Bill Text: CA SB604 | 2015-2016 | Regular Session | Introduced
Bill Title: California Insurance Guarantee Association: definitions.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Failed) 2016-02-01 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB604 Detail]
Download: California-2015-SB604-Introduced.html
BILL NUMBER: SB 604 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Hall
FEBRUARY 27, 2015
An act to amend Section 1063.1 of the Insurance Code, relating to
the California Insurance Guarantee Association.
LEGISLATIVE COUNSEL'S DIGEST
SB 604, as introduced, Hall. California Insurance Guarantee
Association: definitions.
Existing law establishes the California Insurance Guarantee
Association to provide coverage against losses arising from the
failure of an insolvent property, casualty, or workers' compensation
insurer to discharge its obligations under its insurance policies.
Existing law requires the association to pay and discharge all
"covered claims," which includes the obligations of the insolvent
insurer.
This bill would additionally provide that a "covered claim"
includes a claim filed by an employee of a general employer that has
entered into a contractual relationship with a special employer that
is a self-insured governmental entity. The bill would provide that in
that case, if certain criteria are met, the contractual agreement
would be conclusive proof that the special employer never intended to
provide workers' compensation insurance for the employees of the
general employer.
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 1063.1 of the Insurance Code is amended to
read:
1063.1. As used in this article:
(a) "Member insurer" means an insurer required to be a member of
the association in accordance with subdivision (a) of Section 1063,
except and to the extent that the insurer is participating in an
insolvency program adopted by the United States government.
(b) "Insolvent insurer" means an insurer that was a member insurer
of the association, consistent with paragraph (11) of subdivision
(c), either at the time the policy was issued or when the insured
event occurred, and against which an order of liquidation with a
finding of insolvency has been entered by a court of competent
jurisdiction, or, in the case of the State Compensation Insurance
Fund, if a finding of insolvency is made by a duly enacted
legislative measure.
(c) (1) "Covered claims" means the obligations of an insolvent
insurer, including the obligation for unearned premiums, that satisfy
all of the following requirements:
(A) Imposed by law and within the coverage of an insurance policy
of the insolvent insurer.
(B) Which were unpaid by the insolvent insurer.
(C) Which are presented as a claim to the liquidator in the state
of domicile of the insolvent insurer or to the association on or
before the last date fixed for the filing of claims in the
domiciliary liquidating proceedings.
(D) Which were incurred prior to the date coverage under the
policy terminated and prior to, on, or within 30 days after the date
the liquidator was appointed.
(E) For which the assets of the insolvent insurer are insufficient
to discharge in full.
(F) In the case of a policy of workers' compensation insurance, to
provide workers' compensation benefits under the workers'
compensation law of this state.
(G) In the case of other classes of insurance if the claimant or
insured is a resident of this state at the time of the insured
occurrence, or the property from which the claim arises is
permanently located in this state.
(2) "Covered claims" also includes the obligations assumed by an
assuming insurer from a ceding insurer where the assuming insurer
subsequently becomes an insolvent insurer if, at the time of the
insolvency of the assuming insurer, the ceding insurer is no longer
admitted to transact business in this state. Both the assuming
insurer and the ceding insurer shall have been member insurers at the
time the assumption was made. "Covered claims" under this paragraph
shall be required to satisfy the requirements of subparagraphs (A) to
(G), inclusive, of paragraph (1), except for the requirement that
the claims be against policies of the insolvent insurer. The
association shall have a right to recover any deposit, bond, or other
assets that may have been required to be posted by the ceding
company to the extent of covered claim payments and shall be
subrogated to any rights the policyholders may have against the
ceding insurer.
(3) "Covered claims" does not include obligations arising from the
following:
(A) Life, annuity, health, or disability insurance.
(B) Mortgage guaranty, financial guaranty, or other forms of
insurance offering protection against investment risks.
(C) Fidelity or surety insurance including fidelity or surety
bonds, or any other bonding obligations.
(D) Credit insurance.
(E) Title insurance.
(F) Ocean marine insurance or ocean marine coverage under an
insurance policy including claims arising from the following: the
Jones Act (46 U.S.C. Secs. 30104 and 30105), the Longshore and Harbor
Workers' Compensation Act (33 U.S.C. Sec. 901 et seq.), or any other
similar federal statutory enactment, or an endorsement or policy
affording protection and indemnity coverage.
(G) Any claims servicing agreement or insurance policy providing
retroactive insurance of a known loss or losses, except a special
excess workers' compensation policy issued pursuant to subdivision
(c) of Section 3702.8 of the Labor Code that covers all or any part
of workers' compensation liabilities of an employer that is issued,
or was previously issued, a certificate of consent to self-insure
pursuant to subdivision (b) of Section 3700 of the Labor Code.
(4) "Covered claims" does not include any obligations of the
insolvent insurer arising out of any reinsurance contracts, nor any
obligations incurred after the expiration date of the insurance
policy or after the insurance policy has been replaced by the insured
or canceled at the insured's request, or after the insurance policy
has been canceled by the liquidator, nor any obligations to a state
or to the federal government.
