Amended in Assembly March 18, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 2734

Introduced by Committee on Insurance (Assembly Members Perea (Chair), Hagman (Vice Chair), Bradford, Ian Calderon, Cooley, Dababneh, Frazier, Gonzalez, Nestande, V. Manuel Pérez, and Wieckowski)

February 25, 2014

An act to amend begin delete Section end delete begin insert Sections 927.2, end insert 1775.1 begin insert , 10505.1, and 11628 end insert of the Insurance Code, and to amend Sections 12251 and 12260 of the Revenue and Taxation Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 2734, as amended, Committee on Insurance. Insurance: begin delete prepayment of taxes. end delete begin insert omnibus. end insert

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Existing

end delete

begin insert (1) end insert begin insert   end insert begin insert Existing end insert law requires every surplus line broker whose annual tax for the preceding calendar year was $5,000 or more to make monthly installment payments on account of the annual tax on business done during the calendar year, and authorizes the Insurance Commissioner to relieve a surplus line broker of his or her obligations to make monthly payments if the broker establishes to the commissioner’s satisfaction that he or she has ceased to transact business in the state, or his or her annual tax for the current year will be less than $5,000.

This bill would raise the threshold for making monthly installment payments to $20,000 or more in annual tax for the preceding calendar year, and would authorize the commissioner to relieve a surplus line broker of his or her obligations to make monthly payments if his or her annual tax for the current year would be less than $20,000.

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(2) Existing law exempts nonprofit cooperative assessment associations whose membership and insurance are restricted to members of a labor union from provisions relating to the supervision or regulation of insurance with respect to the provision of job protection benefits to their members. Existing law also prohibits these associations from being a member of the California Insurance Guarantee Association for the purpose of providing insolvency insurance to each member.

end insert begin insert

This bill would provide that the job protection benefits may include accidental death benefits. The bill would prohibit these associations from being a member of any insurance guaranty association in this state and would require each policy issued in this state pursuant to these provisions to contain a specified notice.

end insert begin insert

(3) Existing law prohibits, among other things, an admitted insurer that is licensed to issue and is issuing motor vehicle liability policies from failing or refusing to accept an application for that insurance, failing or refusing to issue that insurance to the applicant, or from issuing or canceling that insurance under conditions less favorable to the insured than in other comparable cases because of specified reasons, including, but not limited to, discrimination between persons within the same geographic area. Existing law prohibits the admitted motor vehicle liability insurer from using specified characteristics, including, but not limited to, location within a geographic area, in and of itself, as a condition or risk for which a higher rate, premium, or charge is required of the insured for that insurance. Existing law also requires an admitted insurer, licensed to issue and issuing motor vehicle liability policies, motor vehicle physical damage policies, or both, to submit annually to the commissioner a record of loss experience, as specified, for the geographic area, as defined, including statistical data by ZIP Code area. An insurer may satisfy its obligation to report statistical data by providing its loss experience data and statewide expense ratio and combined ratio on its assigned-risk business to a rating or advisory organization for submission to the commissioner. This data is required to be made public by the commissioner annually after examination.

end insert begin insert

This bill would instead require an insured to submit the record of loss experience for the geographic area biennially. The bill would also require statewide summary data to be submitted to the commissioner annually. The bill would also require that the reported data be made available to the public biennially.

end insert begin delete

Existing

end delete

begin insert (4) end insert begin insert   end insert begin insert Existing end insert law requires insurers transacting insurance in this state whose annual tax for the preceding calendar year was $5,000 or more to make prepayments of the annual tax for the current calendar year, except as provided. The commissioner is authorized to relieve an insurer of its obligations to make prepayments if the insurer establishes to the commissioner’s satisfaction that the insurer has ceased to transact business in the state, or the insurer’s annual tax for the current year will be less than $5,000.

This bill would raise the threshold for making tax prepayments to $20,000 or more in annual tax for the preceding calendar year, and would authorize the commissioner to relieve an insurer of its obligations to make prepayments if the insurer’s annual tax for the current year would be less than $20,000.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

end insert

begin insert Section 927.2 of the end insert begin insert Insurance Code end insert begin insert is amended
to read: end insert

927.2.  

(a) (1) By July 1, 2013, each admitted insurer, with
California premiums written of one hundred million dollars
($100,000,000) or more, shall submit a report to the commissioner
on its minority, women, and disabled veteran-owned business
procurement efforts during the reporting period.

(2) The report shall include all of the following:

(A) The insurer’s supplier diversity policy statement.

(B) The insurer’s outreach and communications to minority,
women, and disabled veteran business enterprises, including:

(i) How the insurer encourages and seeks out minority, women,
and disabled veteran owned business enterprises to become
potential suppliers.

(ii) How the insurer encourages its employees involved in
procurement to seek out minority, women, and disabled
veteran-owned business enterprises to become potential suppliers.

