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The surplus line broker shall within one week or as soon thereafter as practicable, after receipt by him of the complete information as to with what companies or other insurers and at what rate the insurance has been placed, file with the insurance commissioner a true report showing the names of the insured and of the insurers, the character of the insurance, location of the property, gross premium payable therefor and the date such insurance takes effect and the terms thereof. As soon as practicable after any such insurance has been cancelled, or any premium thereon has been increased or reduced, such surplus line broker shall file with the insurance commissioner a report thereof in the same detail as required in the case of the report above referred to.

On or before the first day of March of each year the surplus line broker shall file with the insurance commissioner a sworn statement of all business transacted under his license during the last preceding calendar year ending December thirty-first. Such statement shall contain true accounts of the gross amount of insurance procured from and placed with unauthorized companies during the calendar year, the gross premium charged therefor, including additional insurance premiums, the gross amount of all insurance cancelled during said year, and the gross return premiums thereon. Such statement shall also include any additional premiums charged, and the gross premium returned during said calendar year on insurance previously effected. All such reports and statements shall be made on blanks to be furnished to the surplus line broker by the insurance commissioner on application therefor.

Every surplus line broker shall on or before the first day of April of each year pay to the insurance commissioner for the use of the State of California a tax of three per cent upon the amount of gross premiums upon all insurance placed under authority of such license, less three per cent of all return premiums on policies cancelled, or upon which premiums have been reduced during the year ending December thirty-first last preceding.

Any surplus line broker who wilfully fails or refuses to report to the insurance commissioner any insurance on property located within this state placed under his name with unauthorized companies, or who shall by wilful omission from the records required to be maintained by him for such purpose, attempt to evade the payment of taxes on any such insurance, shall upon conviction thereof in addition to being required to pay the tax thereon, be further penalized by a fine of not exceeding one hundred dollars for each offense and the insurance commissioner shall further forth with revoke the license of any such surplus line broker.

The insurance commissioner shall also revoke the license of any surplus line broker who wilfully fails or refuses to perform any of the other duties hereinbefore specified as required of said broker.

[Revoking license.] If in the opinion of the insurance commissioner the solvency of any surety on a bond hereby required has become impaired or doubtful, he shall notify the surplus line broker in writing, and unless within ten days after receipt of such notice the solvency of such surety is proved to the satisfaction of the insurance commissioner, or a new bond is substituted therefor, said insurance commissioner shall revoke the license of the surplus line broker. The removal of the office of the surplus line broker from this state, or the removal therefrom of his accounts of his business as such, or the closing of his said office for a period of more than twenty consecutive days, shall constitute a termination of the authority of said surplus line broker, and shall be tantamount to an express revocation of his license, whether or not the insurance commissioner thereafter revokes the same. No new license shall be issued to any surplus line broker whose license has been revoked for any reason other than the insufficiency of his sureties, within the period of one year after such revocation, and until all indebtedness of said surplus line broker on former business has been paid to said insurance commissioner.

(Examination of policies, etc., by insurance commissioner.] Every insured for whom insurance has been effected with unauthorized companies shall produce for examination by the insurance commissioner, whenever requested by him, in writing so to do. all policies, contracts, and other documents evidencing such insurance and disclose to him the true amount of the gross premiums paid or agreed to be paid therefor, or upon refusal so to do, he shall forfeit to the State of California the sum of two hundred dollars for each refusal. Nothing in this section shall be construed to deprive any citizen of this state of the right to negotiate and effect insurance on his own property with any unauthorized company. Nothing in this section shall be construed to permit any broker to solicit or place marine insurance or insurance on property of railroads or other common carriers engaged in interstate trade with nonadmitted insurers until three-quarters of the companies duly authorized to transact such class of insurance in this state shall have first been given a refusal of such insurance at equal rates and same conditions as may be bona fide obtainable from insurance companies admitted to do the same character of insurance under the laws of the State of New York.

[Repeal.] Section four hundred thirty-nine of the Penal Code, in so far as it is inconsistent with the provisions hereof, is hereby repealed.

