SECTIONS 10490-10505.1 - California Statutes

INSURANCE CODE

SECTION 10490-10505.1

10490. This article is applicable only to life and disability
insurance. Except as otherwise expressly permitted by this code or
when transacted pursuant to or expressly exempted by this article,
life or disability insurance shall not be transacted in this State by
any person other than a corporation. A person shall not transact
life or disability insurance in this State except pursuant to a valid
and unrevoked certificate of authority issued by the commissioner
or, after registration with the commissioner, under a valid and
unrevoked certificate of exemption issued by the commissioner
pursuant to this article. Any person subject to or exempted from
Chapter 10 of this part is also exempted from this article.

10490.1. Any nonprofit incorporated or unincorporated mutual
benefit association in existence prior to January 1, 1945, which
confines its membership to officers and employees of a common
employer or group of affiliated or related employers including
persons who were such officers or employees at the time of becoming
members and which pays death benefits only to nominees or the estates
of deceased members, or pays disability benefits in amounts not
exceeding (except in the case of unemployment compensation disability
benefits under the provisions of the Unemployment Insurance Act) one
thousand five hundred dollars ($1,500) in the aggregate in any one
calendar year on account of the disability of any one person, or
which pays both such benefits is exempt from the provisions of this
code relating to such life insurance in respect to such members and
to such disability insurance in respect to such members and their
dependents.

10490.2. If an association described in Section 10490.1 has
operated pursuant thereto since January 1, 1945, it may procure a
certificate of exemption from the commissioner upon meeting all of
the requirements of this article relating thereto except those of
Section 10494. Thereafter such association shall be subject to:
(a) All of the requirements of this article relating to an
association holding a certificate of exemption except Section 10494,
and
(b) The limitations of Section 10490.1, except that it may pay
disability benefits in amounts not exceeding three thousand six
hundred dollars ($3,600) in the aggregate in any one calendar year on
account of the disability of any one person.

10491. Persons possessing a valid and unrevoked certificate of
authority to transact life or disability or life and disability
insurance issued by the commissioner are not subject to this article.

10492. Any incorporated or unincorporated benefit and relief
association organized on or after January 15, 1951, of either
nonprofit or charitable character may, if it complies with the
requirements of Section 10493 (c) (1), (2), (3), or (6) and the other
requirements of this article, procure a certificate of exemption
from the commissioner.

10493. Any incorporated or unincorporated benefit and relief
association organized before January 15, 1951, may procure a
certificate of exemption from the commissioner if it complies with
all of the following:
(a) All of the other requirements of this article.
(b) As respects life or disability or life and disability
insurance transacted by it, it is of an entirely nonprofit nature.
(c) Any one of the following requirements as to membership and
purpose:
(1) It is composed of and its membership limited to the appointive
officers and employees of a public school district or districts
and/or the pupils of any such district or districts, or of any
private school or schools.
(2) It is composed of and its membership limited to the appointive
officers and employees of a municipal playground system, or the
systems of two or more municipalities united in a league, federation
or other association for the purpose of promoting intercity
competitions or other activities, and/or the participants in dancing,
recreational, sporting, educational, social and/or theatrical
activities sponsored and/or directed by such system or systems and
carried on through the use of any of the facilities of such system or
systems.
(3) Its membership in this state is 1,000 or more and it is either
an organization of a purely religious or benevolent character or its
membership is limited to the members of such an organization.
(4) It is composed of and its membership is limited to the members
of another organization which other organization is of a purely
religious or benevolent character and has a total membership in this
state of not less than 1,000.
(5) It is a domestic organization, lodge, society or order which
prior to September 19, 1947, provided life or disability benefits or
both such benefits to its members and
(A) Is of a charitable, benevolent or beneficent character or
becomes such within one year from September 4, 1951, and in both
instances is thereafter of such character, and
(B) Operates in such a manner that the payment of such benefits
even though it be one of the express purposes of such organization,
lodge or order, is as a matter of fact incidental to its charitable,
benevolent or beneficent purposes or within one year from September
4, 1951, operates in such a manner and in both instances thereafter
operates in such a manner.
(6) Officers and employees of a common employer, and related
dependents of such officers and employees, comprising wives, husbands
and unmarried dependent children under 19 years of age, and living
in the same household.
(d) Pays a filing fee in the amount of seven hundred eight dollars
($708).

