INSURANCE GUARANTEE
ASSOCIATION
Sec.
1063. Establishment; powers and duties.
1063.1 Definitions.
1063.2 Covered claims; duties.
1063.3 To aid in the detection and prevention of member insurer insolvencies.
1063.4 Cooperation; assignment of claims.
1063.5 Insolvency; premiums; categories of claim payments; charges or credits; net direct written premiums; failure to pay premiums; interest.
1063.6 Stay of proceedings against insolvent insurer.
1063.7 Liquidator; powers and duties.
1063.8 Exemptions.
1063.9 Regulation.
1063.10 Judicial review.
1063.11 Rules, regulations and orders.
1063.12 Liability limits; indemnification against costs and expenses; proration of costs and expenses
1063.13 Members prohibited from engaging in unlawful trade practice.
1063.14 Plan of operation; recoup of assessments by surcharge on premiums.
1063.145 Surcharge statement; association description and purpose
1063.15 Workers' compensation matters; time periods applicable to association
1063.16 Request to issue bonds pursuant to Article 14.25
Article 14.2 was added by Stats.1969, c. 1347, p.
2699,
§3,eff.Sept.2, 1969.
§ 1063. Establishment; powers and
duties
(a) Within 60 days after the original effective date of this article, all insurers, including reciprocal insurers, admitted to transact insurance in this state of any or all of the following classes only in accordance with the provisions of Chapter 1 (commencing with Section 100) of Part 1 of this division: fire (see Section 102), marine (see Section 103), plate glass (see Section 107), liability (see Section 108), workers’ compensation (see Section 109), common carrier liability (see Section 110), boiler and machinery (see Section 111), burglary (see Section 112), sprinkler (see Section 114), team and vehicle (see Section 115), automobile (see Section 116), aircraft (see Section 118), and miscellaneous (see Section 120), shall establish the California Insurance Guarantee Association (the association); provided however, this article shall not apply to the following classes or kinds of insurance: life and annuity (see Section 101), title (see Section 104), fidelity or surety including fidelity or surety bonds, or any other bonding obligations (see Section 105), disability or health (see Section 106), credit (see Section 113), mortgage (see Section 117), mortgage guaranty, insolvency or legal (see Section 119), financial guaranty or other forms of insurance offering protection against investment risks (see Section 124) the ocean marine portion of any marine insurance or ocean marine coverage under any insurance policy including the following: the Jones Act (46 U.S.C. Sec. 688), the Longshore and Harbor Workers' Compensation Act (33 U.S.C. Sec. 901 et seq.), or any other similar federal statutory enactment, or any endorsement or policy affording protection and indemnity coverage, or reinsurance as defined in Section 620, or fraternal fire insurance written by associations organized and operating under Sections 9080 to 9103, inclusive. Any insurer admitted to transact only those classes or kinds of insurance excluded from this article shall not be a member insurer of the association. Each insurer admitted to transact a class of insurance included in this article, including the State Compensation Insurance Fund, as a condition of its authority to transact insurance in this state, shall participate in the association whether established voluntarily or by order of the commissioner after the lapse of 60 days following the original effective date of this article in accordance with rules to be established as provided in this article. It shall be the purpose of the association to provide for each member insurer insolvency insurance as defined in Section 119.5.
(b) The association shall be managed by a board of governors, composed of nine member insurers, each of which shall be appointed by the commissioner to serve initially for terms of one, two, or three years and thereafter for three-year terms so that three terms shall expire each year on December 31, and shall continue in office until his or her successor shall be appointed and qualified. At least five members of the board shall be domestic insurers. At least three of the members shall be stock insurers, and at least three shall be nonstock insurers. The nine members shall be representative, as nearly as possible, of the classes of insurance and of the kinds of insurers covered by this article. In case of a vacancy for any reason on the board, the commissioner shall appoint a member insurer to fill the unexpired term. In addition to the nine member insurers, the membership of the board shall also include one public member appointed by the President pro Tempore of the Senate, one public member appointed by the Speaker of the Assembly, one business member appointed by the commissioner, and one labor member appointed by the commissioner.
(c) The association shall adopt a plan of operations, and any amendments thereto, not inconsistent with the provisions of this article, necessary to assure the fair, reasonable, and equitable manner of administering the association, and to provide for such other matters as are necessary or advisable to implement the provisions of this article. The plan of operations and any amendments thereto shall be subject to prior written approval by the commissioner. All members of the association shall adhere to the plan of operation.
(d) If for any reason the association fails to adopt a suitable plan of operation within 90 days following the original effective date of this article, or if at any time thereafter the association fails to adopt suitable amendments to the plan of operation, the commissioner shall after hearing adopt and promulgate such reasonable rules as are necessary or advisable to effectuate the provisions of this chapter. These rules shall continue in force until modified by the commissioner after hearing or superseded by a plan of operation, adopted by the association and approved by the commissioner.
(e) In accordance with its plan of operation, the association may designate one or more of its members as a servicing facility, but a member may decline this designation. Each servicing facility shall be reimbursed by the association for all reasonable expenses it incurs and for all payments it makes on behalf of the association. Each servicing facility shall have authority to perform any functions of the association that the board of governors lawfully may delegate to it and to do so on behalf of and in the name of the association. The designation of servicing facilities shall be subject to the approval of the commissioner.
(f) The association shall have authority to borrow funds when necessary to effectuate the provisions of this article and may provide in its plan of operations for any of the following:
(1) The issuance of notes, bonds, or debentures, or the establishment of a special purpose trust or other entity, solely for the purpose of facilitating a financing.
(2) The security of that borrowing or those notes, bonds, or debentures by pledging or granting liens or mortgages, or by otherwise encumbering its real or personal property, including, but not limited to, premiums levied under Section 1063.5.
(g) The association, either in its own name or through servicing facilities, may be sued and may use the courts to assert or defend any rights the association may have by virtue of this article as reasonably necessary to fully effectuate the provisions thereof.
(h) The association shall have the right to intervene as a party in any proceeding instituted pursuant to Section 1016 wherein liquidation of a member insurer as defined in Section 1063.1 is sought.
(i) (1) The association shall have an annual audit of its financial condition conducted by an independent certified public accountant. The audit shall be conducted , to the extent possible, in accordance with generally accepted auditing standards (GAAS) and the report of the audit shall be submitted to the commissioner.
