1631-1651
INSURANCE CODE
SECTION 1631-1651
1631. Unless exempt by the provisions of this article, a person
shall not solicit, negotiate, or effect contracts of insurance, or
act in any of the capacities defined in Article 1 (commencing with
Section 1621) unless the person holds a valid license from the
commissioner authorizing the person to act in that capacity. The
issuance of a certificate of authority to an insurer does not exempt
an insurer from complying with this article.
1631.5. Nothing in this article shall be deemed to affect the
current operations of the Healthy Families Program (Part 6.2
(commencing with Section 12693) of Division 2) or the Access for
Infants and Mothers Program (Part 6.3 (commencing with Section 12695)
of Division 2).
1632. Unless prohibited in this article, a person otherwise
eligible for a license may be authorized to act in one or more of the
capacities specified in this chapter.
1633. Any person who transacts insurance without a valid license so
to act is guilty of a misdemeanor punishable by a fine not exceeding
fifty thousand dollars ($50,000) or by imprisonment in a county jail
for a period not exceeding one year, or by both that fine and
imprisonment.
1633.5. It is hereby declared to be the intent of the Legislature
in enacting this chapter that the regulations prescribed herein be
the exclusive regulations relating to the conduct of insurance
business by persons licensed to act in any of the capacities defined
hereunder, any local regulations or ordinances notwithstanding.
1634. No license is required under this chapter for a person to act
in any of the following capacities:
(a) As a full-time salaried employee of a title insurer,
controlled escrow company or an underwritten title company.
(b) As a salaried solicitor or agent of a mortgage insurer or
mortgage guaranty insurer provided no part of the compensation of the
person is on a commission basis.
(c) As the attorney in fact of a reciprocal or interinsurance
exchange.
(d) As a life and disability insurance analyst.
(e) As a surplus line broker or special lines surplus line broker.
(f) As a bail agent, bail solicitor or bail permittee.
(g) As an employee, not paid on a commission basis, of a home
protection company, including, but not limited to, soliciting,
negotiating, or effecting home protection contracts by the employee.
(h) As an employee of a creditor who secures and forwards
information for the purpose of obtaining group credit life, credit
disability, or involuntary unemployment insurance, or for enrolling
individuals in a group credit life, credit disability, or involuntary
unemployment insurance plan or issuing certificates of insurance
thereunder where no commission is paid to the employee for those
services.
1635. No license is required under the provisions of this chapter
for a person to act in the following capacities or to engage in the
following activities, providing no commission is paid or allowed,
directly or indirectly, by the insurer, creditor, retailer, or other
person for acting in those capacities or engaging in those
activities:
(a) The business of examining, certifying or abstracting titles to
real property.
(b) The solicitation for membership in a fraternal benefit society
and other activities to the extent and as described in Sections
11013 and 11102 of this code.
(c) As a salaried representative of a reciprocal or interinsurance
exchange or of its attorney in fact.
(d) Employment which does not include the solicitation,
negotiation, or effecting of contracts of insurance and the signing
of policies or other evidences of insurance.
(e) As an officer of an insurer or a salaried traveling employee
of the type commonly known as a special agent or as an agency
supervisor, while performing duties and exercising functions that are
commonly performed by a special agent or agency supervisor, if the
person engaging in the activity does not do either of the following:
(1) Effect insurance.
(2) Solicit or negotiate insurance except as a part of and in
connection with the business of a fire and casualty broker-agent or
life agent licensed under this chapter.
(f) As an officer or salaried representative of a life insurer if
his or her activities are limited to direct technical advice and
assistance to a properly licensed person and his or her activities do
not include effecting, soliciting, or negotiating insurance except
as a part of and in connection with the business of a fire and
casualty broker-agent or life agent licensed under this chapter.
(g) Employment by an insurer at its home or branch office which
does not include the solicitation, negotiation, or effecting of
contracts of insurance, and which may as part thereof include the
signing of policies or other evidences of insurance.
