BILL NUMBER: AB 2084 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 12, 2012
INTRODUCED BY Assembly Member Solorio
FEBRUARY 23, 2012
An act to amend Section 1764.1 of the Insurance Code,
relating to insurance. An act to amend Section 10270.2
of, and to add Section 10270.2.5 to, the Insurance Code, relating to
insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 2084, as amended, Solorio. Insurance: nonadmitted
insurer: surplus line brokers: disclosure. Blanket
insurance.
Existing law provides that blanket insurance is that form of
insurance providing coverage for specified circumstances and insuring
by describing all persons within a class of persons defined in a
policy issued to a master policyholder, and not by specifically
naming the persons covered. Under existing law, the permitted types
of blanket insurance are those where the blanket policy is issued to
specified entities, including, but not limited to, a volunteer fire
company providing benefits to members only in the event of accident
incurred while performing actions incident to such membership and a
proprietor or sponsor of an organized camping institution providing
benefits to campers or persons responsible for their support for
death or dismemberment resulting from accident, or for hospital,
medical, surgical, or nursing expenses resulting from accident or
sickness related to the camper's specified connection with the
camping institution.
This bill would revise and recast those above entities to instead
include (1) a volunteer or governmental fire department, emergency
medical services company, or similar volunteer or governmental
organization providing benefits to members or participants only in
the event of accident incurred while performing actions incident to
an activity or operation sponsored or supervised by the department,
company, or organization and (2) a sports team or camp, as specified,
providing benefits to participants, campers, and other specified
persons responsible for their support for death or dismemberment
resulting from accident, or for hospital, medical, surgical, or
nursing expenses resulting from specified accident or sickness
related to the participants, campers, or other specified person's
connection with the sports team or camp, as specified.
This bill would additionally specify other permitted types of
blanket insurance issued to specified entities that include, but are
not limited to, (1) an employer providing accident benefits to any
group of workers, dependents, or guests, limited by reference to
specified hazards incident to activities or operations of the
employer, (2) any common carrier or any operator, owner, or lessor of
a means of transportation providing accident benefits to any
specified group of persons who may become lessees or passengers
limited by reference to travel status, and (3) an entertainment
production company providing accident benefits to any group of
participants, volunteers, audience members, contestants, employees,
or independent contractors while engaged in any activity or operation
of the entertainment production company.
Existing law prohibits a person from transacting any class of
insurance business in this state without first being an admitted
insurer. Under existing law, admission is secured by procuring a
certificate of authority from the Insurance Commissioner. Existing
law authorizes the above-described blanket policies, among others, to
provide that the cost of the insurance coverage is required to be
paid by either the policyholder, or the individuals insured or their
parents or guardians, payable through the policyholder. Existing law
prohibits a blanket policy from being issued until approved as to
substance and form by the commissioner.
This bill would extend these provisions to the newly established
permitted types of blanket insurance described above. The bill would
also authorize the commissioner to add to the list of entities that
may be eligible to purchase blanket insurance for any risk or class
of risks, relating to accident benefits which may be properly
eligible for blanket insurance, as specified.
(1) Existing law requires every nonadmitted insurer, in the case
of insurance to be purchased by a home state insured, and every
surplus line broker, in the case of any insurance with a nonadmitted
carrier for a home state insured to be transacted by the surplus line
broker, to obtain, at the time of accepting an application for an
insurance policy, other than a renewal of that policy, the signature
of the applicant on a disclosure statement. An industrial insured is
not required to receive the disclosure except on confirmation of
insurance, the certificate of placement, or the policy. An industrial
insured is defined as, among other things, having 25 or more
employees on average during the prior 12 months and having aggregate
annual premiums for insurance for all risks other than workers'
compensation and health coverage totaling no less than $25,000. A
violation of this requirement is a crime punishable by imprisonment
in a county jail as either a misdemeanor or a felony or by a fine of
not more than $10,000, or by both that imprisonment and fine.
This bill would change the definition of industrial insured by
increasing the number of employees an industrial insured is required
to have to 50 and by increasing the industrial insured's aggregate
annual premiums for insurance for all risks other than workers'
compensation and health coverage to no less than $50,000. Because
this bill would expand the scope of an existing crime, it would
create a state-mandated local program.
