SECTIONS 699-728 - California Statutes

INSURANCE CODE

SECTION 699-728

699. Except as specifically permitted by this code, a certificate
of authority shall not be issued to an unincorporated insurer. This
section shall not be applicable to an unincorporated insurer now
holding a certificate of authority to transact any class of insurance
in California, nor shall it affect the right of any such
unincorporated insurer to hereafter apply for or be issued a renewal
certificate of authority or an amended certificate of authority to
transact additional classes of insurance; provided, that any such
unincorporated insurer shall continue to comply insofar as applicable
with the same requirements as are now or hereafter applicable to
corporate insurers; nor shall this section prohibit the issuance of a
certificate of exemption to the trustees of a fund established by
one employer, or by two or more employers in the same industry, or by
one or more labor unions, or by one or more employers and one or
more labor unions, to insure employees of the employers or members of
the unions for the benefit of persons other than the employers or
the unions.

699.1. The Public Employees' Retirement System is exempt from the
provisions of this code with respect to the group life insurance
program established pursuant to Article 7 (commencing with Section
21400), Chapter 9, Part 3, Title 2 of the Government Code.

699.5. (a) The ownership or financial control, in part, direct or
indirect, of any domestic, foreign, or alien insurer, by any state of
the United States or by a foreign government or by any political
subdivision of either, or by an agency of any other state,
government, or subdivision thereof, shall not, provided the insurer
complies with all other requirements for issuance, renewal, or
continuation of a license, restrict the commissioner from issuing,
renewing, or continuing in effect the license of that insurer to
transact in this state the kinds of insurance business for which that
insurer is otherwise qualified under the provisions of this chapter
and under its charter, unless the commissioner finds that any of the
following is true:
(1) The insurer is subject to any form of subsidy that would
enable it to compete unfairly with domestic insurers.
(2) The insurer is subject to governmental practices that
discriminate on the basis of any characteristic listed or defined in
subdivision (b) or (e) of Section 51 of the Civil Code.
(3) The ownership or financial control will create the presence of
any sovereign immunity in the insurer.
(4) Appropriate measures and controls do not exist to avoid
security problems resulting from an insurer's access to confidential
information and data of its insured.
(5) The ownership or financial control results in substantial or
undue influence being asserted over the insurer.
(b) The failure by any applicant for a license to submit the
information requested by the commissioner for the purposes of
determining whether to make a finding pursuant to subdivision (a)
shall be sufficient to deny the application.
(c) Nothing in the amendments to this section enacted during the
1994 portion of the 1993-94 Regular Session of the Legislature shall
be interpreted to authorize the issuance of a license to an insurer
wholly owned by any governmental entity described in subdivision (a).

700. (a) A person shall not transact any class of insurance
business in this state without first being admitted for that class.
Except for the State Compensation Insurance Fund as authorized by
Sections 11770 and 11778 to 11780.5, inclusive, admission is secured
by procuring a certificate of authority from the commissioner. The
certificate shall not be granted until the applicant conforms to the
requirements of this code and of the laws of this state prerequisite
to its issue.
(b) The unlawful transaction of insurance business in this state
in willful violation of the requirement for a certificate of
authority is a public offense punishable by imprisonment in the state
prison, or in a county jail not exceeding one year, or by fine not
exceeding one hundred thousand dollars ($100,000), or by both that
fine and imprisonment, and shall be enjoined by a court of competent
jurisdiction on petition of the commissioner.
(c) After the issuance of a certificate of authority, the holder
shall continue to comply with the requirements as to its business set
forth in this code and in the other laws of this state, including,
but not limited to, Chapter 5 (commencing with Section 1631), with
regard to employees or contractors who solicit, negotiate, or effect
insurance.
(d) Where a hearing is held under this section the proceedings
shall be conducted in accordance with Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code, and the commissioner shall have all the powers granted therein.
(e) The commissioner shall either issue or deny an application for
a certificate of authority within 180 calendar days after the date
of the application.
(f) The commissioner and his or her authorized representative
shall be prohibited from seeking a waiver to extend the 180 calendar
day period specified in subdivision (e), nor shall the applicant be
permitted to waive that period.

700.01. In addition to any or all of the classes of insurance which
it is permitted to transact by all other applicable provisions of
this code, any incorporated insurer admitted or hereafter admitted
for one or more of the classes of insurance stated in Section 100,
except life, title, mortgage, or mortgage guaranty shall (subject to
any limitations contained in its articles of incorporation or
charter) be admitted after January 1, 1990, for any or all of the
following classes, upon making application therefor and complying
with all applicable requirements of law, if its paid-in capital is
not less than two million six hundred thousand dollars ($2,600,000)
or the aggregate of the amounts hereinafter set forth opposite the
classes transacted by it in the United States if an alien insurer, or
in any jurisdiction if other than an alien insurer, whichever is
lower; provided, that the paid-in capital of incorporated insurers
not transacting either fire, marine or surety insurance making
application under this section shall be at least three hundred
thousand dollars ($300,000) in excess of that aggregate amount. In no
event shall any incorporated insurer, as a condition for its
admission, be permitted to have a paid-in capital of less than one
million dollars ($1,000,000) or be required to have a paid-in capital
in excess of two million six hundred thousand dollars ($2,600,000)
for any or all of the classes of insurance hereinafter set forth.

