BILL NUMBER: SB 1451 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 2, 2012
INTRODUCED BY Senator Calderon
FEBRUARY 24, 2012
An act to amend Section 1104 Sections
11162 and 11163 of , and to add
Section 11163.5 to, the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
SB 1451, as amended, Calderon. Insurance: fraternal benefit
societies: loans.
Existing law prohibits an admitted insurer from making any loan,
other than a policy loan, to any officer, director, trustee, or other
person having authority in the management of its funds, and the
officer, director, trustee, or other person is prohibited from
accepting the loan. The prohibition does not include a loan to, or
for the benefit of, an employee for the purpose of paying the
premiums on a life insurance policy on the life of the employee.
Existing law governs the organization of fraternal benefit
societies, which, among other characteristics, are nonprofit,
incorporated societies, orders, or supreme lodges, without capital
stock, conducted solely for the benefit of members and their
beneficiaries, have a representative form of government, and make
provision for the payment of benefits. Existing law authorizes these
entities to provide all forms of life and disability insurance,
except as specified. Existing law makes it a felony for any officer,
director, agent, or employee of any fraternal benefit society to
borrow funds of the society, to become endorser or surety for loans
by the society to others, or to be obligor for moneys borrowed or
loaned by the society. Existing law also makes it a felony for an
officer, trustee, agent, or employee of a fraternal benefit society
to ask, receive, or consent or agree to receive anything of value for
procuring or endeavoring to procure a loan to any person from the
trust funds of, or funds belonging to, a fraternal benefit society.
This bill would include as exceptions to the loan
prohibition except from these prohibitions ,
startup loans to an agent, or policy loans by parties
subject to the laws regulating loans made by a
fraternal benefit societies society to a
member of the society under certain conditions and loans made to a
life licensee, as defined, appointed by the fraternal benefit
society, under specified conditions, including that the loan is not
made to an officer or director of the society, that the loan is
secured in accordance with insurance industry practices for that
loan, and that no officer, director, agent, or employee of the
society, other than the life licensee, receives consideration due to
the making of the loan .
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 11162 of the
Insurance Code is amended to read:
11162. It Except as provided in Section
11163.5, it is a felony, punishable by imprisonment pursuant to
subdivision (h) of Section 1170 of the Penal Code, for any officer,
director, agent or employee of any fraternal benefit society to,
directly or indirectly, for himself or as partner or agent of others:
(a) Borrow any of the funds of such society.
(b) Become endorser or surety for loans by the society to others.
(c) In any manner be obligor for moneys borrowed or loaned by such
society.
SEC. 2. Section 11163 of the Insurance
Code is amended to read:
11163. It Except as provided in Section
11163.5, it is a felony, punishable by imprisonment pursuant to
subdivision (h) of Section 1170 of the Penal Code, for any officer,
trustee, agent or employee of a fraternal benefit society to ask,
receive, or consent or agree to receive anything of value for
procuring or endeavoring to procure a loan to any person from the
trust funds of, or funds belonging to, a fraternal benefit society.
SEC. 3. Section 11163.5 is added to the
Insurance Code , to read:
11163.5. Sections 11162 and 11163 shall not prohibit the
following:
(a) A loan by a fraternal benefit society to a member made under
the provisions of a certificate form available to members of the
society in the ordinary course of the society's business.
(b) A loan to a life licensee, as defined in Section 1626,
appointed by the fraternal benefit society pursuant to Section 1704,
if all of the following apply:
(1) The loan is not made, directly or indirectly, to an officer or
director of the society.
(2) The loan is secured in accordance with insurance industry
practices for these loans.
(3) No officer, director, agent, or employee of the society, other
than the life licensee, receives any consideration due to the making
of the loan.
(4) The loan is for the purpose of enabling the licensee to lease
an office, lease or purchase office equipment or supplies, or pay for
other expenses related to selling the society's certificates for not
more than six months.
SECTION 1. Section 1104 of the Insurance Code
is amended to read:
1104. An admitted insurer shall not make any loan, other than a
policy loan, to any officer, director, trustee, or other person
having authority in the management of its funds, nor shall that
officer, director, trustee, or other person accept the loan.
This section does not prohibit a loan to, or for the benefit of,
an employee for the purpose of paying the premiums on a life
insurance policy on the life of that employee, agent startup loans,
or policy loans by parties subject to Chapter 10 (commencing with
Section 10970) of Part 2 of Division 2 regarding fraternal benefit
societies.