(5) "Covered claims" does not include any obligations to insurers,
insurance pools, or underwriting associations, nor their claims for
contribution, indemnity, or subrogation, equitable or otherwise,
except as otherwise provided in this chapter.
An insurer, insurance pool, or underwriting association may not
maintain, in its own name or in the name of its insured, a claim or
legal action against the insured of the insolvent insurer for
contribution, indemnity, or by way of subrogation, except insofar as,
and to the extent only, that the claim exceeds the policy limits of
the insolvent insurer's policy. In those claims or legal actions, the
insured of the insolvent insurer is entitled to a credit or setoff
in the amount of the policy limits of the insolvent insurer's policy,
or in the amount of the limits remaining, where those limits have
been diminished by the payment of other claims.
(6) "Covered claims," except in cases involving a claim for
workers' compensation benefits or for unearned premiums, does not
include a claim in an amount of one hundred dollars ($100) or less,
nor that portion of a claim that is in excess of any applicable
limits provided in the insurance policy issued by the insolvent
insurer.
(7) "Covered claims" does not include that portion of a claim,
other than a claim for workers' compensation benefits, that is in
excess of five hundred thousand dollars ($500,000).
(8) "Covered claims" does not include any amount awarded as
punitive or exemplary damages, nor any amount awarded by the Workers'
Compensation Appeals Board pursuant to Section 5814 or 5814.5 of the
Labor Code because payment of compensation was unreasonably delayed
or refused by the insolvent insurer.
(9) "Covered claims" does not include (A) a claim to the extent it
is covered by any other insurance of a class covered by this article
available to the claimant or insured or (B) a claim by a person
other than the original claimant under the insurance policy in his or
her own name, his or her assignee as the person entitled thereto
under a premium finance agreement as defined in Section 673 and
entered into prior to insolvency, his or her executor, administrator,
guardian, or other personal representative or trustee in bankruptcy,
and does not include a claim asserted by an assignee or one claiming
by right of subrogation, except as otherwise provided in this
chapter.
(10) "Covered claims" does not include any obligations arising out
of the issuance of an insurance policy written by the separate
division of the State Compensation Insurance Fund pursuant to
Sections 11802 and 11803.
(11) "Covered claims" does not include any obligations of the
insolvent insurer arising from a policy or contract of insurance
issued or renewed prior to the insolvent insurer's admission to
transact insurance in the State of California.
(12) "Covered claims" does not include surplus deposits of
subscribers as defined in Section 1374.1.
(13) "Covered claims" shall also include obligations arising under
an insurance policy written to indemnify a permissibly self-insured
employer pursuant to subdivision (b) or (c) of Section 3700 of the
Labor Code for its liability to pay workers' compensation benefits in
excess of a specific or aggregate retention. However, for purposes
of this article, those claims shall not be considered workers'
compensation claims and therefore are subject to the per-claim limit
in paragraph (7), and any payments and expenses related thereto shall
be allocated to category (c) for claims other than workers'
compensation, homeowners, and automobile, as provided in Section
1063.5.
These provisions shall apply to obligations arising under a policy
as described herein issued to a permissibly self-insured employer or
group of self-insured employers pursuant to Section 3700 of the
Labor Code and notwithstanding any other provision of this code,
those obligations shall be governed by this provision in the event
that the Self-Insurers' Security Fund is ordered to assume the
liabilities of a permissibly self-insured employer or group of
self-insured employers pursuant to Section 3701.5 of the Labor Code.
The provisions of this paragraph apply only to insurance policies
written to indemnify a permissibly self-insured employer or group of
self-insured employers under subdivision (b) or (c) of Section 3700
of the Labor Code, for its liability to pay workers' compensation
benefits in excess of a specific or aggregate retention, and this
paragraph does not apply to special excess workers' compensation
insurance policies unless issued pursuant to authority granted in
subdivision (c) of Section 3702.8 of the Labor Code, and as provided
for in subparagraph (G) of paragraph (3). In addition, this paragraph
does not apply to any claims servicing agreement or insurance policy
providing retroactive insurance of a known loss or losses as are
excluded in subparagraph (G) of paragraph (3).
Each permissibly self-insured employer or group of self-insured
employers, or the Self-Insurers' Security Fund, shall, to the extent
required by the Labor Code, be responsible for paying, adjusting, and
defending each claim arising under policies of insurance covered
under this section, unless the benefits paid on a claim exceed the
specific or aggregate retention, in which case:
(A) If the benefits paid on the claim exceed the specific or
aggregate retention, and the policy requires the insurer to defend
and adjust the claim, the California Insurance Guarantee Association
(CIGA) shall be solely responsible for adjusting and defending the
claim, and shall make all payments due under the claim, subject to
the limitations and exclusions of this article with regard to covered
claims. As to each claim subject to this paragraph, notwithstanding
any other provisions of this code or the Labor Code, and regardless
of whether the amount paid by CIGA is adequate to discharge a claim
obligation, neither the self-insured employer, group of self-insured
employers, nor the Self-Insurers' Security Fund shall have any
obligation to pay benefits over and above the specific or aggregate
retention, except as provided in this subdivision.
