Code Section Group

Insurance Code - INS

DIVISION 2. CLASSES OF INSURANCE [1880 - 12880.5]

  ( Division 2 enacted by Stats. 1935, Ch. 145. )

PART 2. LIFE AND DISABILITY INSURANCE [10110 - 11549]

  ( Part 2 enacted by Stats. 1935, Ch. 145. )

CHAPTER 5. General Regulation of Life Insurers [10430 - 10509.938]

  ( Chapter 5 enacted by Stats. 1935, Ch. 145. )

ARTICLE 4. Qualifications and Exemptions [10490 - 10505.1]
  ( Article 4 repealed and added by Stats. 1941, Ch. 1060. )

10490.
  

This article is applicable only to life and disability insurance. Except as otherwise expressly permitted by this code or when transacted pursuant to or expressly exempted by this article, life or disability insurance shall not be transacted in this State by any person other than a corporation. A person shall not transact life or disability insurance in this State except pursuant to a valid and unrevoked certificate of authority issued by the commissioner or, after registration with the commissioner, under a valid and unrevoked certificate of exemption issued by the commissioner pursuant to this article. Any person subject to or exempted from Chapter 10 of this part is also exempted from this article.

(Amended by Stats. 1943, Ch. 957.)

10490.1.
  

Any nonprofit incorporated or unincorporated mutual benefit association in existence prior to January 1, 1945, which confines its membership to officers and employees of a common employer or group of affiliated or related employers including persons who were such officers or employees at the time of becoming members and which pays death benefits only to nominees or the estates of deceased members, or pays disability benefits in amounts not exceeding (except in the case of unemployment compensation disability benefits under the provisions of the Unemployment Insurance Act) one thousand five hundred dollars ($1,500) in the aggregate in any one calendar year on account of the disability of any one person, or which pays both such benefits is exempt from the provisions of this code relating to such life insurance in respect to such members and to such disability insurance in respect to such members and their dependents.

(Amended by Stats. 1949, Ch. 1392.)

10490.2.
  

If an association described in Section 10490.1 has operated pursuant thereto since January 1, 1945, it may procure a certificate of exemption from the commissioner upon meeting all of the requirements of this article relating thereto except those of Section 10494. Thereafter such association shall be subject to:

(a) All of the requirements of this article relating to an association holding a certificate of exemption except Section 10494, and

(b) The limitations of Section 10490.1, except that it may pay disability benefits in amounts not exceeding three thousand six hundred dollars ($3,600) in the aggregate in any one calendar year on account of the disability of any one person.

(Added by Stats. 1953, Ch. 1356.)

10491.
  

Persons possessing a valid and unrevoked certificate of authority to transact life or disability or life and disability insurance issued by the commissioner are not subject to this article.

(Repealed and added by Stats. 1941, Ch. 1060.)

10492.
  

Any incorporated or unincorporated benefit and relief association organized on or after January 15, 1951, of either nonprofit or charitable character may, if it complies with the requirements of Section 10493 (c) (1), (2), (3), or (6) and the other requirements of this article, procure a certificate of exemption from the commissioner.

(Amended by Stats. 1951, Ch. 569.)

10493.
  

Any incorporated or unincorporated benefit and relief association organized before January 15, 1951, may procure a certificate of exemption from the commissioner if it complies with all of the following:

(a) All of the other requirements of this article.

(b) As respects life or disability or life and disability insurance transacted by it, it is of an entirely nonprofit nature.

(c) Any one of the following requirements as to membership and purpose:

(1) It is composed of and its membership limited to the appointive officers, employees, and pupils of a public school district or of the appointive officers, employees, and pupils of any private school.

(2) It is composed of and its membership limited to the appointive officers and employees of a municipal playground system, or the systems of two or more municipalities united in a league, federation, or other association for the purpose of promoting intercity competitions or other activities, or the participants in dancing, recreational, sporting, educational, social or theatrical activities sponsored or directed by that system or systems and carried on through the use of any of the facilities of that system or systems.

(3) Its membership in this state is 1,000 or more and it is either an organization of a purely religious or benevolent character or its membership is limited to the members of that organization.

(4) It is composed of and its membership is limited to the members of another organization and that other organization is of a purely religious or benevolent character and has a total membership in this state of not less than 1,000.

(5) It is a domestic organization, lodge, society, or order that prior to September 19, 1947, provided life or disability benefits or both of those benefits to its members and is both of the following:

(A) It is of a charitable, benevolent, or beneficent character or becomes so within one year from September 4, 1951, and in both instances is thereafter of that character.

