E&S Premium Rates Subject To Prop 103

[abtoe]

Can any of you technical folks out there tell me where in California's Insurance Code does it say that Surplus Lines premium rates are exempt from the filing requirements of Proposition 103, CIC Section 1861.05(b)? Do the statutes require companies like Scottsdale to file their rates in California?

I noticed that Section 1861.13 says that Prop 103 "shall apply to all insurance on risks or on operations in this state, except those listed in Section 1851," however Section 1851 does not exempt E&S business.

It's also interesting to note that CIC Section 41 provides that "All insurance in this State is governed by the provisions of this code."

[LadyBroker]

Not all lines of insurance are governed by prop 103. Also, and I am taking a guess here, and am sure others will know if I am correct, non admitted carriers are not regulated by the state, which is why they are termed 'non admitted'. In that case, their rates and forms are not subject to prior approval by the state of California.

Is there a particular line of coverage you are questioning?

[INTLXS]

I thought Prop 103 had to do with Auto. You can't write auto liability on a non-admitted or surplus lines basis, so this would be a moot point.

[LadyBroker]

Prop 103 had the most immediate and widespread impact on the Auto insurance market, but it also regulates most other consumer products, like homeowners, and quake, and some small business lines. From what I could gather from a quick review of the summary posted on the California DOI website, it looks to speak mostly towards personal lines, and small business owners. For instance, it doesn't cover Products liability, or All Risk property, except for homeowners fire insurance.

[SurplusFuss]

California does allow commercial auto to be written as surplus lines.

As for whether 103 applies to surplus lines, I think that it does not. I say that because when Prop 103 became effective, E&S business in CA increased.

However, the California Surplus Lines Association is the expert on laws and regs. I'm sure they'd be happy to answer the question for you.

http://www.slacal.org/about_us/abt_contact_us.html

Also, this is the section of CA law that applies to surplus lines:

http://www.leginfo.ca.gov/cgi-bin/displ ... =1760-1780

Hope that helps.

Thanks,
-Fussy

[abtoe]

Thanks for trying, but those answers are all too vague to be of any practical use.

The law is specifically defined by the statutes, adopted by the people of California or by the legislature, not by the opinion of the Commissioner, the SLA or any other person. Nonadmitted policies are enforced in California courts, using California law, just like any other contracts. The statutes I cited clearly state that all insurance is subject to the Insurance code, without exception to nonadmitted insurance.

Does anyone out there know of another statute or published court case that says otherwise, particularly with respect to the filing requirements of Prop 103?

[NDA]

Most CA sections of the statutes refer to insurer and is in many cases shown in the section state that it is "admitted" or "licensed" or "authorized". Surplus lines insurers are not "authorized" by definition.

Some sections are unclear, however sections applying to filling of rates and forms are clear about not applying to surplus lines. If you look at the non-renewal/cancellation section it clearly states that it does not apply to surplus lines.

[abtoe]

NDA: You offered good comments, and your observation that some statutes expressly apply to only "authorized" or "admitted" insurers is correct.

In fact, that type of specific reference establishes the foundation for the public and the judiciary to know that lawmakers were aware of the difference between "admitted" and "nonadmitted" when they wrote the laws, and that they intentionally omitted such specific references when their other laws were written without such specific reference.

The fact is that Prop 103 is defined by sections 1861.01 et seq, which apply to all insurers, not just "admitted" or "authorized" insurers; and section 1861.05(b) applies to "every insurer," not every "authorized" insurer; and section 1861.13 applies to "all insurance," not just "authorized" insurance; and section 1851 applies to "all insurance" with certain listed exceptions, none of which are unauthorized or nonadmitted insurance transactions.

The lawmakers could have easily written those sections or changed them so as to limit their application to admitted insurers, but they clearly did not.

[TheInsKid]

I would submit the following to consider;

Since the passage of Prop 103, no surplus lines insurance has been called into issue by the FTCR or any other consumer group, except however personal lines and med mal liability. In fact there have been many attacks on Med liability and the CA courts have not taken the opportunity to even try and regulate any med liability outside of the "regulated companies"

[abtoe]

Dear InsKid:

With respect to the business of insurance, you are correct in saying that it is "interstate commerce," but you are wrong to assume that it is not governed by state law.

Federal acts that do not expressly purport to regulate the "business of insurance" will not preempt state laws and regulations that regulate the "business of insurance." (See Federal McCarran-Ferguson Act of 1945.) There are no such Federal acts, other than the Terrorism Risk Insurance Act and the Federal Risk Retention Act; and there is no exception for the regulation of insurance rates and forms.

State legislation affects companies regarding interstate commerce all the time. The constitution merely prohibits state legislation that adversely discriminates against entities involved in interstate commerce. Clearly, state legislation putting nonadmitted carriers on the same footing as admitted carriers is not prohibited. Most insurance in California is underwritten by companies that are not domiciled in California, and all of that business is subject to California law, including but not limited to the Insurance Code (e.g., pursuant to Section 41 thereof).

While I respect the conventional thinking that you've describe, such does not constitute California law; rather, California's laws are defined and enforced on the basis of expressed written statutes, not upon any popular convention. Although in conflict with conventional thinking, the statutes that I've cited are precise and unambiguous. The law should not be dismissed for mere convenience or convention.

If you (or others) can not cite the exact statute(s) that you claim defines the conventional "basic definition of surplus lines regulation" in California, then it is only logical to conclude that Prop 103 applies equally to admitted and nonadmitted insurers, pursuant to CIC Sections 41 and 1861.13.

[LadyBroker]

It seems as though you have a specific question in mind. Why not post your specific issue, and perhaps someone from the DOI will respond? Or, perhaps contacting the DOI directly would be helpful.

[abtoe]

Thanks for the suggestion LadyBroker.

The question is, is there any statute or case that provides an exemption to CIC Sections 41 and 1861.13 for unauthorized insurance transactions?

My impression of the DOI is that it is a political bureaucracy, motivated by what may or may not get the attention of voters, not always professional in its approach to the law. In fact the DOI/Commissioner has been found in violation of the law on more than one occasion. The DOI is nothing more than an extension of our Executive Branch of government, a law enforcement agency; that is, it is charged with upholding the law, not writing it or interpreting it. I'd much prefer the opinion of legal scholars or technical experts.

[csr@ramt]

Why don't you go in and look at the websiter for The Surplus Line Association of Califormia's web page. You can review all the regulations and other material that you want. It is a very good site with alot of information. Hope you find what your looking for. The address for the site is http://www.sla-cal.org

[abtoe]

Thanks csr@ramt, but Insurance Journal maintains this forum publicly, making its website much better than the SLA's. The SLA's website fails to answer my question and it provides no means for public discussion on the subject.

Like the California DOI, I believe that the SLA is motivated by self-serving interests; that is, the SLA is comprised exclusively of surplus lines brokers, people that make money by selling unauthorized insurance. Thus, their agenda is likely to advocate that they are exempt from regulation.

An objective answer is not likely to come from someone that has a stake at risk. Nonetheless, the SLA people are free to post their personal opinions here, on Insurance Journal's "Forums" site.

[csr@ramt]

Then I guess you did not go into the website and see all the regulations that govern the E & S market in the State of California. I do not know of any other place to tell you where to go except to that website and since the site is open to the public I think that it is the easiest place to find out the information your looking for.