(2) The association shall annually audit at least one-third of the service companies retained by the association to adjust claims of insolvent insurers. The audits shall (A) assure that all covered claims are being investigated, adjusted, and paid in accordance with customary industry standards and practices and all applicable statutes, rules and regulations, and (B) examine the management and supervisory systems overseeing the claims functions. The audits shall be conducted by the association or an independent auditor, provided that the three largest service companies, as measured by the number of claims processed for the association during the previous three fiscal years, shall be audited by an independent auditor at least once every three years. The Association shall implement systems to retain independent auditing firms for the purpose of this paragraph, provided that no one firm is designated or utilized as an exclusive provider. Audits conducted pursuant to this paragraph shall be submitted annually to the commissioner for review.
(j) The commissioner shall examine the association to the same extent as, and in accordance with, the requirements of Article 4 (commencing with Section 730) of Chapter 1 of Part 2 of Division 2, which sets forth the examination requirements applicable to admitted insurers. A copy of the examination report shall be filed with the Chairpersons of the Senate and Assembly Committees on Insurance no later than December 31 of the year the report is completed.
(Added by Stats.1969, c. 1347,
p. 2699, § 3, eff.
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 a member insurer against which an order of liquidation or receivership with a finding of insolvency has been entered by a court of competent jurisdiction.
(c) (1) "Covered claims" means the obligations of an insolvent insurer, including the obligation for unearned premiums, (i) imposed by law and within the coverage of an insurance policy of the insolvent insurer; (ii) which were unpaid by the insolvent insurer; (iii) which are presented as a claim to the liquidator in this state or to the association on or before the last date fixed for the filing of claims in the domiciliary liquidating proceedings; (iv) 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; (v) for which the assets of the insolvent insurer are insufficient to discharge in full; (vi) in the case of a policy of workers' compensation insurance, to provide workers' compensation benefits under the workers' compensation law of this state and (vii) 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 include 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 (i) to (vii), 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 any obligations arising from the following:
(i) Life, annuity, health or disability insurance.
(ii) Mortgage guaranty, financial guaranty, or other forms of insurance offering protection against investment risks.
(iii) Fidelity or surety insurance including fidelity or surety bonds, or any other bonding obligations.
(iv) Credit insurance.
(v) Title insurance.
(vi) Ocean marine insurance or ocean marine coverage under any insurance policy including claims arising from the following: the Jones Act (46 U.S.C.A. Sec. 688), the Longshore and Harbor Worker's Compensation Act (33 U.S.C.A. Sec. 901 et seq.), or any other similar federal statutory enactment, or any endorsement or policy affording protection and indemnity coverage.
(vii) Any claims servicing agreement or insurance policy providing retroactive insurance of 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 cover 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 association as provided in this chapter, or after the insurance policy has been canceled by the liquidator, nor any obligations to any 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, any 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 shall be entitled to a credit or set off in the amount of the policy limits of the insolvent insurer's policy, or in the amount of such 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 any claim in an amount of one hundred dollars ($100) or less, nor that portion of any 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 any 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 because payment of compensation was unreasonably delayed or refused by the insolvent insurer.
(9) "Covered claims" does not include (i) any claim to the extent it is covered by any other insurance of a class covered by this article available to the claimant nor (ii) any claim by any person other than the original claimant under the insurance policy in his 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 any 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 any
policy or contract of insurance issued or renewed prior to the insolvent
insurer's admission to transact insurance in the State of
(12) "Covered claims" does not include surplus deposits of subscribers as defined in Section 1374.1.
(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 any 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 any insured making a first party claim or any person instituting a liability claim; provided that 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, which insures against maritime perils or risks and other related perils or risks, which 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 any 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 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 any policy providing retroactive insurance of a known loss or return of a premium under any retrospectively rated policy or a policy subject to a contingent surcharge or any 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 experience during the policy period.
(Added by
Stats. 1969, c. 1347, p. 2699, § 3, eff.
§ 1063.2. Covered claims; duties; priority
of claims
(a) The association shall pay and discharge covered claims and in connection therewith pay for or furnish loss adjustment services and defenses of claimants when required by policy provisions. It may do so either directly be itself or through a servicing facility or through a contract for reinsurance and assumption of liabilities by one or more member insurers or through a contract with the liquidator, upon terms satisfactory to the association and to the liquidator, under which payments on covered claims would be made by the liquidator using funds provided by the association.
(b) The association shall be a party in interest in all proceedings involving a covered claim, and shall have the same rights as the insolvent insurer would have had if not in liquidation, including, but not limited to, the right to: (1) appear, defend, and appeal a claim in a court of competent jurisdiction; (2) receive notice of, investigate, adjust, compromise, settle, and pay a covered claim; and (3) investigate, handle, and deny a noncovered claim. The association shall have no cause of action against the insureds of the insolvent insurer for any sums it has paid out, except as provided by this article.
(c) (1) If damages against uninsured motorists are recoverable by the claimant from his or her own insurer, the applicable limits of the uninsured motorists coverage shall be a credit against a covered claim payable under this article. Any person having a claim that may be recovered under more than one insurance guaranty association or its equivalent shall seek recovery first from the association of the place of residence of the insured, except that if it a first-party claim for damage to property with a permanent location, he or she shall seek recovery first from the association of the permanent location of the property, and if it is a workers' compensation claim, he or she shall seek recovery first from the association of the residence of the claimant. Any recovery under this article shall be reduced by the amount of recovery from any other insurance guaranty association or its equivalent. A member insurer may recover in subrogation from the association only one-half of any amount paid by such insurer under uninsured motorist coverage for bodily injury or wrongful death (and nothing for a payment for anything else), in those cases where the injured person insured by such an insurer has proceeded under his or her uninsured motorist coverage on the ground that the tort feasor is uninsured as a result of the insolvency of his or her liability insurer (an insolvent insurer as defined in this article), provided that such member insurer shall waive all rights of subrogation against such tortfeasor. Any amount paid a claimant in excess of the amount authorized by this section may be recovered by action brought by the association.
(2) Any claimant having collision coverage on a loss which is covered by the insolvent company's liability policy shall first proceed against his or her collision carrier. Neither that claimant nor the collision carrier, if it is a member of the association, shall have the right to sue or continue a suit against the insured of the insolvent insurance company for such collision damage.
(d) The association shall have the right to recover from any person who is an affiliate of the insolvent insurer and whose liability obligations to other persons are satisfied in whole or in part by payments made under this article the amount of any covered claim and allocated claims expense paid on behalf of that person pursuant to this article.
(e) Any person having a claim or legal right of recovery under any governmental insurance or guaranty program which is also a covered claim, shall be required to first exhaust his or her right under the program. Any amount payable on a covered claim shall be reduced by the amount of any recovery under the program.
(f) "Covered claims" for unearned premium by lenders under insurance premium finance agreements as defined in Section 673 shall be computed as of the earliest cancellation date of the policy pursuant to Section 673 or subdivision (g) of this section.