(2) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes no .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10270.2 of the
Insurance Code is amended to read:
10270.2. Blanket insurance is that form of insurance providing
coverage for specified circumstances and insuring by description all
or nearly all persons within a class of persons defined in a policy
issued to a master policyholder, and not by specifically naming the
persons covered (by certificate or otherwise, although a statement of
the coverage provided may be given, or required by the policy to be
given to persons eligible). The permitted types of blanket insurance
are those where the blanket policy is issued to any of the following:
(a) A volunteer or governmental fire company
department, emergency medical services
company, or similar volunteer or governmental organization
providing benefits to members or participants only in
the event of accident incurred while performing actions
incident to such membership an activity or
operation sponsored or supervised by the department, company, or
organization .
(b) A college, school, or other institution of learning, a school
district or districts or school jurisdictional unit, or to the head,
principal, or governing board of any such educational unit who or
which shall be deemed the policyholder; providing benefits to
students without necessarily any restriction as to activity, time, or
place, or to teachers or employees while performing actions incident
to special duties, such as at camps, at summer playgrounds, or
during tours or excursions; and providing benefits to such students,
teachers, or employees, and spouses and dependents of such students,
teachers, and employees, for death or dismemberment resulting from
accident or for hospital, medical, surgical, drug, or nursing
expenses resulting from accident or sickness.
(c) A proprietor or sponsor of an organized camping
institution, sports team, camp, or sponsor, or
proprietor thereof, who shall be deemed the policyholder,
providing benefits to sports team participants or campers
, employees, officials, or supervisors, or persons
responsible for their support for death or dismemberment resulting
from accident, or for hospital, medical, surgical, or nursing
expenses resulting from accident to such
those participants, campers , employees, officials, or s
upervisors, or persons responsible for their support,
or arising out of sickness of such
those participants, campers, employees, officials, or
supervisors, or persons responsible for their support, provided
the accident or the first manifestation of such sickness occurs
while such those participants, campers
, employees, officials, or supervisors, or persons responsible
for their support are in or on the buildings or premises of the
sports team or camp institution , or
being transported between their homes and the sports team or
camp institution , or while at any other
place as an incident to sports team-sponsored or
camp-sponsored activities or while being transported to, from, or
between such those places.
(d) To a newspaper, farm paper, magazine, or other periodical
publication, which shall be deemed the policyholder, providing
benefits for independent contractors, such as carriers,
newsboys, dealers, distributors, wholesalers, or others engaged in
the sale, distribution, collecting for, or other activities
pertaining to, the marketing and delivery of such publications,
including attendance at a coaching school or participation as a
member of a trip organized, supervised, and sponsored as a reward for
meritorious service, on account of loss resulting from accident or
sickness, such benefit to be payable to such independent contractors
or to their parents, guardians, or other persons responsible for
their support.
When the premium for the insurance is paid by the person insured,
he may, upon request, obtain from the insurer in certificate form a
copy of the policy.
(e) Any religious, charitable, recreational, educational, athletic
or civic organization, or branch thereof, which shall be deemed the
policyholder, providing benefits to any group of members,
employees, or participants for death or dismemberment or for
hospital, medical, surgical, or nursing expenses all resulting from
accident incurred incident to specific hazards pertaining to any
activity or activities or operations sponsored or supervised by
or on the premises of such policyholder.
(f) To a policy issued on application of an employer, a majority
of the employees in this state of an employer, or both, to pay the
benefits afforded by a voluntary plan of unemployment compensation
disability insurance. Notwithstanding the provisions of Section
10113, such policies may incorporate by reference any of the
appropriate provisions of Part 2 (commencing with Section 2601) of
Division 1 of the Unemployment Insurance Code and the authorized
regulations of the Director of Employment Development.
(g) An employer, who shall be deemed the policyholder, providing
accident benefits to any group of workers, dependents, or guests,
limited by reference to specified hazards incident to activities or
operations of the policyholder.
(h) Any common carrier or any operator, owner, or lessor of a
means of transportation, who shall be deemed the policyholder,
providing accident benefits to any group of persons who may become
lessees or passengers limited by reference to their travel status on
that common carrier or that means of transportation.
