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Chapter 9. Basic Property Insurance Inspection And Placement Plan of California Insurance Code >> Division 2. >> Part 1. >> Chapter 9.
The purposes of this chapter are to do all of the following:
(a) To assure stability in the property insurance market for property located in the State of California.
(b) To assure the availability of basic property insurance as defined by this chapter.
(c) To encourage maximum use, in obtaining basic property insurance, of the normal insurance market provided by admitted insurers and licensed surplus line brokers.
(d) To provide for the equitable distribution among admitted insurers of the responsibility for insuring qualified property for which basic property insurance cannot be obtained through the normal insurance market by the establishment of a FAIR Plan (fair access to insurance requirements), an industry placement facility and a joint reinsurance association.
(a) To assure stability in the property insurance market for property located in the State of California.
(b) To assure the availability of basic property insurance as defined by this chapter.
(c) To encourage maximum use, in obtaining basic property insurance, of the normal insurance market provided by admitted insurers and licensed surplus line brokers.
(d) To provide for the equitable distribution among admitted insurers of the responsibility for insuring qualified property for which basic property insurance cannot be obtained through the normal insurance market by the establishment of a FAIR Plan (fair access to insurance requirements), an industry placement facility and a joint reinsurance association.
Unless the provision or context otherwise requires, the
following definitions shall govern the construction of this chapter:
(a) "Association," "industry placement facility," or "facility," means a joint reinsurance association (the California FAIR Plan Association), formed by insurers licensed to write and engaged in writing basic property insurance within this state to assist persons in securing basic property insurance and to formulate and administer a program for the equitable apportionment among such insurers of such basic property insurance.
(b) "Commissioner" means the Insurance Commissioner of this state.
(c) "Basic property insurance" means insurance against direct loss to real or tangible personal property at a fixed location in those geographic or urban areas designated by the commissioner, from perils insured under the standard fire policy and extended coverage endorsement and vandalism and malicious mischief and such other insurance coverages as may be added with respect to such property by the industry placement facility with the approval of the commissioner or by the commissioner, but shall not include insurance on automobile or farm risks. For the purposes of earthquake coverage that is provided as a component of basic property insurance, the association shall sell only the policy described in Section 10089. In force policies of basic property insurance that include earthquake coverage shall be renewed with the coverage specified in Section 10089, and the association shall comply with the notice requirements of paragraph (2) of subdivision (a) of Section 10086.
(d) "Inspection bureau" means the organization or organizations designated by the association with the approval of the commissioner to make inspections to determine the condition of the properties for which basic property insurance is sought and to perform such other duties as may be authorized by the association.
(e) "Premiums written" means gross direct premiums charged with respect to property in this state on all policies of basic property insurance and the basic property insurance premium components of all multiperil policies, less return premiums, dividends paid or credited to policyholders, or the unused or unabsorbed portions of premium deposits.
(f) "Insurer" means any person who undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event, and shall include reciprocals and interinsurance exchanges.
(a) "Association," "industry placement facility," or "facility," means a joint reinsurance association (the California FAIR Plan Association), formed by insurers licensed to write and engaged in writing basic property insurance within this state to assist persons in securing basic property insurance and to formulate and administer a program for the equitable apportionment among such insurers of such basic property insurance.
(b) "Commissioner" means the Insurance Commissioner of this state.
(c) "Basic property insurance" means insurance against direct loss to real or tangible personal property at a fixed location in those geographic or urban areas designated by the commissioner, from perils insured under the standard fire policy and extended coverage endorsement and vandalism and malicious mischief and such other insurance coverages as may be added with respect to such property by the industry placement facility with the approval of the commissioner or by the commissioner, but shall not include insurance on automobile or farm risks. For the purposes of earthquake coverage that is provided as a component of basic property insurance, the association shall sell only the policy described in Section 10089. In force policies of basic property insurance that include earthquake coverage shall be renewed with the coverage specified in Section 10089, and the association shall comply with the notice requirements of paragraph (2) of subdivision (a) of Section 10086.
(d) "Inspection bureau" means the organization or organizations designated by the association with the approval of the commissioner to make inspections to determine the condition of the properties for which basic property insurance is sought and to perform such other duties as may be authorized by the association.
(e) "Premiums written" means gross direct premiums charged with respect to property in this state on all policies of basic property insurance and the basic property insurance premium components of all multiperil policies, less return premiums, dividends paid or credited to policyholders, or the unused or unabsorbed portions of premium deposits.
(f) "Insurer" means any person who undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event, and shall include reciprocals and interinsurance exchanges.
This chapter shall not apply to county mutual fire insurers
nor to fraternal fire insurers.
