1760-1780
INSURANCE CODE
SECTION 1760-1780
1760. (a) Any person may negotiate and effect insurance to protect
himself, herself, or itself against loss, damage, or liability with
any nonadmitted insurer.
(b) Every person that effects insurance governed by this chapter
shall pay the tax imposed by Part 7.5 (commencing with Section 13201)
of Division 2 of the Revenue and Taxation Code.
1760.5. (a) The provisions of this chapter limiting the insurance
that may be placed with nonadmitted insurers and requiring any report
thereof shall not apply to:
(1) Reinsurance of the liability of an admitted insurer.
(2) Insurance against perils of navigation, transit or
transportation upon hulls, freights or disbursements, or other
shipowner interests; upon goods, wares, merchandise and all other
personal property and interests therein, in the course of exportation
from or importation into any country, or transportation coastwise,
including transportation by land or water from point of origin to
final destination and including war risks; and marine builder's
risks, drydocks and marine railways, including insurance of ship
repairer's liability, and protection and indemnity insurance, but
excluding insurance covering bridges or tunnels.
(3) Aircraft or spacecraft insurance.
(4) Insurance on property or operations of railroads engaged in
interstate commerce.
(b) The insurance specified in paragraphs (2), (3), and (4) of
subdivision (a) may be placed with a nonadmitted insurer only by and
through a special lines' surplus line broker. The license of a
special lines' surplus line broker shall be applied for and procured
and shall be subject to the same fees for filing on issuance in the
same manner as the license of a surplus line broker, except that in
lieu of the bond required by Section 1765, there shall be delivered
to the commissioner a bond in the form, amounts, and conditions
specified in Sections 1663 and 1665 for an insurance broker and only
one fee shall be collected from one person for both licenses. The
licensee in respect to the business shall be subject to all the
provisions of this chapter except Sections 1761, 1763, 1765.1, and
1775.5.
(c) The commissioner may address to any licensed special lines'
surplus line broker a written request for full and complete
information respecting the financial stability, reputation, and
integrity of any nonadmitted insurer with whom the licensee has dealt
or proposes to deal in the transaction of insurance specified in
paragraphs (2), (3), or (4) of subdivision (a). The licensee so
addressed shall promptly furnish in written or printed form so much
of the information requested as he or she can produce together with a
signed statement identifying the same and giving reasons for
omissions, if any. After due examination of the information and
accompanying statement, the commissioner may, if he or she believes
it to be in the public interest, order in writing the licensee to
place no further insurance business on property located or operations
conducted within or on the lives of persons who are residents of
this state with that nonadmitted insurer on behalf of any person. Any
placement with that nonadmitted insurer made by a licensee after
receipt of the order is a violation of this chapter. The commissioner
may issue an order if he or she finds that a nonadmitted insurer
with whom the licensee has dealt or proposes to deal in the
transaction of insurance is in an unsound financial condition, is
disreputable, or is lacking in integrity. The order shall also
include notice of a hearing to be held at a time and place fixed
therein, which shall be not less than 20 nor more than 30 days from
service of the order upon the licensee.
(d) The commissioner may, in respect to business written or placed
under the provisions of this section, require information and
reports thereof that the commissioner considers necessary,
convenient, or advisable.
(e) Each placing of insurance in violation of this chapter is a
misdemeanor.
(f) The commissioner may revoke, suspend, or deny any license
granted pursuant to this code in accordance with the procedure
provided in Article 13 (commencing with Section 1737) of Chapter 5,
or any certificate of authority granted pursuant to this code in
accordance with the procedure provided in Section 704 whenever the
commissioner finds that the licensee or holder of the certificate has
committed a violation of this section.
(g) The premium for insurance placed by or through a special lines'
surplus line broker pursuant to this section shall not be subject to
the tax imposed upon the broker based upon gross premiums paid for
insurance placed under authority conferred by the license.