(h) The completion or delivery of a declaration or certificate of
coverage under a running inland marine insurance contract evidencing
coverage thereunder and including only those negotiations as are
necessary to the completion or delivery if the person performing
those acts or his or her employer has an insurable interest in the
risk covered by the certificate or declaration.
(i) As an employee of a licensed fire and casualty broker-agent,
whose employment is one or more of the following:
(1) That of a regularly salaried administrative or clerical
employee whose activities do not include the solicitation,
negotiation, or effecting of contracts of insurance from the insuring
public.
(2) That of a salesperson who devotes substantially all of his or
her activities to selling merchandise and whose solicitation of
insurance is limited only to the quoting of a premium for insurance
to be included in the purchase price covering the interest retained
in the merchandise by the seller.
(j) The solicitation, negotiation or effectuation of home
protection contracts by a person licensed pursuant to Part 1
(commencing with Section 10000) of Division 4 of the Business and
Professions Code in connection with his or her licensed function
authorized by Section 10131 or 10131.6 of the Business and
Professions Code. Neither the receipt of a payment permitted by
Section 12760 nor the receipt of a benefit permitted by Section 12765
shall disqualify the recipient from the licensing exemption provided
by this chapter.
(k) Employees of an insurer whose duties are the inspection,
processing, adjusting, investigation, or settling of claims,
conducting safety inspections, or accepting or rejecting business
from licensed insurance agents or brokers.
(l) Officers, directors, or employees of an insurer or producer
whose executive, administrative, managerial, or clerical activities
are only indirectly related to solicitation, negotiation, or
effecting the sale of insurance, provided those persons do not have
direct contact with consumers in a sales or service capacity except
as otherwise provided by this section.
(m) Employees whose activities are limited to making clerical
changes in existing policies or providing indirect marketing and
servicing support for the purpose of determining general interest in
insurance products.
1637. An organization may hold any license or licenses necessary to
act in the following capacities under this chapter and no others:
(a) A license to act as a life-only agent.
(b) A license to act as an accident and health agent.
(c) A license to act as a property broker-agent.
(d) A license to act as a casualty broker-agent.
(e) A license to act as a cargo shipper's agent.
(f) A license to act as a personal lines licensee.
(g) A license to act as a credit insurance agent.
(h) A license to act as a rental car agent.
(i) A nonresident license to act as a limited lines licensee
pursuant to subdivision (i) of Section 1639.
(j) A license to act as a self-service storage agent.
(k) A license to act as a limited lines automobile insurance
agent.
1638. (a) A nonresident license is a license issued to a person not
a resident of this state.
A person is a resident of this state if either of the following
applies:
(1) He or she occupies a dwelling in this state and intends this
state to be his or her domicile.
(2) He or she maintains his or her principal place of business in
this state.
(b) A person licensed under this chapter may designate only one
state as his or her resident state.
1638.5. Unless denied licensure pursuant to Article 6 (commencing
with Section 1666), a nonresident person shall receive a production
agency license if he or she meets the following requirements:
(a) The person is currently licensed and in good standing in the
state, territory of the United States, or province of Canada in which
he or she is licensed as a resident producer.
(b) The person has submitted the proper request for licensure and
has paid the fees required by Section 1750.5.
(c) The person has submitted or transmitted to the Insurance
Commissioner the application for licensure that the person submitted
to the state, territory of the United States, or province of Canada
in which he or she is licensed as a resident, or submitted or
transmitted to the commissioner, a completed National Association of
Insurance Commissioners (NAIC) Uniform Nonresident Application.
(d) The state, territory of the United States, or province of
Canada in which the person holds a resident producer license awards
nonresident producer licenses to residents of this state on the same
basis.
1639. The following types of licenses under this chapter may be
issued to nonresidents:
(a) A property broker-agent or a casualty broker-agent if the
nonresident is duly licensed to transact those lines of insurance
described in Section 1625, under the laws of the state, territory of
the United States, or province of Canada where the resident license
is maintained.
