Article 6. Powers Of Commissioner of California Insurance Code >> Division 2. >> Part 2. >> Chapter 10. >> Article 6.

Subject to the annual fee provisions as provided herein, every certificate of authority issued to a fraternal benefit society shall be for an indefinite term and shall expire with the expiration or termination of the corporate existence of the holder thereof unless sooner revoked by the commissioner. The commissioner shall require the payment of two thousand nine hundred fifty dollars ($2,950) in lawful money of the United States, in advance as a fee for filing an application for each original certificate of authority authorizing any fraternal benefit society to transact insurance in this state. Each society possessing a certificate of authority of indefinite term 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 or revocation. 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. A duly certified copy or duplicate of such certificate of authority shall be prima facie evidence that the holder is a fraternal benefit society within the meaning of this chapter.

No foreign or alien society shall transact business in this State without a certificate of authority issued by the commissioner. Any such society may receive a certificate of authority to transact business in this State upon a showing that its assets are invested in accordance with the provisions of this chapter and filing with the commissioner:
  (a) A duly certified copy of its charter or articles of incorporation;
  (b) A copy of its constitution and laws, certified by its secretary or corresponding officer;
  (c) A power of attorney to the commissioner as prescribed in Section 11104;
  (d) A statement of its business under oath of its president and secretary or corresponding officers in a form prescribed by the commissioner, duly verified by an examination made by the supervising insurance official of its home state or other state satisfactory to the commissioner;
  (e) A valuation report prepared and executed in accordance with Section 11133 of this chapter;
  (f) A certificate from the proper official of its home state, territory, province or country that the society is legally incorporated and licensed to transact business therein;
  (g) Copies of its certificate forms;
  (h) Such other information as the commissioner may deem necessary to a proper exhibit of its plan of operation; and
  (i) Payment of the fee specified in Section 11090. Any foreign or alien society desiring admission to this State shall have the qualifications required of domestic societies organized under this chapter. If the commissioner refuses to issue such license, he shall reduce his refusal to writing, file the same in his office and furnish a copy thereof, together with a statement of his reason therefor, to the secretary or corresponding officer of the society.

The commissioner shall act as prescribed in Section 11093 when upon investigation he finds that a domestic society:
  (a) Has exceeded its power;
  (b) Has failed to comply with any provision of this chapter;
  (c) Is not fulfilling its contracts in good faith;
  (d) Has a membership of less than 400 after an existence of one year; or
  (e) Is transacting business fraudulently or in a manner hazardous to its members, creditors, the public or the business.

(a) If the commissioner finds that any of the conditions set forth in Section 11092 exist in respect to a domestic society, he or she shall, in an order to show cause, notify the society of his or her findings and wherein those conditions exist and shall set a date after a reasonable period of time on which it shall show cause why it should not be enjoined from carrying on any business until the overt act or violation complained of shall have been corrected, or why an action in quo warranto should not be commenced against the society.
  (b) If on such date the society does not present good and sufficient reason why it should not be so enjoined or why such action should not be commenced, the commissioner may present the facts relating thereto to the Attorney General who shall, if he or she deems the circumstances warrant, commence an action to enjoin the society from transacting business or in quo warranto.
  (c) The court shall thereupon notify the society of a hearing. If after a full hearing it appears that the society should be so enjoined or liquidated or a receiver appointed, the court shall enter the necessary order.

If the court orders the society enjoined, the commissioner shall suspend its certificate of authority. Thereafter such society shall have no authority to do business in this State until:
  (a) The commissioner finds that the overt act or violation complained of has been corrected;
  (b) The costs of such action, if any, have been paid by the society;
  (c) The court has dissolved its injunction; and
  (d) The commissioner has reinstated the certificate of authority.

If the court orders the society liquidated, it shall be enjoined from carrying on any further business, whereupon the receiver of the society shall proceed at once to take possession of the books, papers, money and other assets of the society and, under the direction of the court, proceed forthwith to close the affairs of the society and to distribute its funds to those entitled thereto.

The provisions of Sections 11093 to 11095 relating to hearing by the commissioner, action by the Attorney General at the request of the commissioner, hearing by the court, injunction and receivership shall be applicable to a society which shall voluntarily determine to discontinue business.

The commissioner shall act as prescribed in Section 11098 when upon investigation he finds that a foreign or alien society transacting or applying to transact business in this State:
  (a) Has exceeded its powers;
  (b) Has failed to comply with any provisions of this chapter;
  (c) Is not fulfilling its contracts in good faith; or
  (d) Is conducting its business fraudulently or in a manner hazardous to its members or creditors or the public.