(iii) How the insurer conducts outreach and communication to
minority, women, and disabled veteran business enterprises.

(iv) How the insurer supports organizations that promote or
certify minority, women, and disabled veteran-owned business
enterprises.

(v) Information regarding appropriate contacts at the insurer for
interested business enterprises.

(C) The report shall include information about which
procurements are made from minority, women, and disabled
veteran business enterprises with begin delete at least a majority of the
enterprise’s workforce end delete begin insert a headquarters’ address end insert in California, with
each category aggregated separately, to the extent that information
is readily accessible. An insurer may also include other relevant
information in the report.

(3) An insurer that does not enter into contracts to procure goods
or services in California satisfies the requirements of paragraph
(2) by filing a statement with the commissioner attesting that it
does not enter into procurement contracts in California.

(b) Nothing in this section shall be construed to require quotas,
set-asides, or preferences in an admitted insurer’s procurement of
goods or services, nor does this section apply to insurer producer
or licensee contracts. Admitted insurers retain the authority to use
business judgment to select the supplier for a particular contract.

(c) Nothing in this section shall preclude an admitted insurer
that is a member of an insurance holding company system, as
defined in Article 4.7 (commencing with Section 1215) of Chapter
2, from complying with paragraphs (1) and (2) of subdivision (a)
through a single filing on behalf of the entire group of affiliated
companies.

(d) Failure to file the report required by subdivision (a), by July
1, 2013, shall subject the admitted insurer to a civil penalty to be
fixed by the commissioner, not to exceed five thousand dollars
($5,000), or if the act or practice was willful, a civil penalty not
to exceed ten thousand dollars ($10,000). An insurer may request,
and the commissioner may grant, a 30-day extension to file the
report if needed due to unintended or unforeseen delays. If the
insurer has failed to file the report within 30 days of a written
notice by the commissioner that the insurer has failed to file the
report, the commissioner may find that the failure to file the report
was willful and increase the civil penalty to an amount not to
exceed ten thousand dollars ($10,000). The penalty imposed by
this section shall be enforced by the commissioner and is
appealable by means of any remedy provided by Section 12940,
or by Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code. This subdivision
is the sole means for enforcement of this section.

(e) Commencing July 1, 2015, each admitted insurer specified
in subdivision (a) shall biennially update its supplier diversity
report and submit the new report to the commissioner no later than
July 1.

(f) By begin delete July 31, 2013, end delete begin insert September 30 of the reporting year, end insert the
commissioner shall establish and maintain a link on the
department’s Internet Web site that provides public access to the
contents of each admitted insurer’s report on minority, women,
and disabled veteran-owned business procurement efforts. The
commissioner shall include a statement on the department’s Internet
Web site that the information contained in the insurer’s report on
minority, women, and disabled veteran-owned businesses is
provided for informational purposes only.

begin delete SECTION 1. end delete
begin insert SEC. 2. end insert   

Section 1775.1 of the Insurance Code is amended to
read:

1775.1.  

(a) For the calendar year 1995, and each calendar year
thereafter, every surplus line broker whose annual tax for the
preceding calendar year was twenty thousand dollars ($20,000) or
more shall make monthly installment payments on account of the
annual tax on business done during the current calendar year
imposed by Section 1775.5.

(b) Notwithstanding any other law, the commissioner may
relieve a surplus line broker of his or her obligation to make
monthly payments if the broker establishes to the satisfaction of
the commissioner that either the broker has ceased to transact
business in this state, or his or her annual tax for the current year
will be less than twenty thousand dollars ($20,000).

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begin insert SEC. 3. end insert   

end insert

begin insert Section 10505.1 of the end insert begin insert Insurance Code end insert begin insert is amended to
read: end insert

10505.1.  

(a)  begin insert (1) end insert begin insert   end insert Any nonprofit cooperative assessment
association, the membership and insurance in which are restricted
to members of a labor union, is exempt from the provisions of this
code relating to the supervision or regulation of insurance with
respect to the provision of job protection benefits begin insert , including any
accidental death benefits, end insert to its members. A nonprofit cooperative
assessment association established pursuant to this section is not,
and shall not be, a member of the California Insurance Guarantee
Association under Article 14.2 (commencing with Section 1063)
of Chapter 1 of Part 2 of Division 1 begin insert , or any other insurance
guaranty association in this state end insert .

begin insert

(2) Each policy issued in this state pursuant to this section shall
contain, in at least 10-point typeface on the front page and the
declaration page, the following notice:

end insert
begin insert end insert
begin insert

“NOTICE

end insert begin insert

This policy is issued by a nonprofit cooperative assessment
association that is not subject to CALIFORNIA insurance laws
and regulation and is not admitted in California. California
insurance guaranty funds are not available for your nonprofit
cooperative assessment association.”