(g) "Covered claims" shall not include any judgments against or obligations or liabilities of the insolvent insurer or the commissioner, as liquidator, or otherwise resulting from alleged or proven torts, nor shall any default judgment or stipulated judgment against the insolvent insurer, or against the insured of the insolvent insurer, be binding against the association.
(h) "Covered claims" shall not include any loss adjustment expenses, including adjustment fees and expenses, attorney fees and expenses, court costs, interest, and bond premiums, incurred prior to the appointment of a liquidator.
(Added by
Stats. 1969, c. 1347, p. 2699, § 3, eff.
1063.3 Financial
condition of members; reports and recommendations; examination; report to board
- Repealed Stats. 1994, c. 6, § 4.
1063.3 To aid in the
detection and prevention of member insurer insolvencies.
(a) The board may, upon majority vote, make recommendations to the commissioner on matters pertaining to regulation for solvency.
(b) The board may prepare a report on the history and causes of any member insurer insolvency in which the association was obligated to pay covered claims, based on the information available to the association, and submit that report along with any recommendations resulting therefrom to the commissioner.
(Enacted by Stats. 1994, c. 6, § 5.)
§ 1063.4
Cooperation; assignment of claims
(a) Insureds entitled to the protection of this article shall cooperate with the association in accordance with their policies in the same manner as they would have been required to cooperate with their insurer if it were not in liquidation and shall be deemed to have assigned to the association any right to make claim against the liquidator for a refund of unearned premium for the period of coverage provided by the association beginning on the date of the order of liquidation to the date of expiration or cancellation.
(b) Any insured or claimant entitled to the benefits of this article who elects to proceed under this article shall be deemed to have assigned to the association his or her rights against the estate of the insolvent insurer.
(Added by Stats. 1969, c. 1347,
p. 2699, § 3, eff.
§ 1063.5 Insolvency; premiums; categories
of claim payments; charges or credits, net direct written premiums; failure to
pay premiums; interest
Each time an insurer becomes insolvent then, to the extent necessary to secure funds for the association for payment of covered claims of that insolvent insurer and also for payment of reasonable costs of adjusting the claims, the association shall collect premium payments from its member insurers sufficient to discharge its obligations. The association shall allocate its claim payments and costs, incurred or estimated to be incurred, to one or more of the following categories: (a) workers' compensation claims; (b) homeowner's claims, and automobile claims, which shall include: automobile material damage, automobile liability (both personal injury and death and property damage), medical payments and uninsured motorists claims; and (c) claims other than workers' compensation, homeowners; and automobile, as above defined. Separate premium payments shall be required for each category. The premium payments for each category shall be used to pay the claims and costs allocated to that category. The rate of premium charged shall be a uniform percentage of net direct written premium in the preceding calendar year applicable to that category. The rate of premium charges to each member in the appropriate categories shall initially be based on the written premium of each insurer as shown in the latest year's annual financial statement on file with the commissioner. The initial premium shall be adjusted by applying the same rate of premium charge as initially used to each insurer's written premium as shown on the annual statement for the second year following the year in which the initial premium charge is made. The difference between the initial premium charge and the adjusted premium charge shall be charged or credited to each member insurer by the association as soon as practical after the filing of the annual statements of the member insurers with the commissioner for the year on which the adjusted premium is based. In the case of an insurer that was a member insurer when the initial premium charge was made and that paid the initial assessment but is no longer a member insurer at the time of the adjusted premium charge by reason of its insolvency or its withdrawal from the state and surrender of its certificate of authority to transact insurance in this state, any credit accruing to that insurer shall be refunded to it by the association. "Net direct written premiums" shall mean the amount of gross premiums, less return premiums, received in that calendar year upon business done in this state, other than premiums received for reinsurance. In cases of a dispute as to the amount of the net direct written premium between the association and one of its members the written decision of the commissioner shall be final. The premium charged to any member insurer for any of the three categories or a category established by the association shall not be more than 2 percent of the net direct premium written in that category in this state by that member per year, starting on January 1, 2003, until December 31, 2007, and thereafter shall be one percent per year. The association may exempt or defer, in whole or in part, the premium charge of any member insurer, if the premium charge would cause the member insurer's financial statement to reflect an amount of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. However, during the period of deferment, no dividends shall be paid to shareholders or policyholders by the company whose premium charge was deferred. Deferred premium charges shall be paid when the payment will not reduce capital or surplus below required minimums. These payments shall be credited against future premium charges to those companies receiving larger premium charges by virtue of the deferment. After all covered claims of the insolvent insurer and expenses of administration have been paid, any unused premiums and any reimbursements or claims dividends from the liquidator remaining in any category shall be retained by the association and applied to reduce future premium charges in the appropriate category. However, an insurer which ceases to be a member of the association, other than an insurer that has become insolvent or has withdrawn from the state and has surrendered its certificate of authority following an initial assessment that is entitled to a refund based upon an adjusted assessment as provided above in this section, shall have no right to refund of any premium previously remitted to the association. The commissioner may suspend or revoke the certificate of authority to transact business in this state of a member insurer which fails to pay a premium when due and after demand has been made.
Interest at a rate equal to the current federal reserve discount rate plus 2 1/2 percent per annum shall be added to the premium of any member insurer which fails to submit the premium requested by the association within 30 days after the mailing request. However, in no event shall the interest rate exceed the legal maximum.
(Added by
Stats. 1969, c. 1347, p. 2699, § 3, eff.
§ 1063.6 Stay of
proceedings against insolvent insurer - Repealed by c. 270, § 1 eff.
§ 1063.6 Stay of proceedings against
insolvent insurer
All proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court in the state shall, subject to waiver by the association in specific cases involving covered claims and subject to waiver by the commissioner as to matters that are not covered claims, be stayed for 60 days from the date that an order of liquidation or an order of receivership with a finding of insolvency has been entered by a superior court in this state or by a court in the state of domicile of the insurer, and an additional time thereafter as may be determined necessary by the court to permit proper defense or conduct of all pending causes of action by the association or the commissioner, as applicable. The stay as to matters to which the insolvent insurer is a party shall be superseded by and when an injunction or stay order is entered by the court in this state having jurisdiction of the liquidation or the ancillary liquidation.
The liquidator, receiver, or statutory successor of an insolvent member insurer shall permit reasonable access by the association to the insolvent insurer's records as is necessary for the association to carry out its duties with regard to covered claims. In addition, the liquidator, receiver, or statutory successor shall provide the association with copies of these records upon the reasonable request of the association and at the expense of the association.
(Added by Stats. 1998, c. 270, § 2, eff. 1-1-99; Amended by Stats 1999, c. 83 (S.B. 966), § 119.)