Amount
of
Number and name of class capital
2.
Fire.....................................
3. $350,000
Marine................................... 350,000
5. 350,000
Surety................................... 250,000
6. 100,000
Disability...............................
7. Plate glass...........................

8.
Liability )
9. Workers' ) ..........300,000 for
) any
compensation ) or all of these
10. Common )
carrier
liability

11. Boiler and
machinery............................. 100,000
12. 100,000
Burglary.............................. 100,000
13. 100,000
Credit................................
14. Sprinkler.........................
15. Team and
vehicle............................... 100,000
16. 200,000
Automobile............................ 100,000
18. 100,000
Aircraft..............................
20. MIscellaneous.....................

This section shall not be applicable to life, title, mortgage, or
mortgage guaranty insurance, and an insurer now or hereafter admitted
to transact life, title, mortgage, or mortgage guaranty insurance
shall not be admitted under the provisions of this section, but its
admission is governed by other applicable provisions of this code.
Insurers admitted for one or more classes of insurance on December
31, 1989, shall be governed by the provisions of this section in
effect as of December 31, 1989, until December 31, 1999. After
December 31, 1999, all insurers governed by this section shall meet
the capital requirements of this section as become effective January
1, 1990. Insurers admitted for one or more classes of insurance on
December 31, 1989, that thereafter amend their certificate of
authority to add a class or classes of insurance shall become subject
to the capital requirements of this section.

700.02. No insurer shall be issued a certificate of authority other
than a renewal certificate of authority for any of the classes set
forth in Section 100 unless at the time of such issuance it
possesses, in addition to the minimum paid-in capital required by
this code a surplus of not less than 100 percent of the minimum
paid-in capital required.
As used in this section, surplus means the excess of admitted
assets over the sum of (1) liabilities for losses reported, expenses,
taxes and all other indebtedness and reinsurance of outstanding
risks as provided by law, and (2) paid-in capital, in the case of an
insurer issuing or having outstanding shares of capital stock, or (3)
the minimum paid-in capital required, in the case of any other
insurer.

700.025. An insurer, including a reciprocal or interinsurance
exchange, admitted on January 1, 1970, to transact automobile
liability insurance under class 8 and automobile insurance under
class 16, or which had a valid bona fide application to transact both
such classes of insurance pending before the commissioner on or
before August 1, 1970, shall not be affected by this section.
Any other insurer, including a reciprocal or interinsurance
exchange, applying to transact either of such class of insurance in
this state, shall possess, at the time of admission for either of
such classes, in addition to all minimum paid-in capital required by
Section 700.01 and all surplus and paid-in capital required by
Sections 700.02 and 700.05, an additional surplus of two hundred
thousand dollars ($200,000).

700.03. Notwithstanding the requirements of Sections 700.01 and
10511 until June 30, 1955, the minimum paid-in capital required for
renewal, for the same classes of insurance, of the certificate of
authority of any insurer which was in effect on July 1, 1953, shall
be that required by such sections as effective on such date. After
June 30, 1955, and until such time as such insurer increases its
paid-in capital to the amount required by Sections 700.01 and 10511
as effective on October 1, 1953, the minimum paid-in capital required
for such renewal shall continue to be that required by such sections
as effective on July 1, 1953, but such insurer shall be required to
maintain a surplus, as defined in Section 700.02, in an amount which,
when combined with the amount of its paid-in capital, shall equal
the minimum amount of paid-in capital required by Sections 700.01 and
10511 as effective on October 1, 1953.

700.04. Paid-in capital for life insurers is governed by Section
10510 of this code; for title insurers by Section 12359; for mortgage
insurers by Section 12440; and for mortgage guaranty insurers by
Section 12640.03.

700.05. (a) In determining the minimum amount of paid-in capital
and surplus required by the applicable provisions of this code for
admission of an insurer, there shall be included all of the classes
of insurance transacted by it in the United States if an alien
insurer, or in any jurisdiction if other than an alien insurer;
provided, that life, title, mortgage or mortgage guaranty insurance
shall not be included among the classes of insurance in determining
the minimum amount of paid-in capital and surplus required if the
minimum paid-in capital is two million six hundred thousand dollars
($2,600,000) or more, and if the paid-in capital is less than two
million six hundred thousand dollars ($2,600,000) the minimum shall
be measured by adding to the amounts set forth in Section 700.01 two
million two hundred fifty thousand dollars ($2,250,000) for life
insurance, two hundred fifty thousand dollars ($250,000) for mortgage
insurance, one million dollars ($1,000,000) for mortgage guaranty
insurance and two hundred fifty thousand dollars ($250,000) for title
insurance.
In applying such provisions, it shall be conclusively presumed
that an insurer transacts all classes of insurance for which it is or
seeks to be admitted to transact in this state.
(b) As used in this section, "insurer" includes a reciprocal or
interinsurance exchange and its attorney in fact.

701. Subject to the annual fee provisions of Section 705, every
certificate of authority shall be for an indefinite term and shall
expire with the expiration or termination of a corporate existence of
the holder thereof. Notwithstanding the provisions of this section,
whenever the commissioner shall determine, after notice and hearing,
that any insurer to whom such certificate has been issued is in
arrears to the State, or to any county or city in the State, for
fees, licenses, taxes, assessments, fines or penalties, accrued on
business transacted in the State, or is otherwise in default for
failure to comply with any of the laws of this State regarding the
governmental control of such insurer by the State, he may order that
such insurer comply with the said requirements within 30 days of such
determination. If the insurer fails to comply within such period,
the certificate of authority may then be revoked, unless the
commissioner's order is stayed by a court of appropriate
jurisdiction.