(h) Special lines' surplus line brokers may advertise and solicit
in conformity with Section 1773, except that they are not subject to
the limitation that any nonadmitted insurer's name appearing in the
advertisements or solicitations must be authorized to accept
placements under Section 1765.1.
1760.6. For purposes of Section 1760.5, "spacecraft" means
missiles, satellites, staffed and unstaffed space vehicles, any
objects intended for launch, or objects launched or assembled in
outer space, including, but not limited to, the space shuttle and any
transportation, communication, information, or other system intended
to be employed in outer space, together with related equipment,
devices, components, and parts.
1760.7. In addition to the authority granted by Section 1760.5, the
commissioner has the discretion to direct special lines' surplus
line brokers to not place further business with an insurer whose
eligibility has been withdrawn pursuant to Section 1765.1.
1761. Except as provided in sections 1760 and 1760.5, a person
within this State shall not transact any insurance on property
located or operations conducted within, or on the lives or persons of
residents of this State with nonadmitted insurers, except by and
through a surplus line broker licensed under this chapter and upon
the terms and conditions prescribed in this chapter.
1762. For purposes of Sections 1764, 1764.1, and 1764.3, the term
"certificate" means a surplus line broker certificate as defined in
Section 48.
1763. (a) A surplus line broker may solicit and place insurance,
other than as excepted in Section 1761, with nonadmitted insurers
only if that insurance can not be procured from insurers admitted for
the particular class or classes of insurance and that actually write
the particular type of insurance in this state. Each surplus line
broker shall be responsible to ensure that a diligent search is made
among insurers that are admitted to transact and are actually writing
the particular type of insurance in this state before procuring the
insurance from a nonadmitted insurer. Each surplus line broker shall
file with the commissioner or his or her designee, within 60 days of
placing any insurance with a nonadmitted insurer, a written report,
that shall be kept confidential, regarding the insurance. This report
shall include the name and address of the insured, the identity of
the insurer or insurers, a description of the subject and location of
the risk, the amount of premium charged for the insurance, a copy of
the declarations page of the policy or a copy of the surplus line
broker's certificate or binder evidencing the placement of insurance,
and other pertinent information that the commissioner may reasonably
require. In addition, each surplus line broker shall file a
standardized form to be prescribed by the commissioner setting forth
the diligent efforts to place the coverage with admitted insurers and
the results of these efforts. The form shall be signed by a person
licensed under this code who has made the diligent search required by
this section or who supervised an unlicensed person or persons who
actually conducted the search. The insurance shall not be placed with
a nonadmitted insurer for the purpose of procuring a rate lower than
the lowest rate that will be accepted by any admitted insurer except
as provided by subdivision (c). The commissioner may make and
publish reasonable rules and regulations, consistent with this
chapter, in respect to transactions governed thereby and the basis or
bases for his or her determinations hereunder.
(b) It shall be prima facie evidence that a diligent search among
admitted insurers has been made if the standardized form filed as
required by subdivision (a) establishes that three admitted insurers
that actually write the particular type of insurance in this state
have declined the risk, or that fewer than three admitted insurers
actually write the particular type of insurance. The commissioner, or
his or her designee, may review the form for the accuracy of the
information provided on it, including, but not limited to, whether
the listed insurers actually write that type of insurance, and
whether the three insurers declined the risk. The commissioner may
take disciplinary action against the person signing the form for any
misrepresentation made in the form due to the negligence of or the
result of an intentional act by that person or the person or persons
who actually conducted the search. Those actions may include any
action authorized to be taken against a licensed person by this code.
Nothing in this subdivision shall preclude the commissioner or his
or her designee from directing the surplus line broker to conduct a
further or additional search among admitted insurers for similar
placements in the future.