§ 1063.7 Liquidator; powers and
duties
When a liquidator, domiciliary or ancillary, is appointed in this state for any member insurer, the liquidator shall promptly give notice of his or her appointment and a brief description of the contents of this article and the nature and functions of the association by prepaid first-class mail, to: (a) all persons known or reasonably expected to have or be interested in claims against the insurer, at the last known address within this state; (b) all insureds of the insurer, at the last known address within this state, accompanied by a notice of the date of termination of insurance; and (c) the board of governors of the association. Such notice may, but need not be, combined with the notice provided for in Section 1021. In the situations where notice is being provided by an ancillary liquidator, notice is only required to the extent information is available to provide the notice. The ancillary liquidator may also rely on the notice provided by the domiciliary liquidator to satisfy the notice requirements of this section. The liquidator may also require that producers of record of the insurer give prompt written notice of the same information, by first-class mail, to their insureds at the last known address within this state. The liquidator shall also promptly publish such notice in a newspaper of general circulation in the county where the insurer had its principal office in this state not less than once per week, for four weeks, and by publication elsewhere in this state as the court shall direct.
(Added by Stats. 1969, c. 1347,
p. 2699, § 3, eff.
Notwithstanding any other provision of law, the association shall be exempt from all license fees, income, franchise, privilege, property, or occupation taxes levied or assessed by this state, any municipality, county, or other political subdivision of this state. The rules of the commissioner promulgated pursuant to this article may exempt the association from: filing an annual statement, maintaining minimum required capital, paying any fees or reimbursements, or meeting any other requirement or doing any other thing required by this code or other laws relating to insurance.
(Added by Stats. 1969, c. 1347,
p. 2699, § 3, eff.
(a) The operation of the association shall at all times be subject to the regulation of the commissioner. The commissioner, or any deputy or examiner, or any person whom the commissioner shall appoint, shall have the power of visitation and examination into the affairs of the association and free access to all books, papers, and documents that relate to the business of the association, may summon and qualify witnesses under oath, and may examine officers, agents or employees, or any other person having knowledge of the affairs, transactions, or conditions of the association.
(b) Any member insurer aggrieved by any action or decision of the association may appeal to the commissioner within 30 days after the action or decision of the association and after exhaustion of administrative remedies may seek court relief as provided in Section 12940.
(Added by
Stats. 1969, c. 1347, p. 2699, § 3, eff.
All orders or decisions of the commissioner made pursuant to Chapter 1347, Statutes of 1969 (of which this article is a part) and the provisions thereof as amended from time to time, shall be subject to judicial review as provided in Section 12940.
(Added by
Stats. 1969, c. 1347, p. 2699, § 3, eff.
§ 1063.11 Rules,
regulations and orders
The commissioner may, upon notice and opportunity for all interested parties to be heard, issue such rules, regulations and orders as may be necessary to carry out the provisions of this article. Such rules and regulations shall be adopted, amended or repealed in accordance with Chapter 4.5 (commencing with Section 11371) or Part 1 of Division 3 of Title 2 of the Government Code.
(Added by Stats. 1969, c. 1347, p. 2699, § 3, eff. Sept.2, 1969.)
§ 1063.12. Liability limits;
indemnification against costs and expenses; proration of costs and expenses;
application of section
(a) The association, its member insurers, and its officers, directors, agents or employees of the association, or its member insurers, shall under no circumstances be liable for any sum in excess of the amount of covered claims of the insolvent insurer, as defined under subdivision (c) of Section 1063.1 of this article and the costs of administration and the costs of loss adjustment, investigation and defenses relating to claims thereunder.
(b) Any person or member made a party to any action, suit or proceeding because such person or member served on the board of governors or on a committee or was an officer or employee of the association shall be held harmless and be indemnified by the association against all liability and costs (including the amounts of judgments, settlements, fines or penalties) and expenses incurred in connection with such action, suit or proceeding; provided, however, such indemnification shall not be provided on any matter in which the person or member shall be finally adjudged in any such action, suit or proceeding to have committed a breach of duty involving gross negligence, dishonesty, willful misfeasance or reckless disregard of the responsibilities of his office.
(c) The costs and expenses of such indemnification shall be prorated and paid for by the members in the same manner as provided in the plan of operations for the proration of premiums.
(d) The provisions of this section shall not be construed as creating any right in any third person, and shall be applicable only as between the association and its member insurers and its officers, directors, agents, or employees of the association or its member insurers.
(Added by Stats. 1969, c. 1347, p. 2699, § 3, eff. Sept. 2 1969; Amended by Stats. 1970, c. 1205, p. 2125, § 12; Amended by Stats. 1979, c. 384, p. 1448, § 4.)
§ 1063.13 Members
prohibited from engaging in unlawful trade practice
No member insurer of the association shall engage in the unlawful trade practice defined and condemned in subdivision (g) of Section 790.03.
(Added by Stats. 1970, c. 1205, p. 2126, § 13.)
§ 1063.14 Plan of operation; recoupment of
assessments by surcharge on premiums
(a) The plan of operation adopted pursuant to subdivision (c) of Section 1063 shall contain provisions whereby each member insurer is required to recoup over a reasonable length of time a sum reasonably calculated to recoup the assessments paid by the member insurer under this article by way of a surcharge on premiums charged for insurance policies to which this article applies. Amounts recouped shall not be considered premiums for any other purpose, including the computation of gross premium tax or agents' commission.
(b) The amount of any surcharge shall be separately stated on either a billing or policy declaration sent to an insured. The association shall determine the rate of the surcharge and the collection period for each category and these shall be mandatory for all member insurers of the association who write business in those categories. Member insurers who collect surcharges in excess of premiums paid pursuant to Section 1063.5 for an insolvent insurer shall remit the excess to the association as an additional premium within 30 days after the association has determined the amount of the excess recoupment and given notice to the member of that amount. The excess shall be applied to reduce future premium charges in the appropriate category.
(c) The plan of operation may permit a member insurer to omit collection of the surcharge from its insureds when the expense of collecting the surcharge would exceed the amount of the surcharge. However, nothing in this section shall relieve the member insurer of its obligation to recoup the amount of surcharge otherwise collectible.
(Added by Stats. 1981, c. 1154,
p. 4617, § 4. Amended by Stats. 1982, c. 622, p. 2614, § 2, eff.
§ 1063.145 Surcharge
statement; association description and purpose
The statement of the amount of surcharge required to be provided under subdivision (b) of Section 1063.14 shall include a description of, and purpose for, the California Insurance Guarantee Association, as follows:
Companies writing property and casualty insurance business in
(Added by Stats. 1988, c. 798, § 2.)