702. (a) An insurer that maintains a certificate of authority to
transact insurance in this state, advertises insurance on the
Internet, and transacts insurance in this state, shall identify all
of the following information on the Internet, regardless of whether
the insurer maintains its Internet presence or if the presence is
maintained on its behalf:
(1) Its name as it appears on its California certificate of
authority, and if different, the name approved by the commissioner
for doing business in this state.
(2) The state of its domicile and its principal place of business.
(3) The number on its California certificate of authority. In lieu
of this number, an insurer may identify all states in which it
maintains certificates of authority to transact insurance, provided
that the insurer discloses its identification number as assigned by
the National Association of Insurance Commissioners.
(b) An Internet presence maintained by or on behalf of an insurer
not admitted to transact insurance in this state constitutes an
advertisement, and the insurer shall comply with the requirements of
Section 703.1 if it transacts insurance as defined in subdivision
(c).
(c) A person who advertises on the Internet shall be deemed to be
transacting insurance in this state if the person does any of the
following:
(1) Provides an insurance premium quote specifically to a
California resident.
(2) Accepts an application for coverage from a California
resident.
(3) Otherwise communicates with a California resident regarding
one or more terms of an agreement to provide insurance or an
insurance policy.
This subdivision shall not apply to any lawful placement with a
nonadmitted insurer, including when a person conveys a quote, accepts
an application, and conducts all communications with a California
resident solely through a surplus line broker or special lines'
surplus line broker pursuant to California surplus line laws.

703. Except when performed by a surplus line broker, the following
acts are misdemeanors when done in this state:
(a) Acting as agent for a nonadmitted insurer in the transaction
of insurance business in this state.
(b) In any manner advertising a nonadmitted insurer in this state.
(c) In any other manner aiding a nonadmitted insurer to transact
insurance business in this state.
In addition to any penalty provided for commission of
misdemeanors, a person violating any provision of this section shall
forfeit to this state the sum of five hundred dollars ($500),
together with one hundred dollars ($100) for each month or fraction
thereof during which he or she continues the violation. This section
shall not apply to advertising authorized by Section 703.1,
subdivision (h) of Section 1760.5, or Section 1773.

703.1. (a) Any nonadmitted insurer that is on the list of eligible
surplus line insurers issued by the commissioner pursuant to
subdivision (f) of Section 1765.1 may advertise in all media,
provided that all of the following apply: (1) the insurer's
unlicensed status in California is disclosed in type of a size no
smaller than any telephone number, address, or fax number appearing
in the advertisement or solicitation, (2) the advertisement does not
contain any assertion, representation, or statement with respect to
the business of insurance or with respect to any person in the
conduct of his or her insurance business, that is untrue, deceptive,
or misleading, and that is known, or that by the exercise of
reasonable care should be known, to be untrue, deceptive, or
misleading, (3) the advertisement does not contain any information
about the nonadmitted insurer's premiums or rates, and (4) no
specific product shall be advertised in a newspaper of general
circulation, in a television or radio broadcast, or in a news
magazine of general circulation.
(b) Any nonadmitted insurer that is not on the list of eligible
surplus line insurers issued by the commissioner pursuant to
subdivision (f) of Section 1765.1 may advertise in all media, except
for media that are targeted primarily at insureds or prospective
insureds residing in California, provided that all of the conditions
set forth in subdivision (a) are complied with and the advertisement
does not contain any information about the insurer's specific
products.
(c) A group of nonadmitted insurers may advertise to the same
extent as a nonadmitted insurer, subject to the same requirements set
forth in subdivision (a) or (b), as applicable.
(d) An eligible nonadmitted insurer that is a member of a group of
insurers may include the name of the group in advertisements that
are authorized by this section.
(e) The permission to advertise granted by this section shall not
be deemed to authorize an insurer to do business in this state.

703.5. Any person, including, but not limited to, persons licensed
or certificated under this code or exempted from regulation under
this code, who as a part of any business advertises as, or holds
himself or herself out as, qualified to advise the public concerning
insurance or qualified to administer workers' compensation for
employers and who in connection with or as part of that business
also, with or without consideration, (a) suggests or recommends to an
employer, or advises an employer, that the employer purchase
aggregate excess or aggregate stop-loss workers' compensation
insurance, or (b) names or suggests to an employer, or advises an
employer of, a nonadmitted insurer from whom aggregate excess or
aggregate stop-loss workers' compensation insurance might be
purchased, is guilty of a misdemeanor. This section does not apply if
the employer is a self-insured public entity, including any agency,
board, or commission provided for by a joint exercise of powers
agreement, or those who have been issued a certificate by the
Director of the Department of Industrial Relations to self-insure.

704. The commissioner may suspend the certificate of authority of
an insurer for not exceeding one year whenever he finds, after proper
hearing following notice, that such insurer engages in any of the
following practices:
(a) Conducting its business fraudulently.
(b) Not carrying out its contracts in good faith.
(c) Habitually and as a matter of ordinary practice and custom
compelling claimants under policies, or liability judgment creditors
of the insured, to either accept less than the amount due under the
terms of the policies or resort to litigation against such insurer to
secure the payment of the amount due.
The order of suspension shall prescribe the period of such
suspension.
The proceedings shall be conducted in accordance with Chapter 5 of
Part 1 of Division 3 of Title 2 of the Government Code, and the
commissioner shall have all the powers granted therein.

