SECTIONS 1390-1402 - California Statutes

INSURANCE CODE

SECTION 1390-1402

1390. The provisions of this article shall apply only to exchanges
writing liability, common carrier liability or workmen's compensation
insurance, except that any exchange may apply for and receive the
certificate provided for by Section 1401.

1391. Whenever an exchange subject to this article, is not
possessed of admitted assets sufficient to discharge all liabilities
and to maintain the required surplus, the attorney may make an
assessment for the amount, subject to the limits provided by this
article, needed to make up the deficiency. If the attorney fails to
make the assessment within 30 days after the commissioner orders him
to do so, the commissioner may make the assessment. If liquidation of
such an exchange is ordered, the assessment may be levied for such
an amount, subject to limits provided by this article, as the
commissioner determines to be necessary to discharge all liabilities
of the exchange, including the reasonable cost of liquidation.

1392. Except as provided by Sections 1397, 1398, 1400 and 1401,
every subscriber of an exchange subject to this article shall be
liable to pay, and shall pay, his proportionate part of any such
assessment, in accordance with law and his contract covering any such
deficiency assessment (a) if he is notified by either the attorney
or the commissioner of intention to levy such assessment within one
year after the expiration or cancellation of his policy, or, (b) if
an order appointing a conservator or liquidator of such exchange is
entered, within one year after such expiration or cancellation.
The period to be covered by the assessment shall be the period of
one year immediately preceding (a) the date of notification by either
the attorney or the commissioner of the intention to levy such
assessment, or, (b) the date of entry of an order appointing a
conservator or liquidator of such exchange, as the case may require.

1393. Each such subscriber's share of the deficiency for which an
assessment is made pursuant to this article, shall be determined by
applying to the premium earned on the member's policy or policies
during the period to be covered by the assessment, the ratio of the
total deficiency to the total premiums earned during such period,
upon all policies subject to such assessment. For the purpose of this
section, premium earned is to be calculated upon the basis of the
amount of the consideration for which the policy is issued, without
the deduction of attorney-in-fact fees, policy fees, or other
charges, excepting charges which do not recur upon the renewal or
extension of the policy.

1394. Subscribers liable to assessment under this article shall pay
the same without offsetting any claim for unearned premiums or
losses payable to or for the account of the subscriber.

1395. Assessments under this article shall be made upon the members
liable to assessment therefor, in proportion to their several
liabilities.

1396. Notice of all such proposed assessments shall be filed with
the commissioner and the assessments shall not take effect until
approved by him after such investigation as he deems necessary.

1397. Assessments under this article, whether levied by the
attorney, or the commissioner in the liquidation of such an exchange
or otherwise, shall be of no greater amount than specified in the
power of attorney.

1398. The power of attorney of an exchange subject to this article
may limit the contingent liability of the subscriber for assessment,
but such contingent liability shall not be less than an amount equal
to and in addition to the amount of the premium deposit provided in
the policy.

1399. Each subscriber to an exchange subject to this article may
maintain with the exchange, in addition to the premium deposit
provided in the policy, a further deposit to be held as the surplus
deposit of such subscriber.

1400. Each such subscriber maintaining a surplus deposit equal to,
and in addition to, the amount of the total current annual premium
deposit provided in his policy, shall have no liability for
assessment during the period such surplus deposit is so maintained.

1401. If an exchange has a surplus of admitted assets over all
liabilities in a sum equal to 1 1/2 times the minimum paid-in capital
required of incorporated insurers issuing policies on a reserve
basis and doing the same classes of insurance, then the Insurance
Commissioner, upon written request, shall issue his certificate
stating such fact. Subscribers at an exchange so certified shall have
no liability for assessment on policies issued while such
certificate remains in effect. Whenever the commissioner finds such
fact does not exist, he shall revoke and require the surrender of his
certificate. Upon revocation of such certificate no policy shall
thereafter be issued nor be permitted to remain in force beyond the
date fixed for the next payment of premium without written
endorsement thereon providing for assessment liability in accordance
with the terms of this chapter.

1401.5. (a) When the commissioner finds after a public hearing that
a reciprocal or interinsurance exchange has at all times during any
consecutive five-year period terminating on December 31, 1964, or on
the last day of any subsequent calendar year, as shown by its annual
statements, as filed or as adjusted by the commissioner, as the case
may be, maintained a surplus of admitted assets over all liabilities
of at least three million dollars ($3,000,000) the commissioner may
make an order that such reciprocal or interinsurance exchange need
not obtain the certificate provided in Section 1401 and that its
subscribers shall thereafter in perpetuity have no liability for
assessment on policies issued or renewed at any time after such order
becomes final or may, if the reciprocal desires not to become
nonassessable, issue a certificate of capability to reinsure. To
request such an order such reciprocal or interinsurance exchange
shall file a petition with the commissioner, on a form prescribed by
the commissioner. The filing fee for such a petition shall be two
hundred thirty-six dollars ($236). The commissioner shall give notice
of such hearing in the insurance press and in such other ways as he
deems advisable and to the extent he deems advisable. Such an order
is subject to the provisions of Section 12940 and any person with
sufficient relevant interest shall be authorized to bring any
permitted action thereunder.
(b) When any such order of the commissioner becomes final any
domestic reciprocal or interinsurance exchange obtaining such an
order shall no longer be subject to or entitled to the benefits of:
subdivision (c) of Section 1307, subdivision (b) of Section 1374, and
Article 6 (commencing with Section 1390) of this chapter.
(c) At such time as all reciprocal or interinsurance exchanges
conducting insurance business in this state are by law governed for
all purposes as to required minimum surplus (including that for
admission, amendment of certificate of authority and solvency) by the
same standards for minimum paid-in capital and surplus as are then
applicable to capital stock insurers, any domestic reciprocal or
interinsurance exchange may obtain the order provided in subdivision
(a), subject to the provisions in subdivision (a) by showing that it
has maintained such minimum paid-in capital and surplus requirement
applicable to capital stock insurers for at least five consecutive
years in lieu of the three million dollars ($3,000,000) surplus
prescribed in subdivision (a).
(d) If the power of attorney or any policy of any domestic
reciprocal or interinsurance exchange obtaining the order provided by
subdivision (a) contains language directly or indirectly creating a
liability for assessment, in respect to policies issued prior to or
issued after such an order becomes final such power of attorney and
all such policies shall be deemed in law to have been amended to
delete and repeal any and all such assessment provisions as of the
date such order becomes final without any further action on the part
of such a reciprocal or interinsurance exchange, its subscribers, its
attorney in fact or the body exercising the subscriber's rights.

1402. All funds of such exchange and the proceeds of the contingent
liability of its subscribers shall be available for the payment of
any liability of the exchange.