BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 488|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: SB 488
Author: Block (D)
Amended: 1/4/16
Vote: 21
SENATE INSURANCE COMMITTEE: 8-0, 1/13/16
AYES: Roth, Gaines, Berryhill, Glazer, Hernandez, Liu,
Mitchell, Wieckowski
NO VOTE RECORDED: Hall
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Public insurance adjusters
SOURCE: California Department of Insurance
DIGEST: This bill revises the eligibility requirements and
regulations applicable to persons holding a license as a public
insurance adjuster (PIA).
ANALYSIS:
Existing law:
1) Defines the term "public insurance adjuster" as:
a) A person who, for compensation, acts on behalf of, or aids
in any manner, an insured in negotiating for or effecting the
settlement of a claim or claims for loss or damage under any
SB 488
Page 2
policy of insurance covering real or personal property; or
b) Any person who advertises, solicits business, or holds
himself or herself out to the public as an adjuster of those
claims; and
c) Any person who, for compensation, investigates, settles,
adjusts, advises, or assists an insured with reference to
claims for those losses on behalf of any public insurance
adjuster.
1) Requires a license to act as a PIA, and establishes three
categories of licenses: PIA, nonresident PIA, and interim PIA.
2) Excludes various persons from the licensing requirement.
3) Requires applicants for a PIA license to meet age, residency,
character, and other requirements; have sufficient experience in
the handling of loss claims under insurance contracts; pass an
examination; and pay a fee.
4) Requires applicants for a nonresident license to meet the same
criteria for a PIA license, except residency, and to appoint the
Insurance Commissioner (IC) as an agent for service of process.
5) Requires applicants for an interim license to be employed and
supervised by a licensee, and meet most other the requirements
for applicants, but they are not required to have prior
experience or pass an exam.
6) Requires specified fees and examinations for application and
renewal of a license.
SB 488
Page 3
7) Exempts some licensees, not including PIAs, from license
renewal if the requirement arises while the licensee is serving
in the military, and holds the license in force during the
period of service until the end of the license year for which he
or she is released from service.
8) Requires PIAs to enter into a written contract on a form
approved by the IC before acting on behalf of the client.
9) Requires PIA contracts to include specified disclosures,
information, and provisions, including a provision allowing the
client to cancel the contract, without penalty and obligation,
by the third business day after the client signs the contract.
10) Provides that if a PIA misrepresents or conceals a material
fact from the insured prior to execution of the contract, the
insured is entitled to rescind the contract without time limit.
11) Prohibits PIAs from soliciting clients between 6:00 p.m. and
8:00 a.m.; during a "loss-producing occurrence"; and, for
residential properties, during a seven-day period after a
disaster.
12) Defines "disaster" to mean either a loss-producing event that
damages or destroys more than 25 dwellings, or an earthquake,
flood, fire, hurricane, riot, storm, tidal wave, or other
similar sudden or catastrophic occurrence for which a state of
emergency has been declared by the President or the Governor or
for which a local emergency has been declared by the executive
officer or governing body of any city, county, or city and
county.
This bill:
1) Redefines "public insurance adjuster" to mean any person, for
compensation, that:
SB 488
Page 4
a) Acts or aids, solely in relation to first party claims
arising under insurance contracts that insure the real or
personal property of the insured, on behalf of an insured
in negotiating for, or effecting the settlement of, a
claim for loss or damage covered by an insurance contract.
b) Advertises for employment as a PIA of insurance claims
or solicits business or represents himself or herself to
the public as a PIA of first party insurance claims for
losses or damages arising out of policies of insurance
that insure real or personal property.
c) Directly or indirectly solicits business, investigates,
or adjusts losses, or advises an insured about first party
claims for losses or damages arising out of policies of
insurance that insure real or personal property for
another person engaged in the business of adjusting losses
or damages covered by an insurance policy, for the
insured.
1) Provides that the definition does not prohibit a PIA from
handling third-party claims if liability is not in dispute.
2) Eliminates some categories of persons exempt from the
licensing requirements including specified public employees,
charitable organizations, and admitted insurers.
3) Adds to the categories of persons exempt from the licensing
requirements a person that negotiate or settles claims
arising under a life or health insurance policy or an
annuity contract, a health care provider or employee who
files claims on behalf of patients, and a person who settles
subrogation claims between insurers.
SB 488
Page 5
4) Clarifies that unlicensed employees or agents of a licensee
may not conduct business for the licensee that would require
a license.
5) Revises application requirements and requires live scan
fingerprinting.
6) Requires applicants to complete a 20-hour prelicensing course
of study, but exempts applicants licensed in another state.
