BILL NUMBER: AB 2884 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 30, 2016
INTRODUCED BY Committee on Insurance (Assembly Members Daly
(Chair), Bigelow, Calderon, Chu, Cooley, Cooper,
Dababneh, Frazier, Gatto, Gonzalez, and Rodriguez))
FEBRUARY 25, 2016
An act to amend Section 1726 of 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, the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 2884, as amended, Committee on Insurance. Insurance: licensees:
Internet: disclosures.
(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.
This bill would, among other things, remove the exemption for any
policy insuring more than 4 automobiles.
(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.
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.
Existing
(3) Existing 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 Insurance Commissioner.
commissioner.
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.
(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.
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.
(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.
This bill would prohibit the commissioner from denying a license
to an applicant without first granting a hearing, as specified.
(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.
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.
(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.
This bill would require the history of the rates of all policies
issued in California to be listed for the 9 preceding years.
(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.
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.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 660 of the Insurance
Code is amended to read:
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 (i) to any to either of the following:
(A) Any policy issued under an
automobile assigned risk plan, or (ii) to any policy
insuring more than four automobiles, or (iii) to any
plan.
(B) Any policy covering garage,
automobile sales agency, repair shop, service station, or public
parking place operation hazards; or haz
ards.
(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
following: (1) that following:
(1) That the insurer has
determined that it will not offer renewal of the policy with the
present insurer, (2) That insurer.
(2) That it is offering
replacement in an affiliated insurer, and (3) That
insurer.
(3) That 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.
SEC. 2. Section 789 of the Insurance
Code is amended to read:
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
chapter. article.
(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.
SEC. 3. Section 1669 of the Insurance
Code is amended to read:
1669. The commissioner may, without hearing, deny an application
if the applicant has: has done one or more of
the following:
(a) Committed a felony as shown by a plea of guilty or nolo
contendere, or by a final judgment of conviction thereof;
(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;
(a) (1) Been convicted of a felony.
(2) Been convicted of a misdemeanor denounced by this code or by
other laws regulating insurance.
(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.
(c)
(b) 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
chapter; or chapter.
(d)
(c) 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.
SEC. 4. Section 1681 of the Insurance
Code is amended to read:
1681. If an applicant fails the qualifying examination, he
or she may, subject to the provisions of 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.
Section 1682, retake a qualifying examination.
SEC. 5. Section 1682 of the Insurance
Code is repealed.
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.
SEC. 6. Section 1682 is added to the
Insurance Code , to read:
1682. (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.
SECTION 1. SEC. 7. 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.
SEC. 8. Section 1749.6 of the Insurance
Code is amended to read:
1749.6. Any person failing to meet the requirements imposed by
Section 1749.3 or 1749.3, 1749.31,
14090.1, or 15059.1 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. Where If
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.
SEC. 9. Section 1807.5 of the Insurance
Code is amended to read:
1807.5. Except as provided in Sections 1669 and 1738, the
commissioner shall not suspend deny, suspend,
or revoke any license, issued under this article, without
first granting a hearing, upon reasonable notice to the
applicant, applicant or licensee, 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.
SEC. 10. Section 10168.6 of the
Insurance Code is amended to read:
10168.6. For the purpose of determining the benefits calculated
under Sections 10168.4 and 10168.5, in the
following apply:
(a) In the case of annuity
contracts under which an 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.
(b) 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 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.
SEC. 11. Section 10234.6 of the
Insurance Code is amended to read:
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 four
nine 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 four
nine 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: GRAPHIC
INSERT HERE: SEE PRINTED VERSION OF THE BILL]
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.
SEC. 12. Section 10234.95 of the
Insurance Code is amended to read:
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 on or after January
1, 1990. for the current year and for nine preceding
years.
(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, since January 1, 1990.
for the current year and for the nine preceding
years. 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 web
Web 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
for the nine preceding years in California as well as all prior
rate increases and rate increase requests or filings in any other
state. state for the nine preceding years.
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.
SEC. 13. Section 11520.5 of the
Insurance Code is amended to read:
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). Such The
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. Where When 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 such a certificate of
authority until its final termination or revocation. Such
The 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.
(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.
(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.
SEC. 14. Section 11691 of the Insurance
Code is amended to read:
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, 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, 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 that 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, that is a qualified custodian as defined in
paragraph (1) of subdivision (a) of Section 1104.9
1104.9, 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) Nothing in this This section
shall does not 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) No A reinsurer entering into a
contract identified in paragraph (2), beginning on or after January
1, 2005, may not 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.