(a) Any person having an insurable interest in real or
tangible personal property who, after diligent effort, has been
unable to obtain basic property insurance through normal channels
from an admitted insurer or a licensed surplus line broker, shall be
entitled upon application to the facility to an inspection of the
property by representatives of the inspection bureau. Such inability
to obtain such insurance after diligent effort through normal
channels may, in the discretion of the association, be demonstrated
by a signed general statement to that effect on a form prescribed by
the association.
(b) The manner and scope of the inspection and the form of the inspection report shall be prescribed by the facility with the approval of the commissioner. The inspection shall include, but need not be limited to, pertinent structural and occupancy features as well as the general condition of the building and surrounding structures. A representative photograph of the property may be taken as part of the inspection.
(c) Promptly after the request for inspection is received, an inspection shall be made and an inspection report filed with the company or companies designated by the facility. A copy of the completed inspection report shall be sent to the facility and to the applicant upon request.
(b) The manner and scope of the inspection and the form of the inspection report shall be prescribed by the facility with the approval of the commissioner. The inspection shall include, but need not be limited to, pertinent structural and occupancy features as well as the general condition of the building and surrounding structures. A representative photograph of the property may be taken as part of the inspection.
(c) Promptly after the request for inspection is received, an inspection shall be made and an inspection report filed with the company or companies designated by the facility. A copy of the completed inspection report shall be sent to the facility and to the applicant upon request.
Within 30 days after the effective date of this chapter,
with the approval of the commissioner, all insurers licensed to write
and engaged in writing in this state, on a direct basis, basic
property insurance or any component thereof in multiperil policies,
shall establish an industry placement facility, the California FAIR
Plan Association, to formulate and administer a program for the
equitable apportionment among such insurers of basic property
insurance which may be afforded persons having an interest in real or
tangible personal property who, after diligent effort (as specified
in subdivision (a) of Section 10093), are unable to procure such
insurance through normal channels from an admitted insurer or a
surplus line broker. Each such insurer, as a condition of its
authority to transact such kinds of insurance in this state, shall
participate in such industry placement facility program in accordance
with rules to be established by a governing committee consisting of
nine insurers elected annually in the manner to be provided in the
program. The governing committee shall, in addition, have as
nonvoting members one representative of insurance agents, one
representative of insurance brokers, one representative of surplus
line brokers, and one representative of the public, each to be
appointed by the Governor. The governing committee may establish
separate classifications of written premiums for the purpose of
equitable distribution but shall not include premiums from automobile
or farm risks. The program may also provide, with the approval of
the commissioner, for assessment of all members in amounts sufficient
to operate the facility, and may establish maximum limits of
liability to be placed through the program, reasonable underwriting
standards for determining insurability of a risk, and commission to
be paid to the licensed producer designated by the applicant.
Notwithstanding subdivision (c) of Section 10095, the
facility shall, pursuant to regulations adopted by the commissioner,
provide for a method whereby insurers who voluntarily write basic
property insurance on risks located in areas designated as brush
hazard areas by the Insurance Services Office (ISO) will, to that
extent, be proportionately relieved of the liability to participate
in a plan adopted pursuant to this chapter. Furthermore,
notwithstanding subdivision (c) of Section 10095, the facility shall,
pursuant to regulations adopted by the commissioner, provide for a
method whereby insurers who voluntarily write basic property
insurance or business owners package insurance on risks located in
areas designated as inner-city areas by the commissioner will, to
that extent, be proportionately relieved of the liability to
participate in a plan adopted pursuant to this chapter. Nothing in
this chapter shall preclude adoption of a plan or plans to allow
proportionate credit for voluntary writings in other areas or for
other classes of insurance.
(a) Within 30 days following the effective date of this
chapter, the association shall submit to the commissioner, for his or
her review, a proposed plan of operation, consistent with the
provisions of this chapter, creating an association consisting of all
insurers licensed to write and engaged in writing in this state, on
a direct basis, basic property insurance or any component thereof in
homeowners or other dwelling multiperil policies. Every insurer so
described shall be a member of the association and shall remain a
member as a condition of its authority to transact those kinds of
insurance in this state.
(b) The proposed plan shall authorize the association to assume and cede reinsurance on risks written by insurers in conformity with the program.
(c) Under the plan, each insurer shall participate in the writings, expenses, profits and losses of the association in the proportion that its premiums written during the second preceding calendar year bear to the aggregate premiums written by all insurers in the program, excluding that portion of the premiums written attributable to the operation of the association. Premiums written on a policy of basic residential earthquake insurance issued by the California Earthquake Authority pursuant to Section 10089.6 shall be attributed to the insurer that writes the underlying policy of residential property insurance.