History: Former section enacted March 12, 1872, founded upon 8 9 act of March 26, 1868, Stats. 1867-8, p. 339; amended March 30, 1874, Code Amdts. 1873-4, pp. 9, 61; April 1, 1878, Code Amdts. 1877-8, p. 13; April 26, 1880, Code Amdts. 1880 (Pol. C. pt.), p. 89; repealed and new section substituted therefor March 8, 1907, Stats, and Amdts. 1907, p. 146, Kerr's Stats. and Amdts. 1906-7, p. 33; amended May 1, 1911, Stats. and Amdts. 1911, p. 1269; April 20, 1917, Stats, and Amdts. 1917, p. 147. In effect July 27, 1917.

8 597. EXAMINATION OF AFFAIRS OF COMPANY, WHEN. The commissioner, whenever he deems necessary, or whenever he is requested by verified petition, signed by twenty-five persons interested, either as stockholders, policyholders, or creditors of any company engaged in insurance business in this state, showing that such company is insolvent under the laws of this state, must make an examination of the business and affairs relating to the insurance business of such company, and must make such an examination whenever any company is organized to do insurance business in this state, and before issuing a certificate of authority other than renewals to such company; provided, the insurance commissioner shall have no authority to issue, and no certificate of authority shall be issued, to any insurance company or corporation hereafter organized or incorporated in this state, whether the same be organized and promoted directly or by means of a holding company or corporation, one of the purposes of which is the organization and promotion of such insurance company or corporation, where such examination shows the expense of organization and promotion to be in excess of fifteen per cent of the total amount actually paid on its capital stock exclusive of surplus.

[Company organized in other state.) Whenever any company, not organized under the laws of this state, applies for a certificate of authority to do business in this state, the insurance commissioner may make, or cause to be made, by the insurance department of the state where such company is organized, an examination of the business and affairs relating to the insurance business of such company. The company organized or existing under the laws of any country outside of the United States, shall be deemed to be organized within the meaning of this act in any state wherein such company maintains the deposits required by the laws of this state.

[Access to books.] For the purpose of making such examination the insurance commissioner shall have free access to all the books and papers of such company, and must thoroughly inspect and examine all its affairs, and ascertain its condition and ability to fulfill its engagements, and that it has complied with all the provisions of law applicable to its insurance transactions.

[Inspection of books.] Every company examined under the provisions of this section must open its books and papers for the inspection of the commissioner, and otherwise facilitate such examination; and the commissioner may administer oaths and examine under oath any person relative to the business of such company; and if he finds the books to be carelessly or improperly kept or posted, he must employ sworn experts to rewrite, post, and balance the same at the expense of such company. Such examination must be conducted in the county where such company has its principal office, and must be private, unless the commissioner deems it necessary to publish the result of such investigation, in which case he may publish the same in two of the public newspapers of this state, one of which must be published in the city of San Francisco and the other in the city of Los Angeles. All examinations must be at the expense of the company, such expense to be paid in advance, and, if any such company refuses to pay such expenses in advance, the insurance commissioner may refuse to issue any such certificate of authority and must revoke any existing certificate of authority authorizing such company to do business.

(State compensation insurance fund.] The insurance commissioner shall have the same powers and authority to make examination of the state compensation insurance fund as are conferred upon him by law relative to the examination of other insurance carriers.

History: Original section enacted March 12, 1872, founded upon § 6 Act March 26, 1868, Stats. 1867-8, p. 37; repealed and present section approved March 8, 1907, Stats, and Amdts. 1907, p. 147, Kerr's Stats. and Amdts. 1906-7, p. 35; amended March 10, 1911, Stats, and Amdts. 1911, p. 334; May 29, 1917, Stats, and Amdts. 1917, p. 1320. In effect July 28, 1917.

$ 602a[2]. HOW CONDITIONS OF COMPANY SHALL BE ESTIMATED. (Estimate of indebtedness of liability insurance companies.] In estimating the condi. tion of any insurance corporation, mutual company, association, the state compensation insurance fund, interinsurance exchange or other insurance carriers engaged in the business of liability insurance and licensed to transact business in this state, the insurance commissioner shall charge as liabilities, all outstanding indebtedness of such carrier, and the premium reserve on policies in force, equal to the unearned portions of the gross premiums charged for covering the risks, computed on each respective risk from the date of the issuance of the policy.