704.5. The commissioner may decline to grant or may suspend or
revoke a certificate of authority of any holder of such certificate
authorized to be certificated under this code if any person or
persons, directly or indirectly, or any person who as an affiliate or
part of any affiliate, directly or indirectly, owning or
controlling, in the aggregate, any interest in more than 10 percent
of the stock of such holder of the certificate, or its subsidiary, or
any company or entity controlling such holder, or if any officer or
director of such holder has been convicted on, or pleaded guilty or
nolo contendere to, an indictment or information in any jurisdiction
charging a felony for theft or larceny, mail fraud, or violation of
any corporate securities statute or any insurance statute.

704.7. The commissioner, in any proceeding under Section 704 for
any of the violations specified in that section, may, by an
alternative order, permit the holder of that certificate of authority
to elect in writing to pay a specified money penalty, within a
specified time, in lieu of the suspension of its certificate of
authority. If the holder so elects, the sum of money specified shall
be paid to the commissioner for the use of the State of California.
The sum specified shall not exceed fifty-five thousand dollars
($55,000). If the holder so electing fails to pay the specified sum
within the specified time the commissioner shall, unless his or her
order be lawfully stayed, forthwith put in effect the alternative
specified in his or her order.
All moneys received by the commissioner pursuant to this section
shall, when appropriated for that purpose by the Legislature, be
available for expenditure by the commissioner in accordance with law
in administration and enforcement of this code and other insurance
laws.
The authority vested in the commissioner by this section shall be
additional to and not in lieu of any other authority to enforce any
penalties, fines or forfeitures, denials, suspensions, restrictions,
or revocations of certificates of authority otherwise authorized by
law.

705. The commissioner shall require the payment of fifty-eight
dollars ($58) in lawful money of the United States, in advance as a
fee for filing an application for each amendment of a certificate of
authority authorizing any insurer to transact business in this state.
Notwithstanding the provisions of Section 701 each insurer
possessing a certificate of authority of indefinite term pursuant to
such section shall owe and pay an annual fee of one hundred
seventy-seven dollars ($177) in lawful money of the United States in
advance on account of such certificate until its final expiration.
Such fee shall be for annual periods commencing on July 1st of each
year and ending on June 30th of each year and shall be due on each
March 1st and shall be delinquent on and after each April 1st.

705.1. The commissioner shall require the payment of one thousand
seven hundred seventy dollars ($1,770) in lawful money of the United
States in advance as a fee for filing an application and all
supporting exhibits including articles of incorporation, certificates
of organization, certificates of capital and assets, certificates of
deposit, financial statements, affidavits, appointments of agents
for service of process, bonds, deposit schedules, appraisals, and
other papers, in support of each original certificate of authority.
Such fee shall be in lieu of the fees for filing or receiving such
papers in support of an application for an original certificate of
authority as specified in Section 940.1 and as specified in the
following sections of the Insurance Code as they existed on January
1, 1963: 705, 712, 900.5, 946, 976, 1350, 1590 (but not 1599), 1601,
7034, 9034 and 11090.

706. Prior to admission each insurer shall file with the
commissioner a certified copy of its last annual statement or a
verified financial statement exhibiting its condition and affairs.

706.5. The commissioner, in addition to any other proper ground for
denying a certificate of authority to a nonadmitted insurer, may
deny such certificate whenever, in his judgment, the investments of
such insurer are not so made as to make available within a reasonable
time sufficient moneys to meet promptly any demand which might in
the ordinary course of events be properly made against the insurer.
In the case of an admitted insurer, whenever the commissioner finds
such a condition to exist, he may order such insurer to cease to
effect new contracts of insurance until its financial circumstances
are changed sufficiently to remove such condition. The commissioner
may suspend or revoke the certificate of authority of any admitted
insurer which fails to comply with such order.
The commissioner shall not issue such order under this section to
any solvent admitted insurer if 25 per cent or more in value of the
assets thereof is in cash or invested in the securities specified by
sections 1171, 1172, 1173, 1174 and 1175, or in securities specified
in sections 1191 and 1192 if such securities are listed on a
securities exchange, subject to regulation, supervision, or control
under a statute of the United States of America. The provisions of
this section likewise apply to reciprocal or interinsurance
exchanges.

706.7. As used in this section, the term "reciprocal state" means a
state the laws of which prohibit an insurer domiciled therein from
insuring the lives or persons of residents of, or property or
operations located in, the State of California unless it then holds a
valid and subsisting certificate of authority issued by the
Insurance Commissioner of this state. This prohibition may be subject
to the exceptions herein set forth.
Subject to the exceptions herein set forth, a domestic insurer
shall not enter into a contract of insurance upon the life or person
of a resident of, or property or operations located in, a reciprocal
state unless it is authorized pursuant to the laws of that state to
transact such insurance therein. The commissioner shall, every four
years, mail notice to every domestic insurer, specifying the
reciprocal states.
The exceptions to the provisions of this section are the
following:
(a) Contracts entered into where the prospective insurant is
personally present in the state in which the insurer is authorized to
transact insurance when he or she signs the application.
(b) The issuance of certificates under a lawfully transacted group
life or group disability policy, where the master policy was entered
into in a state in which the insurer was then authorized to transact
insurance.
(c) The renewal or continuance in force, with or without
modification, of contracts otherwise lawful and which were not
originally executed in violation of this section.