If the commissioner finds that any of the conditions set forth in Section 11097 exist in respect to a foreign or alien society, he shall, in an order to show cause, notify the society of his findings wherein such conditions exist and shall set a date after a reasonable period of time on which it shall show cause why its certificate of authority should not be suspended, revoked or refused. If on such date the society does not present good and sufficient reason why its authority to do business in this State should not be suspended, revoked or refused, he may suspend or refuse the certificate of authority of the society to do business in this State until satisfactory evidence is furnished to him that such suspension or refusal should be withdrawn or he may revoke the authority of the society to do business in this State. Nothing contained in this section shall be taken or construed as preventing any such society from continuing in good faith all contracts made in this State during the time it was legally authorized to transact business herein.

Article 14 (commencing with Section 1010) of Chapter 1 of Part 2 of Division 1 applies to any society, except as otherwise provided in this chapter.

Every society operating under the provisions of this chapter and issuing a policy or certificate of insurance may appoint agents to represent it.

Except as otherwise provided in Sections 11102 and 11103, such agents and such societies are subject to Chapter 5 (commencing with Section 1621) of Part 2 of Division 1 and those agents shall be licensed as life agents. Those agents are also subject to Sections 750, 751, and 760.5, and the terms "insurance agent" and "life agent" as used in those sections include the agents of those societies.

Chapter 5 (commencing with Section 1621) of Part 2 of Division 1 does not apply to any of the following, nor shall any of the following be required to be licensed as life agents:
  (a) Any officer of a local lodge of a society, while acting as such, if that officer (1) does not effect insurance, (2) solicits or negotiates only as a part of, and in connection with, the business of a fraternal agent licensed in accordance with the provisions of Section 11101, and (3) is not remunerated on a commission basis.
  (b) Any member of a society who does not effect insurance and whose solicitation or negotiation is incidental to the securing of new members for the society and whose only remuneration therefor consists of prizes in the form of merchandise or payments of a nominal amount. This subdivision does not exempt from the provisions of Chapter 5 nor from the license requirement of Section 11101 any person remunerated on a regular salary or commission basis or employed either full or part time for the purpose of soliciting or negotiating fraternal benefit insurance.
  (c) Any person directly employed by a society at the home or a branch office thereof who does not solicit or negotiate fraternal benefit insurance and who receives no commissions but who may, as a part of his or her regular employment, sign policies, certificates, or other evidences of fraternal benefit insurance.
  (d) Any person whose employment does not include the solicitation, negotiation, or effecting of fraternal benefit insurance contracts and who does not sign policies, certificates, or any other evidences of those contracts.

Insofar as his or her license to represent a fraternal benefit society is concerned, the examination requirements of Article 7 (commencing with Section 1675) of Chapter 5 of Part 2 of Division 1 does not apply to any agent of a society who was in the service of a society on March 1, 1945, and who is licensed to represent a fraternal benefit society on January 1, 1952, and continuously thereafter, nor to any agent of a society who does not devote substantially full time to the sale of life or disability insurance, whether that insurance is provided by insurance policies or by fraternal benefit policies or certificates. If any person exempted from such examination requirements by virtue of not devoting substantially full time to the sale of life or disability insurance as hereinabove provided, shall, after securing a license pursuant to the provisions of this section, thereafter devote substantially full time to the sale of such insurance, the society shall give notice thereof to the commissioner. The commissioner thereupon shall send to the licensee a notice specifying when the examination fee shall be paid and when, not sooner than one month nor later than three months the licensee must qualify by examination. Failure to pass the examination or failure to appear pursuant to notification shall result in a termination 45 days thereafter of all license privileges unless within such 45-day period the licensee passes the examination. The licensee shall not be permitted to retake the examination more than twice within that 45-day period. Thereafter the person may be licensed as a fraternal benefit agent only if he or she files a new application for the license and either (a) takes and passes the qualifying examination or (b) demonstrates affirmatively to the commissioner that he or she will no longer devote substantially full time to the sale of life or disability insurance.

Every society authorized to do business in this State shall appoint in writing the commissioner and each successor in office to be its true and lawful attorney upon whom all lawful process in any action or proceeding against it shall be served, and shall agree in such writing that any lawful process against it which is served on said attorney shall be of the same legal force and validity as if served upon the society, and that the authority shall continue in force so long as any liability remain outstanding in this State. Copies of such appointment, certified by said commissioner, shall be deemed sufficient evidence thereof and shall be admitted in evidence with the same force and effect as the original thereof might be admitted.