[Computation of reserve.] The reserve for outstanding losses under insurance against loss or damage from accident to or injuries suffered by an employee or other person and for which the insured is liable shall be computed as follows:

(1) [Liability suits.] For all liability suits being defended under policies written more than

(a) Ten years prior to the date as of which the statement is made, one thousand five hundred dollars for each suit.

(b) Five and less than ten years prior to the date as of which the statement is made, one thousand dollars for each suit.

(C) Three and less than five years prior to the date as of which the statement is made, eight hundred fifty dollars for each suit.

(2) [Liability policies.] For all liability policies written during the three years immediately preceding the date as of which the statement is made, such reserve shall be sixty per centum of the earned liability premiums of each of such three years less all loss and loss expense payments made under the liability policies written in the corresponding years; but in any event, such reserve shall, for the first of such three years, be not less than seven hundred fifty dollars for each outstanding liability suit on said year's policies.

(3) [Claims under policies written three years prior.] For all compensation claims under policies written more than three years prior to the date as of which the statement is made, the present values at four per centum interest of the determined and the estimated future payments.

(4) [Claims under policies written three years preceding.] For all compensation claims under policies written in the three years immediately preceding the date as of which the statement is made, such reserve shall be seventy per centum of the earned compensation premiums of each of such three years, less all loss and loss expense payments made in connection with such claims under policies written in the corresponding years; but in any event in the case of the first year of any such three-year period such reserve shall be not less than the present value at four per centum interest of the determined and the estimated unpaid compensation claims under policies written during such year.

["Earned premiums."] The term "earned premiums,” as used herein, shall include gross premiums charged on all policies written, including all determined excess and additional premiums, less return premiums, other than premiums returned to policy. holders as dividends, and less reinsurance premiums and premiums on policies cancelled, and less unearned premiums on policies in force.

["Compensation.”] The term "compensation" as used in this act, shall relate to all insurance effected by virtue of statutes providing compensation to employees for personal injuries irrespective of fault of the employer. The term "liability" shall relate to all insurance except compensation insurance against loss or damage from accident to or injuries suffered by an employee or other person and for which the insured is liable.

[“Loss payments.”] The terms "loss payments” and “loss expense payments,” as used herein, shall include all payments to claimants, including payments for medical and surgical attendance, legal expenses, salaries and expenses of investigators, adjusters and field men, rents, stationery, telegraph and telephone charges, postage, salaries and expenses of office employees, home office expenses, and all other payments made on account of claims, whether such payments shall be allocated to specific claims or unallocated.

[Distribution of unallocated liability loss expense payments. All unallocated liability loss expense payments made in a given calendar year subsequent to the first four years in which an insurer has been issuing liability policies, shall be distributed as follows: Thirty-five per centum shall be charged to the policies written in that year, forty per centum to the policies written in the preceding year, ten per centum to the policies written in the second year preceding, ten per centum to the policies written in the third year preceding, and five per centum to the policies written in the fourth year preceding, and such payments made in each of the first four calendar years in which an insurer issues liability policies shall be distributed as follows: In the first calendar year one hundred per centum shall be charged to the policies written in that year, in the second calendar year fifty per centum shall be charged to the policies written in that year and fifty per centum to the policies written in the preceding year; in the third calendar year forty per centum shall be charged to the policies written in that year, forty per centum to the policies written in the preceding year, and twenty per centum to the policies written in the second year preceding, and in the fourth calendar year thirtyfive per centum shall be charged to the policies written in that year, forty per centum to the policies written in the preceding year, fifteen per centum to the policies written in the second year preceding, and ten per centum to the policies written in the third year preceding, and a schedule showing such distribution shall be included in the annual statement.