707. A domestic insurer shall, prior to admission, file with the
commissioner a copy of its articles of incorporation and certificate
of any increase or diminution of its capital stock, certified by the
Secretary of State to be a copy of that which is filed in his office.

708. A foreign insurer shall, prior to admission, file with the
commissioner the following:
(a) If organized in a jurisdiction which requires articles to be
filed, a copy of its articles of incorporation, duly certified by the
officer having the custody of such articles.
(b) If organized in a jurisdiction which does not require articles
to be filed, a copy of the law, charter, or deed of settlement under
which the insurer is organized, duly certified by the proper
custodian thereof, or proved by affidavit to be a copy.
(c) A certificate under the hand and seal of the officer, if any,
having supervision of insurance business in the jurisdiction of its
organization, stating that the insurer is organized under the laws of
such jurisdiction, and has the amount of capital stock or assets
required by this code.

709. If the insurer is organized in any other State, it shall,
prior to admission, file with the commissioner a certificate setting
forth:
(a) The nature and character of its business.
(b) The location of its principal office.
(c) The names of the following parties:
(1) If the insurer is not incorporated, and there are more than
ten owners of interests therein, the names of the ten persons who own
the largest interests; if there are ten or less such owners, the
names of all such owners.
(2) If the insurer is incorporated, the names of all officers and
persons by whom the business is managed.
(d) The amount of actual capital to be employed therein.
The certificate must be verified by the affidavit of the chief
officer, secretary, agent, or manager of the company.

709.5. (a) Any insurer that is organized under the laws of any
other state and is admitted to do business in this state for the
purpose of writing insurance may become a domestic insurer by
designating its principal place of business at a place in this state.
The domestic insurer shall be entitled to like certificates and
licenses to transact business in this state and shall be subject to
the authority and jurisdiction of this state.
(b) Any domestic insurer may, upon the prior approval of the
commissioner, transfer its domicile to any other state in which it is
admitted to transact the business of insurance, and upon the
transfer shall cease to be a domestic insurer, and shall be admitted
to this state if qualified as a foreign insurer. The commissioner
shall approve any proposed transfer unless he or she determines that
the transfer is not in the interest of the policyholders of this
state. An insurer seeking to transfer its domicile shall provide the
commissioner with information and documentation reasonably necessary
to make this determination. The commissioner shall either approve or
disapprove the transfer within 90 calendar days after the date of the
request. The commissioner and his or her authorized representative
shall be prohibited from seeking a waiver to extend the
90-calendar-day period, nor shall the insurer be permitted to waive
that period.
(c) The certificate of authority, agent and broker appointments
and licenses, rates, and other items that the commissioner allows in
his or her discretion, that are in existence at the time any insurer
licensed to transact the business of insurance in this state
transfers its corporate domicile to this or any other state by
merger, consolidation, or any other lawful method shall continue in
full force and effect upon that transfer if the insurer remains duly
qualified to transact the business of insurance in this state. All
outstanding policies of any transferring insurer shall remain in full
force and effect and need not be endorsed as to the new name of the
company or its new location unless so ordered by the commissioner.
Every transferring insurer shall file new policy forms with the
commissioner on or before the effective date of the transfer, but may
use existing policy forms with appropriate endorsements if allowed
by, and under such conditions as approved by, the commissioner.
However, every transferring insurer shall notify the commissioner of
the details of the proposed transfer, and shall file promptly all
resulting amendments to corporate documents filed or required to be
filed with the commissioner.
(d) An insurer seeking qualification under this section shall pay
to the commissioner a filing fee of four thousand two hundred fifty
dollars ($4,250). Except for an insurer that is a wholly owned
subsidiary of a domestic holding company, an insurer seeking
qualification shall file with the Secretary of State a notice of its
intent to redomesticate, and upon completion of the redomestication,
shall also file a designation of an agent for service of process.
(e) Notwithstanding any other provision of the law, this section
shall provide the exclusive means for an admitted insurer to change
its domicile to, or transfer its domicile from, this state.

710. If there are any written articles of agreement or association,
a copy thereof shall accompany such certificates.

711. An insurer organized out of the United States shall also file
such certificate and articles, but the certificate need not contain
the names of any officers or managers other than those resident
within the United States, nor any statement of capital not employed
within the United States, and the affidavit shall be made by the
chief executive officer or manager in the United States.

713. A copy of the instrument or record of the action making any
change in any of the documents filed with the commissioner pursuant
to this article, proved by certificates of custodian of the original,
or by affidavit, shall be filed with the commissioner.

714. The commissioner shall require the payment of twenty-nine
dollars ($29) in lawful money of the United States, in advance, as a
fee for filing papers required under Section 713, on account of
change or changes made at one time.

715. The commissioner shall have no authority to issue a
certificate of authority, other than a renewal certificate of
authority, to any domestic insurer, whether organized and promoted
directly or by means of a holding company, where the commissioner's
examination shows that the expense of organization and promotion,
exclusive of attorney fees, accountant fees, and actuary fees,
exceeds 12 percent of the total amount actually paid on its capital
stock.