end insert
begin insert end insert

(b) “Job protection insurance” means the business of providing
indemnity to conductors, engineers, motormen, brakemen,
switchmen, firemen, dispatchers, clerks, operators, trackmen,
signalmen, and maintenance of way personnel of steam and electric
railways and to busdrivers and truckdrivers employed by common
carriers for loss of position arising from discharge or suspension,
which indemnity is payable in installments that do not exceed the
average monthly wage of the insured. begin insert “Job protection insurance”
may include accidental death coverage insuring the member. end insert
Nothing in this section is intended to regulate or define any benefit
delivery system which provides indemnity, as defined in this
section, in any manner other than the sale of insurance. Labor
unions providing the type of indemnity defined in this section,
shall be expressly exempt from any regulation by any state agency.

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begin insert SEC. 4. end insert   

end insert

begin insert Section 11628 of the end insert begin insert Insurance Code end insert begin insert is amended to
read: end insert

11628.  

(a) (1) No admitted insurer that is licensed to issue
and issuing motor vehicle liability policies, as defined in Section
16450 of the Vehicle Code, shall fail or refuse to accept an
application for that insurance, to issue that insurance to an applicant
therefor, or issue or cancel that insurance under conditions less
favorable to the insured than in other comparable cases, except for
reasons applicable alike to persons of every characteristic listed
or defined in subdivision (b) or (e) of Section 51 of the Civil Code,
including, but not limited to, language, or persons of the same
geographic area; nor shall any characteristic listed or defined in
subdivision (b) or (e) of Section 51 of the Civil Code, including,
but not limited to, language, or location within a geographic area,
of itself, constitute a condition or risk for which a higher rate,
premium, or charge may be required of the insured for that
insurance.

(2) As used in this section “geographic area” means a portion
of this state of not less than 20 square miles defined by description
in the rating manual of an insurer or in the rating manual of a rating
bureau of which the insurer is a member or subscriber. In order
that geographic areas used for rating purposes may reflect
homogeneity of loss experience, a record of loss experience for
the geographic area shall include the breakdown of actual loss
experience statistics by ZIP Code area (as designated by the United
States Postal Service) within each geographic area for family
owned private passenger motor vehicles and lightweight
commercial motor vehicles, under 11⁄2-ton load capacity, used for
local service or retail delivery, normally within a 50-mile radius
of garaging, and that are not part of a fleet of five or more motor
vehicles under one ownership. A record of loss experience for the
geographic area, including that statistical data by ZIP Code area,
shall be submitted begin delete annually end delete begin insert biennially end insert to the commissioner for
examination by each insurer licensed to issue and issuing motor
vehicle liability policies, motor vehicle physical damage policies,
or both. Loss experience shall include separate loss data for each
type of coverage, including liability or physical damage coverage,
underwritten. begin delete That end delete begin insert The biennial end insert report shall include the insurer’s
statewide loss ratio, loss adjustment expense ratio, expense ratio,
and combined ratio on its assigned-risk business. begin insert Statewide
summary data shall be submitted annually to the commissioner. end insert
An insurer may satisfy its obligation to report statistical data under
this subdivision by providing its loss experience data and statewide
expense ratio and combined ratio on its assigned-risk business to
a rating or advisory organization for submission to the
commissioner. This data shall be made available to the public by
the commissioner begin delete annually end delete begin insert biennially end insert after examination. However,
the data shall be released in aggregate form by ZIP Code begin insert or
statewide basis end insert in order that no individual insurer’s loss experience
for any specific geographic area be revealed. Differentiation in
rates between geographical areas shall not constitute unfair
discrimination.

(3) All information reported to the department pursuant to this
subdivision shall be confidential.

(4) As used in this section:

(A) “Language” means the inability to speak, read, write, or
comprehend the English language.

(B) “Dependents” shall include, but not be limited to, issue
regardless of generation.

(C) “Spouse” shall be determined without regard to current
marital status.

(b) The commissioner may require insurers with combined ratios
on statewide assigned-risk business that are 10 percent above the
mean combined ratio for all plan participants to also report the
following:

(1) The reason for the excessive ratio.

(2) A plan for reducing the ratio, and when the reduction can
be expected to occur. The commissioner may require insurers
subject to this subdivision to provide periodic reports on the
progress in reducing the combined ratio.

(c) (1) No admitted insurer, licensed to issue and issuing motor
vehicle liability insurance policies as defined in Section 16450 of
the Vehicle Code, shall fail or refuse to accept an application for
that insurance, refuse to issue that insurance to an applicant
therefor, or cancel that insurance solely for the reason that the
applicant for that insurance or any insured is employed in a specific
occupation, or is on active duty service in the Armed Forces of
the United States.

(2) Nothing in this section shall prohibit an insurer from doing
any of the following:

(A) Considering the occupation of the applicant or insured as
a condition or risk for which a higher rate or discounted rate may
be required or offered for coverage in the course and scope of his
or her occupation.