(b) A personal lines broker-agent if the nonresident is duly
licensed to transact those lines of insurance described in Section
1625.5, under the laws of the state, territory of the United States,
or province of Canada where the resident license is maintained.
(c) A life-only agent or an accident and health agent if the
nonresident possesses a resident license in another state, territory
of the United States, or province of Canada to transact life
insurance or disability insurance.
(d) A nonresident life-only agent may be granted authority to
transact variable contracts if he or she has been granted that
authority by the state where the resident license is maintained.
(e) A surplus line broker and a special lines surplus broker if
the nonresident holds that type of license in the state or territory
of the United States where the resident license is maintained.
(f) A credit insurance agent if the nonresident holds that type of
license in the state, territory of the United States, or province of
Canada where the resident license is maintained.
(g) A rental car agent if the nonresident holds that type of
license in the state, territory of the United States, or province of
Canada where the resident license is maintained.
(h) A cargo shipper's agent if the nonresident holds that type of
license in the state, territory of the United States, or province of
Canada where the resident license is maintained.
(i) A limited lines license if the nonresident holds that type of
license in the state, territory of the United States, or province of
Canada where the resident license is maintained. As used in this
section, "limited lines license" means any authority granted by the
resident state that restricts the authority of the license to less
than the total authority granted by any of the types of licenses
identified in this section.
(j) A self-service storage agent if the nonresident holds that
type of license in the state, territory of the United States, or
province of Canada where the resident license is maintained.
1639.1. (a) The class or classes of insurance which a nonresident
person is licensed to transact under his or her resident license
shall be determined according to the definitions of classes of
insurance in Sections 101 to 120, inclusive. A certificate from the
insurance regulatory authority of the nonresident's home state may be
accepted as evidence of the applicant's license status and the
capacity or capacities in which he or she is licensed. The Insurance
Commissioner may also verify the producer's licensing status through
the Producer Database maintained by the National Association of
Insurance Commissioners, its affiliates or subsidiaries.
(b) A nonresident producer who moves from one state to another
state or a resident producer who moves from this state to another
state shall file a change of address and provide certification from
the new resident state within 30 days of the change of legal
residence. No fee or license application is required.
(c) The license authority granted to the nonresident shall not
exceed the class or classes of insurance granted by the license
issued under the laws of the state, territory of the United States,
or province of Canada where the resident license is maintained.
1640. A person authorized to act as an insurance solicitor is not
eligible at the same time to act as an insurance agent or broker, and
a person authorized to act as either an insurance agent or broker is
not eligible at the same time to act as an insurance solicitor.
1642. An insurer or reciprocal or interinsurance exchange is not
eligible for any license under this chapter; but a corporation
rendering sales services in connection with a separate account may be
licensed irrespective of the extent of ownership of the corporation
by an insurer. Nothing herein shall be interpreted to prohibit an
insurer or reciprocal or interinsurance exchange from licensing its
employees who solicit, negotiate, or effect contracts of insurance
pursuant to this article.
1644. A person under 18 years of age is not eligible to apply for a
license pursuant to this chapter, Chapter 5A (commencing with
Section 1759), Chapter 6 (commencing with Section 1760), and Chapter
7 (commencing with Section 1800) of Part 2 of Division 1, and Chapter
1 (commencing with Section 14000) and Chapter 2 (commencing with
Section 15000) of Division 5.
1646. An organization is not eligible for a license under this
chapter if its articles of incorporation or association or agreement
of copartnership forbid it to act in the capacity for which a license
is sought.
1647.5. (a) Each limited liability company, at the time of
licensing pursuant to this chapter and, with respect to surplus line
brokers, Chapter 6 (commencing with Section 1760), and at all times
during which the company holds an active license, is required to
provide security for claims against it as follows:
(1) For claims based upon acts, errors, or omissions arising out
of the practice of insurance agency, brokerage, or surplus line
brokerage, a licensed limited liability company providing insurance
agency, brokerage, or surplus line brokerage services shall comply
with the requirements of subparagraph (A) or (B), or pursuant to
subdivision (b), some combination of those requirements.