716. No certificate of authority shall be granted to a foreign or
alien applicant that has not actively transacted for three years the
classes of insurance for which it seeks to be admitted.
This section shall not apply to any of the following:
(a) An applicant 51 percent or more of whose voting shares are
owned by a reputable insurer admitted to this state for at least
three years.
(b) An applicant which is the successor in interest, by merger,
transformation, consolidation, purchase, or other transaction, of
substantially all the insurance business and going concern value of a
reputable insurer which was, and still is, the dominant factor in
such transaction, and could itself have been admitted.
(c) An applicant 51 percent or more of whose voting shares are
owned by a noninsurance corporation, or a corporation authorized as
an insurer but not actively engaged in the insurance business, which
corporation, directly or indirectly, owns 51 percent or more of the
voting shares of one or more insurers all of which, except the
applicant and those which are alien insurers, are reputable insurers
admitted to this state for at least three years.
(d) An applicant which meets the conditions established by the
commissioner for exemption from this section.

717. Before granting a certificate of authority or amended
certificate of authority to any applicant, the commissioner shall
consider the qualifications of said applicant in respect to the
following subjects: (a) capital and surplus; (b) lawfulness and
quality of investments; (c) financial stability; (d) reinsurance
arrangements; (e) competency, character, and integrity of management;
(f) ownership and control of issued and outstanding shares in the
case of a capital stock insurer; (g) whether claims under policies
are promptly and fairly adjusted and are promptly and fully paid in
accordance with law and the terms of policies; (h) fairness and
honesty of methods of doing business; (i) method by which said
applicant was promoted if any of its promoters remain as stockholders
or in management; and (j) hazard to policyholders or creditors.
Upon consideration of all relevant qualifications the commissioner
shall issue a certificate of authority to such applicant, unless the
commissioner shall have made a finding, or findings, that the
applicant is materially deficient in respect to one or more of the
items as outlined in (a) through (j), above.

717.1. Where the applicant is a wholly owned domestic subsidiary of
an admitted domestic insurer the commissioner shall issue a
certificate of authority to such applicant within 180 days of
application unless the commissioner shall have made a finding that
the applicant is substantially deficient in respect to one or more of
the items set forth in Section 717.

717.2. (a) On and after January 1, 2007, for purposes of Section
717, the commissioner shall consider, with respect to any application
for a certificate of authority or amended certificate of authority
to transact health insurance, as defined in subdivision (b) of
Section 106, in this state, any available evidence regarding any one
or more of the following:
(1) Any prior history of providing, or arranging to provide for,
health care coverage, services, or benefits in this state and the
applicant's history of substantial compliance with applicable state
and federal laws, regulations, and requirements.
(2) Any prior history in this state or any other state, of
providing, or arranging to provide for, health care coverage,
services, or benefits for which the applicant is authorized to
receive Medicare Program reimbursement or Medicaid Program
reimbursement, and the applicant's history of substantial compliance
with applicable state and federal laws, regulations, and
requirements.
(3) Any prior history on the part of the applicant's management of
providing, or arranging to provide for, health services as a
licensed health professional or an individual or entity contracting
with a health care service plan or insurer, and the applicant's
history of substantial compliance with state requirements, and
applicable federal law, regulations, and requirements.
(b) The commissioner may also require the applicant to provide
information or documents for the purposes of this section. The
commissioner shall consider any other relevant information concerning
misconduct.

718. If upon due investigation the commissioner shall find that any
applicant for a certificate of authority, or amended certificate of
authority, will not conduct its business in conformity with all
applicable provisions of the laws of this state, he shall not grant
any certificate of authority, or amended certificate of authority, to
such applicant.
Where the applicant is a wholly owned subsidiary of or under the
management and control of an admitted insurer, or is the successor in
interest by merger, consolidation, sale and purchase, or otherwise,
of such an admitted insurer, and the applicant is without substantial
prior operating history, the commissioner may reasonably rely on the
known characteristics and reputation of the admitted insurer to the
extent relevant and appropriate under the circumstances.

720. The commissioner may after notice and hearing promulgate such
reasonable rules and regulations, and amendments and additions
thereto, as are necessary or convenient to carry out the purposes and
provisions of this code governing the issuance, suspension and
revocation of certificates of authority. Any such rule or regulation
shall be promulgated in accordance with the procedure provided in
Chapter 4.5 (commencing with Section 11371) of Part 1 of Division 3
of Title 2 of the Government Code.

721. As used in Sections 704.5, 716, 717 and 718, the term
"applicant" includes the attorney-in-fact of a reciprocal or
interinsurance exchange. Wherever reference therein is made to an
officer, director, or management of the applicant, such reference is
deemed to include the officers, directors, and management of the
attorney-in-fact of a reciprocal or interinsurance exchange, and the
members of the board of governors or other governing committee of the
reciprocal itself.

725. Any person otherwise qualified may be a director of two or
more insurers, but no such interlocking directorate shall be used as
a means of substantially lessening competition in the business of
insurance or of creating a monopoly.
Whenever the commissioner has reason to believe that there is a
violation of this section, he shall serve upon the insurer or
insurers and the director or directors, as the case may be, a notice
pursuant to Section 38 of a hearing before the commissioner to be
held not less than thirty days after the service of such notice, and
requiring such insurer or insurers and such director or directors, as
the case may be, to show cause why an order should not be made by
the commissioner directing such insurer or insurers and such director
or directors, as the case may be, to cease and desist from such
violation.
If, after a hearing in accordance with the procedure provided in
Section 704, the commissioner finds that there has been a violation
of this section he shall issue and cause to be served upon such
insurer or insurers and such director or directors, as the case may
be, an order reciting the facts found by him, and setting forth the
respects in which there has been a violation of this section, and
directing such insurer or insurers and such director or directors, as
the case may be, to cease and desist from such violation.
Any such cease and desist order of the commissioner shall be
subject to judicial review. Subject to said judicial review, any
person violating any such cease and desist order shall be guilty of a
misdemeanor and the commissioner may, after a hearing in accordance
with the procedure provided in Section 704, decline to grant or renew
or may suspend or revoke a certificate of authority of any insurer
or insurers violating any such cease and desist order.