(i) An entertainment production company, who shall be deemed the
policyholder, providing accident benefits to any group of
participants, volunteers, audience members, contestants, employees,
or independent contractors while engaged in any activity or operation
of the policyholder.
(j) A bank or other financial institution, a parent holding
company of a bank or other financial institution, or to the trustee,
trustees, or agent designated by one or more banks, financial
institutions, or parent holding company of a bank or other financial
institution providing accident benefits to debtors, guarantors,
purchasers, credit card holders, checking account holders,
mortgagors, and other customers.
A "blanket policy" is any disability policy of the nature herein
described sold to any of the entities described in subdivision (a),
(b), (c), (d), (e), or (f) , (g), (h), (i),
or (j), of this section and providing coverage for any group of
persons within permitted categories defined in the policy. Policies
referred to in subdivision (f) shall comply with the provisions of
this section specifically referring thereto. Policies referred to in
subdivision (a), (b), (c), (d), or (e) , (g),
(h), (i), or (j) may provide that the cost of the insurance
coverage shall be borne by either the policyholder, or the
individuals insured or their parents or guardians, payable through
the policyholder. In the absence of a policy provision excluding
coverage for otherwise covered individuals who have not individually
enrolled with the policyholder and undertaken to pay all or a
specified portion of the premium allocable to such individual, such
policy shall provide the described insurance for all who fall within
the categories of covered individuals defined in the policy. Such
policy may, but is not required to, contain provisions requiring a
minimum number of participating persons or a minimum percentage of
participation before the policy is effective. In the absence of such
a provision coverage shall not be denied any individual otherwise
eligible on those grounds.
No policies described in subdivision (a), (b), (c), (d),
or (e) , (g), (h), (i), or (j), of this section
shall be issued until approved as to substance and form by the
commissioner. The commissioner may after notice and hearing
promulgate such reasonable rules and regulations, relating to the
substance, form, and issuance of such policies, as are necessary or
desirable to preserve, insofar as applicable, standards as respects
substance, form, and issuance comparable to the standards in such
respects prescribed by this chapter and applicable to other types of
disability policies, and to further the purpose or purposes for which
such policies are to be issued.
No policies described in subdivision (f) shall be issued until
approved as to form by the commissioner. The commissioner may after
notice and hearing promulgate such reasonable rules and regulations,
relating to the form and issuance of such policies, as do not affect
the substance of the coverage, and as are necessary or desirable to
preserve, insofar as applicable, standards as respects form and
issuance comparable to the standards in such respects prescribed by
this chapter and applicable to other types of disability policies,
and to further the purpose or purposes for which such policies are to
be issued. Notwithstanding the provisions of Section 10113, such
policies may incorporate by reference any of the appropriate
provisions of Part 2 (commencing with Section 2601) of Division 1 of
the Unemployment Insurance Code and the authorized regulations of the
Director of Employment Development.
SEC. 2. Section 10270.2.5 is added to th
e Insurance Code , to read:
10270.2.5. In addition to the permitted types of blanket
insurance issued to entities described in Section 10270.2, the
commissioner may, in his or her discretion, add other entities that
may be eligible to purchase blanket insurance for any risk or class
of risks, relating to accident benefits which may be properly
eligible for blanket insurance. The discretion of the commissioner
may be exercised on an individual risk basis or class of risks
relating to accident benefits, or both.
SECTION 1. Section 1764.1 of the Insurance Code
is amended to read:
1764.1. (a) (1) Every nonadmitted insurer, in the case of
insurance to be purchased by a home state insured pursuant to Section
1760, and surplus line broker, in the case of any insurance with a
nonadmitted carrier for a home state insured to be transacted by the
surplus line broker, shall be responsible to ensure that, at the time
of accepting an application for an insurance policy, other than a
renewal of that policy, issued by a nonadmitted insurer, the
signature of the applicant on the disclosure statement set forth in
subdivision (b) is obtained. In fulfillment of this responsibility,
the nonadmitted insurer and the surplus line broker may rely, if it
is reasonable under all the circumstances to do so, on the disclosure
statement received from a licensee involved in the transaction as
prima facie evidence that the disclosure statement and appropriate
signature from the applicant have been obtained. The surplus line
broker shall maintain a copy of the signed disclosure statement in
his or her records for a period of at least five years. These records
shall be made available to the commissioner and the insured upon
request. This disclosure shall be signed by the applicant, and is not
subject to any limited power of attorney agreement between the
applicant and an agent or broker, or a surplus line broker. The
disclosure statement shall be in boldface 16-point type on a
freestanding document. In addition, every policy issued by a
nonadmitted insurer and every certificate evidencing the placement of
insurance shall contain, or have affixed to it by the insurer or
surplus line broker, the disclosure statement set forth in
subdivision (b) in boldface 16-point type on the front page of the
policy.