10494. Such a benefit and relief association shall not provide for
payment of a death benefit of more than two thousand dollars ($2,000)
or for disability benefits of more than five hundred dollars ($500)
to any one person in any one period of 12 consecutive months and
shall not issue to its members a policy or benefit certificate or any
other evidence of benefits except that found in the articles of the
association or the bylaws thereof. However, a benefit and relief
association described in paragraph (1) of subdivision (c) of Section
10493 may provide for a death benefit up to two thousand dollars
($2,000), disability benefits up to one thousand dollars ($1,000) or
insurance protection for medical and hospital expenses up to one
thousand five hundred dollars ($1,500), or any combination or all
thereof.

10494.2. Any incorporated or unincorporated benefit and relief
association, the membership and insurance in which are restricted to
the ministers, priests, rabbis, rectors, vicars, pastors, or readers
of any conference, presbytery, diocese, convention or synod or any
other similar body of a religious organization (a portion of whose
territory is located in the State of California) and the employees of
such religious body may procure a certificate of exemption from the
commissioner if it does not provide for a death benefit (life and/or
accidental death insurance) greater than two thousand dollars
($2,000) or a disability benefit greater than two thousand dollars
($2,000), payable in any 12-month period; provided it complies with
all applicable provisions of this article.

10494.5. Any employer maintaining a plan for furnishing disability
insurance benefits to his employees for nonindustrial and
nonoccupational injuries or sickness, under which plan the employer
defrays 50 percent or more of the expense of such benefits, may
secure a certificate of exemption from the commissioner under this
article if such employer in respect to such plan otherwise complies
with and is subject to the requirements of this article. Such
compliance with this article need be only with respect to such plan
and not in respect to other business of the employer.

10494.6. Any employer who qualifies for a certificate of exemption
under Section 10494.5 by virtue of which certificate he or she
maintains a plan for furnishing disability benefits to his or her
employees may, if he or she elects, make available for the related
dependents of his or her employees, comprising wives, husbands and
unmarried dependent children living in the same household, a
supplemental plan of disability benefits containing any or all of the
following benefits, hospital, surgical and medical; provided, that
as to the supplemental plan the Insurance Commissioner finds that all
of the following exist:
(a) The supplemental plan shall be separately stated, setting out
all of the provisions of coverage.
(b) The plan shall set out the respective contributions of the
employer and employees. All contributions of employees received or
retained by the employer shall be trust funds and shall be separately
accounted for by the employer and may not inure to the benefit of
the employer in any manner whatsoever.
(c) The plan permits the disabled individual a free choice of
physician and surgeon, or podiatrist in the case of those services
that are within the scope of practice of podiatric medicine, as
defined in Section 2472 of the Business and Professions Code, and
hospital.
(d) The employer agrees to assume 50 percent of the cost of
maintaining the plan, and he or she further agrees to guarantee the
benefits if the contributions required for the supplementary benefits
are not sufficient to pay the cost of same. The funds necessary to
discharge the employer's 50 percent assumption shall be trust funds
and shall be separately accounted for by him or her.

10494.7. With respect to the supplemental plan described in Section
10494.6, the commissioner may, in addition to the regulations
permitted by Section 10498.6, promulgate other reasonable regulations
covering all matters set forth in Section 10494.6 and this section.
The commissioner shall require each employer making available such
supplemental plan to post with him security in the form of a bond of
an admitted surety insurer conditioned on the payment by the employer
of his obligations under the entire plan or of deposits with the
commissioner of securities approved by him to secure the payment of
such obligations. Such security shall be equal to the greater of (a)
twenty-five thousand dollars ($25,000), (b) the estimated
contributions of the employees under the entire plan for the ensuing
year, (c) the contributions paid by the employees under the entire
plan during the preceding year, or (d) one-half of all of the amounts
of benefit either paid or incurred by the employer under the entire
plan during the preceding year.
If, on examination or investigation of any plan which includes
benefits for dependents, the commissioner finds that the aggregate of
the trust funds separately held for the supplemental plan and the
security in the form hereinabove described may not, in his judgment,
be adequate to guarantee the payment of outstanding and incurred
liabilities of the entire plan, he may require the employer to post
such additional security as will, in his judgment, be adequate to
guarantee the payment of all outstanding and incurred liabilities of
the entire plan, and, if the employer fails to post such additional
security, he may revoke the employer's certificate of exemption.