726. The commissioner shall notify the Secretary of State of any
refusal to issue a certificate of authority to transact insurance to
an applicant therefor.

728. (a) For the purposes of this section, the following
definitions are applicable:
(1) "Subject person" means any director, officer, or employee or
other natural person who participates in the management, direction,
or control of an insurer.
(2) "Insurer" means any domestic insurer, and any insurer which is
admitted to transact insurance in this state, provided that if a
subject person of an insurer is not a resident of California, or
operating out of a place of business within California, then the
subject person shall be engaged in the direct management, direction,
or control of the insurer in California in order to come within the
provisions of this section.
(b) If, after notice and a hearing, the commissioner finds all of
the following, the commissioner may issue an order removing a subject
person from his or her office or employment with the insurer and
prohibiting the subject person from further participating in any
manner in the conduct of the business of the insurer, except with the
prior consent of the commissioner:
(1) The subject person has engaged in repeated acts of misconduct
with respect to the operations of an insurer which have resulted in
substantial financial loss to an insurer.
(2) The misconduct which forms the pattern is fraudulent, or
consists of willful acts or omissions involving personal dishonesty
in the acceptance, custody, or payment of money or property on the
part of the subject person which has endangered or is likely to
endanger the solvency of the insurer.
(3) The pattern of misconduct is relevant in that it demonstrates
unfitness to continue as a subject person.
(c) (1) If the commissioner gives written notice pursuant to
subdivision (b) to a subject person, the commissioner may immediately
issue an order suspending the subject person from his or her office
or employment with the insurer and prohibiting the subject person
from further participating in any manner in the conduct of the
business of an insurer, except with the prior consent of the
commissioner if the commissioner: (A) finds that failure to
immediately issue such order threatens the financial solvency of the
insurer or may otherwise cause immediate and irreparable financial
injury to the insurer (B) serves that subject person and the insurer
with written notice of the suspension order; and (C) finds that all
of the necessary factors are present which would permit the
commissioner, after notice and a hearing, to issue an order pursuant
to subdivision (b) removing a subject person from his or her office
or employment with the insurer and prohibiting the subject person
from further participating in any manner in the conduct of the
business of an insurer.
(2) Any suspension order issued pursuant to paragraph (1) of this
subdivision shall be effective until the date the commissioner
dismisses the charges contained in the notice served under
subdivision (b) or paragraph (1) of this subdivision, the effective
date of an order issued by the commissioner pursuant to subdivision
(b), or a court issues a stay of the order pursuant to subdivision
(d).
(d) Within 10 days after a subject person has been served with an
order of suspension pursuant to subdivision (c), the person may apply
to the superior court of the county in which the principal office of
the insurer is located for a stay of the order pending completion of
the proceedings pursuant to subdivision (b), and the court shall
have jurisdiction to issue an order staying the suspension. Nothing
in this subdivision shall be deemed to authorize the court to issue a
stay order on an ex parte basis.
(e) (1) If the commissioner finds both of the following, he or she
may immediately issue an order suspending a subject person from his
or her office or employment with an insurer and prohibiting the
subject person from further participating in any manner in the
conduct of the business of an insurer, except with the prior consent
of the commissioner: (A) the subject person has been charged in an
indictment issued by a grand jury, or in an information, complaint,
or similar pleading issued by a United States Attorney, district
attorney, or other governmental official or agency authorized to
prosecute crimes, with a crime punishable by imprisonment for a term
exceeding one year and which involves as one of its necessary
elements a fraudulent act or an act of dishonesty in the acceptance,
custody, or payment of money or property; and (B) that a failure to
immediately issue the order threatens the financial solvency of the
insurer, or may otherwise cause immediate and irreparable financial
injury to the insurer.
In the event the criminal proceedings are terminated other than by
judgment of conviction, an order issued pursuant to paragraph (1) of
this subdivision shall be deemed rescinded as if it had not been
issued.
(2) If the commissioner finds both of the following, he or she may
immediately issue an order removing a subject person from his or her
office or employment with an insurer and prohibiting the subject
person from further participating in any manner in the conduct of the
business of the insurer, except with the prior consent of the
commissioner: (A) the person has been convicted during the preceding
five years of a crime that is punishable by imprisonment for a term
exceeding one year and that has as one of its necessary elements a
fraudulent act or an act of dishonesty in the accepting, custody, or
payment of money or property; and (B) that a failure to immediately
issue the order threatens the financial solvency of the insurer, or
may otherwise cause immediate and irreparable financial injury to the
insurer.
(3) The fact that any subject person charged with a crime
involving as one of its necessary elements a fraudulent act or any
act of dishonesty in the acceptance, custody, or payment of money or
property is not convicted of that crime shall not preclude the
commissioner from issuing an order regarding the subject person
pursuant to other provisions of this code.
(f) (1) Within 30 days after an order is issued pursuant to
subdivision (c) or (e), the person to whom the order is issued may
choose to do either of the following: (A) file with the commissioner
an application for a hearing on the order. The commissioner shall,
upon written request of the person, extend the 30-day period by an
