principal payment features prior to maturity that are utilized
pursuant to subdivision (a), all principal payments received shall
be retained as part of the deposit.

(i) Withdrawal of any amount of the deposit required under
subdivision (a) that results in a reduction of the required amount
of the deposit may only occur with the prior written consent of the
commissioner.