(d) The plan shall provide for administration by a governing committee under rules to be adopted by it with the approval of the commissioner. Voting on administrative questions of the association and facility shall be weighted in accordance with each insurer's premiums written during the second preceding calendar year as disclosed in the reports filed by the insurer with the commissioner.
(e) The plan shall provide for a plan to encourage persons to secure basic property insurance through normal channels from an admitted insurer or a licensed surplus line broker by informing those persons what steps they must take in order to secure the insurance through normal channels.
(f) The plan shall be subject to the approval of the commissioner and shall go into effect upon the tentative approval of the commissioner. The commissioner may, at any time, withdraw his or her tentative approval or he or she may, at any time after he or she has given his or her final approval, revoke that approval if he or she feels it is necessary to carry out the purposes of the chapter. The withdrawal or revocation of that approval shall not affect the validity of any policies executed prior to the date of the withdrawal. If the commissioner disapproves or withdraws or revokes his or her approval to all or any part of the plan of operation, the association shall, within 30 days, submit for review an appropriately revised plan or part thereof, and, if the association fails to do so, or if the revised plan so filed is unacceptable, the commissioner shall promulgate a plan of operation or part thereof as he or she may deem necessary to carry out the purpose of this chapter.
(g) The association may, on its own initiative or at the request of the commissioner, amend the plan of operation, subject to approval by the commissioner, who shall have supervision of the inspection bureau, the facility and the association. The commissioner or any person designated by him or her, shall have the power of visitation of and examination into the operation and free access to all the books, records, files, papers, and documents that relate to operation of the facility and association, and may summon, qualify, and examine as witnesses all persons having knowledge of those operations, including officers, agents, or employees thereof.
(h) Every insurer member of the plan shall provide to applicants who are denied coverage the statewide toll-free "800" number for the plan established pursuant to Section 10095.5 for the purpose of obtaining information and assistance in obtaining basic property insurance.
(b) The proposed plan shall authorize the association to assume and cede reinsurance on risks written by insurers in conformity with the program.
(c) Under the plan, each insurer shall participate in the writings, expenses, profits and losses of the association in the proportion that its premiums written during the second preceding calendar year bear to the aggregate premiums written by all insurers in the program, excluding that portion of the premiums written attributable to the operation of the association. Premiums written on a policy of basic residential earthquake insurance issued by the California Earthquake Authority pursuant to Section 10089.6 shall be attributed to the insurer that writes the underlying policy of residential property insurance.
(d) The plan shall provide for administration by a governing committee under rules to be adopted by it with the approval of the commissioner. Voting on administrative questions of the association and facility shall be weighted in accordance with each insurer's premiums written during the second preceding calendar year as disclosed in the reports filed by the insurer with the commissioner.
(e) The plan shall provide for a plan to encourage persons to secure basic property insurance through normal channels from an admitted insurer or a licensed surplus line broker by informing those persons what steps they must take in order to secure the insurance through normal channels.
(f) The plan shall be subject to the approval of the commissioner and shall go into effect upon the tentative approval of the commissioner. The commissioner may, at any time, withdraw his or her tentative approval or he or she may, at any time after he or she has given his or her final approval, revoke that approval if he or she feels it is necessary to carry out the purposes of the chapter. The withdrawal or revocation of that approval shall not affect the validity of any policies executed prior to the date of the withdrawal. If the commissioner disapproves or withdraws or revokes his or her approval to all or any part of the plan of operation, the association shall, within 30 days, submit for review an appropriately revised plan or part thereof, and, if the association fails to do so, or if the revised plan so filed is unacceptable, the commissioner shall promulgate a plan of operation or part thereof as he or she may deem necessary to carry out the purpose of this chapter.
(g) The association may, on its own initiative or at the request of the commissioner, amend the plan of operation, subject to approval by the commissioner, who shall have supervision of the inspection bureau, the facility and the association. The commissioner or any person designated by him or her, shall have the power of visitation of and examination into the operation and free access to all the books, records, files, papers, and documents that relate to operation of the facility and association, and may summon, qualify, and examine as witnesses all persons having knowledge of those operations, including officers, agents, or employees thereof.
(h) Every insurer member of the plan shall provide to applicants who are denied coverage the statewide toll-free "800" number for the plan established pursuant to Section 10095.5 for the purpose of obtaining information and assistance in obtaining basic property insurance.
(a) The association shall establish and maintain a
statewide toll-free "800" number through which persons may receive
assistance in applying for insurance through the plan. The
association shall cause the number to be published in all general
distribution telephone directories in California.
(b) Every insurance agent or broker transacting basic property insurance shall either assist persons in making application for insurance through the plan or provide persons who desire that insurance with the toll-free number established pursuant to subdivision (a).