10495. A certificate of exemption may be procured from the
commissioner by filing with him or her certified copies of the
articles of incorporation, association, bylaws, rules and
regulations, or other organization or governing documents of the
applicant together with certified copies of any evidences of
insurance which it may issue and a statement of the operations of the
applicant. There shall also be filed with the application a
statement of the financial condition and income and disbursement
exhibit of the applicant in such form as the commissioner may, in his
or her discretion, find necessary in order to determine whether the
applicant complies with the applicable requirements of this article.
The commissioner may, pursuant to Article 4 (commencing with Section
730) of Chapter 1 of Part 2 of Division 1, require from any person
transacting life or disability insurance, whether or not an applicant
for a certificate of exemption, such information as will enable him
or her to determine whether or not the person is transacting life or
disability insurance in conformity with or in violation of this code.

10496. Any person transacting life or disability insurance without
a certificate of authority so to do issued by the commissioner shall
not give, allow, or promise to give or allow any compensation for
procuring new members. "Compensation", as used herein, is confined to
a payment, percentage, bonus, or monetary credit given, promised, or
allowed for the securing of new members which, directly or by any
arrangement, understanding, or device, is based, in whole or in part,
upon the number of new members or reinstatements procured, or the
nominal or contingent value of their certificates or policies, or the
net or gross amount of dues or premiums paid or payable by them or
upon any other variable result or contingency.

10497. If the commissioner finds that an applicant for a
certificate of exemption meets the applicable requirements of this
article and those requirements of this code, made applicable to such
an applicant by this article, and that the applicant is not formed,
conducted or operated for profit or as a commercial insurance
enterprise for the benefit of any group or person rather than the
relatively equal benefit of its members, he shall register the
applicant and issue to it a certificate of exemption.

10498. An applicant for a certificate of exemption must comply
with, and the possessor of a certificate of exemption is subject to,
the following provisions of this code:
Sections 1 to 41, inclusive;
Chapter 1, Part 1, Division 1;
Chapter 2, Part 1, Division 1;
Article 1, Chapter 6, Part 1, Division 1;
Article 3, Chapter 6, Part 1, Division 1;
Chapter 9, Part 1, Division 1;
Sections 10110, 10111, 10112 and 10114;
Article 4, Chapter 1, Part 2, Division 1;
Article 6, Chapter 1, Part 2, Division 1;
Article 8, Chapter 1, Part 2, Division 1;
Article 9, Chapter 1, Part 2, Division 1;
Article 14, Chapter 1, Part 2, Division 1;
Article 15, Chapter 1, Part 2, Division 1;
Article 17, Chapter 1, Part 2, Division 1;
Article 1, Chapter 2, Part 2, Division 1;
Article 2, Chapter 2, Part 2, Division 1;
Article 3, Chapter 2, Part 2, Division 1;
Article 4, Chapter 2, Part 2, Division 1;
Article 7, Chapter 2, Part 2, Division 1;
Article 2, Chapter 1, Part 2, Division 2;
Article 4, Chapter 1, Part 2, Division 2;
Article 5, Chapter 1, Part 2, Division 2;
Section 10270.98;
Chapter 3, Part 2, Division 2;
Article 1, Chapter 5, Part 2, Division 2;
Division 3.
Applicants for and possessors of certificates of exemption not
organized or incorporated under the laws of this State in lieu of
meeting the requirements of Article 7, Chapter 2, Part 2, Division 1,
and Articles 1, 2, 4, 5, Chapter 1, Part 2, Division 2, shall
conform to such reasonable investment standards as the commissioner
prescribes.

10498.5. If a holder of a certificate of exemption receives or
maintains funds for any purpose other than administering and
providing the benefits that make it subject to this article, it shall
segregate and maintain separately all funds received by it for the
purpose of administering and providing such benefits.
When so segregated and maintained separately such benefit funds
are not subject to enforcement of a money judgment or other process
by or on behalf of creditors of the holder of a certificate of
exemption, except that such funds are subject to enforcement of a
claim for benefits.

10498.6. The commissioner may from time to time issue regulations
which shall govern persons holding certificates of exemption under
this article, setting forth financial and other standards which, in
his opinion, are required to avoid a condition of hazard, and further
specifying the requirements of submission of statements of financial
condition.