(B) It operates in a manner so that the payment of the benefits even though it be one of the express purposes of that organization, lodge, or order, is as a matter of fact incidental to its charitable benevolent, or beneficent purposes or within one year from September 4, 1951, operates in that manner and in both instances thereafter operates in that manner.

(6) Officers and employees of a common employer, and related dependents of those officers and employees, comprising spouses and dependent children who are not married or in registered domestic partnerships and are under 19 years of age, and living in the same household.

(d) Pays a filing fee in the amount of one thousand six hundred ninety-three dollars ($1,693).

(Amended by Stats. 2017, Ch. 534, Sec. 61. (AB 1699) Effective January 1, 2018.)

10494.
  

Such a benefit and relief association shall not provide for payment of a death benefit of more than two thousand dollars ($2,000) or for disability benefits of more than five hundred dollars ($500) to any one person in any one period of 12 consecutive months and shall not issue to its members a policy or benefit certificate or any other evidence of benefits except that found in the articles of the association or the bylaws thereof. However, a benefit and relief association described in paragraph (1) of subdivision (c) of Section 10493 may provide for a death benefit up to two thousand dollars ($2,000), disability benefits up to one thousand dollars ($1,000) or insurance protection for medical and hospital expenses up to one thousand five hundred dollars ($1,500), or any combination or all thereof.

(Amended by Stats. 1992, Ch. 368, Sec. 3. Effective January 1, 1993.)

10494.2.
  

Any incorporated or unincorporated benefit and relief association, the membership and insurance in which are restricted to the ministers, priests, rabbis, rectors, vicars, pastors, or readers of any conference, presbytery, diocese, convention or synod or any other similar body of a religious organization (a portion of whose territory is located in the State of California) and the employees of such religious body may procure a certificate of exemption from the commissioner if it does not provide for a death benefit (life and/or accidental death insurance) greater than two thousand dollars ($2,000) or a disability benefit greater than two thousand dollars ($2,000), payable in any 12-month period; provided it complies with all applicable provisions of this article.

(Added by Stats. 1961, Ch. 1117.)

10494.5.
  

Any employer maintaining a plan for furnishing disability insurance benefits to his employees for nonindustrial and nonoccupational injuries or sickness, under which plan the employer defrays 50 percent or more of the expense of such benefits, may secure a certificate of exemption from the commissioner under this article if such employer in respect to such plan otherwise complies with and is subject to the requirements of this article. Such compliance with this article need be only with respect to such plan and not in respect to other business of the employer.

(Added by Stats. 1943, Ch. 957.)

10494.6.
  

Any employer who qualifies for a certificate of exemption under Section 10494.5 by virtue of which certificate he or she maintains a plan for furnishing disability benefits to his or her employees may, if he or she elects, make available for the related dependents of his or her employees, comprising spouses and dependent children who are not married or in registered domestic partnerships living in the same household, a supplemental plan of disability benefits containing any or all of the following benefits, hospital, surgical and medical; provided, that as to the supplemental plan the Insurance Commissioner finds that all of the following exist:

(a) The supplemental plan shall be separately stated, setting out all of the provisions of coverage.

(b) The plan shall set out the respective contributions of the employer and employees. All contributions of employees received or retained by the employer shall be trust funds and shall be separately accounted for by the employer and may not inure to the benefit of the employer in any manner whatsoever.

(c) The plan permits the disabled individual a free choice of physician and surgeon, or podiatrist in the case of those services that are within the scope of practice of podiatric medicine, as defined in Section 2472 of the Business and Professions Code, and hospital.

(d) The employer agrees to assume 50 percent of the cost of maintaining the plan, and he or she further agrees to guarantee the benefits if the contributions required for the supplementary benefits are not sufficient to pay the cost of same. The funds necessary to discharge the employer’s 50 percent assumption shall be trust funds and shall be separately accounted for by him or her.

(Amended by Stats. 2016, Ch. 50, Sec. 61. (SB 1005) Effective January 1, 2017.)

10494.7.
  

With respect to the supplemental plan described in Section 10494.6, the commissioner may, in addition to the regulations permitted by Section 10498.6, promulgate other reasonable regulations covering all matters set forth in Section 10494.6 and this section. The commissioner shall require each employer making available such supplemental plan to post with him security in the form of a bond of an admitted surety insurer conditioned on the payment by the employer of his obligations under the entire plan or of deposits with the commissioner of securities approved by him to secure the payment of such obligations. Such security shall be equal to the greater of (a) twenty-five thousand dollars ($25,000), (b) the estimated contributions of the employees under the entire plan for the ensuing year, (c) the contributions paid by the employees under the entire plan during the preceding year, or (d) one-half of all of the amounts of benefit either paid or incurred by the employer under the entire plan during the preceding year.