additional 30 days provided the request is filed with the
commissioner within 30 days after the order is issued. If the
commissioner fails to commence the hearing within 15 business days
after the application is filed, or within a longer period of time to
which the person consents, the order shall be deemed rescinded as if
it had not been issued. Within 30 days after the hearing, the
commissioner shall affirm, modify, or rescind the order; otherwise,
the order shall be deemed rescinded as if it had not been issued, or
(B) petition for judicial review of the order pursuant to Section
1085 of the Code of Civil Procedure, where the court shall exercise
its independent judgment on the evidence.
(2) The right of any person to whom an order is issued pursuant to
subdivision (c) or (e) to petition for judicial review of the order
shall not be affected by the failure of that person to apply to the
commissioner for a hearing on the order as provided by this
subdivision.
(g) (1) Any person to whom an order is issued pursuant to
subdivision (b), (c), or (e) may apply to the commissioner to modify
or rescind the order. The commissioner shall not grant the
application unless he or she finds that it is reasonable to believe
that the person will, if and when he or she becomes a subject person,
comply with all of the applicable provisions of this code and of any
regulation or order issued thereunder.
(2) The right of any person to whom an order is issued pursuant to
subdivision (b), (c), or (e) to petition for judicial review of the
order shall not be affected by the failure of that person to apply to
the commissioner pursuant to paragraph (1).
(h) (1) It is unlawful for any subject person or former subject
person to whom an order is issued pursuant to subdivision (b), (c) or
(e) to do any of the following as long as the order is effective,
except with the prior consent of the commissioner: (A) to serve or
act as a subject person for or in any insurer; or (B) to directly or
indirectly solicit, procure, or transfer or attempt to transfer or
vote any proxy, consent or authorization with respect to any shares
or other securities of any insurer having voting rights.
(2) If, after notice and a hearing, the commissioner finds that
any person has violated paragraph (1) of this subdivision, the
commissioner may order that person to pay to the commissioner a civil
penalty in an amount the commissioner may specify; provided however,
that the amount of the civil penalty shall not exceed one thousand
dollars ($1,000) for each violation or, in the case of a continuing
violation, one thousand dollars ($1,000) for each day for which the
violation continues, which may be recovered in a civil action.
In determining the amount of civil penalty to be paid to the
commissioner under this paragraph, the commissioner shall consider
the financial resources and good faith of the person charged, the
gravity of the violation, the history of previous violations by the
person, and such other factors as in the opinion of the commissioner
may be relevant.
(3) If, after notice and a hearing, the commissioner finds that
any insurer has knowingly aided and abetted a subject person in a
violation of paragraph (1) of this subdivision, the commissioner may
order that insurer to pay to the commissioner a civil penalty in an
amount the commissioner may specify; provided however, that the
amount of the civil penalty shall not exceed ten thousand dollars
($10,000) for each violation, or in the case of a continuing
violation, ten thousand dollars ($10,000) for each day for which the
violation continues up to a maximum of one hundred thousand dollars
($100,000), which may be recovered in a civil action. Continuation of
the subject person's salary or other employee benefits pending final
disposition shall not be considered aiding and abetting a subject
person.
In determining the amount of civil penalty to be paid to the
commissioner under this paragraph, the commissioner shall consider
the financial resources and good faith of the person charged, the
gravity of the violation, the history of previous violations by the
person, and such other factors as in the opinion of the commissioner
may be relevant.
(i) Except as otherwise provided by this section any hearing
required by this section shall be conducted in accordance with
Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code, subject to the following:
(1) At the option of the subject person, all such hearings shall
be a closed session and private, and the records of the hearings
shall not be made public unless the hearing results in a final order
adverse to the subject person.
(2) Where judicial review is sought by the subject person pursuant
to Section 11523 of the Government Code, the court shall exercise
its independent judgment upon the evidence.
(3) When a subject person to whom an order has been issued
pursuant to subdivision (c) or (e) applies to the commissioner for a
hearing pursuant to subparagraph (A) of paragraph (1) of subdivision
(f), the Office of Administrative Hearings shall schedule the hearing
on a priority basis at the earliest possible time and once the
hearing is commenced, it shall not be continued for more than three
business days without the consent of the subject person.
(4) If the Office of Administrative Hearings cannot schedule the
commencement of a hearing within 15 business days as provided by
paragraph (1) of subdivision (f), and the subject person does not
waive his or her right to a hearing commencing within 15 days, the
hearings may be conducted by administrative law judges appointed by
the commissioner. In the event the subject person chooses to accept a
hearing before an administrative law judge appointed by the
commissioner, the hearing shall be completed within 45 days of
commencement unless additional time is requested by the subject
person. If the hearing is not completed within 45 days, the order
shall be deemed rescinded as if it had not been issued.
(j) Nothing in this section is intended to or shall be construed
to create a private cause of action against an offending subject
person or an insurer or production agency that aids and abets a
subject person, based on the standards established by this section or
the commissioner's findings or orders pursuant to this section.
(k) Notwithstanding this section, or any other authority of the
commissioner, the commissioner shall not have the power to remove or
replace either the Board of Directors or the President of the State
Compensation Insurance Fund.