(A) (i) Maintain a policy or policies of insurance against
liability imposed on or against it by law for damages arising out of
claims in an amount for each claim of at least one hundred thousand
dollars ($100,000) multiplied by the number of licensees rendering
professional services on behalf of the company, with a minimum
required amount of five hundred thousand dollars ($500,000); however,
the maximum amount of insurance is not required to exceed five
million dollars ($5,000,000) for claims initially asserted in any one
calendar year, less amounts paid in defending, settling, or
discharging those claims. In addition, the policy shall contain, at a
minimum, a provision that the policy cannot be nonrenewed, canceled,
or terminated, without providing written notice to the commissioner
within 10 days.
(ii) An applicant who wishes to satisfy the requirements of this
section wholly, or in part, by maintaining a policy or policies of
insurance as set forth in clause (i) shall submit to the commissioner
a certification of coverage pursuant to subdivision (d). If a
license is automatically issued or renewed without providing this
certification, the license may be inactivated by the commissioner
upon discovery of the lack of compliance with this paragraph.
(iii) If the policy specified in clause (i) contains a deductible
or self-insured retention and the policy provides that the insurer is
ultimately responsible for payment of the total amount of the claim
up to the policy limits, including the deductible or retention, the
policyholder shall not be required to maintain security for payment
of its deductible limit or self-insured retention liability under the
terms set forth in subparagraph (B).
(iv) If the policy specified in clause (i) contains a deductible
limit or self-insured retention and does not provide that the insurer
is responsible for payment of the total amount of the claim up to
the policy limits, the policyholder shall maintain security for
payment of its deductible limit or self-insured retention under the
terms set forth in subparagraph (B).
(B) Maintain in trust or bank escrow, cash, bank certificates of
deposit, United States Treasury obligations, bank letters of credit,
or bonds of insurance companies as security for payment of
liabilities imposed by law for damages arising out of all claims in
an amount of at least one hundred thousand dollars ($100,000)
multiplied by the number of licensees rendering professional services
on behalf of the company, with a minimum required amount of five
hundred thousand dollars ($500,000); however, the maximum amount of
security is not required to exceed five million dollars ($5,000,000)
for claims initially asserted in any one calendar year, less amounts
paid in defending, settling, or discharging those claims.
(b) For purposes of satisfying the security requirements of this
section, a limited liability company may aggregate the security
provided by it pursuant to subparagraphs (A) and (B) of paragraph (1)
of subdivision (a).
(c) At the time of licensing pursuant to this article, limited
liability companies shall file with the commissioner information, in
the manner prescribed by the commissioner, and accompanied by all
documentation requested by the commissioner, demonstrating compliance
with the financial security requirements of this section. Limited
liability companies shall also file an annual confirmation with the
commissioner, at a time and in a manner, and with documentation,
prescribed by the commissioner, demonstrating continuing compliance
with the financial security requirements of this section.
(d) If the security requirements of this section are satisfied
wholly, or in part, with an insurance policy, then a certification of
coverage shall be submitted to the commissioner by the licensee or
applicant, and signed by an authorized agent or employee of the
insurer. The certification of coverage shall be in the following
form:
Department of Insurance
Limited Liability Company
Certification of Coverage Under Section 1647.5
of the California Insurance Code
I hereby certify that the insurance company
listed below has issued a policy or policies of
insurance as follows:
Insured Name: __________________________________
License Number: ________________________________
Company Name: __________________________________
Address: _______________________________________
Policy Number(s): ______________________________
Insurance Company: _____________________________
Policy Effective Date: _________________________
Policy Expiration Date: ________________________
Specify whether blanket or individual policy: __
Specify number of licensees rendering services:
________________________________________________
I hereby certify that the limited liability
company named above is insured against claims
arising from errors and omissions as defined
and described in the amounts and limits set
forth in Section 1647.5 of the California
Insurance Code. I understand and agree that the
insurance coverage for the entity and person(s)
insured under this policy or policies may not
be terminated, canceled, or nonrenewed,
regardless of cause or reason, without
providing written notice to the commissioner
within ten (10) days.
