BILL NUMBER: SB 18 CHAPTERED
BILL TEXT
CHAPTER 239
FILED WITH SECRETARY OF STATE AUGUST 6, 1997
APPROVED BY GOVERNOR AUGUST 6, 1997
PASSED THE SENATE JULY 11, 1997
PASSED THE ASSEMBLY JUNE 30, 1997
AMENDED IN ASSEMBLY JUNE 19, 1997
AMENDED IN ASSEMBLY JUNE 5, 1997
AMENDED IN ASSEMBLY MAY 7, 1997
AMENDED IN SENATE FEBRUARY 12, 1997
INTRODUCED BY Senator Rosenthal
(Coauthor: Assembly Member Figueroa)
DECEMBER 2, 1996
An act to amend Section 1523 of the Code of Civil Procedure, and
to amend Section 12936 of the Insurance Code, relating to insurance,
making an appropriation therefor, and declaring the urgency thereof,
to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 18, Rosenthal. Insurance: funds.
Under existing law, property held by a business that is unclaimed
for more than 3 years escheats to the state and, in general, is
deposited into the Unclaimed Property Fund. Existing law also
provides that insurance rebates ordered under Proposition 103 that
cannot be made escheat to the state, and provides that, for the
1996-97 fiscal year, amounts in excess of $14,000,000 are deposited
in the Insurance Fund to repay a specified loan, and amounts that
escheat in the 1997-98 fiscal year also shall be deposited in the
Insurance Fund in an amount necessary to repay that loan.
This bill would provide that funds subject to escheat under the
above provisions that are subject to escheat on or after July 1,
1997, shall be transferred by the Controller to the Department of
Insurance for deposit in the Insurance Fund up to the amount that
will repay principal and interest on the General Fund loan authorized
by the Budget Act of 1996. It would provide that those funds are
continuously appropriated for that purpose. It would provide for a
transfer to the General Fund on June 30, 1998, and, if necessary, on
June 30, 1999. The bill would make related changes.
Since the bill would affect the distribution of insurance rebates
ordered under Proposition 103, it would amend Proposition 103 and,
thus, would require a 2/3 vote for enactment.
This bill would also require the Controller to transfer
$10,000,000 from the General Fund to the Insurance Fund in equal
payments over 3 years, to commence during the first quarter of the
1997-98 fiscal year, to resolve the issues raised by pending
litigation in a specified case concerning the alleged unlawful
transfer of money from the Insurance Fund to the General Fund. It
would authorize the payment of a sum not to exceed $50,000 for
payment of plaintiffs' attorneys' fees in that case. It would
provide for the use of the funds by the Department of Insurance for
specified purposes.
The bill would declare that it is to take effect immediately as an
urgency statute.
Appropriation: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1523 of the Code of Civil Procedure is amended
to read:
1523. If an insurer, after a good faith effort to locate and
deliver to a policyholder a Proposition 103 rebate ordered or
negotiated pursuant to Section 1861.01 of the Insurance Code,
determines that a policyholder cannot be located, all funds
attributable to that rebate escheat to the state and shall be
delivered to the Controller. The funds subject to escheat on or
after July 1, 1997, shall be transferred by the Controller to the
Department of Insurance for deposit in the Insurance Fund up to the
amount that will repay principal and interest on the General Fund
loan authorized by Item 0845-001-0001 of the Budget Act of 1996 for
expenditure as provided in Section 12936 of the Insurance Code.
SEC. 2. Section 12936 of the Insurance Code is amended to read:
12936. (a) (1) Escheated funds deposited in the Insurance Fund
pursuant to Section 1523 of the Code of Civil Procedure shall be
transferred to the General Fund on June 30, 1998, to repay the
principal and interest on the General Fund loan provided pursuant to
Item 0845-001-0001 of the Budget Act of 1996, and such funds are
hereby continuously appropriated for that purpose.
(2) If the Director of Finance determines that funds subject to
escheat for the 1997-98 fiscal year are insufficient to repay the
General Fund loan plus the interest owed, funds subject to escheat in
the 1998-99 fiscal year, up to the amount necessary to repay the
General Fund loan plus the interest owed, shall be available for
expenditure by the commissioner to repay the principal and interest
on the General Fund loan. Notwithstanding the loan repayment date
specified in Item 0845-001-0001 of the Budget Act of 1996, such a
determination by the Director of Finance shall trigger an extension
of the loan repayment date to June 30, 1999.
(b) A policyholder who was entitled to a rebate pursuant to
settlement or order of the commissioner and who has not received the
escheated rebate may submit a claim to the Controller. The
Controller shall pay the claim from among the Proposition 103 refunds
that have escheated to the state and been deposited in the Unclaimed
Property Fund upon verification that the claim is valid.
SEC. 3. (a) The purpose of Sections 3, 4, and 5 of this act is to
immediately resolve the issues raised by pending litigation in the
case of Edward M. Gaines, American Insurance Association, National
Association of Independent Insurers, and the Personal Insurance
Federation of California v. Craig Brown, as Director of Finance of
the State of California, Kathleen Connell, as Controller of the State
of California, and Matt Fong, as Treasurer of the State of
California, concerning the alleged unlawful transfer of ten million
dollars ($10,000,000) from the Insurance Fund, a fund derived from
money collected from the insurance industry to support the Department
of Insurance, to the state's General Fund, to be used for General
Fund purposes, pursuant to the Budget Act of 1992.
(b) The Legislature finds that the resolution of the issues set
forth in this act is fair and reasonable, and shall be implemented
immediately by the Department of Finance, Controller, and Treasurer.
SEC. 4. The Controller shall transfer ten million dollars
($10,000,000) from the General Fund to the Insurance Fund in the
manner, and for expenditure, as provided in Section 5 of this act.
SEC. 5. (a) In accordance with Section 4 of this act, the
Controller shall transfer ten million dollars ($10,000,000) from the
General Fund to the Insurance Fund in equal annual payments over a
three-year period. The first transfer shall commence during the
first quarter of the 1997-98 fiscal year.
(b) A sum, not to exceed fifty thousand dollars ($50,000), shall
be deducted by the Controller from the first annual payment to pay
plaintiffs' attorneys' fees and costs in the case cited in Section 3
of this act. Upon notification from the Insurance Commissioner that
a sum has been agreed to by the parties or determined by the court,
and upon the furnishing to the Controller of a court-endorsed copy of
the dismissal with prejudice of the case, the Controller shall draw
and issue a warrant from this sum made payable to plaintiffs' counsel
of record.
(c) Funds transferred to the Insurance Fund during the three-year
period are hereby appropriated for expenditure by the Insurance
Commissioner to fund consumer services programs of the Department of
Insurance through the 1999-2000 fiscal year. The funds may also be
used by the department during this period for the investigation of
and enforcement actions against licensees of the department.
SEC. 6. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to immediately resolve issues raised in the case of
Gaines, et al. v. Brown, et al., referred to in Section 3 of this
act, involving the transfer of money from the Insurance Fund to the
General Fund, and in order to provide for the deposit of funds to the
Insurance Fund as soon as possible to ensure that adequate funding
is available for essential consumer protection services of the
Department of Insurance, it is necessary that this act take effect
immediately.