(2) In a case in which the applicant has not received and
completed the signed disclosure form required by this section, he or
she may cancel the insurance so placed. The cancellation shall be on
a pro rata basis as to premium, and the applicant shall be entitled
to the return of any broker's fees charged for the placement.
(b) The following notice shall be provided to home state insureds
and home state insured applicants for insurance as provided by
subdivision (a), and shall be printed in English and in the language
principally used by the surplus line broker and nonadmitted insurer
to advertise, solicit, or negotiate the sale and purchase of surplus
line insurance. The surplus line broker and nonadmitted insurer shall
use the appropriate bracketed language for application and issued
policy disclosures:
"NOTICE:
1. THE INSURANCE POLICY THAT YOU HAVE PURCHASED] ARE APPLYING TO
PURCHASE] IS BEING ISSUED BY AN INSURER THAT IS NOT LICENSED BY THE
STATE OF CALIFORNIA. THESE COMPANIES ARE CALLED "NONADMITTED" OR
"SURPLUS LINE" INSURERS.
2. THE INSURER IS NOT SUBJECT TO THE FINANCIAL SOLVENCY REGULATION
AND ENFORCEMENT THAT APPLY TO CALIFORNIA LICENSED INSURERS.
3. THE INSURER DOES NOT PARTICIPATE IN ANY OF THE INSURANCE
GUARANTEE FUNDS CREATED BY CALIFORNIA LAW. THEREFORE, THESE FUNDS
WILL NOT PAY YOUR CLAIMS OR PROTECT YOUR ASSETS IF THE INSURER
BECOMES INSOLVENT AND IS UNABLE TO MAKE PAYMENTS AS PROMISED.
4. THE INSURER SHOULD BE LICENSED EITHER AS A FOREIGN INSURER IN
ANOTHER STATE IN THE UNITED STATES OR AS A NON-UNITED STATES (ALIEN)
INSURER. YOU SHOULD ASK QUESTIONS OF YOUR INSURANCE AGENT, BROKER, OR
"SURPLUS LINE" BROKER OR CONTACT THE CALIFORNIA DEPARTMENT OF
INSURANCE AT THE FOLLOWING TOLL-FREE TELEPHONE NUMBER____. ASK
WHETHER OR NOT THE INSURER IS LICENSED AS A FOREIGN OR NON-UNITED
STATES (ALIEN) INSURER AND FOR ADDITIONAL INFORMATION ABOUT THE
INSURER. YOU MAY ALSO CONTACT THE NAIC'S INTERNET WEB SITE AT
WWW.NAIC.ORG.
5. FOREIGN INSURERS SHOULD BE LICENSED BY A STATE IN THE UNITED
STATES AND YOU MAY CONTACT THAT STATE'S DEPARTMENT OF INSURANCE TO
OBTAIN MORE INFORMATION ABOUT THAT INSURER.
6. FOR NON-UNITED STATES (ALIEN) INSURERS, THE INSURER SHOULD BE
LICENSED BY A COUNTRY OUTSIDE OF THE UNITED STATES AND SHOULD BE ON
THE NAIC'S INTERNATIONAL INSURERS DEPARTMENT (IID) LISTING OF
APPROVED NONADMITTED NON-UNITED STATES INSURERS. ASK YOUR AGENT,
BROKER, OR "SURPLUS LINE" BROKER TO OBTAIN MORE INFORMATION ABOUT
THAT INSURER.