10499. The commissioner may at any time notify any person
possessing a certificate of exemption that the commissioner has
grounds to believe that it is violating any of the applicable
provisions of this code or is not operating in strict conformity with
the documents filed with the commissioner as a basis of its
application for the certificate of exemption. The notice shall fix
the time and place for hearing at which the person notified may
appear and show cause why the commissioner should not revoke its
certificate of exemption. The time fixed shall not be less than 15
nor more than 60 days after date of the notice.
At the time and place specified in the notice and order to show
cause, the commissioner shall hold a hearing at which the possessor
of a certificate of exemption may present evidence to show that it is
not violating any applicable provision of this code, and that it is
operating in conformity with the documents which were filed as a
basis for the certificate of exemption. If after the hearing the
commissioner finds the evidence shows that the operations of the
person are in violation of any of the applicable provisions of this
code, or are in violation of the documents upon which its application
for certificate of exemption was based, the commissioner shall
revoke the certificate of exemption and the person whose certificate
of exemption is thus revoked shall cease the transaction of life and
disability insurance until it procures a new certificate of exemption
or a certificate of authority under other provisions of this code.
This article does not prevent the commissioner from acting and
bringing proceedings under Article 14 (commencing with Section 1010)
of Chapter 1 of Part 2 of Division 1, if grounds exist for the
institution of such proceedings with respect to any person
transacting life or disability insurance either with or without a
certificate of exemption.

10500. Every person not expressly exempted by the provisions of
this code that transacts life or disability insurance without a valid
and unrevoked certificate of authority or without a valid and
unrevoked certificate of exemption issued pursuant to this article is
guilty of a misdemeanor. Every employee, officer, or agent of any
person who knowingly assists any person in the transaction of
insurance in violation of the provisions of this code, is guilty of a
misdemeanor.

10501. Any person subject to this article who upon January 1, 1943,
was paying, allowing, or promising to pay benefits in the event of
death or disability, or otherwise transacting life or disability
insurance without a valid and unrevoked certificate of authority so
to do, may apply for a certificate of exemption under this article.
After filing such application, or if such application has
heretofore been filed, such person may continue to transact such
insurance until the application is denied or such certificate of
exemption is issued.

10505. (a) A labor union having all of the following
characteristics is exempt from the provisions of this code relating
to life and disability insurance in respect to the benefits herein
specified and transactions connected therewith:
(1) It is organized for the purpose of collective bargaining
concerning grievances, labor disputes, wages, rates of pay, hours of
employment, or conditions of work and for the mutual benefit of its
members and not for profit.
(2) Either (A) it does not issue policies but provides for payment
of those benefits in its bylaws, constitution, or rules and
regulations; or (B) it is composed of members of one craft or
industry or allied craft or industries.
(3) The payment of those benefits is incidental to the purposes of
that union.
(b) Any incorporated organization, the membership and insurance in
which are restricted to members of that labor union and the officers
of which are members of the labor union, is likewise exempt from
this code to the same extent as that labor union.
(c) Any organization described in either subdivision (a) or (b) is
also exempt from all provisions of this code relating to insurance
protecting against wage losses from any cause in respect to the
benefits promised.

10505.1. (a) Any nonprofit cooperative assessment association, the
membership and insurance in which are restricted to members of a
labor union, is exempt from the provisions of this code relating to
the supervision or regulation of insurance with respect to the
provision of job protection benefits to its members. A nonprofit
cooperative assessment association established pursuant to this
section is not, and shall not be, a member of the California
Insurance Guarantee Association under Article 14.2 (commencing with
Section 1063) of Chapter 1 of Part 2 of Division 1.
(b) "Job protection insurance" means the business of providing
indemnity to conductors, engineers, motormen, brakemen, switchmen,
firemen, dispatchers, clerks, operators, trackmen, signalmen, and
maintenance of way personnel of steam and electric railways and to
busdrivers and truckdrivers employed by common carriers for loss of
position arising from discharge or suspension, which indemnity is
payable in installments that do not exceed the average monthly wage
of the insured. Nothing in this section is intended to regulate or
define any benefit delivery system which provides indemnity, as
defined in this section, in any manner other than the sale of
insurance. Labor unions providing the type of indemnity defined in
this section, shall be expressly exempt from any regulation by any
state agency.