Service may be made as provided in Article 1 (commencing with Section 12919) of Chapter 2 of Division 3.

An application for injunction against, proceedings for the dissolution of, or the appointment of a receiver for, any domestic society or branch thereof shall not be entertained by any court unless made by the Attorney General.

A fraternal benefit society, its members, employees, agents, delegates, directors, and officers by whatever name known are subject to Section 12924.

Any domestic society may be converted into and receive a certificate of authority as a mutual life insurance company by compliance with all of the requirements of the laws of this State pertaining to mutual life insurance companies, provided that the plan for such conversion has been approved by the commissioner. Such plan shall be prepared in writing, setting forth in full the terms and conditions thereof. The board of directors, or other executive body charged with the responsibility for the management of the society's affairs, shall submit such plan to the supreme legislative and governing body of such association or society at any regular or special meeting thereof, by giving a full, true and correct copy of such plan of proposed conversion with the notice of such meeting. Such notice shall be given as provided in the laws of the society for the convocation of such supreme legislative and governing body in regular or special session, as the case may be. The affirmative votes of two-thirds of all members of such supreme legislative and governing body shall be necessary for the approval of such agreement. Such plan shall also have been approved by the vote of the majority of the members who vote at a meeting called for that purpose. Notice of such meeting of members together with a full, true and correct copy of such plan of proposed conversion shall be given by mailing such notice from the head office of the society at least 30 days prior to such meeting in a sealed envelope, postage prepaid, addressed to each member at his last known post-office address. Such members may vote either in person or by mail on ballots furnished by the society. No such conversion shall take effect unless and until approved by the commissioner. The commissioner may give such approval if he finds that the proposed change is in conformity with the requirements of law and is not prejudicial to the certificate holders of the society. Such action in approving or disapproving shall be subject to judicial review.

On such conversion:
  (a) Except as provided in (b) hereof all funds, assets and liabilities of any nature which theretofore were the funds, assets or liabilities of such society shall become the funds, assets and liabilities of such mutual life insurance company. In determining whether such mutual life insurance company meets the minimum capital and surplus requirements of this code, the commissioner shall consider such funds to be those of such mutual life insurance company. Such conversion shall likewise extinguish the assessment liability, if any, of the members, certificate holders or beneficiaries of such society.
  (b) If by reason of any contract right in any member, certificate holder or beneficiary which exists on the effective date of this chapter, the transfer of such funds or assets would violate such right then the assets or funds as to which such contract right pertains shall be segregated and held to discharge the liabilities of such mutual life insurance company to the persons entitled thereto. In this case such separate funds shall not be considered by the commissioner in determining if such mutual life insurance company meets minimum capital and surplus requirements, and the assessment liability, if any, of such member, certificate holder or beneficiary is not extinguished.

In addition to any other ground for disapproving such conversion, the commissioner may refuse to give such approval unless evidence satisfactory to him is submitted that:
  (a) The reserves on all certificates theretofore issued are sufficient to carry them to maturity either by reason of the amount thereof or by reason of action by such society pursuant to either subsection (c) hereof or Section 11111;
  (b) The plan of conversion will result in the availability of all funds and assets of the mutual life insurance company to the carrying out of the contracts of insurance whether transacted before or after conversion; and
  (c) The society has lawfully amended all outstanding certificates on which the member's contribution was inadequate to carry such certificate to maturity without assessment. Such amendment shall accomplish that purpose by either increasing the amount of contribution or premium, by whatever name known, sufficiently or, at the option of the certificate holder, reducing the amount of his benefits sufficiently.

Any society may comply with subsection (a) of Section 11110 by deducting from its surplus an amount which, when added to the reserves on certificates theretofore issued, shall be sufficient to carry such certificates to maturity and establish and maintain after its conversion into a mutual life insurance company a special reserve in such an amount. The basis of such special reserve shall not be altered without the prior written consent of the commissioner. The commissioner shall give such consent only when he finds that such alteration will not impair nor imperil the purpose for which such special reserve is established. Any impairment of such reserve shall, to the extent thereof, be deemed a deficiency of required reserves and shall render the mutual life insurance company insolvent. No part of such special reserve shall be deemed to be a part of the capital paid in or of the surplus of the mutual life insurance company.

All decisions and findings of the commissioner made under the provisions of this chapter shall be subject to review by proper proceedings in any court of competent jurisdiction in this State.