(c) It shall be conclusively presumed that insurance is placed in
violation of this section if the insurance is actually placed with a
nonadmitted insurer at a lower rate of premium or lower premium than
the lowest rate of premium or the lowest premium that could be
obtained from an admitted insurer unless, at the time the insurance
attaches, there is filed with the commissioner a statement describing
the insurance, specifying the rate and the nearest procurable rates
from admitted insurers. The statement shall include an explanation of
the reasons that the insurance must be placed with a nonadmitted
insurer even though it is available from an admitted insurer. Unless
the commissioner, or his or her designee, within five days after that
filing notifies the filing broker that in his or her opinion the
placing of the insurance constitutes a violation of this section, the
broker may thereafter maintain in effect that insurance. If within
that five-day period the commissioner notifies the surplus line
broker that the insurance is in violation of this section and orders
the broker to effect termination of that insurance within 10 days
from the notice, and the broker fails or refuses to effect that
termination, that failure or refusal is a violation of this section.
(d) Statements filed under this section are not subject to public
inspection unless the commissioner determines that the public
interest or the welfare of the filing broker requires that any
statement be made public.
(e) For purposes of this section, "type of insurance" means the
hazard or combination of hazards covered by a contract of insurance.
(f) Notwithstanding subdivision (a), this section shall not apply
to insurance issued or delivered in this state by a nonadmitted
Mexican insurer by and through a surplus line broker affording
coverage exclusively in the Republic of Mexico on property located
temporarily or permanently in, or operations conducted temporarily or
permanently within, the Republic of Mexico.
(g) This section does not apply to the extension of coverage by a
nonadmitted insurer, of or for the same risks, and to the same
insured under an existing surplus lines policy. Such an extension may
not exceed 90 days in the aggregate during any 12-month period. The
extension may not include a change in coverage, terms, and
conditions, or limits. Any additional premium charged for the
extension shall be determined pro rata, based on the same rate of
premium as the existing surplus lines policy.
1763.1. (a) The commissioner may by order declare eligible for
placement with a nonadmitted insurer and exempt from all requirements
of Section 1763 except the filing of a confidential written report,
any type of insurance coverage or risk for which he or she finds,
after a public hearing, that there is not a reasonable or adequate
market among admitted insurers. The commissioner or his or her
designee shall maintain an export list showing all those exempt
coverages and risks. A public hearing shall be held annually or more
often at the commissioner's discretion and reasonable notice of a
hearing shall be given to all interested parties including surplus
line brokers, admitted insurers, trade associations representing
admitted insurers, agents and brokers, and consumer groups. The
hearing shall not be required to be conducted in accordance with
Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code. Any such order by the commissioner
shall continue in effect until terminated by the commissioner. Where
the commissioner receives written comments or testimony or otherwise
determines, prior to a hearing that a type of insurance on the export
list is more available in the admitted market the commissioner may
remove the type of insurance from the list. The eligibility of any
type of insurance to remain on the list is subject to an annual
affirmative finding by the commissioner, however, when written
comment or testimony is received prior to a hearing, the eligibility
of that type of insurance to remain on the export list shall be
reviewed at the next hearing and that type of insurance may not
remain on the export list without an affirmative decision by the
commissioner or his or her designee that there is not a reasonable or
adequate market among admitted insurers. The commissioner or his or
her designee shall notify all surplus line brokers of any removal.
For purposes of this section, the commissioner shall not be
authorized to include on the export list as eligible for placement
with a nonadmitted insurer, automobile or motor vehicle liability
insurance, insurance on residential property, as defined under
Section 10087, or any insurance written by the California FAIR plan.
(b) The surplus line advisory organization authorized by Chapter
6.1 (commencing with Section 1780.50) shall pay the costs for a
maximum of two public hearings per year held by the commissioner or
his or her designee pursuant to this section.
(c) Except for the removal of a type of insurance from the export
list pursuant to subdivision (a), nothing in this section shall
authorize the commissioner to declare any type of insurance
ineligible for exportation.