§ 1063.15 Workers' compensation matters;
time periods applicable to association
In any workers' compensation matter the association shall have the same period of time within which to act or to exercise a right as is accorded to the insurer by the Labor Code, and those time periods shall be tolled against the association until 45 days after the appointment of a domiciliary or receiver.
(Added by Stats. 1991, c. 537 (S.B.1104), § 2.)
§ 1063.16. Request to issue bonds pursuant
to Article 14.25
The association, to the extent it
determines necessary or desirable, may request the department to issue bonds
pursuant to Article 14.25 (commencing with Section 1063.50) to provide funds to
pay covered claims of insolvent insurers. The association may act as agent of
the department to collect premium payments levied by the department on its
member insurers. If the association borrows the proceeds of the bonds from the
department, the association may assess an additional premium, not to exceed 2
percent of the net direct premium written by the member insurer, to be applied
exclusively to the repayment of the loan. The revenue received from the
additional premium shall be pledged to the repayment of the loan and shall be
used exclusively for that purpose until the bonds have been paid or provision
for the payment of them has been made. (Stats. 1996, c. 793, § 1, eff.
1-1-97.)
ARTICLE 14.25 INSURANCE ASSESSMENT BOND
FUND
Article 14.25 (commencing with Section
1863.50) is added to Chapter 1 of Part 2 of Division 1 of the Insurance Code, to
read: Article 14.25. Insurance Assessment Bond Fund
Sec.
1063.50
Findings
and declarations; purpose of article
1063.51
Definitions
1063.52
Creation; deposit of bond proceeds and
insurer assessments; continuous appropriation purpose
1063.53
Claims
exceeding capacity to pay following natural disaster; declaration of emergency;
requesst for
1063.54
Issuance
of bonds; purpose; assessments for repayment of bonds; assumption of insolvent
insurers’
1063.55
Order
authorizing bonds; bond provisions; sale
1063.56
Preparation of bonds;
sale
1063.57
Refunding bonds; issuance; purpose;
applicable statutory provisions
1063.58
Refunding bonds; sale or exchange; use of
proceeds
1063.59
Personal
liability or accountability; issuance of bonds
1063.60
Negotiable bond anticipation
notes
1063.61
Bond
agreements; state pledge
1063.62
Bonds as
legal investments and securities
1063.63
Assessment or loan repayment revenues;
pledging to secure payment of bonds or to pay costs
1063.64
Agreements with financial institutions;
purpose; reimbursement obligations
1063.65
Nature
of obligation; statement on face of bonds
1063.66
Taxation
1063.67
Employment of
professionals
1063.68
Agreements to obtain financing; application
of Public Contract Code
§ 1063.50. Findings and declarations; purpose of
article
The
California Insurance Guarantee Association is authorized to pay and discharge
certain claims of insolvent insurers as defined in Section 1063.1 through the
collection of premiums from its members, which amounts are limited by law and
take time to assess and collect. If a natural disaster such as a major
earthquake or fire were to occur in
(Stats. 1996, c. 793, § 2.)
§ 1063.51. Definitions
(a) The terms "member insurer," "insolvent insurer," and "covered claims" have the meanings assigned those terms in Section 1063.1.
(b) "CIGA" means the California Insurance Guarantee Association, established pursuant to Article 14.2 (commencing with Section 1063).
(c) "Commissioner" means the Insurance Commissioner.
(d) "Board" means the board of governors of CIGA.
(e) "Department" means the Department of Insurance.
(f) "Insurance Assessment Bond Fund" is the fund created pursuant to Section 1063.52.
(g) "Insurance assessments" means the premiums collected by the department or by CIGA pursuant to Section 1063.5, 1063.53, or 1063.54.
(Stats. 1996, c. 793, § 2, eff
1-1-97.)
§ 1063.52. Creation; deposit of bond proceeds and
insurer assessments; continuous appropriation; purpose
The Insurance Assessment Bond Fund is hereby created in the State Treasury. Proceeds from the sale of bonds issued pursuant to this article and insurance assessments to repay bonds issued pursuant to this article shall be deposited in the Insurance Assessment Bond Fund.
All money in the fund is hereby continuously appropriated to the department for the exclusive purpose of carrying out the purposes of this part, and, notwithstanding the provisions of Chapter 2 (commencing with Section 12850) of Part 2.5 of Division 3 of Title 2 of the Government Code or the provisions of Article 2 (commencing with Section 13320) of Chapter 3 of Part 3 of Division 3 of Title 2 of the Government Code, or the provisions of Sections 11032 and 11033 of the Government Code, application of the fund shall not be subject to the supervision or budgetary approval of any other officer or division of state government. The department may pledge any or all of the moneys in the fund as security for payment of the principal of, and interest and redemption premiums, if any, on, bonds issued pursuant to this article, and, for that purpose or as necessary or convenient to the accomplishment of any other purpose under this article, may divide the fund into separate accounts.
(Stats. 1996, c. 793, § 2, eff
1-1-97.)
§ 1063.53. Claims exceeding capacity to pay
following natural disaster; declaration of emergency; request
for
(a) In the event a natural disaster such as an earthquake or fire results in covered claim obligations currently payable and owed by the association in excess of its capacity to pay from current funds and current premium assessments allowable under Section 1063.5, and upon a declaration of emergency by the Governor or the President of the United States, the board, in its sole discretion, may by resolution request the department to issue bonds pursuant to this article to provide funds for the payment of covered claims and expenses related thereto. Should the bonds be issued, the department shall have the authority to levy upon member insurers insurance assessments in the amount necessary to pay the principal of and interest on the bonds, and to meet other requirements established by agreements relating to the bonds. The department may enter into an agreement with CIGA for CIGA to act as agent for the department to collect the assessments.
The department may assume the obligation to pay the covered claims of insolvent insurers for the purpose of paying the claims with the proceeds of the bonds. The obligation of the department to pay claims shall be a limited obligation payable only our of the proceeds of the bonds. The department shall enter into an agreement with CIGA for CIGA to act as agent of the department to adjust and administer the payment of the claims. Premium payments collected pursuant to this authority may only be used for servicing the bond obligations provided for in this section and may be pledged for that purpose. Premium assessments made pursuant to this section shall also be subject to the surcharge provisions in Sections 1063.14 and 1063.145.
(b) In addition to the premium assessments provided for in this section, the board in its discretion and subject to other obligations of the association, may utilize current funds of the association, premium assessments made under Section 1063.5, and advances or dividends received from the liquidators of insolvent insurers to pay the principal and interest on any bonds issued at the board's request.
(Stats. 1996, c. 793, § 2, eff
1-1-97.)