Signature:_____________________Date: ___________
(Insurance Company Representative)
Title: _________________________________________
(e) The commissioner may summarily deny or decline to act upon an
application for the issuance or renewal of a license, or may
summarily inactivate an existing license, for failure to comply with
the requirements of this section.
(1) If the commissioner inactivates a license for failure to
comply with the requirements of subparagraph (A) of paragraph (1) of
subdivision (a), the effective date of the inactivation shall be the
date on which the insurance policy or policies used to satisfy that
requirement expire or are canceled, as indicated by the expiration
date specified on the certification of coverage filed pursuant to
subdivision (d) or by a notification received from the insurer of
termination, cancellation, or nonrenewal of coverage.
(2) If the commissioner inactivates a license for failure to
comply with the requirements of subparagraph (B) of paragraph (1) of
subdivision (a), or with the requirements of subdivision (b), the
effective date of the inactivation shall be the date set by the
commissioner as the deadline for demonstrating compliance with those
provisions.
(3) Within 10 working days of the date of inactivation under this
section, the commissioner shall send by certified mail to the
licensee's address, as reflected in the commissioner's records, a
notice to the licensee of the inactivation of the license.
(4) A license that has been inactivated pursuant to this section
shall be reactivated if, within 30 days of the date of inactivation,
the licensee demonstrates, in the manner prescribed by the
commissioner, satisfaction of the requirements of subparagraph (A) or
(B) of paragraph (1) of subdivision (a), or the requirements of
subdivision (b), and includes any fees, penalties, and any other
required licensing documents necessary to reactivate the license,
including new company appointment forms, bonds, and any new business
entity endorsements as required. If a certification of coverage is
provided to demonstrate compliance with these requirements, and the
certification indicates that the insurance policy or policies have
been in effect continuously from the date of the inactivation, the
license shall be reactivated retroactive to and including the date of
inactivation. If the certification of coverage shows an effective
date for the insurance policy or policies later than the date of
inactivation, the license shall be reactivated as of the effective
date of the policy or policies.
(f) Any licensee who, acting alone or in concert with others,
willfully or knowingly causes or allows to be filed with the
commissioner for the purpose of demonstrating compliance with this
section a certification of coverage described in subdivision (d), or
any other document required by this section, that is false,
fraudulent, or misleading, shall be subject to administrative
penalty, including suspension or revocation of the licensee's
license, after notice and hearing as provided for in the
Administrative Procedure Act. However, nothing in this section shall
entitle a licensee to notice or hearing on the summary denial of an
application or the summary inactivation of a license pursuant to
subdivision (e).
(g) The commissioner may disclose on the department's Internet Web
site the names and license numbers of those licensees whose licenses
have been inactivated or who have been penalized due to
noncompliance with this section. The commissioner may also report
that information to the National Association of Insurance
Commissioners (NAIC).
(h) The commissioner may adopt regulations as necessary to
implement this section.
1649.5. Notwithstanding Section 1642, an insurer may own or
control, whether directly or indirectly, a separate entity licensed
under this chapter as a fire and casualty broker-agent or life agent
as defined in Section 1621, 1622, or 1623, respectively. Insurance
transacted by a fire and casualty broker-agent with and on behalf of
the owning or controlling insurer shall be in its capacity as an
insurance agent.
1650. Every license issued under this chapter shall state thereon
all the following:
(a) The name of the licensee.
(b) The capacity of the license.
(c) The conditions, if any, subject to which the license is
issued.
(d) The effective date and expiration date of the license.
(e) If issued to an organization, by separate listing attached to
it, the name of each natural person who is qualified to be named
thereon pursuant to the provisions of Section 1628.
1651. The commissioner shall at all times retain full property
rights in any document evidencing any license issued pursuant to
Chapters 5, 6, 7, and 8 of this part. He may require the surrender of
said document for any proper reason.