(b) Every insurance agent or broker transacting basic property insurance shall either assist persons in making application for insurance through the plan or provide persons who desire that insurance with the toll-free number established pursuant to subdivision (a).
(1) Any applicant or affected insurer shall have the right
of appeal from any act or decision of either the facility or the
association to the governing committee. A decision of the committee
may be appealed to the commissioner within 30 days after such
decision. Upon such appeal the commissioner may make any order to
implement the purposes of the chapter and the plan.
(2) All orders or decisions of the commissioner made pursuant to this chapter shall be subject to judicial review.
(2) All orders or decisions of the commissioner made pursuant to this chapter shall be subject to judicial review.
There shall be no liability on the part of, and no cause of
action of any nature shall arise against the insurers, the inspection
bureau, the facility, the association, the governing committee,
their agents or employees, or the commissioner or his authorized
representatives, with respect to any inspections required to be
undertaken by this chapter or for any acts or omissions in connection
therewith, or for any statements made in any reports and
communications concerning the insurability of the property, or in the
findings required by the provisions of this chapter, or at the
hearings conducted in connection therewith. The reports and
communications of the inspection bureau, the facility, the
association, and the records of the governing committee shall not be
considered public documents.
Acceptance of risks assigned under this chapter and
performance of any act required by this chapter is a condition of the
right to continue to hold a certificate of authority to transact
insurance business in this state. All insurers, on and after the
effective date of this chapter, by continuing to hold a certificate
of authority to transact insurance business shall be deemed to have
consented to the responsibilities imposed by this chapter.
In addition to any powers conferred upon him by this or any
other law, the commissioner is authorized to do all things necessary
to enable the State of California and any insurer participating in
any program approved by the commissioner to fully participate in any
federal program of reinsurance which may be hereafter enacted for
purposes similar to the purposes of this chapter.
The commissioner may require such reports from insurers
concerning risks insured under any program approved pursuant to this
chapter as he shall deem necessary to effect the purposes of this
chapter.
The facility, subject to the approval of the Insurance
Commissioner, may provide for the equitable distribution of risks
provided for in this chapter by means of assignment to individual
members of such facility or by a pool or association of insurers
participating in such facility.
(a) (1) Rates for the FAIR Plan shall not be excessive,
inadequate, or unfairly discriminatory, and shall be actuarially
sound so that premiums are adequate to cover expected losses,
expenses and taxes, and shall reflect investment income of the plan.
If the plan returns premiums to members annually, the rates shall not
include any component relating to surplus enhancements.
(2) If the FAIR Plan policy of a property owner would be subject to a brush surcharge solely because of an adjacent property owner's failure to comply with applicable laws, ordinances, and regulations regarding brush clearance requirements, the surcharge shall instead be imposed on the policy of the adjacent property owner if the adjacent property is also insured through the FAIR Plan.
(b) Rates for a policy of earthquake property insurance issued by the association shall be established based on the best available scientific information for assessing the risk of earthquake loss. Factors that the association shall consider in adopting rates include, but are not limited to, the following:
(1) Location of the insured property and its proximity to earthquake faults and to other geological factors affecting the risk of earthquake.
(2) The soil type upon which the insured dwelling is built.
(3) Construction type of the insured dwelling.
(4) The presence of earthquake hazard reduction factors as defined in Section 10089.2.
(c) Notwithstanding Section 10097, all information considered by the association in establishing rates shall be public records.
(d) The classification system established by the association for policies of earthquake property insurance shall not be adjusted or tempered in any manner to provide rates lower than are justified for classifications presenting a high risk of loss, or higher than are justified for classifications presenting a low risk of loss.
(2) If the FAIR Plan policy of a property owner would be subject to a brush surcharge solely because of an adjacent property owner's failure to comply with applicable laws, ordinances, and regulations regarding brush clearance requirements, the surcharge shall instead be imposed on the policy of the adjacent property owner if the adjacent property is also insured through the FAIR Plan.
(b) Rates for a policy of earthquake property insurance issued by the association shall be established based on the best available scientific information for assessing the risk of earthquake loss. Factors that the association shall consider in adopting rates include, but are not limited to, the following:
(1) Location of the insured property and its proximity to earthquake faults and to other geological factors affecting the risk of earthquake.
(2) The soil type upon which the insured dwelling is built.
(3) Construction type of the insured dwelling.
(4) The presence of earthquake hazard reduction factors as defined in Section 10089.2.
(c) Notwithstanding Section 10097, all information considered by the association in establishing rates shall be public records.
(d) The classification system established by the association for policies of earthquake property insurance shall not be adjusted or tempered in any manner to provide rates lower than are justified for classifications presenting a high risk of loss, or higher than are justified for classifications presenting a low risk of loss.