If, on examination or investigation of any plan which includes benefits for dependents, the commissioner finds that the aggregate of the trust funds separately held for the supplemental plan and the security in the form hereinabove described may not, in his judgment, be adequate to guarantee the payment of outstanding and incurred liabilities of the entire plan, he may require the employer to post such additional security as will, in his judgment, be adequate to guarantee the payment of all outstanding and incurred liabilities of the entire plan, and, if the employer fails to post such additional security, he may revoke the employer’s certificate of exemption.

(Added by Stats. 1953, Ch. 1811.)

10495.
  

A certificate of exemption may be procured from the commissioner by filing with him or her certified copies of the articles of incorporation, association, bylaws, rules and regulations, or other organization or governing documents of the applicant together with certified copies of any evidences of insurance which it may issue and a statement of the operations of the applicant. There shall also be filed with the application a statement of the financial condition and income and disbursement exhibit of the applicant in such form as the commissioner may, in his or her discretion, find necessary in order to determine whether the applicant complies with the applicable requirements of this article. The commissioner may, pursuant to Article 4 (commencing with Section 730) of Chapter 1 of Part 2 of Division 1, require from any person transacting life or disability insurance, whether or not an applicant for a certificate of exemption, such information as will enable him or her to determine whether or not the person is transacting life or disability insurance in conformity with or in violation of this code.

(Amended by Stats. 1982, Ch. 454, Sec. 107.)

10496.
  

Any person transacting life or disability insurance without a certificate of authority so to do issued by the commissioner shall not give, allow, or promise to give or allow any compensation for procuring new members. “Compensation”, as used herein, is confined to a payment, percentage, bonus, or monetary credit given, promised, or allowed for the securing of new members which, directly or by any arrangement, understanding, or device, is based, in whole or in part, upon the number of new members or reinstatements procured, or the nominal or contingent value of their certificates or policies, or the net or gross amount of dues or premiums paid or payable by them or upon any other variable result or contingency.

(Amended by Stats. 1982, Ch. 454, Sec. 108.)

10497.
  

If the commissioner finds that an applicant for a certificate of exemption meets the applicable requirements of this article and those requirements of this code, made applicable to such an applicant by this article, and that the applicant is not formed, conducted or operated for profit or as a commercial insurance enterprise for the benefit of any group or person rather than the relatively equal benefit of its members, he shall register the applicant and issue to it a certificate of exemption.

(Amended by Stats. 1943, Ch. 957.)

10498.
  

An applicant for a certificate of exemption must comply with, and the possessor of a certificate of exemption is subject to, the following provisions of this code:

Sections 1 to 41, inclusive;

Chapter 1, Part 1, Division 1;

Chapter 2, Part 1, Division 1;

Article 1, Chapter 6, Part 1, Division 1;

Article 3, Chapter 6, Part 1, Division 1;

Chapter 9, Part 1, Division 1;

Sections 10110, 10111, 10112 and 10114;

Article 4, Chapter 1, Part 2, Division 1;

Article 6, Chapter 1, Part 2, Division 1;

Article 8, Chapter 1, Part 2, Division 1;

Article 9, Chapter 1, Part 2, Division 1;

Article 14, Chapter 1, Part 2, Division 1;

Article 15, Chapter 1, Part 2, Division 1;

Article 17, Chapter 1, Part 2, Division 1;

Article 1, Chapter 2, Part 2, Division 1;

Article 2, Chapter 2, Part 2, Division 1;

Article 3, Chapter 2, Part 2, Division 1;

Article 4, Chapter 2, Part 2, Division 1;

Article 7, Chapter 2, Part 2, Division 1;

Article 2, Chapter 1, Part 2, Division 2;

Article 4, Chapter 1, Part 2, Division 2;

Article 5, Chapter 1, Part 2, Division 2;

Section 10270.98;

Chapter 3, Part 2, Division 2;

Article 1, Chapter 5, Part 2, Division 2;

Division 3.

Applicants for and possessors of certificates of exemption not organized or incorporated under the laws of this State in lieu of meeting the requirements of Article 7, Chapter 2, Part 2, Division 1, and Articles 1, 2, 4, 5, Chapter 1, Part 2, Division 2, shall conform to such reasonable investment standards as the commissioner prescribes.

(Amended by Stats. 1982, Ch. 1066, Sec. 2.)

