SECTIONS 11525-11528 - California Statutes

INSURANCE CODE

SECTION 11525-11528

11525. A solvent domestic incorporated insurer having a paid-in
capital represented by outstanding shares of capital stock and
issuing, on a reserve basis, nonassessable policies of life insurance
or of both life and disability insurance, may convert itself into an
incorporated mutual life insurer, or life and disability insurer,
issuing nonassessable policies on a reserve basis. To that end it may
provide and carry out a plan for the acquisition of the outstanding
shares of its capital stock for the benefit of its policyholders, or
any class or classes of its policyholders, by complying with the
requirements of this chapter.

11526. Such plan shall include appropriate proceedings for amending
the insurer's articles of incorporation to give effect to the
acquisition, by said insurer, for the benefit of its policyholders or
any class or classes thereof, of the outstanding shares of its
capital stock and the conversion of the insurer from a stock
corporation into a nonstock corporation for the benefit of its
members. The members of such nonstock corporation shall be the
policyholders from time to time of the class or classes for whose
benefit the stock of the insurer was acquired, and the policyholders
of such other class or classes as may be specified in such
corporation's articles of incorporation as they may be amended from
time to time. Such plan shall be:
(a) Adopted by a vote of a majority of the directors.
(b) Approved by the vote of the holders of at least a majority of
the outstanding shares at a special meeting of shareholders called
for that purpose, or by the written consent of such shareholders.
(c) Submitted to the commissioner and approved by him in writing.
(d) Approved by a majority vote of all the policyholders of the
class or classes for whose benefit the stock is to be acquired voting
at an election by the policyholders called for that purpose, subject
to the provisions of Section 11528. The terms "policyholder" and
"policyholders" as used in this chapter shall be deemed to mean the
person or persons insured under an individual policy of life
insurance, or of disability insurance, or of any combination of life
and disability insurance. They shall also include the person or
persons to whom any annuity or pure endowment is presently or
prospectively payable by the terms of an individual annuity or pure
endowment contract, except where the policy or contract declares some
other person to be the owner or holder thereof, in which case such
other person shall be deemed the policyholder. In any case where such
policy or contract names two or more persons as joint insureds,
payees, owners or holders thereof, the persons so named shall be
deemed collectively to be but one policyholder for the purpose of
this chapter. In any case where a policy or contract shall have been
assigned by assignment absolute on its face to an assignee other than
the insurer, and such assignment shall have been filed at the
principal office of the insurer at least 30 days prior to the date of
any election or meeting referred to in this chapter, then such
assignee shall be deemed at such election or meeting to be the
policyholder. For the purpose of this chapter the terms "policyholder"
and "policyholders" include the employer to whom, or a president,
secretary or other executive officer of any corporation or
association to which a master group policy has been issued, but
exclude the holders of certificates or policies issued under or in
connection with a master group policy. Beneficiaries under unmatured
contracts shall not as such be deemed to be policyholders.
(e) Filed in the office of the Insurance Commissioner after having
been approved as provided in subdivisions (b), (c) and (d) of this
section.

11527. The commissioner shall examine the plan submitted under
subdivision (c) of Section 11526. The commissioner shall not approve
the plan unless in the commissioner's opinion the rights and
interests of the insurer, its policyholders, and shareholders are
protected and the commissioner is satisfied that the plan will be
fair and equitable in its operation.

11528. The election prescribed by subdivision (d) of Section 11526,
shall be called by the board of directors or the president and every
policyholder of the class or classes for whose benefit the stock is
to be acquired, whose insurance shall have been in force for at least
one year prior to the election shall have one vote, regardless of
the number of policies or amount of insurance the policyholder holds,
and regardless of whether the policies are policies of life
insurance or policies of disability insurance. Notice of the election
shall be given to policyholders entitled to vote by mail from the
principal office of the insurer at least 30 days prior to the date
set for the election, in a sealed envelope, postage prepaid,
addressed to the policyholder at that person's last known address.
Voting shall be by one of the following methods:
(a) At a meeting of those policyholders, held pursuant to the
notice, by ballot in person or by proxy.
(b) If not by the method described in subdivision (a), then by
mail pursuant to a procedure and on forms to be prescribed by the
plan.
The election shall be conducted under the direction and
supervision of three impartial and disinterested inspectors appointed
by the insurer and approved by the commissioner. In case any person
appointed as inspector fails to appear at the meeting or fails or
refuses to act at the election, the vacancy, if occurring in advance
of the convening of the meeting or in advance of the opening of the
mail vote, may be filled in the manner prescribed for the appointment
of inspectors and, if occurring at the meeting or during the canvass
of the mail vote, may be filled by the person acting as chairperson
of the meeting or designated for that purpose in the plan. The
decision, act, or certificate of a majority of the inspectors shall
be effective in all respects as the decision, act, or certificate of
all. The inspectors of election shall determine the number of
policyholders, the voting power of each, the policyholders
represented at the meeting or voting by mail, the existence of a
quorum, and the authenticity, validity, and effect of proxies. They
shall receive votes, hear and determine all challenges and questions
in any way arising in connection with the right to vote, count and
tabulate all votes, determine the result, and do such other acts as
are proper to conduct the vote with fairness to all policyholders.
The inspectors of election shall, before commencing performance of
their duties, subscribe to and file with the insurer and with the
commissioner an oath that they, and each of them, will perform their
duties impartially, in good faith, to the best of their ability and
as expeditiously as is practicable. On the request of the insurer,
the commissioner, a policyholder or his or her proxy, the inspectors
shall make a report in writing of any challenge or question or matter
determined by them and execute a certificate of any fact found by
them. They shall also certify the result of the vote to the insurer
and to the commissioner. Any report or certificate made by them shall
be prima facie evidence of facts stated therein. All necessary
expenses incurred in connection with the election shall be paid by
the insurer. For the purpose of this section, a quorum shall consist
of 5 percent of the policyholders of the insurer entitled to vote at
the election.