(B) If the benefits paid on the claim exceed the specific or
aggregate retention, and the policy does not require the insurer to
defend and adjust the claim, the permissibly self-insured employer or
group of self-insured employers, or the Self-Insurers' Security
Fund, shall not have any further payment obligations with respect to
the claim, but shall continue defending and adjusting the claim, and
shall have the right, but not the obligation, in any proceeding to
assert all applicable statutory limitations and exclusions as
contained in this article with regard to the covered claim. CIGA
shall have the right, but not the obligation, to intervene in any
proceeding where the self-insured employer, group of self-insured
employers, or the Self-Insurers' Security Fund is defending a claim
and shall be permitted to raise the appropriate statutory limitations
and exclusions as contained in this article with respect to covered
claims. Regardless of whether the self-insured employer or group of
self-insured employers, or the Self-Insurers' Security Fund, asserts
the applicable statutory limitations and exclusions, or whether CIGA
intervenes in a proceeding, CIGA shall be solely responsible for
paying all benefits due on the claim, subject to the exclusions and
limitations of this article with respect to covered claims. As to
each claim subject to this paragraph, notwithstanding any other
provision of the Insurance Code or the Labor Code and regardless of
whether the amount paid by CIGA is adequate to discharge a claim
obligation, neither the self-insured employer, group of self-insured
employers, nor the Self-Insurers' Security Fund, shall have an
obligation to pay benefits over and above the specific or aggregate
retention, except as provided in this subdivision.
(C) In the event that the benefits paid on the covered claim
exceed the per-claim limit in paragraph (7), the responsibility for
paying, adjusting, and defending the claim shall be returned to the
permissibly self-insured employer or group of employers, or the
Self-Insurers' Security Fund.
These provisions shall apply to all pending and future
insolvencies. For purposes of this paragraph, a pending insolvency is
one involving a company that is currently receiving benefits from
the guarantee association.
(14) "Covered claims" shall include any claims filed by an
employee of a general employer that has entered into a contractual
relationship with a special employer who is a self-insured
governmental entity and has satisfied the provisions of paragraph (1)
of subdivision (d) of Section 3602 of the Labor Code. In no event is
the self-insurance of a special employer governmental entity to be
considered other insurance for purposes of this article if the
provisions of paragraph (1) of subdivision (d) of Section 3602 of the
Labor Code are required by contractual agreement between the general
employer and the special employer. The contractual agreement shall
be conclusive proof that the special employer never had the intent to
provide workers' compensation insurance for the employees of the
general employer.
(d) "Admitted to transact insurance in this state" means an
insurer possessing a valid certificate of authority issued by the
department.
(e) "Affiliate" means a person who directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under
common control with an insolvent insurer on December 31 of the year
next preceding the date the insurer becomes an insolvent insurer.
(f) "Control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies
of a person, whether through the ownership of voting securities, by
contract other than a commercial contract for goods or nonmanagement
services, or otherwise, unless the power is the result of an official
position with or corporate office held by the person. Control is
presumed to exist if a person, directly or indirectly, owns,
controls, holds with the power to vote, or holds proxies
representing, 10 percent or more of the voting securities of any
other person. This presumption may be rebutted by showing that
control does not in fact exist.
(g) "Claimant" means an insured making a first party claim or a
person instituting a liability claim. However, no person who is an
affiliate of the insolvent insurer may be a claimant.
(h) "Ocean marine insurance" includes marine insurance as defined
in Section 103, except for inland marine insurance, as well as any
other form of insurance, regardless of the name, label, or marketing
designation of the insurance policy, that insures against maritime
perils or risks and other related perils or risks, that are usually
insured against by traditional marine insurance such as hull and
machinery, marine builders' risks, and marine protection and
indemnity. Those perils and risks insured against include, without
limitation, loss, damage, or expense or legal liability of the
insured arising out of or incident to ownership, operation,
chartering, maintenance, use, repair, or construction of a vessel,
craft, or instrumentality in use in ocean or inland waterways,
including liability of the insured for personal injury, illness, or
death for loss or damage to the property of the insured or another
person.
(i) "Unearned premium" means that portion of a premium as
calculated by the liquidator that had not been earned because of the
cancellation of the insolvent insurer's policy and is that premium
remaining for the unexpired term of the insolvent insurer's policy.
"Unearned premium" does not include any amount sought as return of a
premium under a policy providing retroactive insurance of a known
loss or return of a premium under a retrospectively rated policy or a
policy subject to a contingent surcharge or a policy in which the
final determination of the premium cost is computed after expiration
of the policy and is calculated on the basis of actual loss
experienced during the policy period.