§ 1063.54. Issuance of bonds; purpose; assessments for repayment of bonds; assumption of insolvent insurers’
Notwithstanding any other provision of law, the department, in accordance with this article and at the request of the board pursuant to Section 1063.53 may issue bonds in order to provide for the payment of covered claims of insolvent insurers or in order to make loans to CIGA, which moneys CIGA is hereby authorized to borrow, to provide for the payment of covered claims of insolvent insurers. For this purpose, the department or CIGA may levy upon member insurers insurance assessments in the amounts necessary to pay the principal of and interest on the bonds and to meet other requirements established by agreements relating to the bonds. The department shall enter into an agreement with CIGA for CIGA to act as agent for the department to collect the assessments. The department may assume the obligation to pay the covered claims of insolvent insurers for the purpose of paying the claims with the proceeds of the bonds. The obligation of the department to pay claims shall be a limited obligation payable only out of the proceeds of the bonds. The department shall enter into an agreement with CIGA for CIGA to act as agent of the department to adjust and administer the payment of claims. The total bonded indebtedness authorized pursuant to this article shall not exceed the level that can be supported by the revenues dedicated to retiring the bonds.
(Stats. 1996, c. 793, § 2, eff
1-1-97.)
§
1063.55. Order authorizing bonds;
bond provisions; sale
The bonds shall be authorized by order of the commissioner, shall be in the form, shall bear the date or dates, and shall mature at the time or times as the order or the indenture authorized by the order may provide, except that no bond shall mature more than 20 years from the date of its issue. The bonds may be issued as serial bonds or as term bonds, or as a combination thereof, and, notwithstanding any other provision of law, the amount of principal of, or interest on, bonds maturing at each date of maturity need not be equal. The bonds shall bear interest at the rate or rates, variable or fixed or a combination thereof, be in the denominations, be in the form, either coupon or registered, carry the registration privileges, be executed in the manner, be payable in the medium of payment at the place or places within or without the state, be subject to the terms of redemption, and contain the terms and conditions as the order or indenture may provide. The bonds shall be sold at public or private sale by the Treasurer at, above, or below the principal amount thereof, on the terms and conditions and for the consideration in the medium of payment that the Treasurer shall determine prior to the sale.
(Stats. 1996, c. 793, § 2, eff
1-1-97.)
Upon receipt of an order of the commissioner authorizing the issuance of bonds, the Treasurer shall provide for their preparation in accordance with the order. The bonds authorized to be issued shall be sold by the Treasurer, at public sale or at private sale, as directed by the order. In the case of a public sale, (a) the bonds shall be sold by the Treasurer at such times as may be fixed by him or her, and upon such notice as he or she may deem to be advisable, upon sealed bids, to the bidder whose bid will result in the lowest net interest cost on account of the bonds, and (b) if no bids are received, or if the Treasurer determines that the bids are not satisfactory, the Treasurer may reject all bids received, if any, and either readvertise or sell the bonds at private sale.
(Stats. 1996, c. 793, § 2, eff
1-1-97.)
§
1063.57. Refunding bonds; issuance;
purpose; applicable statutory provisions
The
department may provide for the issuance of refunding bonds for the purpose of
refunding any bonds then outstanding which have been issued under the provisions
of this article, including the payment of any redemption premium thereon and any
interest accrued or to accrue to the date of redemption of those bonds. The
issuance of the obligations, the maturities and other details thereof, the
rights of the holders thereof, and the rights, duties, and obligations of the
department in respect of the same shall be governed by the provisions of this
article that relate to the issuance of bonds, insofar as those provisions may be
appropriate therefor.
(Stats. 1996, c. 793, § 2, eff
1-1-97.)
§
1063.58. Refunding bonds; sale or
exchange; use of proceeds
Refunding bonds issued as provided in Section 1063.57 may be sold, or exchanged for outstanding bonds issued under this article and, if sold, the proceeds thereof may be applied, in addition to any other authorized purposes, to the purchase, redemption, or payment of the outstanding bonds. Pending the application of the proceeds of the refunding bonds, with any other available moneys, (a) to the payment of the principal, accrued interest, and any redemption premium on the bonds being refunded, (b) to the payment of any interest on those refunding bonds, or (c) to any expenses incurred in connection with the refunding, the proceeds may be invested in obligations permitted under the bond resolution authorizing the issuance of refunding bonds.
(Stats. 1996, c. 793, § 2, eff.
1-1-97.)
§
1063.59. Personal liability or
accountability; issuance of bonds
The Treasurer or any other person executing the notes or bonds shall not be subject to any personal liability or accountability by reason of the issuance thereof.
(Stats. 1996, c. 793, § 2, eff.
1-1-97.)
§
1063.60. Negotiable bond
anticipation notes
The department may issue negotiable bond anticipation notes and may refund those notes from time to time. Bond anticipation notes may be paid from the proceeds of sale of the bonds of the department in anticipation of which they were issued. Bond anticipation notes and agreements relating thereto and the order or orders authorizing those notes and agreements may contain any provisions, conditions, or limitations that a bond, agreement relating thereto, or bond order of the department may contain.
(Stats. 1996, c. 793, § 2, eff.
1-1-97.)
§
1063.61. Bond agreements; state
pledge
The state does hereby pledge to and agree with the holders of any bonds issued under this article that the state will not limit or alter the rights hereby vested in the department to fulfill the terms of any agreements made with the holders thereof or in any way impair the rights and remedies of those holders until the bonds, together with the interest thereon, with interest on any unpaid installments of interest, and all costs and expenses in connection with any action or proceeding by or on behalf of those holders, are fully met and discharged. The department is authorized to include this pledge and agreement of the state in any agreement with the holders of the notes or bonds.
(Stats. 1996, c. 793, § 2, eff.
1-1-97.)
§
1063.62. Bonds as legal investments
and securities
Bonds issued under this article shall be legal investments in which all public officers and public bodies of this state, its political subdivisions, all municipalities and municipal subdivisions, all insurance companies and associations and other persons carrying on an insurance business, all banks, bankers, banking institutions, including savings and loan associations, building and loan associations, trust companies, savings banks and savings associations, investment companies and other persons carrying on a banking business, all administrators, guardians, conservators, executors, trustees and other fiduciaries, and all other persons whatsoever who are now or may hereafter be authorized to invest in bonds or in other obligations of the state, may properly and legally invest funds, including capital, in their control or belonging to them. The bonds may be used by those private financial institutions, persons, or associations as security for public deposits. The bonds are also hereby made securities which may properly and legally be deposited with and received by all public officers and bodies of the state or any agency or political subdivision of the state and all municipalities and public corporations for any purpose for which the deposit of bonds or other obligations of the state is now or may hereafter be authorized by law, including deposits to secure public funds.