7. CALIFORNIA MAINTAINS A LIST OF APPROVED SURPLUS LINE INSURERS.
ASK YOUR AGENT OR BROKER IF THE INSURER IS ON THAT LIST, OR VIEW THAT
LIST AT THE INTERNET WEB SITE OF THE CALIFORNIA DEPARTMENT OF
INSURANCE: WWW.INSURANCE.CA.GOV.
8. IF YOU, AS THE APPLICANT, REQUIRED THAT THE INSURANCE POLICY
YOU HAVE PURCHASED BE BOUND IMMEDIATELY, EITHER BECAUSE EXISTING
COVERAGE WAS GOING TO LAPSE WITHIN TWO BUSINESS DAYS OR BECAUSE YOU
WERE REQUIRED TO HAVE COVERAGE WITHIN TWO BUSINESS DAYS, AND YOU DID
NOT RECEIVE THIS DISCLOSURE FORM AND A REQUEST FOR YOUR SIGNATURE
UNTIL AFTER COVERAGE BECAME EFFECTIVE, YOU HAVE THE RIGHT TO CANCEL
THIS POLICY WITHIN FIVE DAYS OF RECEIVING THIS DISCLOSURE. IF YOU
CANCEL COVERAGE, THE PREMIUM WILL BE PRORATED AND ANY BROKER'S FEE
CHARGED FOR THIS INSURANCE WILL BE RETURNED TO YOU."
(c) When a contract is issued to an industrial insured, neither
the nonadmitted insurer nor the surplus line broker is required to
provide the notice required in this section except on the
confirmation of insurance, the certificate of placement, or the
policy, whichever is first provided to the insured, nor is the
insurer or surplus line broker required to obtain the insured's
signature. The producer shall ensure that the notice affixed to the
confirmation of insurance, certificate of placement, or the policy is
provided to the insured. The producer shall insert the current
toll-free telephone number of the Department of Insurance as provided
in paragraph 5 of the notice.
(1) An industrial insured is an insured:
(A) That employs at least 50 employees on average during the prior
12 months; and
(B) That has aggregate annual premiums for insurance for all risks
other than workers' compensation and health coverage totaling no
less than fifty thousand dollars ($50,000); or
(C) That obtains insurance through the services of a full-time
employee acting as an insurance manager or a continuously retained
insurance consultant. A "continuously retained insurance consultant"
does not include: (i) an agent or broker through whom the insurance
is being placed, (ii) a subagent or subproducer involved in the
transaction, or (iii) an agent or broker that is a business
organization employing or contracting with a person mentioned in
clauses (i) and (ii).
(2) The surplus line broker shall be responsible to ensure that
the applicant is an industrial insured. A surplus line broker who
reasonably relies on information provided in good faith by the
applicant, whether directly or through the producer, shall be deemed
to be in compliance with this requirement.
(d) For purposes of compliance with the requirement of subdivision
(a) that the signature of the applicant be obtained, the following
shall apply:
(1) If the insurance transaction is not conducted at an in-person,
face-to-face meeting, the applicant's signature on the disclosure
form may be transmitted by the applicant to the agent or broker via
facsimile or comparable electronic transmittal.
(2) In the case of commercial lines coverage, or personal
insurance coverage subject to Section 675 and any umbrella coverage
associated therewith, where an applicant requires that insurance
coverage be bound immediately, either because existing coverage will
lapse within two business days of the time the insurance is bound or
because the applicant is required to have coverage in place within
two business days, and the applicant cannot meet in person with the
agent or broker to sign the disclosure form, the agent or broker may
obtain the signature of the applicant within five days of binding
coverage, provided that the applicant may cancel the insurance so
placed within five days of receiving the disclosure form from the
agent or broker. The cancellation shall be on a pro rata basis, and
the applicant shall be entitled to the rescission or return of any
broker's fees charged for the placement. When a policy is canceled,
the broker shall inform the applicant that the broker's fee must be
returned and that the premium must be prorated.
(e) Notwithstanding subdivision (a), this section shall not apply
to insurance issued or delivered in this state by a nonadmitted
Mexican insurer by and through a surplus line broker affording
coverage exclusively in the Republic of Mexico on property located
temporarily or permanently in, or operations conducted temporarily or
permanently within, the Republic of Mexico.
SEC. 2. No reimbursement is required by this
act pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.