[Distribution of unallocated compensation loss expense payments.] All unallocated compensation loss expense payments made in a given calendar year subsequent to the first three years in which an insurer has been issuing compensation policies shall be distributed as follows: Forty per centum shall be charged to the policies written in that year, forty-five per centum to the policies written in the preceding year, ten per centum to the policies written in the second year preceding and five per centum to the policies written in the third year preceding, and such payments made in each of the first three calendar years in which an insurer issues compensation policies shall be distributed as follows: In the first calendar year one hundred per centum shall be charged to the policies written in that year, in the second calendar year fifty per centum shall be charged to the policies written in that year and fifty per centum to the policies written in the preceding year, in the third calendar year forty-five per centum shall be charged to the policies written in that year, forty-five per centum to the policies written in the preceding year and ten per centum to the policies written in the second year preceding, and a schedule showing such distribution shall be included in the annual statement.

[Additional reserves.] Whenever, in the judgment of the insurance commissioner, the liability or compensation loss reserves of any insurer under his supervision, calculated in accordance with the foregoing provisions, are inadequate, he may, in his discretion, require such insurer to maintain additional reserves based upon estimated individual claims or otherwise.

[Schedule of experience.] Each insurer that writes liability or compensation policies shall include in the annual statement required by law a schedule of its experience thereunder in such form as the insurance commissioner may prescribe.

History: Amendment approved June 6, 1913, Stats. and Amdts. 1913, p. 493; amended May 26, 1917, Stats, and Amdts. 1917, p. 1178. In effect July 27, 1917.

Editorial Note: On June 6, 1913, two acts were passed amending $ 602a, see Stats. and Amdts. 1913, pp. 465, 493, Kerr's Cumulative Supplement to Cyc. Codes of California, 1906-1913, pp. 65-70, and "editorial" note on pp. 67, 68. From a reading of the two amendments of 1903 it is manifest that the intention of the legislature was to amend the second of the acts passed on June 6, 1913, and which in "Kerr's Cumulative Supplement" and "Kerr's Small Codes of California," is

designated as $ 602[a]. $ 616.

issuance. The company may limit the au1. General agent under this section

thority of its agents, and whether or not The

authority has been limited is a question clause declaring that the process agent shall also be "deemed in law a general agent"

of fact, and the mere proof that one has does not prevent an insurance company from

been made a “general agent" under this inserting in the policy stipulations that such

section does not make it a question of law. agent shall have no power to waive for

-Belden v. Union Central Life Ins. Co., 167 feitures or alter the terms of the policy after

Cal. 740, 141 Pac. 370.

8 633. LICENSE TO ACT AS INSURANCE AGENT. No person, shall. within this state act as the agent of any insurance or surety company or society until such person shall have first obtained a license from the insurance commissioner authorizing him or it so to act.

[Agent, who is.] Any person duly appointed and authorized by an insurance or surety company or society to solicit applications for insurance or surety bonds, or effect insurance or surety bonds in the name of such company, shall be an agent within the meaning of this section. The insurance commissioner shall upon written notice from any insurance or surety company or society, authorized to transact business in this state, of its appointment of any person to act as its agent and upon pay. ment of the fee provided for in section six hundred five of the Political Code, issue to such person a license in such form as may be prescribed by the insurance department;

[Application.] provided, however, that such proposed licensee shall first file with the insurance commissioner of the State of California upon a form to be prescribed and furnished by said insurance commissioner, an application in writing, duly verified under oath, reciting:

1. The applicant's full name and address;
2. The name of the company for which the applicant is to act as agent;
3. The applicant's experience in the insurance or surety business;

4. If the applicant is engaged in any business other than insurance or surety, the nature of such business and the name under which such business is conducted;

5. That the applicant intends to carry on in good faith the occupation of an insurance or surety agent, and that said applicant does not seek such appointment for the purpose of avoiding or preventing the operation or enforcement of the insurance laws of this state.

[Revocation or suspension of license.] If it shall be brought to the attention of the insurance commissioner that any agent licensed hereunder has wilfully misstated any material fact in his application, or that the purpose or principal use of such license as an insurance or surety agent is to avoid or prevent the operation or enforcement of any antirebate law or other insurance law of this state, then the insurance commis

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