(Stats. 1996, c. 793, § 2, eff.
1-1-97.)
§ 1063.63. Assessment or loan repayment revenues; pledging to secure repayment of bonds or to pay costs
All or any part of the revenues from the insurance assessments or from loan repayments by CIGA may be pledged by the department to secure the repayment of any bonds issued under this article and to pay costs incurred in the issuance or administration of the bonds. Any pledge made to secure the bonds shall be valid and binding from the time the pledge is made. The revenues pledged and thereafter received by the department or by any trustee, depository or custodian shall be deposited in a separate account and shall be immediately subject to the lien of the pledge without any physical delivery thereof or further act, and the lien of the pledge shall be valid and binding against all parties having claims of any kind in tort, contract, or otherwise against the department, CIGA, or the trustee, depository, or custodian, irrespective of whether the parties have notice thereof. The indenture or agreement by which the pledge is created need not be recorded. All of those insurance assessments, to the extent so pledged, are hereby continuously appropriated for that purpose.
(Stats. 1996, c. 793, § 2, eff.
1-1-97.)
§
1063.64. Agreements with financial
institutions; purpose; reimbursement obligations
The department and CIGA are each authorized to enter into those contracts or agreements with those banks, insurers, or other financial institutions that it determines are necessary or desirable to improve the security and marketability of the bonds issued under this article. Those contracts or agreements may contain an obligation to reimburse, with interest, any of those banks, insurers, or other financial institutions for advances used to pay the purchase price of, or principal or interest on, the bonds. Any such reimbursement obligation shall be payable solely from, and may be secured by a pledge of, the revenues derived from the insurance assessments levied for that purpose or from loan repayments by CIGA.
(Stats. 1996, c. 793, § 2, eff.
1-1-97.)
§ 1063.65. Nature of obligation; statement on face
of bonds
The bonds shall not be, and shall state on their face
that they are not, general obligations of the department or of the state or any
political subdivision thereof, but are limited obligations of the state. Bonds
issued under the provisions of this article shall not be deemed to constitute a
debt or liability or general obligation of the state or any political
subdivision thereof other than as provided in this article and shall be payable
solely from funds herein provided therefor. All of the bonds and any prospectus
or other printed representation of the department concerning the bonds shall
contain on the face thereof a statement to the following effect: "Neither the
faith and credit nor the taxing power of the State of
The issuance of bonds under the provisions of this article shall not directly or indirectly or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation whatever therefor or to make any appropriation for their payment.
(Stats. 1996, c. 793, § 2, eff.
1-1-97.)
§
1063.66.
Taxation
Bonds issued by the department pursuant to this article, their transfer and the income therefrom, shall be free from taxation of every kind by the state and every city or county or other political subdivision of the state, except inheritance and gift taxes.
(Stats. 1996, c. 793, § 2, eff.
1-1-97.)
§
1063.67. Employment of
professionals
The department is authorized and empowered to employ financial consultants, advisers, legal counsel, and accountants as may be necessary in its judgment in connection with the issuance and sale of any bonds or other obligations of the department. Payment for these services may be made out of the proceeds of the sale of the bonds or other obligations. The department may delegate to the Treasurer the employment of those professionals.
(Stats. 1996, c. 793, § 2, eff.
1-1-97.)
§
1063.68. Agreement to obtain
financing; application of Public Contract Code
The provisions of Section 10295 and Sections 10335 to 10382, inclusive, of the Public Contract Code shall not apply to agreements entered into by the department or Treasurer in connection with the obtaining of financing.
(Stats. 1996, c. 793, § 2, eff.
1-1-97.)
Article 14.26 Workers’ Compensation Bond
Fund
Article 14.26 (commencing with Section 1063.70) is
added to Chapter 1 of Part 2 of Division 1 of the Insurance Code, to read:
Article 14.26. Workers’
Compensation Bond Fund
§ 1063.70. The California Insurance
Guarantee Association is authorized to pay and discharge certain claims of
insolvent insurers as defined in Section 1063.1 through the collection of
premiums from its members, which amounts are limited by law and take time to
assess and collect. This article
provides for the ability of CIGA to request the issuance of bonds by the
California Infrastructure and Economic Development Bank pursuant to Article 8
(commencing with Section 63049.6) of Chapter 2 of Division 1 of Title 6.7 of the
Government Code to more expeditiously and effectively provide for the payment of
covered claims that arise as a result of the
insolvencies of insurance companies providing workers' compensation
insurance. The bonds are to be paid
from the special bond assessments assessed by CIGA for those purposes and the
other funds provided pursuant to Section 1063.74. Special bond assessments to repay bonds
issued for payment of workers compensation benefits shall be assessed, to the
extent necessary, for the claims category.
It is a public purpose and in the best interest of the public health,
safety, and general welfare of the residents of this state to provide for the
issuance of bonds to pay claimants and policyholders having covered claims
against insolvent insurers operating in this state.
§ 1063.71. (a) The terms "member insurer,"
"insolvent insurer," and "covered claims" have the meanings assigned those terms
in Section 1063.1.
(b) The terms "CIGA," "commissioner," "board," and "department" have the
meanings assigned those terms in Section 1063.51.
(c) "Bank" means the California Infrastructure and Economic Development
Bank created pursuant to Article 1 (commencing with Section 63020) of Chapter 2,
Division 1 of Title 6.7 of the Government Code.
(d) "Bonds" means bonds issued by the Bank pursuant to Article 8
(commencing with Section 63049.6) of Chapter 2 of Division 1 of Title 6.7 of the
Government Code to provide funds for the payment of the covered claims and the
adjusting and defense expenses relating to those claims that are issued at the
request of the board pursuant to Section 1063.73.
(e) "Collateral" means the special bond assessments, the right of CIGA to
be paid the special bond assessments, all revenues therefrom, the separate
account of the Workers' Comp Bond Fund into which special bond assessments are
deposited, and the proceeds thereof.
(f) "Special bond assessment" means the premiums collected by CIGA
pursuant to Section 1063.74.
(g) "Workers' Comp Bond Fund" means the fund created pursuant to Section
1063.72.
