BILL NUMBER: AB 784 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 20, 2009
AMENDED IN ASSEMBLY APRIL 13, 2009
INTRODUCED BY Assembly Member Gaines
FEBRUARY 26, 2009
An act to amend Sections 700 and 703 of the Insurance Code,
relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 784, as amended, Gaines. Insurance transactions: nonadmitted
insurers.
Existing law regulates the business of insurance and prohibits
persons from transacting any class of insurance within this state
without first being admitted for that class and makes a violation of
that prohibition a crime.
This bill would provide that a nonadmitted insurer that is
affiliated with a California domestic insurer shall not be deemed to
be transacting insurance in California so as
long as all California business written by the nonadmitted
insurer is transacted by and through a surplus lines broker licensed
in California. The bill would also authorize a nonadmitted insurer to
receive administrative services rendered in California by its
California domestic insurer affiliate or any other affiliate
so as long as the administrative services do
not relate to the placement or transaction of any California risk or
constitute management of the nonadmitted insurer. The bill would also
permit a nonadmitted insurer and its California domestic affiliate
to have common directors and officers so as
long as the nonadmitted insurer maintains a resident operating
manager in its home state, as specified.
Vote: majority. Appropriation: no. Fiscal committee: yes
no . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 700 of the Insurance Code is amended to read:
700. (a) A person shall not transact any class of insurance
business in this state without first being admitted for that class.
Except for the State Compensation Insurance Fund as authorized by
Sections 11770 and 11778 to 11780.5, inclusive, admission is secured
by procuring a certificate of authority from the commissioner. The
certificate shall not be granted until the applicant conforms to the
requirements of this code and of the laws of this state prerequisite
to its issue.
(b) The unlawful transaction of insurance business in this state
in willful violation of the requirement for a certificate of
authority is a public offense punishable by imprisonment in the state
prison, or in a county jail not exceeding one year, or by fine not
exceeding one hundred thousand dollars ($100,000), or by both that
fine and imprisonment, and shall be enjoined by a court of competent
jurisdiction on petition of the commissioner.
(c) After the issuance of a certificate of authority, the holder
shall continue to comply with the requirements as to its business set
forth in this code and in the other laws of this state, including,
but not limited to, Chapter 5 (commencing with Section 1631), with
regard to employees or contractors who solicit, negotiate, or effect
insurance.
(d) 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 therein.
(e) The commissioner shall either issue or deny an application for
a certificate of authority within 180 calendar days after the date
of the application.
(f) The commissioner and his or her authorized representative
shall be prohibited from seeking a waiver to extend the 180 calendar
day period specified in subdivision (e), nor shall the applicant be
permitted to waive that period.
(g) (1) A nonadmitted insurer that is affiliated with a California
domestic insurer shall not be deemed to be transacting insurance in
California so as long as all California
business written by the nonadmitted insurer is transacted by and
through a surplus lines broker licensed in California. A nonadmitted
insurer may receive administrative services rendered in California by
its California domestic insurer affiliate or any other affiliate
so as long as the administrative
services do not relate to the placement or transaction of any
California risk or constitute management of the nonadmitted insurer.
(2) A nonadmitted insurer and its California domestic affiliate
may have common directors and officers so as
long as the nonadmitted insurer maintains a resident operating
manager in its home state who is responsible for and carries out all
transaction and management functions in its home state.
SEC. 2. Section 703 of the Insurance Code is amended to read:
703. Except when performed by a surplus line broker or permitted
by subdivision (g) of Section 700, the following acts are
misdemeanors when done in this state:
(a) Acting as agent for a nonadmitted insurer in the transaction
of insurance business in this state.
(b) In any manner advertising a nonadmitted insurer in this state.
(c) In any other manner aiding a nonadmitted insurer to transact
insurance business in this state.
In addition to any penalty provided for commission of
misdemeanors, a person violating any provision of this section shall
forfeit to this state the sum of five hundred dollars ($500),
together with one hundred dollars ($100) for each month or fraction
thereof during which he or she continues the violation. This section
shall not apply to advertising authorized by Section 703.1,
subdivision (h) of Section 1760.5, or Section 1773.