1763.2. (a) A licensed surplus line broker may originate surplus
lines business, or may accept that business from any other
originating licensee duly licensed for the type or types of insurance
involved, and may compensate those licensees therefor.
(b) For any information involved in any insurance transaction
described in subdivision (a), or involved in the eligibility of the
risk for placement with a surplus line broker, the originating
licensee shall use due care and diligence in the collection,
preparation, and transmission of the information to the surplus line
broker.
1763.5. In addition to the requirements of Section 1763, no surplus
line broker shall solicit from, or place with, any nonadmitted
insurer, any insurance covering private passenger automobiles if that
insurance contains in whole or in part the limits of coverage
provided under the California Automobile Assigned Risk Plan unless
the surplus line broker, producing agent, broker, or insured has
first submitted to the California Automobile Assigned Risk Plan a
properly completed and executed application in accordance with the
requirements of the plan for the coverage provided by the plan and
the plan itself has determined that the application is ineligible for
the limits of coverage applied for and so notifies the surplus line
broker or insured in writing.
For purposes of this section, a private passenger automobile
includes motorcycles, but does not include a fleet of five or more
automobiles rated for business use and used in a business.
1764. (a) A licensed surplus line broker may issue evidence of
insurance, including binders, covernotes, and certificates evidencing
the placement of insurance with an eligible nonadmitted insurer, and
with prior written authority, may issue policies of the insurer.
(b) Certificates may be issued pursuant to subdivision (a) or (b)
of Section 1764.2. The certificates shall be in the name of the
surplus line broker and not in the name of the nonadmitted insurer,
shall be signed by the surplus line broker, and shall contain all of
the matters specified in Insurance Code Section 381.
(c) Policies may only be issued pursuant to subdivision (a) of
Section 1764.2. The policies shall contain all of the matters
specified in Section 381 and shall be countersigned by the surplus
line broker.
1764.1. (a) (1) Every nonadmitted insurer, in the case of insurance
to be purchased by a resident of this state pursuant to Section
1760, and surplus line broker, in the case of any insurance with a
nonadmitted carrier to be transacted by the surplus line broker,
shall be responsible to ensure that, at the time of accepting an
application for an insurance policy, other than a renewal of that
policy, issued by a nonadmitted insurer, the signature of the
applicant on the disclosure statement set forth in subdivision (b) is
obtained. In fulfillment of this responsibility, the nonadmitted
insurer and the surplus line broker may rely, if it is reasonable
under all the circumstances to do so, on the disclosure statement
received from a licensee involved in the transaction as prima facie
evidence that the disclosure statement and appropriate signature from
the applicant have been obtained. The surplus line broker shall
maintain a copy of the signed disclosure statement in his or her
records for a period of at least five years. These records shall be
made available to the commissioner and the insured upon request. This
disclosure shall be signed by the applicant, and is not subject to
any limited power of attorney agreement between the applicant and an
agent or broker, or a surplus line broker. The disclosure statement
shall be in boldface 16-point type on a freestanding document. In
addition, every policy issued by a nonadmitted insurer and every
certificate evidencing the placement of insurance shall contain, or
have affixed to it by the insurer or surplus line broker, the
disclosure statement set forth in subdivision (b) in boldface
16-point type on the front page of the policy.
(2) In a case in which the applicant has not received and
completed the signed disclosure form required by this section, he or
she may cancel the insurance so placed. The cancellation shall be on
a pro rata basis as to premium, and the applicant shall be entitled
to the return of any broker's fees charged for the placement.
(b) The following notice shall be provided to policyholders and
applicants for insurance as provided by subdivision (a), and shall be
printed in English and in the language principally used by the
surplus line broker and nonadmitted insurer to advertise, solicit, or
negotiate the sale and purchase of surplus line insurance. The
surplus line broker and nonadmitted insurer shall use the appropriate
bracketed language for application and issued policy disclosures:
"NOTICE:
1. THE INSURANCE POLICY THAT YOU