7) Repeals the provisions relating to interim licenses;
establishes an apprentice PIA license effective for no more
than 12 months; limits apprentices to participation in the
factual investigation, tentative closing, and solicitation
of losses; and requires apprentice compensation be on a
salaried or hourly basis.
8) Requires applicants for PIA license to have at least two
years of experience in the handling of loss claims under
insurance contracts, except that applicants who have served
12 months under the new apprenticeship program are deemed to
have met the requirement.
9) Requires organization applicants to designate a licensed
individual to be responsible for compliance with insurance
laws.
10) Revises the eligibility requirements for nonresident licenses
so that, absent a history of certain types of misconduct, a
license will be granted if the person is licensed and is in
good standing in his or her home state, has paid the
necessary fees, and meets the standard financial
responsibility requirements.
11) Requires the contract with the insured to contain a notice
SB 488
Page 6
that the PIA may not base a fee on any amount paid to the
insured by the insurer prior to the contract.
12) Tolls the three-business-day cancellation period until the
client receives a copy of the signed contract and extends it
to five calendar days for claims resulting from a
"catastrophic disaster" as defined in this bill.
13) Permits PIAs to solicit clients between 6:00 p.m. and 8:00
a.m. if requested by the policyholder.
14) Defines "loss-producing occurrence" and clarifies that a
loss-producing occurrence is ongoing whenever any specified
circumstances are still present such as emergency responders
are still present on the property or an evacuation order is
still in effect.
15) Eliminates the definition of "disaster" and defines the
phrase "catastrophic disaster" as an event that results in
large numbers of deaths and injuries; causes extensive
damage or destruction of facilities that provide and sustain
human needs; produces an overwhelming demand on state and
local response resources and mechanisms; causes a severe
long-term effect on general economic activity; and severely
affects state, local, and private sector capabilities to
begin and sustain response activities; and also provides
that a catastrophic disaster shall be declared by the U.S.
President or the Governor.
16) Clarifies that a PIA may not solicit clients until seven days
have elapsed from the conclusion of a loss-producing
occurrence if the property is included in an area subject to
a catastrophic disaster, but may provide written materials
without making personal contact.
17) Adjusts provisions related to application and renewal fees.
SB 488
Page 7
18) Adds PIAs to the list of licensees exempt from examination
and fees on renewal if the requirement arises while serving
in the military.
19) Makes various technical changes and removes obsolete
references.
Background
Insurance adjusters investigate the circumstances of an
insurance claim, evaluate the covered losses, and negotiate
settlements according to the policy and applicable law.
Adjusters may be hired by an insurer or a claimant. PIAs
represent commercial and noncommercial insureds (policyholders
and others who are protected under the contract) in the
negotiation or settlement of claims involving real or personal
property. PIAs are typically paid on a contingency fee basis
taking a portion of the settlement proceeds. They serve the
consumer in a position of trust and confidence and are regulated
by California Department of Insurance (CDI).
SB 488 makes comprehensive revisions to PIA licensing laws many
of which conform to the model act adopted by the National
Association of Insurance Commissioners. Its most significant
provisions clarify when PIAs should not be soliciting clients,
establish new standards of reciprocity for nonresident licensees
with states that have similar licensing requirements, enhance
consumer protections related to the service contract between the
PIA and the client, and establish a new apprenticeship program.
Recent amendments reflect negotiations among the author, CDI,
and the California Association of Public Insurance Adjusters
(CAPIA). All known opposition has been removed, however,
several trade associations that have taken a neutral position on
the bill continue to have concerns about some of the provisions
related to the apprentice license and services provided to
third-party claimants, as well as a concern that the bill does
not address potential delays in the filing of a notice of a
claim by insureds represented by PIAs.
SB 488
Page 8
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
SUPPORT: (Verified1/19/16)
California Department of Insurance (source)
California Association of Public Insurance Adjusters
NCFIA Anti-Fraud Alliance
United Policyholders
OPPOSITION: (Verified1/19/16)
None received
ARGUMENTS IN SUPPORT: CDI supports SB 488 because it
SB 488
Page 9
clarifies several provisions that would build stronger consumer
protections related to fees, representation agreements, and
losses arising from catastrophes. The CAPIA supports the bill
because it conforms California law to the National Association
of Insurance Commissioners Public Adjusters Licensing Model Act
relative to apprentice PIAs, non-resident licensees and other
technical issues, including the definition of a disaster.
Prepared by:Hugh Slayden / INS. / (916) 651-4110
1/20/16 15:39:59
**** END ****