§ 1063.72. The Workers' Comp Bond Fund is
hereby created. Proceeds from the
sale of bonds shall be deposited in a separate account in the Workers' Comp Bond
Fund. Only CIGA, and with respect
to payment of the bonds, the trustee for the bonds, shall have the ability to
authorize disbursements from the separate
account. Special bond assessments
shall be deposited in a separate account in the Workers' Comp Bond Fund and
shall not be commingled with any other moneys. Only the trustee for the bonds shall
have the ability to authorize disbursements from this separate account, and CIGA
shall have no right or authority to authorize disbursements from this separate
account. The Workers' Comp Bond
Fund shall be maintained with the trustee for the bonds. Following payment or
provision for payment of the bonds, amounts in the Workers' Comp Bond Fund shall
be transferred to the fund that is designated in the indenture. All money in the Workers' Comp Bond Fund
and all special bond assessments shall be used by CIGA for the exclusive purpose
of carrying out the purposes of this part, and, notwithstanding any other
provisions of law, the Workers' Comp Bond Fund shall not be a state fund, shall
not be subject to the rules or procedures of any fund in the State Treasury, and
application of the fund shall not be subject to the supervision or budgetary
approval of any officer or division of state government. CIGA and the trustee for the bonds may
as necessary or convenient to the accomplishment of any other purpose under this
article, divide the fund into separate accounts.
§ 1063.73. In the event CIGA determines
that the insolvency of one or more member insurers providing workers'
compensation insurance will result in covered claim obligations for workers'
compensation claims in excess of CIGA's capacity to pay from current funds, the
board, in its sole discretion, may by resolution request the Bank to issue bonds
pursuant to Article 8 (commencing with Section 63049.6) of Chapter 2 of Division
1 of Title 6.7 of the Government Code to provide funds for the payment of the
covered claims and the adjusting and defense expenses relating to those
claims. Notwithstanding any other
provision of law, CIGA is hereby authorized to borrow proceeds of the bonds to
provide for those purposes. CIGA
may request the Bank to issue bonds pursuant to Article 8 (commencing with
Section 63049.6) of Chapter 2 of Division 1 of Title 6.7 of the Government
Code. CIGA shall provide the
commissioner with a copy of the request and the commissioner may, within 30 days
of receipt of the request, modify, cancel, or require a delay in the requested
issuance. The proceeds of bonds
issued for workers' compensation benefits may be used by CIGA to reimburse funds
advanced or temporarily loaned from other categories to fund workers'
compensation claims.
§ 1063.74. (a) Notwithstanding any other
limits on assessments, CIGA shall have the authority to levy upon member
insurers special bond assessments in the amount necessary to pay the principal
of and interest on the bonds, and to meet other requirements established by
agreements relating to the bonds.
The assessments shall be collected only from the member insurers
providing workers' compensation insurance, in the same manner as separate
premium payments are used to pay the claims and costs allocated to that category
pursuant to Section 1063.5. Special
bond assessments made pursuant to this section shall also be subject to the
surcharge provisions in Sections 1063.14 and 1063.145.
(b) In addition to the special bond assessments provided for in this
section, the board in its discretion and subject to other obligations of the
association, may utilize current funds of CIGA, premium assessments made under
Section 1063.5, and advances or dividends received from the liquidators of
insolvent insurers to pay the principal and interest on any bonds issued at the
board's request and shall utilize, to the extent feasible, the recoveries from
the liquidators of the estates of insolvent workers' compensation carriers to
pay bonds issued at the board's request to fund workers' compensation
claims.
§ 1063.75. Any bonds issued to provide
funds for covered claim obligations for workers' compensation claims shall be
issued prior to
§ 1063.76. (a) The collateral shall be
used solely for the purpose of paying the principal and redemption price of, and
interest on, the bonds and any amounts owing by CIGA under contracts entered
into pursuant to Section 1063.77, and shall not be used for any other
purpose. Member insurers shall pay
the special bond assessments directly to the trustee for the bonds. Any collateral in the possession of CIGA
shall be held by CIGA in trust for the benefit of the trustee for the
bonds.
(b) Upon the issuance of the first bond, the collateral shall be subject
to a first priority statutory lien in favor of the trustee for the bonds, for
the benefit of the holders of the bonds and the parties to the contracts entered
into pursuant to Section 1063.77, to secure the payment of the principal and
redemption price of, and interest on, the bonds and any amounts owing by CIGA under contracts entered into pursuant to Section
1063.77. This lien shall arise by
operation of law automatically without any action on the part of CIGA, the bank,
or any other person. This lien is a
continuous lien on all collateral effective from the time the first bond is
issued, whether or not a particular item of collateral exists at the time of the
issuance. From the time the first
bond is issued, this lien shall be valid, effective, prior, perfected, binding,
and enforceable against CIGA, its successors, purchasers of the collateral,
creditors, and all others asserting rights in the collateral, irrespective of
whether those parties have notice of the lien and without the need for any
physical delivery, recordation, filing, or further act. Upon default in the payment of the
principal or redemption price of, or interest on, the bonds, or any amounts
owing by CIGA under contracts entered into pursuant to Section 1063.77, the
trustee for the bonds shall be entitled to foreclose or otherwise enforce this
lien on the collateral.
(c) No person acting under any provision of law or principle of equity
shall be permitted in any way to impede or in any manner interfere with (1) the
full and timely payment of the principal and redemption price of, and interest
on, the bonds and any amounts owing by CIGA under contracts entered into
pursuant to Section 1063.77, or (2) the statutory lien created by this section
and the full and timely application of the collateral to the payment of the
principal and redemption price of, and
interest on, the bonds and any amounts owing by CIGA under contracts entered
into pursuant to Section 1063.77.
(d) None of the collateral shall be subject to garnishment, levy,
execution, attachment, or other process, writ (including writ of mandate), or
remedy in connection with the assertion or enforcement of any debt, claim,
settlement, or judgment against the state, the department, the commissioner, the
bank, CIGA, or the board, nor shall any of the collateral be subject to the
claims of any creditor of the state, the department, the commissioner, the bank,
CIGA, or the board. This paragraph
shall not limit the rights or remedies of the trustee for the bonds, the holders
of the bonds, or the parties to contracts entered into pursuant to Section
1063.77.
(e) As long as any bond is outstanding, CIGA shall not be subject to
Article 14 (commencing with Section 1010) or Article 14.3 (commencing with
Section 1064.1) of Chapter 1 of Part 2 of Division 1 of the Insurance
Code.
§ 1063.77. CIGA is authorized to enter
into those contracts or agreements with those banks, insurers, or other
financial institutions or parties that it determines are necessary or desirable
to improve the security and marketability of,
or to manage interest rates or other risks associated with, the bonds issued
pursuant to Article 8 (commencing with Section 63049.6) of Chapter 2 of Division
1 of Title 6.7 of the Government Code.
Those contracts or agreements may contain an obligation to reimburse,
with interest, any of those banks, insurers, or other financial institutions or
parties for advances used to pay the purchase price of, or principal or interest
on, the bonds or other obligations.
(Added by 2003, c. 635 (A.B.
227), § 7.)