10498.5.
  

If a holder of a certificate of exemption receives or maintains funds for any purpose other than administering and providing the benefits that make it subject to this article, it shall segregate and maintain separately all funds received by it for the purpose of administering and providing such benefits.

When so segregated and maintained separately such benefit funds are not subject to enforcement of a money judgment or other process by or on behalf of creditors of the holder of a certificate of exemption, except that such funds are subject to enforcement of a claim for benefits.

(Amended by Stats. 1982, Ch. 497, Sec. 128. Operative July 1, 1983, by Sec. 185 of Ch. 497.)

10498.6.
  

The commissioner may from time to time issue regulations which shall govern persons holding certificates of exemption under this article, setting forth financial and other standards which, in his opinion, are required to avoid a condition of hazard, and further specifying the requirements of submission of statements of financial condition.

(Added by Stats. 1945, Ch. 1374.)

10499.
  

The commissioner may at any time notify any person possessing a certificate of exemption that the commissioner has grounds to believe that it is violating any of the applicable provisions of this code or is not operating in strict conformity with the documents filed with the commissioner as a basis of its application for the certificate of exemption. The notice shall fix the time and place for hearing at which the person notified may appear and show cause why the commissioner should not revoke its certificate of exemption. The time fixed shall not be less than 15 nor more than 60 days after date of the notice.

At the time and place specified in the notice and order to show cause, the commissioner shall hold a hearing at which the possessor of a certificate of exemption may present evidence to show that it is not violating any applicable provision of this code, and that it is operating in conformity with the documents which were filed as a basis for the certificate of exemption. If after the hearing the commissioner finds the evidence shows that the operations of the person are in violation of any of the applicable provisions of this code, or are in violation of the documents upon which its application for certificate of exemption was based, the commissioner shall revoke the certificate of exemption and the person whose certificate of exemption is thus revoked shall cease the transaction of life and disability insurance until it procures a new certificate of exemption or a certificate of authority under other provisions of this code.

This article does not prevent the commissioner from acting and bringing proceedings under Article 14 (commencing with Section 1010) of Chapter 1 of Part 2 of Division 1, if grounds exist for the institution of such proceedings with respect to any person transacting life or disability insurance either with or without a certificate of exemption.

(Amended by Stats. 1983, Ch. 142, Sec. 86.)

10500.
  

Every person not expressly exempted by the provisions of this code that transacts life or disability insurance without a valid and unrevoked certificate of authority or without a valid and unrevoked certificate of exemption issued pursuant to this article is guilty of a misdemeanor. Every employee, officer, or agent of any person who knowingly assists any person in the transaction of insurance in violation of the provisions of this code, is guilty of a misdemeanor.

(Amended by Stats. 1983, Ch. 142, Sec. 87.)

10501.
  

Any person subject to this article who upon January 1, 1943, was paying, allowing, or promising to pay benefits in the event of death or disability, or otherwise transacting life or disability insurance without a valid and unrevoked certificate of authority so to do, may apply for a certificate of exemption under this article.

After filing such application, or if such application has heretofore been filed, such person may continue to transact such insurance until the application is denied or such certificate of exemption is issued.

(Amended by Stats. 1945, Ch. 1374.)

10505.
  

(a) A labor union having all of the following characteristics is exempt from the provisions of this code relating to life and disability insurance in respect to the benefits herein specified and transactions connected therewith:

(1) It is organized for the purpose of collective bargaining concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work and for the mutual benefit of its members and not for profit.

(2) Either (A) it does not issue policies but provides for payment of those benefits in its bylaws, constitution, or rules and regulations; or (B) it is composed of members of one craft or industry or allied craft or industries.

(3) The payment of those benefits is incidental to the purposes of that union.

(b) Any incorporated organization, the membership and insurance in which are restricted to members of that labor union and the officers of which are members of the labor union, is likewise exempt from this code to the same extent as that labor union.

(c) Any organization described in either subdivision (a) or (b) is also exempt from all provisions of this code relating to insurance protecting against wage losses from any cause in respect to the benefits promised.

(Amended by Stats. 1988, Ch. 582, Sec. 1.)

10505.1.
  

(a) (1) 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, including any accidental death benefits, 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, or any other insurance guaranty association in this state.

(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:


“NOTICE

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.”


(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. “Job protection insurance” may include accidental death coverage insuring the member. 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.

(Amended by Stats. 2014, Ch. 362, Sec. 5. (AB 2734) Effective January 1, 2015.)

INSInsurance Code - INS4.