(B) Charging a deviated rate to any classification of risks
involving a specific occupation, or grouping thereof, if the rate
meets the requirements of Chapter 9 (commencing with Section
begin delete 1850) end delete begin insert 1850.4) end insert of Part 2 of Division 1 and is based upon actuarial
data begin delete which end delete begin insert that end insert demonstrates a significant actual historical
differential between past losses or expenses attributable to the
specific occupation, or grouping thereof, and the past losses or
expenses attributable to other classification of risks. For purposes
of compiling that actuarial data for a specific occupation or
grouping thereof, a person shall be deemed employed in the
occupation in which that data is compiled if any of the following
is true:

(i) The majority of his or her employment during the previous
year was in the occupation.

(ii) The majority of his or her aggregate earnings for the
immediate preceding three-year period were derived from the
occupation.

(iii) The person is a member in good standing of a union that is
an authorized collective bargaining agent for persons engaged in
the occupation.

(3) Nothing in this section shall be construed to include in the
definition of “occupation” any status or activity that does not result
in remuneration for work done or services performed, or
self-employment in a business operated out of an applicant’s or
insured’s place of residence or persons engaged in the renting,
leasing, selling, repossessing, rebuilding, wrecking, or salvaging
of motor vehicles.

(d) Nothing in this section shall limit or restrict the ability of
an insurer to refuse to accept an application for or refuse to issue
or cancel insurance for the reason that it is a commercial vehicle
or based upon the consideration of a vehicle’s size, weight, design,
or intended use.

(e) It is the intent of the Legislature that actuarial data by
occupation may be examined for credibility by the commissioner
on the same basis as any other automobile insurance data begin delete which end delete
begin insert that end insert he or she is empowered to examine.

(f) (1) Except as provided in Article 4 (commencing with
Section 11620), nothing in this section or in Article 10
(commencing with Section 1861.01) of Chapter 9 of Part 2 of
Division 1 or in any other provision of this code, shall prohibit an
insurer from limiting the issuance or renewal of insurance, as
defined in subdivision (a) of Section 660, to persons who engage
in, or have formerly engaged in, governmental or military service
or segments of categories thereof, and their spouses, dependents,
direct descendants, and former dependents or spouses.

(2) The term “military service” includes, but is not limited to,
officers, warrant officers, and enlisted persons, officer and warrant
officer candidates, cadets or midshipmen at a service academy,
cadets or midshipmen in advance Reserve Officer Training Corps
programs or on Reserve Officer Training Corps program
scholarships, National Guard officer candidates, students in
government-sponsored precommissioning programs, and foreign
military officers while on temporary duty in the United States.

(g) Any person subject to regulation by the commissioner
pursuant to this code who fails to comply with a data call required
by the department pursuant to subdivision (a) shall be liable to the
state for a civil penalty in an amount not exceeding five thousand
dollars ($5,000) for each 30-day period that the person is not in
compliance, unless the failure to comply is willful, in which case
the civil penalty shall be in an amount not to exceed ten thousand
dollars ($10,000) for each 30-day period that the person is not in
compliance, but not to exceed an aggregate amount of one hundred
thousand dollars ($100,000). The commissioner shall collect the
amount so payable and may bring an action in the name of the
people of the State of California to enforce collection. These
penalties shall be in addition to other penalties provided by law.

(h) This section shall be known and may be cited as the
“Rosenthal Auto Insurance Nondiscrimination Law.”

begin delete SEC. 2. end delete
begin insert SEC. 5. end insert   

Section 12251 of the Revenue and Taxation Code, as
added by Section 13 of Chapter 33 of the Statutes of 2013, is
amended to read:

12251.  

(a) For the calendar year 1970, and each calendar year
thereafter, insurers transacting insurance in this state and whose
annual tax for the preceding calendar year was twenty thousand
dollars ($20,000) or more shall make prepayments of the annual
tax for the current calendar year imposed by Section 28 of Article
XIII of the California Constitution and this part, provided that
prepayments shall not be made with respect to the tax on ocean
marine insurance underwriting profit or any retaliatory tax.

(b) This section shall become operative on July 1, 2013.

begin delete SEC. 3. end delete
begin insert SEC. 6. end insert   

Section 12260 of the Revenue and Taxation Code, as
added by Section 28 of Chapter 33 of the Statutes of 2013, is
amended to read:

12260.  

(a) Notwithstanding any other provision of this article,
the commissioner may relieve an insurer of its obligation to make
prepayments if the insurer establishes to the satisfaction of the
commissioner that either the insurer has ceased to transact
insurance in this state, or the insurer’s annual tax for the current
year will be less than twenty thousand dollars ($20,000).

(b) This section shall become operative on July 1, 2013.